MANUFACTURERS SERVICES LTD, S-1/A, 2000-06-21

MANUFACTURERS SERVICES LTD
S-1/A, 2000-06-21
ELECTRONIC COMPONENTS, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 2000

REGISTRATION NO. 333-96227
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 8
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

MANUFACTURERS' SERVICES LIMITED
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3679 04-3258036
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>

300 BAKER AVENUE, SUITE 106, CONCORD, MASSACHUSETTS 01742
(978) 287-5630
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

KEVIN C. MELIA
300 BAKER AVENUE, SUITE 106
CONCORD, MASSACHUSETTS 01742
(978) 287-5630
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:

<TABLE>
<S> <C>
DAVID B. WALEK, ESQ. WINTHROP B. CONRAD, JR., ESQ.
Ropes & Gray Davis Polk & Wardwell
One International Place 450 Lexington Avenue
Boston, Massachusetts 02110 New York, New York 10017
(617) 951-7000 (212) 450-4000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

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

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

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

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

The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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<PAGE>
We will amend and complete the information in this prospectus. Although we are
permitted by US federal securities laws to offer these securities using this
prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities has been declared
effective by the SEC. This prospectus is not an offer to sell these securities
or our solicitation of your offer to buy these securities in any jurisdiction
where that would not be permitted or legal.
<PAGE>

SUBJECT TO COMPLETION--JUNE 21, 2000

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

PROSPECTUS
, 2000

[LOGO]

MANUFACTURERS' SERVICES LIMITED

11,000,000 SHARES OF COMMON STOCK

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<TABLE>
<S> <C>
MANUFACTURERS' SERVICES LIMITED: THE OFFERING:
- We are a leading global provider of - We are offering 11,000,000 shares of our common
advanced electronics design, stock.
manufacturing and related services. - The underwriters have an option to purchase an
- Manufacturers' Services Limited additional 1,650,000 shares from the selling
300 Baker Avenue, Suite 106 stockholders to cover
Concord, Massachusetts 01742 over-allotments.
(978) 287-5630 - This is our initial public offering, and no
public market currently exists for our shares.
SYMBOL & MARKET: - We anticipate that the initial public offering
- Our common stock has been authorized price for our shares will be between $15.00 and
for listing on the New York Stock $17.00 per share.
Exchange under the symbol "MSV." - Closing: , 2000.
</TABLE>

<TABLE>
<CAPTION>
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<S> <C> <C>
Per Share Total
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Public offering price: $ $
Underwriting fees:
Proceeds to Manufacturers' Services Limited:
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</TABLE>

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.

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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
--------------------------------------------------------------------------------

DONALDSON, LUFKIN & JENRETTE

BANC OF AMERICA SECURITIES LLC

ROBERTSON STEPHENS

THOMAS WEISEL PARTNERS LLC

DLJDIRECT INC.
<PAGE>

Picture of circuit board, hard disk drive and keypad with the caption "The
products you use every day... designed and manufactured worldwide..." Picture
of doctor using a medical device and picture of person using a telephone.
Picture of hard disk drive, Palm computing device, floppy disk drive, pager,
stop watch and cellular telephone.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 6
Forward-Looking Statements......... 13
Use of Proceeds.................... 14
Dividend Policy.................... 14
Capitalization..................... 15
Dilution........................... 16
Selected Consolidated Financial
Data............................. 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 19
Business........................... 34
</TABLE>

<TABLE>
<CAPTION>
Page
<S> <C>
Management......................... 51
Relationships and Transactions
with Related Parties............. 61
Principal and Selling
Stockholders..................... 63
Description of Indebtedness........ 65
Description of Capital Stock....... 68
Shares Eligible for Future Sale.... 74
Underwriting....................... 77
Legal Matters...................... 81
Experts............................ 81
Where You Can Find More
Information...................... 81
Index to Consolidated Financial
Statements....................... F-1
</TABLE>

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

The industry data presented in this prospectus, except where otherwise
noted, has been compiled from an electronics manufacturing services industry
report--"Contract Manufacturing from a Global Perspective, 1999
Update"--prepared by Technology Forecasters, Inc., a California based management
consulting firm specializing in the electronics manufacturing services industry.
Technology Forecasters is commonly relied upon as an information source in the
electronics manufacturing services industry. Although we have not independently
verified any such data, we believe that the information provided by Technology
Forecasters in this prospectus is reliable. In addition, some MSL data presented
in this prospectus has been compiled from internal MSL surveys and schedules,
which, while believed by us to be reliable, have not been verified by any
independent sources.

In this prospectus, references to "MSL" and "Manufacturers' Services" refer
to Manufacturers' Services Limited and its subsidiaries, except where noted or
the context clearly suggests otherwise. Total Cost of
Ownership-Registered Trademark-, the globe symbol and the globe with the name
"Manufacturers' Services" are registered trademarks of Manufacturers' Services
Limited. This prospectus contains trademarks, service marks and trade names of
companies and organizations other than Manufacturers' Services Limited.

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PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS IMPORTANT INFORMATION REGARDING OUR BUSINESS AND
THIS OFFERING. BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL THE
INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS
CAREFULLY, ESPECIALLY "RISK FACTORS" BEGINNING ON PAGE 6 AND OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES, BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.

MANUFACTURERS' SERVICES LIMITED

Overview

We are a leading global provider of advanced electronics design,
manufacturing and related services. We provide these services to original
equipment manufacturers primarily in the voice and data communications, computer
and related peripherals, medical equipment and industrial and consumer
electronics industries. The services that we provide are commonly referred to as
electronics manufacturing services. We provide original equipment manufacturers,
or OEMs, with a comprehensive range of services, including:

- product design and new product introduction services;

- materials procurement and management;

- assembly and manufacturing;

- testing services;

- order fulfillment and distribution; and

- after-market support.

We assist our customers in the design and product introduction phases of
development to reduce the time it takes to bring their products to market and
optimize their design for high volume manufacturing. We obtain competitive
component pricing and greater sourcing flexibility for our customers through our
material and inventory management expertise and our global information systems.
We utilize sophisticated assembly and manufacturing techniques in order to
provide the complex functionality and small product size that is required by
OEMs. We subject our manufactured products to a comprehensive set of tests for
quality, functionality and reliability, including, in some instances,
product-specific tests that we design for our customers. Additionally, we assist
our customers in packaging and distributing the final products directly into
their distribution channels and to their end users. We also provide a wide range
of after-market support services such as repair, refurbishment, exchange, system
upgrades and spare part manufacturing. By providing these services, we allow our
customers to focus on their core competencies, and we enhance their
competitiveness by reducing the cost of their products and shortening the time
from product conception to product introduction in the marketplace.

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our customers and their end-markets, which benefits our customers by reducing
the time required to get their products to market and by increasing their
flexibility to respond to changing market conditions. We believe that the
combination of our services and our global manufacturing network has enabled us
to become integral to our customers' product development and manufacturing
strategies.

We target leading OEMs in rapidly growing industries. We seek to establish
long-term, integrated relationships with OEMs that have chosen outsourcing as a
core manufacturing strategy. Due to our focus on rapidly growing industries, our
prospects are influenced by recent trends, such as the buildout of the
communications and Internet infrastructure, the proliferation of personal
computing devices and other technological trends. Our most significant customers
based on sales in the first fiscal quarter of 2000 include industry leaders such
as:

<TABLE>
<S> <C>
3Com Corporation Iomega Corporation
ADC Telecommunications, Inc. LM Ericsson Telefon AB
Gilat Satellite Networks Ltd. LSI Logic Corporation
Hewlett-Packard Company Palm, Inc.
International Business Machines Rockwell International
Corporation Corporation
</TABLE>

We also serve selected emerging companies in order to establish an early
outsourcing relationship that will provide us with attractive growth
opportunities as the products of these emerging companies gain market
acceptance.

OEMs, which once pursued fully integrated business strategies, have begun
outsourcing their new product design, materials procurement and management,
assembly and manufacturing, order fulfillment and distribution and after-market
support functions. As a result of this increasing trend by OEMs to outsource
these functions, the electronics manufacturing services industry has experienced
significant growth over the past several years. We have capitalized on this
industry growth through a combination of strategic acquisitions and internal
expansion. Our total net sales have increased from $183.2 million in 1995, our
first full year of operations, to $920.7 million in 1999, a compound annual
growth rate of approximately 50%. While we experienced net losses of
approximately $9.7 million, $17.3 million and $6.2 million in 1996, 1997 and
1998, respectively, we reported net income of approximately $2.0 million in
1999.

Technology Forecasters projects that electronics manufacturing services
industry revenues will grow annually at 20% from 1998 through 2003, reaching
$149 billion in 2003. Technology Forecasters also projects that the twelve
electronics manufacturing services providers with revenues of greater than $500
million in 1998 will have an annual growth rate of 30% over the 1998 to 2003
period. We believe that we are well positioned to benefit from this forecasted
growth.

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Our Business Strategy

Our objective is to be the premier provider of value-added electronics
design, manufacturing and related services to leading OEMs in rapidly growing
industries. Our strategy to achieve this objective includes the following key
elements:

- establish and maintain long-term relationships with leading OEMs in
rapidly growing industries;

- expand our global presence;

- expand our integrated design, manufacturing and related services;

- continually reduce our customers' overall product costs;

- reduce our customers' time-to-global market and time-to-global volume; and

- actively pursue strategic acquisitions.

An important element of our business strategy has been to acquire existing
OEM manufacturing facilities, retain their business and employees, integrate the
acquired operations and introduce new customers into the acquired facilities. As
an increasing number of OEMs are divesting their manufacturing operations, we
intend to selectively pursue acquisitions of OEM divestitures and other
strategic opportunities.

In 1995, we established a significant presence in North America, Europe and
Asia by acquiring facilities from AT&T, IBM and Omnitron, a spin-off of LM
Ericsson. We also acquired two Asian contract manufacturers, Connett
Technologies and Topas Electronics. More recently, in 1998 we assumed operation
of an IBM facility in Charlotte, North Carolina. In 1999, we acquired an
existing manufacturing facility in Salt Lake City, Utah, from 3Com. The Salt
Lake City facility manufactures handheld computing devices, known as Palm
computing devices, and modems and network interface cards. In connection with
this acquisition, we entered into a two-year supply agreement with Palm, a
subsidiary of 3Com, to produce Palm computing devices and a two-year supply
agreement with 3Com to produce modems and network interface cards. Additionally
in 1999, we considerably enhanced our North American product design services
with the acquisition of two electronics design firms, Electronic System
Packaging and Ronlin Design.

Our History

We are organized as a Delaware corporation. In January 1995, investment
entities affiliated with Donaldson, Lufkin & Jenrette, Inc. acquired
substantially all of our outstanding common stock, and after this offering they
will own approximately 57.5% of our common stock. Our principal executive office
is located at 300 Baker Avenue, Suite 106, Concord, Massachusetts 01742 and our
telephone number is (978) 287-5630. We maintain a website on the Internet at
WWW.MSL.COM. Information contained on our website is not incorporated by
reference into this prospectus, and you should not consider that information as
part of this prospectus.

3
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THE OFFERING

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<S> <C>
Common stock offered by us................ 11,000,000 shares
Common stock outstanding after
this offering........................... 30,947,770 shares
Use of proceeds........................... We plan to use the net proceeds from this offering
to retire all of our outstanding senior preferred
stock and to repay a portion of our indebtedness.
See "Use of Proceeds."
New York Stock Exchange symbol............ MSV
</TABLE>

The number of shares of our common stock to be outstanding after this
offering is based on the number of shares outstanding as of April 2, 2000, the
last day of our first fiscal quarter. It excludes:

- 2,521,703 shares of common stock reserved for issuance upon the exercise
of outstanding options granted under our stock option plans, of which
889,929 were exercisable at a weighted average exercise price equal to
$12.12 per share;

- 2,264,207 additional shares of common stock available for future grants
under our stock option plans; and

- 1,288,550 shares of common stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price equal to $4.72 per share.

4
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SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes the consolidated financial data for our
business. You should read this information together with our "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and notes included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
First Fiscal
Year Ended December 31, Quarter(a)
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net sales...................... $183,164 $474,288 $562,666 $837,993 $920,722 $206,964 $332,820
Gross profit................... 16,499 38,133 35,879 45,259 55,233 11,085 16,315
Operating income (loss)........ 5,210 3,880 (4,252) 8,695 16,411 3,157 (6,387)
Income (loss) applicable to
common stock before
extraordinary loss........... 1,217 (9,726) (17,278) (4,039) 1,201 103 (12,954)
Income (loss) per share
applicable to common stock
before extraordinary loss:
Basic...................... $ 0.19 $ (0.74) $ (1.07) $ (0.21) $ 0.06 $ 0.01 $ (0.66)
Diluted.................... $ 0.19 $ (0.74) $ (1.07) $ (0.21) $ 0.06 $ 0.01 $ (0.66)
Weighted average number of
shares outstanding:
Basic...................... 6,430 13,159 16,172 18,746 19,384 19,053 19,673
Diluted.................... 6,430 13,159 16,172 18,746 19,608 19,208 19,673
</TABLE>

<TABLE>
<CAPTION>
April 2, 2000
-------------------------
Actual As Adjusted(b)
(In thousands)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................................... $ 11,736 $ 11,736
Working capital............................................. 102,944 103,444
Total assets................................................ 451,236 449,696
Current portion of long-term debt and capital lease
obligations............................................... 7,500 7,000
Long-term debt and capital lease obligations................ 142,215 37,575
Senior preferred stock...................................... 39,595 --
Total stockholders' equity.................................. 39,197 182,392
</TABLE>

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

(a) The financial data for the first fiscal quarter of 1999 and 2000 is as of
and for the three-month periods ended April 4, 1999 and April 2, 2000,
respectively.

(b) As adjusted gives effect to this offering, assuming net proceeds of $162.1
million. See "Use of Proceeds" and "Capitalization."

5
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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS. ANY OF THESE RISKS COULD
HAVE A MATERIAL AND NEGATIVE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE
TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Because a significant portion of our sales currently comes from a small number
of customers, any decrease in sales from these customers could harm our
operating results.

We depend on a small number of customers for a large portion of our
business, and changes in our customers' orders have, in the past, had a
significant impact on our operating results. If a major customer significantly
reduces the amount of business it does with us, there would be an adverse impact
on our operating results. The following table sets forth the percentages of our
total net sales to customers who accounted for 10% or more of our total net
sales and the percentage of our total net sales to our ten largest customers in
each period presented:

<TABLE>
<CAPTION>
Year Ended
December 31, Three Months Ended
------------------------------ ------------------
1997 1998 1999 April 2, 2000
<S> <C> <C> <C> <C>
International Business Machines
Corporation..................... 51% 51% 49% 25%
Iomega Corporation................ 19% 20% 14% 6%
Palm, Inc......................... -- -- 3% 29%
Ten largest customers as a
group........................... 81% 89% 88% 90%
</TABLE>

Based on our recent acquisition of inventory, manufacturing assets and other
intangibles from 3Com and the related supply agreements, we anticipate that 3Com
and its subsidiary, Palm, will each become a major customer in the year ending
December 31, 2000.

We expect to continue to depend on sales to our major customers. Since it is
not always possible to replace lost business on a timely basis, it is likely
that our operating results would be adversely affected if one or more of our
major customers were to cancel, delay or reduce a large amount of business with
us in the future. In addition, we generate significant accounts receivable in
connection with providing services to our major customers. If one or more of our
customers were to become insolvent or otherwise be unable to pay for our
services, our operating results and financial condition could be adversely
affected.

We intend to pursue strategic acquisitions of manufacturing facilities and
businesses, and the failure to successfully integrate acquired facilities and
businesses may adversely affect our financial performance.

Successfully completing future acquisitions is an important part of our
overall business strategy. However, any future acquisitions we make could result
in:

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- difficulty in integrating our operations, technologies, systems, products
and services with those of the acquired facility;

- difficulty in operating in foreign countries, in the case of acquisitions
that we make outside the U.S., and over significant geographical
distances;

- diversion of our capital and our management's attention away from other
business issues;

- an increase in our expenses and our working capital requirements;

- potential loss of key employees and customers of facilities or businesses
we acquire; and

- financial risks, such as:

-- potential liabilities of the facilities and businesses we acquire;

-- our need to incur additional indebtedness; and

-- dilution if we issue additional equity securities.

We may not successfully integrate any operations, technologies, systems,
products or services that we may acquire in the future, and we cannot assure you
that any of our recent or future acquisitions will be successful. If any of our
recent or future acquisitions are not successful, it is likely that our
financial performance will be adversely affected.

Our growth may be limited and our competitive position may be harmed if we are
unable to identify, finance and close future acquisitions.

We expect to actively pursue strategic acquisitions as part of our overall
business strategy. Competition for acquiring attractive facilities and
businesses in our industry is substantial. In executing this part of our
business strategy, we may experience difficulty in identifying suitable
acquisition candidates or in completing selected transactions. In addition, our
existing bank credit facility limits our ability to acquire the assets or
businesses of other companies. If we are able to identify acquisition
candidates, such acquisitions may be financed with substantial debt or with
potentially dilutive issuances of equity securities. Our ability to successfully
complete acquisitions in the future will depend upon several factors, including
the continued availability of financing. We cannot assure you that financing for
acquisitions will be available on terms acceptable to us, if at all.

The incurrence of indebtedness in connection with the consummation of future
acquisitions could harm our operating results and financial condition.

Our acquisition strategy could require us to incur substantial amounts of
indebtedness. As of April 2, 2000, our total debt was $149.7 million and our
interest expense for the quarter then ended was $3.5 million. After a portion of
the proceeds from this offering is used to repay existing indebtedness, we will
still owe approximately $44.6 million in principal amount of indebtedness. Our
future level of indebtedness could have consequences for our business,
including:

- vulnerability to the effects of poor economic and industry conditions
affecting our business;

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- dedication of a substantial portion of our cash flow from operations to
repayment of debt, limiting the availability of cash for working capital,
capital expenditures or acquisitions which may be attractive to us;

- reduced flexibility in planning for, or reacting to, changes in our
business and industry; and

- failure to comply with the financial covenants under our credit agreements
relating to interest coverage, leverage, consolidated EBITDA and net worth
resulting in an event of default, which if not cured or waived, could
cause substantially all of our indebtedness to become immediately due and
payable.

We have financial instruments that are subject to interest rate risk,
principally debt obligations under our bank credit facility. An increase in the
base rates upon which our interest rates are determined could have an adverse
effect on our operating results and financial condition.

Contemporaneously with this offering, we intend to refinance our existing
indebtedness under our bank credit facility with a new bank credit facility. We
anticipate that the new bank credit facility will impose operating and financial
restrictions on us substantially similar to those contained in our existing bank
credit facility, including a limitation on our ability to pay cash dividends on
our common stock. See "Description of Indebtedness."

Competition from existing or new companies in the electronics manufacturing
services industry could cause us to experience downward pressure on prices,
fewer customer orders, reduced margins, the inability to take advantage of new
business opportunities and the loss of market share.

We operate in a highly competitive industry. We compete against many
domestic and foreign companies, some of which have substantially greater
manufacturing, financial, research and development and marketing resources than
we do. Some of our competitors have broader geographic breadth and range of
services than we do. In addition, some of our competitors may have more
developed relationships with our existing customers than we do. We also face
competition from the manufacturing operations of our current and potential
customers, who continually evaluate the benefits of internal manufacturing
versus outsourcing. As more OEMs dispose of their manufacturing assets and
increase the outsourcing of their products, we will face increasing competitive
pressures to grow our business in order to maintain our competitive position.

We depend on our suppliers, some of which are the sole source for our
components, and our production would be substantially curtailed if these
suppliers are not able to meet our demands and alternative sources are not
available.

We order raw materials and components to complete our customers' orders, and
some of these raw materials and components are ordered from sole-source
suppliers. Although we work with our customers and suppliers to minimize the
impact of shortages in raw materials and components, we sometimes experience
short-term adverse effects due to price fluctuations and delayed shipments. In
the past, there have been industry-wide shortages of electronic components,
particularly memory and logic devices. If a significant shortage of raw
materials or components were to occur, we may have to delay shipments, and our
operating results would be adversely affected. In some cases,

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supply shortages of particular components will substantially curtail production
of products using these components. While most of our significant customer
contracts permit quarterly or other periodic reviews of pricing based on
decreases and increases in the prices of raw materials and components, we are
not always able to pass on price increases to our customers. Accordingly, some
raw material and component price increases could adversely affect our operating
results. We also depend on a small number of suppliers for many of the other raw
materials and components that we use in our business. If we were unable to
continue to purchase these raw materials and components from our suppliers, our
operating results would be adversely affected. Because many of our costs are
fixed, our margins depend on our volume of output at our facilities and a
reduction in volume will adversely affect our margins.

Long-term contracts are not typical in our industry, and reductions,
cancellations or delays in customer orders would adversely affect our operating
results.

As is typical in the electronics manufacturing services industry, we do not
usually obtain long-term purchase orders or commitments from our customers.
Instead, we work closely with our customers to develop non-binding forecasts of
the future volume of orders. Customers may cancel their orders, change
production quantities from forecasted volumes or delay production for a number
of reasons beyond our control. Significant or numerous cancellations, reductions
or delays in orders by our customers would reduce our net sales. In addition,
because many of our costs are fixed, a reduction in net sales could have an
adverse effect on our operating results. From time to time we make capital
investments in anticipation of future business opportunities. There can be no
assurance that we will receive the anticipated business. If we are unable to
obtain the anticipated business, our operating results and financial condition
may be harmed.

Uncertainties and adverse trends affecting the electronics industry or any of
our major customers may adversely affect our operating results.

Our business depends on the electronics industry, which is subject to rapid
technological change, short product life-cycles and pricing and margin pressure.
In addition, the electronics industry has historically been cyclical and subject
to significant downturns characterized by diminished product demand, rapid
declines in average selling prices and production over-capacity. When these
factors adversely affect our customers, we may suffer similar effects. Our
customers' markets are also subject to economic cycles and are likely to
experience recessionary periods in the future. The economic conditions affecting
the electronics industry, in general, or any of our major customers, in
particular, may adversely affect our operating results.

Because we have significant operations overseas, our operating results could be
harmed by economic, political, regulatory and other factors existing in foreign
countries in which we operate.

We have substantial international manufacturing operations in Europe and
Asia. Our international operations are subject to inherent risks, which may
adversely affect us, including:

- political and economic instability in countries where we have
manufacturing facilities, particularly in Asia where we conduct a
significant portion of our business;

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- fluctuations in the value of currencies, particularly in Spain where our
functional currency is the Spanish peseta;

- high levels of inflation, historically the case in a number of countries
in Asia where we do business;

- changes in labor conditions and difficulties in staffing and managing our
foreign operations;

- greater difficulty in collecting our accounts receivable and longer
payment cycles;

- burdens and costs of our compliance with a variety of foreign laws;

- increases in the duties and taxes we pay;

- imposition of restrictions on currency conversion or the transfer of
funds; and

- expropriation of private enterprises.

Our quarterly operating results are subject to fluctuations and seasonality, and
if we fail to meet the expectations of securities analysts or investors, our
share price may decrease significantly.

Our annual and quarterly results may vary significantly depending on various
factors, many of which are beyond our control and may not meet the expectations
of securities analysts or investors. If this occurs, the price of our stock
would likely decline. These factors include:

- variations in the timing and volume of customer orders relative to our
manufacturing capacity;

- introduction and market acceptance of our customers' new products;

- changes in demand for our customers' existing products;

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

- effectiveness in managing our manufacturing processes;

- changes in competitive and economic conditions generally or in our
customers' markets;

- the timing of, and the price we pay for, acquisitions and related
integration costs;

- changes in the cost or availability of components or skilled labor; and

- foreign currency exposure.

As is the case with many technology companies, we typically ship a
significant portion of our products in the last few weeks of a quarter. Also,
one of our significant end-markets is the consumer electronics market. This
market exhibits particular strength towards the end of the year in connection
with the holiday season. As a result, we have experienced relative strength in
net sales in our fourth quarter.

10
<PAGE>
Loss of any of our key personnel could hurt our business because of their
experience in the electronics manufacturing services industry and their
technological expertise.

We operate in the highly competitive electronics manufacturing services
industry and depend on the services of our key senior executives and other
technological experts because of their experience in the electronics
manufacturing services industry and their technical expertise. The loss of the
services of one or several of our key employees or an inability to attract,
train and retain qualified and skilled employees, specifically engineering and
sales personnel, could result in the loss of customers or otherwise inhibit our
ability to operate and grow our business successfully. In addition, our ability
to successfully integrate acquired facilities or businesses depends, in part, on
our ability to retain and motivate key management and employees hired by us in
connection with the acquisition.

If we are unable to maintain our technological expertise in design and
manufacturing processes we will not be able to successfully compete.

We believe that our future success will depend upon our ability to develop
and provide design and manufacturing services that meet the changing needs of
our customers. This requires that we successfully anticipate and respond to
technological changes in design and manufacturing processes in a cost-effective
and timely manner. As a result, we continually evaluate the advantages and
feasibility of new product design and manufacturing processes. We cannot,
however, assure you that our process development efforts will be successful.

Our controlling stockholders and some of our directors may have interests that
differ from yours.

Donaldson, Lufkin & Jenrette, Inc. and its affiliates control us and have
significant control over our business, policies and affairs, including the power
to appoint new management, prevent or cause a change of control and approve any
action requiring the approval of the holders of our common stock, including
adopting some amendments to our certificate of incorporation and approving
mergers or sales of all or substantially all of our assets. Affiliates of
Donaldson, Lufkin & Jenrette, Inc. have the right to elect a majority of our
directors. The interests of these stockholders and directors may differ from
your interests or the interests of other stockholders. See "Relationships and
Transactions with Related Parties" for more information concerning affiliates of
Donaldson, Lufkin & Jenrette, Inc.

Provisions in our charter documents and Delaware law may delay, deter or prevent
someone from acquiring us, which could decrease the value of your shares.

Provisions in our charter and bylaws may have the effect of delaying,
deterring or preventing a change of control or changes in our management that
you might consider favorable unless approved by our stockholders and directors
affiliated with Donaldson, Lufkin & Jenrette, Inc. Those provisions serve to
limit the circumstances in which a premium may be paid for our common stock in
proposed transactions or where a proxy contest for control of our board may be
initiated. If a change of control or change in management is delayed, deterred
or prevented, the market price of our common stock could suffer.

11
<PAGE>
We are subject to a variety of environmental laws that expose us to potential
financial liability.

Our operations are regulated under a number of federal, state and foreign
environmental and safety laws and regulations that govern, among other things,
the discharge of hazardous materials into the air and water as well as the
handling, storage and disposal of these materials. These laws and regulations
include the Clean Air Act, the Clean Water Act, the Resource, Conservation and
Recovery Act, and the Comprehensive Environmental Response, Compensation and
Liability Act, as well as analogous state and foreign laws. Compliance with
these environmental laws is a major consideration for us because we use
hazardous materials in our manufacturing process. In addition, because we are a
generator of hazardous wastes, we, along with any other person who arranges for
the disposal of our wastes, may be subject to financial exposure for costs
associated with an investigation and any remediation of sites at which we have
arranged for the disposal of hazardous wastes if these sites become
contaminated, even if we fully comply with applicable environmental laws. In the
event of a violation of environmental laws, we could be held liable for damages
and for the costs of remedial actions and could also be subject to revocation of
our effluent discharge permits. Any revocation could require us to cease or
limit production at one or more of our facilities, thereby negatively impacting
our revenues and potentially causing our common stock price to decline.
Environmental laws could also become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with any
violation, which also could negatively impact our operating results.

RISKS RELATED TO THIS OFFERING

Our common stock has no prior public market, and we cannot assure you that our
stock price will not decline.

Prior to this offering, there has been no public market for our common
stock. We cannot assure you that an active trading market for our common stock
will develop or be sustained after this offering. The initial public offering
price for our common stock will be determined by negotiations between the
underwriters and us. We cannot assure you that the initial public offering price
will correspond to the price at which our common stock will trade in the public
market subsequent to this offering or that the price of our common stock
available in the public market will reflect our actual financial performance.
The stock markets in general, and the stock prices of our competitors in
particular, have recently experienced extreme volatility that has often been
unrelated to their operating performance. These broad market fluctuations may
adversely affect the trading price of our common stock.

Sales of our common stock by existing investors may begin shortly after
completion of this offering, which could cause our stock price to decline.

Sales of a substantial number of shares of our common stock in the public
market following this offering, or the perception that these sales could occur,
could cause the market price of our common stock to decline. The shares of our
common stock outstanding prior to this offering will be eligible for sale in the
public market at various times in the future. We, all of our officers, directors
and stockholders owning most of our shares have generally agreed not to sell any
shares of our common stock for a period of 180 days after the date of this
prospectus without the prior written consent of the underwriters. Upon
expiration of the lock-up period described above,

12
<PAGE>
approximately 1,009,793 additional shares will be eligible for sale in the
public market without restriction and 18,579,104 shares held by some of our
affiliates will become eligible for sale, subject to the restrictions under
Rule 144. In addition, some of our existing stockholders have the right to
require us to register their shares.

The initial public offering price is significantly higher than the book value of
our common stock, and you will experience immediate and substantial dilution in
the value of your investment.

The initial public offering price per share will significantly exceed our
net tangible book value per share. Accordingly, investors purchasing shares in
this offering will suffer immediate and substantial dilution of $11.29 per
share. See "Dilution."

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. Some of the
forward-looking statements can be identified by the use of forward-looking words
such as "believes," "expects," "may," "will," "should," "seeks,"
"approximately," "intends," "plans," "estimates" or "anticipates" or the
negative of those words or other comparable terminology. Forward-looking
statements involve risks and uncertainties. A number of important factors could
cause actual results to differ materially from those in the forward-looking
statements. These factors include systems failures, technological changes,
volatility of securities markets, government regulations and economic conditions
and competition in the areas in which we conduct our operations. For a
discussion of factors that could cause actual results to differ, please see the
discussion under "Risk Factors" contained in this prospectus. The
forward-looking statements made in this prospectus relate only to events as of
the date on which the statements are made.

13
<PAGE>
USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately
$162.1 million from the sale of our common stock, offered at an assumed initial
public offering price per share of $16.00, after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us. We
will not receive any proceeds from the sale of our common stock by the selling
stockholders pursuant to any exercise of the underwriters' over-allotment
option.

We intend to use approximately $57.0 million of the net proceeds of this
offering to retire all of our outstanding senior preferred stock. The preferred
stock was issued in November 1999 to DLJ Investment Funding II, Inc., DLJ
Investment Partners II, L.P., DLJ ESC II L.P. and DLJ Investment Partners, L.P.
in connection with our acquisition from 3Com of selected inventory, fixed assets
and intangible assets in Salt Lake City, Utah. Holders of our senior preferred
stock are entitled to a quarterly cash dividend at the rate of 14% per annum
through November 26, 2000 and thereafter at a rate of 15% per annum, payable in
cash at the mandatorily redeemable date or in additional shares of senior
preferred stock. In connection with the anticipated retirement of our
outstanding senior preferred stock, our net income available to common
stockholders for the purposes of determining earnings per share will be reduced
by approximately $17.4 million in the second fiscal quarter of the year ending
December 31, 2000.

We intend to use approximately $105.1 million of the net proceeds of this
offering to discharge a portion of our indebtedness under our bank credit
facility. We expect to repay approximately $74.2 million under our term loan
facilities and approximately $30.9 million under our revolving credit facility.
Our term loan facilities have a final maturity of July 31, 2004. Our revolving
credit facility has a final maturity of July 31, 2002. As of April 2, 2000, the
interest rate for our term loan facilities was 9.94% and for our revolving
credit facility was between 9.13% and 11.00%. Following this offering and the
application of the net proceeds, we will have approximately $33.2 million
outstanding under our bank credit facility. In connection with the anticipated
repayment of our indebtedness under our bank credit facility, we will record an
extraordinary non-cash charge of $1.5 million associated with the write-off of
deferred financing costs.

DIVIDEND POLICY

We have never declared or paid any cash dividends on shares of our common
stock, and we do not anticipate paying any cash dividends for at least the next
five years. We currently intend to retain any future earnings to finance
operations and expansion and to reduce indebtedness. In addition, our existing
bank credit facility limits, and we expect that our new bank credit facility
will limit, our ability to pay cash dividends on our common stock. Payment of
future cash dividends, if any, will be at the discretion of our board of
directors, after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs, plans for
expansion and restrictions imposed by lenders, if any.

14
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of April 2, 2000. Our
capitalization is presented:

- on an actual basis; and

- as adjusted to reflect the application of the estimated net proceeds from
this offering to retire all of our outstanding senior preferred stock and
to repay a portion of our outstanding indebtedness,

assuming an initial public offering price of $16.00 per share.

<TABLE>
<CAPTION>
April 2, 2000
-------------------------------------
Actual As Adjusted
(In thousands, except per share data)
<S> <C> <C>
Cash and cash equivalents............................. $ 11,736 $ 11,736
======== ========
Long-term debt and capital lease obligations:
Revolving facility.................................. $ 64,100 $ 33,210
Term loans.......................................... 74,250 --
Other long-term debt and capital lease obligations
including current portion......................... 11,365 11,365
-------- --------
Total long-term debt and capital lease
obligations..................................... 149,715 44,575

Senior redeemable preferred stock due 2006, $.001 par
value, redemption value $25.00 per share; 2,000
shares authorized (actual and as adjusted); 2,000
shares issued and outstanding (actual); no shares
issued and outstanding (as adjusted)................ 39,595 --

Stockholders' equity:
Preferred stock, $.001 par value, 3,000 shares
authorized (actual and as adjusted); no shares
issued and outstanding (actual and as adjusted)... -- --
Common stock, $.001 par value, 150,000 shares
authorized (actual and as adjusted); 19,948 shares
issued and outstanding (actual); 30,948 shares
issued and outstanding (as adjusted).............. 20 31
Additional paid-in capital.......................... 92,042 236,766
Accumulated deficit................................. (41,184) (42,724)
Accumulated other comprehensive loss................ (11,681) (11,681)
-------- --------
Total stockholders' equity........................ 39,197 182,392
-------- --------
Total capitalization.................................. $228,507 $226,967
======== ========
</TABLE>

15
<PAGE>
DILUTION

The net tangible book value of our common stock as of April 2, 2000 was
approximately $2.5 million, or approximately $0.12 per share. Net tangible book
value per share represents the amount of our stockholders' equity, less goodwill
and other intangible assets, divided by the total number of shares of our common
stock outstanding.

Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of our common stock in this offering and the
net tangible book value per share of our common stock immediately after the
completion of this offering.

Following:

- our sale of 11,000,000 shares of common stock in this offering at an
assumed initial public offering price of $16.00 per share, and after
deducting:

- the estimated underwriting discounts and commissions; and

- the estimated offering expenses; and

- the application of the estimated net proceeds from this offering,

our net tangible book value as of April 2, 2000 would have been approximately
$145.6 million or approximately $4.71 per share. This represents an immediate
increase in net tangible book value of approximately $4.59 per share to the
existing stockholders and an immediate dilution in net tangible book value of
approximately $11.29 per share to purchasers of our common stock in this
offering. The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $16.00
Net tangible book value per share as of
April 2, 2000........................................ $0.12
Increase per share attributable to new investors....... 4.59
-----
Net tangible book value per share after this offering.... 4.71
------
Dilution per share to new investors...................... $11.29
======
</TABLE>

The following table illustrates as of April 2, 2000, the difference between
the number of shares of common stock purchased from us, the total consideration
paid to us and the average price paid by existing stockholders and by the new
investors purchasing shares of our common stock in this offering, before
deduction of estimated underwriting discounts and commissions and offering
expenses:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------- ----------------------- Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 19,947,770 64% $ 82,875,957 32% $ 4.15
New stockholders..... 11,000,000 36 176,000,000 68 16.00
---------- --- ------------ ---
Total.............. 30,947,770 100% $258,875,957 100%
========== === ============ ===
</TABLE>

The foregoing table assumes no exercise of any stock options and warrants
outstanding as of April 2, 2000. As of April 2, 2000, there were options and
warrants outstanding to purchase a total of 3,810,253 shares of our common
stock, 817,368 of which have an exercise price of $4.00 per share and 2,992,885
of which have exercise prices ranging from $4.80 to $20.00 per share. If all of
the options and warrants with an exercise price of $4.00 per share are
exercised, you will experience further dilution in the amount of approximately
$0.02 per share.

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of and for the dates
and periods indicated has been derived from our audited consolidated financial
statements and our unaudited interim consolidated financial statements. In the
opinion of management, the unaudited interim consolidated financial statements
include all adjustments necessary for a fair presentation of our financial
position and results of operations. The selected consolidated financial data and
notes should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated financial
statements and notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1995 1996 1997

(In thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Net sales........................... $ 183,164 $ 474,288 $ 562,666
Cost of goods sold.................. 166,665 436,155 526,787
--------- --------- ---------
Gross profit........................ 16,499 38,133 35,879
Selling, general and
administrative(b)................. 11,289 31,718 28,037
Restructuring and other asset
writedowns........................ -- 2,535 12,094
Litigation settlement............... -- -- --
--------- --------- ---------
Operating income (loss)............. 5,210 3,880 (4,252)
Interest expense, net............... (1,476) (5,702) (7,723)
Minority interest................... 416 -- --
Foreign exchange gain (loss)........ 931 (1,760) (931)
--------- --------- ---------
Income (loss) before provision for
income taxes and extraordinary
loss.............................. 5,081 (3,582) (12,906)
Provision for income taxes.......... 3,864 6,144 4,372
--------- --------- ---------
Income (loss) before extraordinary
loss.............................. 1,217 (9,726) (17,278)
Extraordinary loss.................. -- -- --
--------- --------- ---------
Net income (loss)................... $ 1,217 $ (9,726) $ (17,278)
========= ========= =========
Net income (loss) applicable to
common stock...................... $ 1,217 $ (9,726) $ (17,278)
========= ========= =========
Basic income (loss) per share:
Income (loss) before
extraordinary loss............ $ 0.19 $ (0.74) $ (1.07)
Extraordinary loss.............. $ -- $ -- $ --
Net income (loss)............... $ 0.19 $ (0.74) $ (1.07)
Weighted average shares
outstanding................... 6,430 13,159 16,172
Diluted income (loss) per share:
Income (loss) before
extraordinary loss............ $ 0.19 $ (0.74) $ (1.07)
Extraordinary loss.............. $ -- $ -- $ --
Net income (loss)............... $ 0.19 $ (0.74) $ (1.07)
Weighted average shares
outstanding................... 6,430 13,159 16,172

Other Financial Data:
Adjusted EBITDA(c).................. $ 4,224 $ 10,934 $ 16,218
Depreciation........................ 1,117 4,693 7,575
Amortization of goodwill and other
intangibles....................... (2,103) (174) 801
Capital expenditures................ 10,510 11,534 25,780
Net cash provided by (used in)
operating activities.............. (1,060) 484 (17,396)
Net cash used in investing
activities........................ (70,754) (11,534) (25,978)
Net cash provided by (used in)
financing activities.............. 79,116 6,647 50,220

<CAPTION>
Year Ended December 31, First Fiscal Quarter(a)
--------------------------- ---------------------------
1998 1999 1999 2000
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................... $ 837,993 $ 920,722 $ 206,964 $ 332,820
Cost of goods sold.................. 792,734 865,489 195,879 316,505
--------- --------- --------- ---------
Gross profit........................ 45,259 55,233 11,085 16,315
Selling, general and
administrative(b)................. 29,835 38,042 7,928 16,702
Restructuring and other asset
writedowns........................ 6,729 780 -- --
Litigation settlement............... -- -- -- 6,000
--------- --------- --------- ---------
Operating income (loss)............. 8,695 16,411 3,157 (6,387)
Interest expense, net............... (10,161) (8,081) (1,702) (3,476)
Minority interest................... -- -- -- --
Foreign exchange gain (loss)........ 721 (2,510) (1,160) (673)
--------- --------- --------- ---------
Income (loss) before provision for
income taxes and extraordinary
loss.............................. (745) 5,820 295 (10,536)
Provision for income taxes.......... 3,294 3,810 192 287
--------- --------- --------- ---------
Income (loss) before extraordinary
loss.............................. (4,039) 2,010 103 (10,823)
Extraordinary loss.................. (2,202) -- -- --
--------- --------- --------- ---------
Net income (loss)................... $ (6,241) $ 2,010 $ 103 $ (10,823)
========= ========= ========= =========
Net income (loss) applicable to
common stock...................... $ (6,241) $ 1,201 $ 103 $ (12,954)
========= ========= ========= =========
Basic income (loss) per share:
Income (loss) before
extraordinary loss............ $ (0.21) $ 0.06 $ 0.01 $ (0.66)
Extraordinary loss.............. $ (0.12) $ -- $ -- $ --
Net income (loss)............... $ (0.33) $ 0.06 $ 0.01 $ (0.66)
Weighted average shares
outstanding................... 18,746 19,384 19,053 19,673
Diluted income (loss) per share:
Income (loss) before
extraordinary loss............ $ (0.21) $ 0.06 $ 0.01 $ (0.66)
Extraordinary loss.............. $ (0.12) $ -- $ -- $ --
Net income (loss)............... $ (0.33) $ 0.06 $ 0.01 $ (0.66)
Weighted average shares
outstanding................... 18,746 19,608 19,208 19,673
Other Financial Data:
Adjusted EBITDA(c).................. $ 26,698 $ 32,086 $ 6,088 $ 9,684
Depreciation........................ 10,686 11,686 2,629 3,731
Amortization of goodwill and other
intangibles....................... 247 2,747 292 2,353
Capital expenditures................ 2,774 39,094 2,178 6,222
Net cash provided by (used in)
operating activities.............. 41,070 (25,121) (8,781) (20,714)
Net cash used in investing
activities........................ (4,483) (81,775) (4,440) (8,806)
Net cash provided by (used in)
financing activities.............. (23,505) 109,229 13,862 17,569
</TABLE>

17
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999

(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:

Cash and cash equivalents........... $ 8,292 $ 3,647 $ 9,513 $ 23,969 $ 24,182

Working capital..................... 64,603 47,857 43,009 54,340 98,273

Total assets........................ 158,857 191,577 266,929 277,608 411,783

Current portion of long-term debt
and capital lease obligations..... 4,061 8,378 33,800 4,939 5,414

Long-term debt and capital lease
obligations....................... 32,396 39,015 47,138 57,188 121,929

Preferred stock..................... 500 500 -- -- 39,204

Total stockholders' equity.......... 50,728 39,332 42,097 39,174 48,621

<CAPTION>
First Fiscal Quarter(a)
---------------------------
1999 2000
(Unaudited)
(In thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $ 23,113 $ 11,736
Working capital..................... 66,501 102,944
Total assets........................ 268,624 451,236
Current portion of long-term debt
and capital lease obligations..... 3,266 7,500
Long-term debt and capital lease
obligations....................... 71,583 142,215
Preferred stock..................... -- 39,595
Total stockholders' equity.......... 37,349 39,197
</TABLE>

------------------------------
(a) The financial data for the first fiscal quarter of 1999 and 2000 is as of
and for the three-month periods ended April 4, 1999 and April 2, 2000,
respectively.

(b) Includes $341, $462, $10 and $3,987 of non-cash charges related to
stock-based compensation in the year ended December 31, 1998, the year ended
December 31, 1999, the First Fiscal Quarter of 1999 and the First Fiscal
Quarter of 2000, respectively.

(c) Adjusted EBITDA is defined as earnings before net interest expense, income
taxes, depreciation and amortization, restructuring and other asset
write-downs and other non-recurring items as well as non-operating expenses
including foreign exchange gain (loss). Adjusted EBITDA is presented because
we believe it is a meaningful indicator of our operating performance.
Adjusted EBITDA is not intended to represent cash flows for the period, nor
is it presented as an alternative to operating income or as an indicator of
operating performance. It should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP in
the United States and is not indicative of operating income or cash flow
from operations as determined under GAAP. Our method of computation may or
may not be comparable to other similarly titled measures of other companies.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING
STATEMENTS AND INVOLVES NUMEROUS RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT
LIMITED TO, THOSE DESCRIBED IN THE "RISK FACTORS" SECTION OF THIS PROSPECTUS.
OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY
FORWARD-LOOKING STATEMENTS.

Overview

We are a leading global provider of advanced electronics manufacturing
services. We provide these services to OEMs primarily in the voice and data
communications, computer and related peripherals, medical equipment and
industrial and consumer electronics industries. Our headquarters are in Concord,
Massachusetts, and we have manufacturing operations in the United States, Spain,
Ireland, Singapore and Malaysia. We operate each of our manufacturing facilities
through direct or indirect wholly-owned subsidiaries of Manufacturers' Services
Limited, a Delaware corporation. We have a corporate organization that was
established to accomplish company-wide objectives and provide functional support
for our manufacturing sites and design centers located throughout the world. The
functional support provided includes marketing, customer support, information
technology, product development and quality assurance, materials and supplier
management and finance and administration. Our corporate operations do not
generate any sales and the expense levels have grown commensurate with the
growth in customer operations and the associated demand for such functional
support. Fluctuation in our corporate expenses are discussed more fully in the
period-to-period comparisons below. Since our founding in 1994, we have
experienced substantial growth driven primarily by recent acquisitions of
existing OEM manufacturing facilities and by the increasing number of OEMs who
are outsourcing their manufacturing requirements. We intend to continue to
actively pursue strategic acquisitions and to benefit from this increasing trend
by OEMs to outsource over the next several years.

We derive most of our net sales under purchase orders from our customers. We
recognize sales, net of product return and warranty costs, typically at the time
of product shipment or as services are rendered. Our cost of goods sold includes
the cost of electronic components and materials, labor costs and manufacturing
overhead. The procurement of raw materials and components requires us to commit
significant working capital to our operations and to manage the purchasing,
receiving, inspection and stocking of these items.

Our operating results are affected by the level of capacity utilization in
our manufacturing facilities, indirect labor costs and selling, general and
administrative expenses. Gross margins and operating income generally improve
during periods of high-volume and high-capacity utilization in our manufacturing
facilities and decline during periods of low-volume and low-capacity
utilization.

Our business strategy includes the continued expansion of our global
manufacturing network. Currently, approximately 78% of our net sales worldwide
are denominated in US dollars, while our labor and utility costs in facilities
outside of the United States are denominated in local currencies. Foreign
currency gains/losses are the result of transacting business in a currency that
is different from the functional currency of our operating entity and the
movements in those currencies between

19
<PAGE>
the time a transaction is recorded for financial reporting purposes and the time
payment is made or received. We currently use forward foreign exchange contracts
on a limited basis, to hedge our foreign currency risk but not for trading
purposes. We expect to continue to utilize forward foreign exchange contracts
only to the extent that they hedge specific underlying transactions that create
foreign currency exchange rate risk for us. Any increase or decrease in our use
of derivative financial instruments will likely be as a result of these
contracts.

Recent Acquisitions

A significant portion of our growth has come from recent acquisitions, which
have strengthened existing customer relationships, added new customers and
increased our range of service offerings.

In November 1999, we acquired from 3Com selected inventory, fixed assets and
other intangibles located in Salt Lake City, Utah, for $80.8 million. The
acquisition was financed with the proceeds from the issuance of $50.0 million of
senior preferred stock and warrants and borrowings under our bank credit
facility. In connection with this acquisition, we entered into a two-year supply
agreement with Palm to produce Palm computing devices and a two-year supply
agreement with 3Com to produce modems and network interface cards. We also
retained the facility employees. Each of the supply agreements reference minimum
amounts of product to be purchased by Palm and 3Com over the life of the
contract. In addition, both supply agreements provide for the segregation of
product costs into costs that can be passed on in the form of pricing to Palm or
3Com on a dollar for dollar basis, and costs that are subject to phased cost
reductions and which will be passed on in the form of phased price reductions to
Palm or 3Com over the life of the contract. The costs that are subject to phased
reductions range from 18% to 45% of the unit pricing depending on the product
being produced. We expect to be able to reduce our costs at a rate that is
consistent with the phased price reductions provided for in the supply
agreements. Accordingly, we expect these provisions of the supply agreements to
have a neutral effect on our gross margins during the term of the supply
agreements.

In the first half of 1999, we acquired two electronics design firms,
Electronic System Packaging and Ronlin Design, for an aggregate purchase price
of approximately $4.4 million.

In the first half of 1998, we acquired selected inventory and fixed assets
of IBM located in Charlotte, North Carolina, for $30.1 million in cash. The
acquisition of these assets was financed with borrowings under our bank credit
facility. In connection with this acquisition, we also entered into a three-year
supply agreement to provide systems assembly and integration, testing and order
fulfillment services for several divisions of IBM and retained the facility
employees.

Restructuring and Other Asset Writedowns

Generally, we enter into business acquisitions or asset acquisitions and
related supply agreements with the intention of improving the existing
manufacturing operations, reducing costs and improving operating margins. To
accomplish this, we typically assess the manufacturing processes and employee
base and restructure the operations.

20
<PAGE>
During the fourth quarter of 1999, we approved a restructuring plan designed
to improve our manufacturing operations at our Charlotte facility. It is
comprised of $0.8 million of severance costs related to a reduction of 33
manufacturing and managerial employees. As of the fiscal quarter ended April 2,
2000, we have paid out $0.5 million in severance payments. We expect the
restructuring plan to be substantially completed by the end of our next fiscal
quarter, and the expected savings from the implementation of this plan are
estimated to be $1.2 million annually. These expense savings will be realized in
the year ending December 31, 2000 and will be reflected in cost of goods sold in
our reported results of operations.

In the fourth quarter of 1998, we approved a plan to restructure various
operations in the United States, Spain and Asia. The total restructuring charge
for this plan was $6.7 million, comprised of the write-off of capitalized
assets, lease termination costs and severance costs related to a reduction of 72
manufacturing and managerial employees. As of December 31, 1999, this plan was
substantially completed, and in 1999 we realized substantially all of the
$3.4 million in annual savings contemplated as a result of implementing this
plan. These savings are reflected in cost of goods sold in our reported results
of operations.

In the fourth quarter of 1997, we approved a plan to restructure various
operations in the United States and Spain. Under this restructuring plan, we
closed a facility located in Fremont, California, during the first quarter of
1998. During the year ended December 31, 1997, the Fremont facility generated
net sales of $19.0 million and a net operating loss of $5.4 million, excluding
the restructuring charge. Restructuring costs totaling $7.2 million were
recorded for the closing of this facility. These costs consisted of the
write-off of capitalized assets, lease termination costs and severance costs
related to a reduction of 103 manufacturing and managerial employees. This
restructuring plan also included charges of $4.9 million consisting of the
severance costs related to a reduction of 40 manufacturing and managerial
employees located at our Valencia facility. This restructuring plan was
substantially completed by December 31, 1998. We are currently realizing
substantially all of the $7.3 million in annual savings contemplated by this
plan. These savings are reflected in cost of goods sold in our reported results
of operations.

We recorded no restructuring charges during the fiscal quarter ended
April 2, 2000. The major components of our restructuring plans recorded in prior
years were as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
(In thousands)
<S> <C> <C> <C>
Employee severance........................... $ 5,387 $3,673 $780
Asset writedowns............................. 4,932 1,135 --
Lease terminations........................... 1,000 1,921 --
Other........................................ 775 -- --
------- ------ ----
$12,094 $6,729 $780
======= ====== ====
</TABLE>

Asset writedowns relate to the closing of facilities and the losses
resulting from equipment dispositions. Other charges include miscellaneous costs
and other commitments. Some severance charges are being paid over periods
greater than one year.

21
<PAGE>
The following table details the activity in our restructuring reserve:

<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1998 1999 Total
(In thousands)
<S> <C> <C> <C> <C>
Restructuring provision................ $12,094 $ -- $ -- $12,094
Cash payments.......................... -- -- -- --
Asset writedowns....................... 4,932 -- -- 4,932
------- ------ ---- -------
Balance at December 31, 1997........... 7,162 -- -- 7,162
Restructuring provision................ -- 6,729 -- 6,729
Cash payments.......................... 6,958 1,127 -- 8,085
Asset writedowns....................... -- 1,135 -- 1,135
------- ------ ---- -------
Balance at December 31, 1998........... 204 4,467 -- 4,671
Restructuring provision................ -- -- 780 780
Cash payments.......................... 204 3,819 266 4,289
Asset writedowns....................... -- 494 -- 494
------- ------ ---- -------
Balance at December 31, 1999........... -- 154 514 668
Cash payments.......................... -- 94 275 369
Asset writedowns....................... -- -- -- --
------- ------ ---- -------
Balance at April 2, 2000............... $ -- $ 60 $239 $ 299
======= ====== ==== =======
</TABLE>

The restructuring reserve of $0.3 million at April 2, 2000 consists of
liabilities for severance payments and will be utilized by the end of our next
fiscal quarter.

Results of Operations

The following table sets forth specified operating data and percentages of
net sales for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------
1997 1998 1999
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales....................... $562,666 100.0% $837,993 100.0% $920,722 100.0%
Cost of goods sold.............. 526,787 93.6 792,734 94.6 865,489 94.0
-------- ----- -------- ----- -------- -----
Gross profit.................... 35,879 6.4 45,259 5.4 55,233 6.0

Selling, general and
administrative(b)............. 28,037 5.0 29,835 3.6 38,042 4.1
Restructuring and other asset
writedowns.................... 12,094 2.1 6,729 0.8 780 0.1
Litigation settlement........... -- -- -- -- -- --
-------- ----- -------- ----- -------- -----
Operating income (loss)......... (4,252) (0.8) 8,695 1.0 16,411 1.8
Interest expense, net........... (7,723) (1.4) (10,161) (1.2) (8,081) (0.9)
Foreign exchange gain (loss).... (931) (0.2) 721 0.1 (2,510) (0.3)
-------- ----- -------- ----- -------- -----
Income (loss) before provision
for income taxes and
extraordinary loss............ (12,906) (2.3) (745) (0.1) 5,820 0.6
Provision for income taxes...... 4,372 0.8 3,294 0.4 3,810 0.4
-------- ----- -------- ----- -------- -----
Income (loss) before
extraordinary loss............ (17,278) (3.1) (4,039) (0.5) 2,010 0.2
Extraordinary loss.............. -- -- (2,202) (0.2) -- --
-------- ----- -------- ----- -------- -----
Net income (loss)............... $(17,278) (3.1)% $ (6,241) (0.7)% $ 2,010 0.2%
======== ===== ======== ===== ======== =====

<CAPTION>
First Fiscal Quarter(a)
------------------------------------------
1999 2000
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net sales....................... 206,964 100.0% 332,820 100.0%
Cost of goods sold.............. 195,879 94.6 316,505 95.1
-------- ----- -------- -----
Gross profit.................... 11,085 5.4 16,315 4.9
Selling, general and
administrative(b)............. 7,928 3.9 16,702 5.0
Restructuring and other asset
writedowns.................... -- -- -- --
Litigation settlement........... -- -- 6,000 1.8
-------- ----- -------- -----
Operating income (loss)......... 3,157 1.5 (6,387) (1.9)
Interest expense, net........... (1,702) (0.8) (3,476) (1.1)
Foreign exchange gain (loss).... (1,160) (0.6) (673) (0.2)
-------- ----- -------- -----
Income (loss) before provision
for income taxes and
extraordinary loss............ 295 0.1 (10,536) (3.2)
Provision for income taxes...... 192 0.1 287 0.1
-------- ----- -------- -----
Income (loss) before
extraordinary loss............ 103 -- (10,823) (3.3)
Extraordinary loss.............. -- -- -- --
-------- ----- -------- -----
Net income (loss)............... $ 103 -- $(10,823) (3.3)%
======== ===== ======== =====
</TABLE>

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

(a) The financial data for the first fiscal quarter of 1999 and 2000 is as of
and for the three-month periods ended April 4, 1999 and April 2, 2000,
respectively.

22
<PAGE>
Fiscal Quarter Ended April 2, 2000 Compared to Fiscal Quarter Ended April 4,
1999

NET SALES

Net sales for the quarter ended April 2, 2000 increased $125.8 million, or
60.8%, to $332.8 million from $207.0 million for the quarter ended April 4,
1999. This increase in net sales was the result of a $129.2 million increase
attributable to the acquisition of our Salt Lake City facility and a
$36.4 million increase resulting from increases in volume from three customers.
These increases were partially offset by volume reductions in two customers'
programs of $43.9 million, resulting from competitive pressures in those
customers' industries.

GROSS PROFIT

Gross profit decreased to 4.9% of net sales for the quarter ended April 2,
2000 from 5.4% of net sales for the quarter ended April 4, 1999. This decrease
resulted from start-up operating costs at our Salt Lake City facility (0.7% of
net sales) and a price reduction on one customer's program (0.4% of net sales).
These decreases were partially offset by the positive effect of having a mix of
customer programs for the quarter ended April 2, 2000 with gross margins that
were higher than the mix of customer programs for the quarter ended April 4,
1999 (0.7% of net sales).

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expense for the quarter ended April 2,
2000 increased to $16.7 million, or 5.0% of net sales, from $7.9 million, or
3.9% of net sales, for the quarter ended April 4, 1999. This increase related to
the increase in amortization of intangibles arising from the asset acquisition
of our Salt Lake City facility ($1.5 million), expenses related to human
resources, accounting and information systems necessary to support our Salt Lake
City facility ($1.5 million), staffing increases at all of our sites to support
growth in customer programs ($1.7 million) and an expense of $4.0 million
related to stock and option grants made to our senior managers and other key
employees.

LITIGATION SETTLEMENT

In April 2000, we reached an understanding to settle a claim for damages
arising from a potential acquisition that was not consummated. As a result, we
recorded a $6.0 million charge in the fiscal quarter ended April 2, 2000.

FOREIGN EXCHANGE GAINS/LOSSES

Foreign exchange losses for the quarter ended April 2, 2000 were
$0.7 million compared with foreign exchange losses of $1.2 million for the
quarter ended April 4, 1999. Approximately $0.5 million and $1.2 million of our
foreign exchange loss for the quarters ended April 2, 2000 and April 4, 1999,
respectively, is unrealized and relates to the strengthening of the US dollar in
relation to the Spanish peseta in connection with a US dollar denominated loan
for our Valencia facility.

NET INTEREST

Net interest expense increased to $3.5 million for the quarter ended
April 2, 2000 from $1.7 million for the quarter ended April 4, 1999, reflecting
higher average borrowings and the impact of increasing interest rates.

23
<PAGE>
PROVISION FOR INCOME TAXES

Provision for income taxes was $0.3 million for the quarter ended April 2,
2000 and $0.2 million for the quarter ended April 4, 1999. Our tax provisions in
both quarters resulted from the mix of profits and losses experienced by us
across the jurisdictions within which we operate. Losses in the United States
and Ireland provided us with no income tax benefit while profits in Spain and
Asia required us to record tax provisions.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

NET SALES

Net sales for the year ended December 31, 1999 increased $82.7 million, or
9.9%, to $920.7 million from $838.0 million for the year ended December 31,
1998. This increase in net sales was the result of a $138.1 million increase
attributable to operating our Charlotte facility for the full year in 1999, as
compared to seven months in 1998, and the acquisition of our Salt Lake City
facility in November 1999. In addition, $81.3 million of this increase was
attributable to growth from three existing customers. These increases were
partially offset by $90.0 million resulting from the cancellation of a
customer's manufacturing program caused by the sale of the business by that
customer to a third party and $39.5 million resulting from a reduction in unit
volumes of a different customer due to competitive pressures in that customer's
industry.

GROSS PROFIT

Gross profit increased to 6.0% of net sales for the year ended December 31,
1999 from 5.4% of net sales for the year ended December 31, 1998. A portion of
this increase (0.1% of net sales) resulted from having a mix of customer
programs in 1999 in which the gross margins were higher than the mix of customer
programs in 1998. A portion of the increase (0.2% of net sales) was due to the
improvement in the utilization of our manufacturing capacity. In addition, the
operations of our Fremont facility in 1998, prior to its closing, negatively
impacted margins in that year (0.3% of net sales).

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expense for the year ended December 31,
1999 increased to $38.0 million, or 4.1% of net sales, from $29.8 million, or
3.6% of net sales, for the year ended December 31, 1998. This increase was
comprised of expenses of $2.4 million related to the impact of operating our
Charlotte facility for a full year, $1.3 million related to the modification of
an equipment leasing arrangement, $1.6 million related to the expansion of our
information systems to support our additional facilities and $1.1 million
related to our acquisition of two electronics design firms and our Salt Lake
City facility. This increase was partially offset by the reduction of expenses
totaling $0.7 million resulting from the closing of our Fremont facility in
1998.

FOREIGN EXCHANGE GAINS/LOSSES

Foreign exchange loss for the year ended December 31, 1999 was $2.5 million
compared with a foreign exchange gain of $0.7 million for the year ended
December 31, 1998. Most of our foreign exchange loss in 1999 is unrealized and
relates to the strengthening of the US dollar in relation to the Spanish peseta
in connection with a US dollar denominated loan for our Valencia facility.

24
<PAGE>
INTEREST EXPENSE

Net interest expense decreased to $8.1 million for the year ended
December 31, 1999 from $10.2 million for the year ended December 31, 1998,
reflecting lower average borrowings during 1999, partially offset by the impact
of increasing interest rates.

PROVISION FOR INCOME TAXES

Provision for income taxes increased to $3.8 million for the year ended
December 31, 1999 compared with $3.3 million for the year ended December 31,
1998. Our tax provision in both years resulted from the mix of profits and
losses we experienced across the jurisdictions within which we operate. Losses
in the United States and Ireland provided us with no income tax benefit while
profits in Spain and Singapore required us to record tax provisions.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

NET SALES

Net sales for the year ended December 31, 1998 increased $275.3 million, or
48.9%, to $838.0 million from $562.7 million for the year ended December 31,
1997. This increase in net sales was the net result of a $175.3 million increase
attributable to our acquisition of the Charlotte facility in June 1998 and an
increase of $135.2 million attributable to growth from five existing customers.
These increases were partially offset by volume reduction in one customer's
program totaling $42.0 million resulting from competitive pressures in this
customer's industry.

GROSS PROFIT

Gross profit decreased to 5.4% of net sales for the year ended December 31,
1998 from 6.4% of net sales for the year ended December 31, 1997. This decrease
resulted from a price reduction on a customer program (1.3% of net sales) and
the negative effect of having a mix of customer programs in 1998 in which the
gross margins were lower than the mix of customer programs in 1997 (1.4% of net
sales). These decreases were partially offset by a price increase on a customer
program (0.8% of net sales) and by increased capacity utilization due to higher
production volumes at several of our manufacturing facilities (0.9% of net
sales).

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expense for the year ended December 31,
1998 increased to $29.8 million, or 3.6% of net sales, from $28.0 million, or
5.0% of net sales, for the year ended December 31, 1997. This increase was
comprised of additional spending on our information systems, our logistics
business and our Charlotte facility. The information systems increases ($0.6
million) were attributable to additional personnel and capital investments that
were necessary to support the addition of the Charlotte facility and growth in
other customer programs. The logistics expenses ($0.8 million) were related to
sales, management and administrative expenses necessary to support the startup
and growth of our logistics business. The increases in Charlotte ($0.4 million)
were related to the establishment of accounting and human resources support for
the facility which was acquired in June 1998.

25
<PAGE>
FOREIGN EXCHANGE GAINS/LOSSES

Foreign exchange gain for the year ended December 31, 1998 was $0.7 million
compared with a foreign exchange loss of $0.9 million for the year ended
December 31, 1997. Our foreign exchange loss in 1998 and gain in 1997 resulted
from various transactions in all of our foreign operating entities and reflects
the general fluctuation in the value of the US dollar in relation to other
currencies.

INTEREST EXPENSE

Net interest expense increased to $10.2 million for the year ended
December 31, 1998 from $7.7 million for the year ended December 31, 1997. This
increase was due to increased borrowings to support working capital requirements
resulting from business expansion during 1998.

PROVISION FOR INCOME TAXES

Provision for income taxes decreased to $3.3 million for the year ended
December 31, 1998 compared with $4.4 million for the year ended December 31,
1997. Our tax provision in both years resulted from the mix of profits and
losses experienced by us across the jurisdictions within which we operate.
Losses in the United States and Ireland provided us with no income tax benefit
while profits in Spain and Asia required us to record tax provisions.

26
<PAGE>
Quarterly Results of Operations

The following table sets forth our unaudited financial information for the
past eight quarterly periods. The information presented has been derived from
our unaudited consolidated financial statements that, in our opinion, reflect
all normal, recurring adjustments necessary for a fair presentation. The
operating results for any quarter are not necessarily indicative of results for
any future period.

<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------------------------
July 4, Oct. 3, Dec. 31, April 4, July 4, Oct. 4, Dec. 31, April 2,
1998 1998 1998 1999 1999 1999 1999 2000
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................ $177,659 $226,603 $244,239 $206,964 $221,043 $221,068 $271,647 $332,820
Cost of goods sold............... 166,898 215,039 231,997 195,879 207,487 206,408 255,715 316,505
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit..................... 10,761 11,564 12,242 11,085 13,556 14,660 15,932 16,315
Selling, general and
administrative(a).............. 7,623 7,548 7,780 7,928 10,253 9,639 10,222 16,702
Restructuring and other asset
writedowns..................... -- -- 6,729 -- -- -- 780 --
Litigation settlement............ -- -- -- -- -- -- -- 6,000
-------- -------- -------- -------- -------- -------- -------- --------
Operating income (loss).......... 3,138 4,016 (2,267) 3,157 3,303 5,021 4,930 (6,387)
Interest expense, net............ 2,740 2,991 1,598 1,702 1,773 1,900 2,706 3,476
Foreign exchange gain (loss)..... 439 1,979 (1,543) (1,160) (1,215) 858 (993) (673)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before provision
for income taxes and
extraordinary loss............. 837 3,004 (5,408) 295 315 3,979 1,231 (10,536)
Provision for income taxes....... 868 1,746 (740) 192 205 2,613 800 287
Income (loss) before
extraordinary loss............. (31) 1,258 (4,668) 103 110 1,366 431 (10,823)
Extraordinary loss............... -- 2,202 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)................ $ (31) $ (944) $ (4,668) $ 103 $ 110 $ 1,366 $ 431 $(10,823)
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss) applicable to
common stock................... $ (31) $ (944) $ (4,668) $ 103 $ 110 $ 1,366 $ (378) $(12,954)
======== ======== ======== ======== ======== ======== ======== ========
Basic income (loss) per share:
Income (loss) before
extraordinary loss........... $ -- $ 0.07 $ (0.25) $ 0.01 $ 0.01 $ 0.07 $ (0.02) $ (0.66)
Extraordinary loss............. $ -- $ (0.12) $ -- $ -- $ -- $ -- $ -- $ --
Net income (loss).............. $ -- $ (0.05) $ (0.25) $ 0.01 $ 0.01 $ 0.07 $ (0.02) $ (0.66)
Weighted average shares
outstanding.................. 18,700 18,804 18,849 19,053 19,453 19,518 19,546 19,673
Diluted income (loss) per share:
Income (loss) before
extraordinary loss........... $ -- $ 0.07 $ (0.25) $ 0.01 $ 0.01 $ 0.07 $ (0.02) $ (0.66)
Extraordinary loss............. $ -- $ (0.12) $ -- $ -- $ -- $ -- $ -- $ --
Net income (loss).............. $ -- $ (0.05) $ (0.25) $ 0.01 $ 0.01 $ 0.07 $ (0.02) $ (0.66)
Weighted average shares
outstanding.................. 18,700 18,966 18,849 19,208 19,576 19,636 19,546 19,673

Other Financial Data:
Adjusted EBITDA(b)............... 5,639 6,295 8,441 6,088 6,414 8,464 11,120 9,684
</TABLE>

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

(a) Includes $341, $10, $10, $10, $432 and $3,987 of non-cash charges related to
stock-based compensation in the three months ended July 4, 1998, April 4,
1999, July 4, 1999, October 4, 1999, December 31, 1999 and April 2, 2000,
respectively.

(b) Adjusted EBITDA is defined as earnings before net interest expense, income
taxes, depreciation and amortization, restructuring and other asset
write-downs and other non-recurring items as well as non-operating expenses
including foreign exchange gain (loss). Adjusted EBITDA is presented because
we believe it is a meaningful indicator of our operating performance.
Adjusted EBITDA is not intended to represent cash flows for the period, nor
is it presented as an alternative to operating income or as an indicator of
operating performance. It should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP in
the United States and is not indicative of operating income or cash flow
from operations as determined under GAAP. Our method of computation may or
may not be comparable to other similarly titled measures of other companies.

27
<PAGE>
The following table sets forth our financial information stated as a
percentage of net sales for the past eight quarterly periods:

<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------------------------
July 4, Oct. 3, Dec. 31, April 4, July 4, Oct. 3, Dec. 31, April 2,
1998 1998 1998 1999 1999 1999 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........... 93.9 94.9 95.0 94.6 93.9 93.4 94.1 95.1
----- ----- ----- ----- ----- ----- ----- -----
Gross profit................. 6.1 5.1 5.0 5.4 6.1 6.6 5.9 4.9
Selling, general and
administrative............. 4.3 3.3 3.2 3.8 4.6 4.4 3.8 5.0
Restructuring and other asset
writedowns................. -- -- 2.8 -- -- -- 0.3 --
Litigation settlement........ -- -- -- -- -- -- -- 1.8
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss)...... 1.8 1.8 (0.9) 1.5 1.5 2.3 1.8 (1.9)
Interest expense, net........ 1.5 1.3 0.7 0.8 0.8 0.9 1.0 1.0
Foreign exchange gain
(loss)..................... 0.2 0.9 (0.6) (0.6) (0.5) 0.4 (0.4) (0.2)
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
provision for income taxes
and extraordinary loss..... 0.5 1.3 (2.2) 0.1 0.1 1.8 0.5 (3.2)
Provision for income taxes... 0.5 0.8 (0.3) 0.1 0.1 1.2 0.3 0.1
Income (loss) before
extraordinary loss......... -- 0.6 (1.9) -- -- 0.6 0.2 (3.3)
Extraordinary loss........... -- 1.0 -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)............ --% (0.4)% (1.9)% --% --% 0.6% 0.2% (3.3)%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

Liquidity and Capital Resources

Net cash used in operating activities of $20.7 million for the quarter ended
April 2, 2000 resulted from an increase in operating assets and liabilities of
$21.6 million, net loss of $10.8 million, depreciation and amortization of
$6.1 million and other non-cash items aggregating $5.6 million. Other non-cash
items include amortization of capitalized finance fees of $0.3 million, foreign
exchange gain of $0.6 million, non-cash charges for equity awards of
$3.8 million and other non-cash charges of $1.0 million associated with the
obligations of Donaldson, Lufkin & Jenrette Securities Corporation under the
settlement agreement with Lockheed Martin Corporation. See "Business--Legal
Proceedings" for further details on the settlement with Lockheed Martin
Corporation. Net cash used by operating activities of $8.8 million for the
quarter ended April 4, 1999 resulted from an increase in operating assets and
liabilities of $13.2 million, net income of $0.1 million, depreciation and
amortization of $2.9 million and other non-cash items aggregating $1.4 million.
Other non-cash items include amortization of capitalized finance fees of
$0.2 million and foreign exchange loss of $1.2 million. The increase in
depreciation and amortization for the quarter ended April 2, 2000 compared to
the quarter ended April 4, 1999 reflects our acquisition of the Salt Lake City
facility in November 1999 and the implementation of a new enterprise resource
planning system in Charlotte during 1999 subsequent to the quarter ended
April 4, 1999.

Net cash used in investing activities for the quarter ended April 2, 2000
was $8.8 million, consisting of $6.2 million of capital expenditures and
$2.6 million of internal use software. Capital

28
<PAGE>
expenditures consisted of production equipment purchased for our Valencia and
Salt Lake City manufacturing sites and computer hardware and software in Salt
Lake City. Net cash used in investing activities for the quarter ended April 4,
1999 was $4.4 million, consisting of $2.2 million of capital expenditures and
$2.2 million of internal-use software. Capital expenditures consisted of
production equipment for our Arden Hills, Charlotte and Asia manufacturing sites
and computer hardware and software.

Net cash provided by financing activities for the quarter ended April 2,
2000 was $17.6 million, consisting of net borrowings of $19.4 million under our
bank credit facility and $1.8 million of dividends paid on our senior preferred
stock. Net cash provided by financing activities for the quarter ended April 4,
1999 was $13.9 million, consisting of net borrowings of $12.8 million under our
bank credit facility and net proceeds of $1.1 million from the issuance of
common stock under shareholder plans for three of our founders.

Net cash used in operating activities of $25.1 million for the year ended
December 31, 1999 resulted from an increase in operating assets and liabilities
of $47.6 million, net income of $2.0 million, depreciation and amortization of
$14.4 million and other non-cash items aggregating $6.1 million. Other non-cash
items include amortization of capitalized finance fees of $0.8 million, foreign
exchange loss of $2.2 million, write-downs and loss on disposal of fixed assets
of $1.9 million and non-cash charges for share issuances of $0.5 million. Cash
provided by operating activities of $41.1 million for the year ended
December 31, 1998 resulted from a decrease in operating assets and liabilities
of $29.7 million, net loss of $6.2 million, depreciation and amortization of
$10.9 million and other non-cash items aggregating $6.7 million. The increase in
depreciation and amortization in 1999 compared to 1998 reflects increased
capital expenditures in 1999 attributable to the implementation of a new
enterprise resource planning system in our Charlotte facility and the addition
of manufacturing assets in several facilities to support additional production
volume. Increased depreciation and amortization also resulted from our
acquisition of the Salt Lake City facility in November 1999. Cash used by
operating activities of $17.4 million for the year ended December 31, 1997
resulted from an increase in operating assets and liabilities of $17.4 million,
net loss of $17.3 million, depreciation and amortization of $8.4 million and
other non-cash items aggregating $8.9 million.

Net cash used in investing activities for the year ended December 31, 1999
was $81.8 million consisting primarily of capital expenditures of $45.1 million
and acquisitions of intangible assets of $35.3 million in connection with our
Salt Lake City facility. Net cash used in investing activities for the year
ended December 31, 1998 was $4.5 million, which consisted of $2.5 million of
internal use software and $2.0 million of production equipment and computer
hardware. Approximately half of the $2.0 million was related to our Charlotte
acquisition. Net cash used in investing activities for the year ended
December 31, 1997 was $26.0 million and consisted of production equipment and
computer hardware purchased for our manufacturing sites in Athlone, Valencia,
Fremont and Asia. We expect capital expenditures in 2000, excluding the effects
of any acquisitions, to be approximately $28.0 million, primarily for the
purchase of additional manufacturing assets.

Net cash provided by financing activities for the year ended December 31,
1999 was $109.2 million, principally consisting of net borrowings of
$64.6 million under our bank credit facility and net proceeds of $49.1 million
from the issuance of senior preferred stock and warrants

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<PAGE>
in connection with our acquisition of the Salt Lake City facility. Net cash used
in financing activities for the year ended December 31, 1998 was $23.5 million,
principally consisting of net repayments under our bank credit facility. Net
cash provided by financing activities for the year ended December 31, 1997 was
$50.2 million, principally consisting of net borrowings of $25.9 million under
our bank credit facility and proceeds of $25.4 million from the issuance of our
common stock.

At April 2, 2000, we had $74.2 million outstanding under our term loan
facilities and $64.1 million outstanding under our revolving credit facility
with $10.9 million available for additional borrowings. Borrowings under our
existing bank credit facility are limited by a borrowing base calculation based
on defined levels of accounts receivable and inventory. At April 2, 2000, the
total borrowing base was $187.2 million.

The interest rate on our revolving credit facility is, at our option,
either:

- 2.00% per annum plus the base rate, which is the higher of:

-- the rate as publicly announced from time to time by Bank of America
as its "reference rate", or

-- the federal funds effective rate plus 0.50% per annum; or

- the reserve-adjusted London interbank offered rate, or Adjusted LIBOR,
plus 3.00% per annum.

The applicable margins for our bank credit facility will be subject to
adjustment, +/-0.25%, based on the ratio of our consolidated total debt to
consolidated EBITDA (as defined in our bank credit facility). The interest rate
on our term loan facility is, at our option, either:

- the base rate plus 2.75% per annum; or

- the sum of Adjusted LIBOR plus 3.75% per annum.

Based upon discussions with our principal lender under our bank credit
facility, we expect to refinance our existing indebtedness under our bank credit
facility upon consummation of this offering. We expect that the new bank credit
facility will provide for borrowings of up to $150.0 million and have a final
maturity in 2004. We anticipate that the new bank credit facility will be
secured by substantially all of our assets and will generally contain less
restrictive covenants, more favorable pricing terms and a lower interest rate
than our existing bank credit facility. To date, no definitive agreement has
been executed, and no assurance can be given that the new bank credit facility
will be executed on these terms or entered into at all.

On April 2, 2000, we had 2,000,000 shares of senior preferred stock
outstanding. The senior preferred stock was issued, along with warrants to
purchase 1,160,542 shares of our common stock at an exercise price of $4.80 per
share, in connection with the acquisition of our Salt Lake City facility. The
senior preferred stock and warrants were recorded at their estimated fair values
of $38.4 million and $10.7 million, respectively. This preferred stock has a
dividend rate of 14% per annum, payable quarterly in cash, through November 26,
2000 and thereafter, a rate of 15% per annum, payable in cash at the mandatorily
redeemable date or in additional shares of senior preferred stock. In the event
that we fail to redeem the senior preferred stock by November 26,

30
<PAGE>
2006, the dividend rate will increase by 0.5% per quarter, up to a maximum
dividend rate of 25% per annum. So long as any shares of senior preferred stock
are outstanding, we are subject to restrictions on the payment of dividends on
our common stock and any other preferred stock in addition to restrictions on
the redemption or purchase of our common stock. Until November 26, 2000, we may,
at our option, redeem all of the senior preferred stock at 114% of its
liquidation value, or $57.0 million. Thereafter, we may redeem the shares at
115% of its liquidation value. All redemptions of senior preferred stock shall
include accrued and unpaid dividends payable thereon. We intend to retire all of
the outstanding shares of senior preferred stock with the proceeds from this
offering. See "Use of Proceeds." Warrants to purchase 222,730 shares of our
common stock are immediately exercisable while warrants to purchase 937,812
shares of our common stock are held in escrow and will be released and become
exercisable if the senior preferred stock remains outstanding on the first
anniversary date of its issuance.

We believe the proceeds of this offering, together with our current level of
working capital, cash generated from operations, leasing capabilities and
amounts available under our existing revolving credit facility will be adequate
to meet our anticipated future operating expenses, capital expenditures and debt
obligations for the next twelve months. Our liquidity needs beyond the next
twelve months will not be materially different from current needs except for the
financing requirements of future acquisitions.

Following the consummation of this offering and the application of the net
proceeds as described in this prospectus, we will have $41.8 million available
under our bank credit facility to make future acquisitions and for general
corporate purposes. We currently have no agreements or understandings about any
specific acquisition. However, we intend to continue our acquisition strategy
which could result in significant future acquisitions. If available resources
are not sufficient to finance these acquisitions, we would be required to seek
additional equity or debt financing. There can be no assurance that funds from
these sources, if required, will be available on terms suitable to us, if at
all.

Quantitative and Qualitative Disclosure Relating to Market Risks

INTEREST RATE RISK

Our exposure to interest rate risk arises from variable rate debt
arrangements entered into for other than trading purposes. The interest rate
risk on our fixed-rate debt is not material as the amounts outstanding under
these arrangements are not significant.

The cost of borrowings under our term loan facility is the applicable spread
plus the underlying cost of funds option (either the base rate or Adjusted
LIBOR). The applicable spread on the base rate loans is 2.75%, and the spread on
the Adjusted LIBOR loans is 3.75%. The cost of borrowing under our revolving
credit facility is the applicable spread plus the underlying cost of funds
option (either the base rate or Adjusted LIBOR). The applicable spread on the
base rate loans varies between 1.75% and 2.25% based on our consolidated
leverage ratio. The applicable spread on the Adjusted LIBOR loans varies between
2.75% and 3.25% based on our consolidated leverage ratio.

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<PAGE>
The following table summarizes our market risks associated with our variable
rate debt in place at April 2, 2000 based on current maturities and interest
rates:

<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
(Dollars in thousands)
2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C>
Term loans balance....... $73,688 $72,938 $72,188 $71,438 --
Effective interest
rate................... 9.938% 9.938% 9.938% 9.938% 9.938%
Principal payments....... $ 688 $ 750 $ 750 $ 750 $71,438
Interest expense......... $ 7,372 $ 7,297 $ 7,223 $ 7,149 $ 4,170

Revolving facility
balance................ $64,100 $64,100 -- -- --
Available credit......... $75,000 $75,000 -- -- --
Effective interest
rate................... 10.259% 10.259% 10.259% -- --
Fee on unused portion.... 0.47% 0.47% 0.47% -- --
Interest expense......... $ 6,877 $ 6,877 $ 4,012 -- --
</TABLE>

The carrying cost of the above credit facility approximates fair value due
to the variable nature of the interest rates.

FOREIGN CURRENCY EXCHANGE RATE RISK

We also have exposure to various foreign currency exchange-rate fluctuations
for cash flow received from our foreign subsidiaries. This risk is mitigated
because the functional currency of our subsidiaries in Ireland, Singapore and
Malaysia is the US dollar and most financial transactions are conducted with the
US dollar. The foreign currency exchange-rate risk for our subsidiary in Spain
is mitigated because substantially all of its financial transactions are
conducted in the Spanish peseta. Our exposure to foreign currency exchange-rate
fluctuations is related to an intercompany loan receivable from the corporate
entity, long-term debt and specific trade receivables and payables, all at our
subsidiary in Spain, which are denominated in US dollars. Our foreign currency
exchange-rate exposure on the intercompany loan receivable and the trade
receivables and payables is mitigated by the use of foreign exchange contracts
which are effective as a hedge against these specific transactions. As of
April 2, 2000, we had the following foreign exchange forward contracts
outstanding:

<TABLE>
<CAPTION>
Notional Amount Fair Value
--------------- ----------
(In thousands)
<S> <C> <C>
Foreign exchange sell contracts:
US Dollars........................................ $ 9,000 $(351)
Foreign exchange buy contracts:
US Dollars........................................ $17,700 $ 714
</TABLE>

As the functional currency of our Spanish operations is the Spanish peseta
and the terms of the lending arrangement require settlement in US dollars, we
are exposed to risks of loss due to fluctuations in the foreign currency
exchange rate between the Spanish peseta and US dollar.

At April 2, 2000, the U.S. denominated debt recorded at our subsidiary in
Spain was $15.0 million. During the first fiscal quarter of 2000, we recorded an
unrealized loss of approximately $0.5 million related to this debt due to the
weakening of the Spanish peseta against the US dollar from 166 pesetas to $1.00
at December 31, 1999 to 174 pesetas to $1.00 at April 2,

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<PAGE>
2000. A hypothetical 10% fluctuation in the foreign currency exchange rate
between the Spanish peseta and the US dollar would result in a change in
unrealized gain (loss) of $1.5 million.

Year 2000

We have actively addressed potential Year 2000 issues. These issues could
have arisen at any point in our purchasing, supply, manufacturing and financial
information systems. Although incomplete or untimely resolution of the Year 2000
issue by us, our key suppliers, clients and other parties could have had a
material adverse effect on our business, results of operations, financial
condition and cash flow, the results to date indicate that Year 2000 issues have
had no material adverse impact.

While we are conducting business as usual, we will continue to watch for
Year 2000 related events that could impact our business, results of operations,
financial condition and cash flow. We believe that our experience in handling
business disruptions resulting from non-Year 2000 events should significantly
reduce any adverse effects of any potential Year 2000 disruptions.

Through April 2, 2000, we have spent approximately $0.1 million in
connection with Year 2000 issues. We do not anticipate any further material
expenditures.

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Financial Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and hedging, requiring recognition of all derivatives as either
assets or liabilities in the statement of financial position measured at fair
value, as well as identifying the conditions for which a derivative may be
specifically designed as a hedge. SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of Effective Date of SFAS
No. 133," deferred the effective date of SFAS No. 133 to fiscal years beginning
after June 15, 2000, which is fiscal year 2001 for us. We are continuing to
evaluate the effects on our financial condition, results of operations and cash
flows of adopting SFAS No. 133.

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<PAGE>
BUSINESS

Overview

We are a leading global provider of advanced electronics manufacturing
services. We provide these services to original equipment manufacturers, or
OEMs, primarily in the voice and data communications, computer and related
peripherals, medical equipment and industrial and consumer electronics
industries. We provide OEMs with a comprehensive range of services, including:

- product design and new product introduction services;

- materials procurement and management;

- assembly and manufacturing;

- testing services;

- order fulfillment and distribution; and

- after-market support.

We have established a network of manufacturing facilities in the world's
major electronics markets--North America, Europe and Asia--to serve the
increasing outsourcing needs of both multinational and regional OEMs. We have
strategically located our manufacturing facilities near our customers and their
end-markets, which benefits our customers by reducing the time required to get
their products to market and by increasing their flexibility to respond to
changing market conditions.

We manufacture a variety of products for our customers. For example, we
manufacture palm-sized computers for one of our customers. In conjunction with
this customer, we work with many global suppliers to procure the materials and
components required for these products. Components and materials are inventoried
for a short period of time before being taken from our inventory and organized
for production. The first step of the production process is printed circuit
board assembly, a capital intensive manufacturing process in which hundreds of
discrete electronic components, including integrated circuits, capacitors and
resistors, are attached to a printed circuit board. The resulting printed
circuit board assembly generally contains all of the electronic functionality of
the completed product. The finished printed circuit board assembly then
undergoes a multi-step test process that identifies manufacturing and
component-related defects. Once the assembly is proven to be fully functional,
it and other mechanical components, including a plastic enclosure, liquid
crystal display and power source, are assembled into the completed product. The
completed product is then tested again before being packed into the retail
packaging and shipped directly to our customer's distribution channels.

Industry Background

Historically, OEMs have been fully integrated, performing the product
design, new product introduction, assembly and manufacturing, testing, order
fulfillment and distribution and after-market support functions for their
products. In recent years, we believe that OEMs throughout the world have
increasingly accepted and relied upon the outsourcing of these functions to
electronics manufacturing services companies. By focusing on these functions, we
believe that electronics

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<PAGE>
manufacturing services companies can provide OEMs with cost savings, superior
technological know-how and access to more advanced manufacturing processes. This
enables OEMs to concentrate on their core competencies, such as product
development, marketing and sales. As a result of this outsourcing strategy, OEMs
have begun to divest a significant portion of their manufacturing facilities and
newer OEMs are choosing to outsource rather than build an internal manufacturing
infrastructure. Today, we believe that the electronics manufacturing services
industry is comprised of companies that provide a broad range of services,
including product design, manufacturing, order fulfillment and after-market
support services for OEMs in the electronics industry.

The electronics manufacturing services industry has experienced significant
growth over the past several years. Technology Forecasters projects that
electronics manufacturing services industry revenues will grow annually at 20%
from 1998 through 2003, reaching $149 billion by 2003. Technology Forecasters
also projects that the twelve electronics manufacturing services providers with
annual revenues of greater than $500 million will have a growth rate of 30% over
the 1998 to 2003 period. In addition, they estimate that electronics
manufacturing services industry revenues accounted for 9.5% of the cost of goods
sold in the electronics industry in 1998 and estimate this percentage will
increase to 17.1% by 2003.

We believe that the growth in the electronics manufacturing services
industry is being fueled primarily by the growth in the number of OEMs that have
chosen an outsourcing strategy and secondarily by the growth of the overall
electronics industry. We also believe that OEMs will increasingly adopt an
outsourcing strategy due to rapidly changing product technologies, shorter
product life-cycles and the increasing capability of electronics manufacturing
services companies to manufacture more complex products. We expect this trend
will favor larger electronics manufacturing services providers that have clear
advantages of scale, geographic diversity and technology and will contribute to
a period of further consolidation in the electronics manufacturing services
industry. Technology Forecasters estimates that the twelve largest electronics
contract manufacturers, which includes us, accounted for approximately 40% of
industry revenue generated by the approximately 3,130 electronics contract
manufacturers operating in 1998. We believe that the factors driving OEMs to
favor an outsourcing strategy include:

ACCELERATED TIME-TO-GLOBAL MARKET. Due to intense competitive pressures in
the electronics industry, OEMs are facing increasingly shorter product
life-cycles and therefore have a growing need to reduce the time required to
bring new products to market. OEMs can significantly improve product development
cycles and shorten time-to-global market by utilizing the expertise and
manufacturing infrastructure of electronics manufacturing services companies,
including capabilities relating to design and quick-turn prototype development.

ACCELERATED TIME-TO-GLOBAL VOLUME. OEMs are increasingly requiring
electronics manufacturing services companies to have global capabilities as they
seek to expand sales and simultaneously introduce new products in major global
markets. Once products have been developed, OEMs need to quickly reach
commercial volume production and distribute their products worldwide in order to
achieve the greatest impact in a competitive market. In addition, electronics
manufacturing services companies with global capabilities are able to offer
their customers a variety of manufacturing locations to better address OEMs'
objectives, including compliance with local

35
<PAGE>
content regulations and the elimination of expensive freight costs, tariffs and
time-consuming customs clearances.

REDUCED CAPITAL INVESTMENT AND SHIFT OF FIXED COSTS TO VARIABLE COSTS. As
electronics products have become more technologically advanced, the
manufacturing process is requiring greater levels of investment in capital
equipment. Outsourcing to electronics manufacturing services companies allows
OEMs to lower their investment in inventory and manufacturing assets and shift
more of their fixed costs to variable costs, thereby increasing their return on
assets. As a result, OEMs can react more quickly to changing market conditions
and allocate capital to other core activities such as sales and marketing and
research and development.

REDUCED TOTAL PRODUCTION COST. OEMs need to continually reduce costs to
remain competitive. Electronics manufacturing services providers are able to
manufacture products at a reduced total cost to OEMs because of higher
utilization of manufacturing capacity, access to leading-edge procurement and
inventory management capabilities, proficiency in purchasing materials and
components and a continual focus on improving the entire supply chain from
product design to after-market support.

ACCESS TO LEADING TECHNOLOGIES. OEMs are continually seeking access to
engineering expertise and manufacturing technologies necessary to build their
increasingly complex products. OEMs are motivated to work with electronics
manufacturing services companies to gain access to their expertise in product
design, assembly, manufacturing and testing technologies, as well as their
expertise in materials procurement and management and after-market support. In
addition, electronics manufacturing services companies provide OEMs with access
to advanced information systems, enabling OEMs to better monitor and control the
global production and distribution of their products.

Our Business Strategy

ESTABLISH AND MAINTAIN LONG-TERM RELATIONSHIPS WITH LEADING OEMS IN RAPIDLY
GROWING INDUSTRIES. We seek to establish and maintain relationships with
leading OEMs beginning with early involvement in their product development and
new product introduction cycles and thereafter provide integrated design,
manufacturing, order-fulfillment and after-market support services. We target
leading OEMs in rapidly growing industries such as the voice and data
communications equipment, computer and related peripherals, medical equipment
and industrial and consumer electronics industries and seek to maintain a
balance of customers among these industries. We also serve emerging companies in
these industries in order to establish an early outsourcing relationship that
will provide us with attractive growth opportunities as the products of these
emerging companies gain market acceptance. We closely integrate our information
systems with those of our customers, and we are increasingly using the Internet
and other information technologies to share information with our customers on a
timely basis. We also believe that a critical factor in maintaining and growing
successful outsourcing relationships is superior customer service.

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<PAGE>
Consistent with this strategy, we track customer satisfaction on a continuing
basis and compensate our key employees, in significant part, based upon meeting
specified goals tied to customer service.

EXPAND OUR GLOBAL PRESENCE. We intend to expand our manufacturing presence
in the world's major electronics markets in order to serve the increasing
outsourcing needs of both multinational and regional OEMs. We currently maintain
manufacturing facilities in the United States, Spain, Ireland, Singapore and
Malaysia, which are in close proximity to the world's major electronics markets.
This strategically positioned network of product design and manufacturing
facilities reduces the time and cost required to bring our customers' products
to market and allows for the simultaneous introduction of our customers'
products in major global markets. To effectively serve the requirements of
current and potential customers, we believe we need to operate in low-cost
locations and have facilities capable of manufacturing products with varying
levels of technical complexity in low, moderate and high volumes. We intend to
seek and evaluate strategic opportunities to continue to expand our geographic
presence and the scope of our manufacturing capabilities, particularly near our
customers and their end-markets.

EXPAND OUR INTEGRATED DESIGN, MANUFACTURING AND RELATED SERVICES. We intend
to continue to expand our service offerings to meet the evolving needs of our
customers and to more effectively control and manage the supply chain. OEMs are
increasingly requiring a wider range of advanced services from electronics
manufacturing services companies. We offer our customers a comprehensive range
of services, including product design and new product introduction services,
materials procurement and management, assembly and manufacturing, testing
services, order fulfillment and distribution and after-market support services.
We have increased our service offerings and expanded our product design
capabilities through recent acquisitions of two electronics design firms,
Electronic System Packaging and Ronlin Design. We believe that our ability to
support customers in these areas provides us insight into our customers' future
manufacturing requirements, which is critical to further penetrating the
electronics manufacturing services market and attracting new customers. We also
assumed the operation of an IBM facility in Charlotte, North Carolina, which
expands our systems assembly and order fulfillment capabilities, and acquired a
facility in Salt Lake City, Utah, from 3Com, which increases our North American
high-volume, low-cost production and radio frequency engineering capabilities.

CONTINUALLY REDUCE OUR CUSTOMERS' OVERALL PRODUCT COSTS. We continually
seek to reduce our customers' overall product costs. We describe our
comprehensive approach to product cost reduction as "Total Cost of Ownership."
Our Total Cost of Ownership solution is based on the principal that the total
cost of a product is the sum of all economic costs related to designing,
producing and delivering final products to customers on a long-term basis. We
believe we are able to reduce our customers' overall product costs through our
integrated product design and manufacturing expertise and strength in global
procurement and supply chain management. Our product design capabilities enable
us to work closely with our customers and develop manufacturing strategies to
more efficiently procure materials and manufacture their products. We believe
the scale of our global materials purchases and our expertise in procurement and
supplier management enhances our ability to obtain advantageous materials
pricing. Our focus on the management of the global supply chain reduces costs by
optimizing the use of materials and components throughout the entire product
life-cycle from design and manufacturing to distribution and after-market
support. In addition, we

37
<PAGE>
continually review our operating performance and implement specific cost
reduction and process improvement initiatives, the savings from which further
reduce our customers' overall product costs. By providing our customers with
Total Cost of Ownership solutions, we believe we enhance our customers'
competitiveness in the marketplace.

REDUCE OUR CUSTOMERS' TIME-TO-GLOBAL MARKET AND TIME-TO-GLOBAL VOLUME. We
seek to reduce our customers' time-to-global market and time-to-global volume
production for their new products through our product design and new product
introduction services and our global manufacturing capabilities. We work closely
with our customers in the early stages of their product development efforts to
reduce product costs and improve the manufacturability and testability of their
products. Our information systems and materials management processes enable us
to rapidly ramp-up operations to meet our customers' needs, quickly respond to
changes in product demand and effectively distribute products directly to our
customers' end-users. By offering our customers a comprehensive range of
services in a variety of manufacturing locations, we are better able to assist
them in rapidly introducing new products into global markets.

ACTIVELY PURSUE STRATEGIC ACQUISITIONS. We intend to continue to pursue the
acquisition of selected OEM assets and electronics manufacturing services and
related companies that offer us relationships with key customers, strong and
experienced management teams, strategic capabilities and locations and expanded
service offerings. Many OEMs are divesting their internal manufacturing
operations to electronics manufacturing services companies. By purchasing
facilities from OEMs, we are able to quickly develop customer relationships and
obtain established manufacturing capacity. Additionally, a number of smaller
electronics manufacturing services companies are seeking to strengthen their
competitive position by becoming part of a larger, global electronics
manufacturing services provider. We believe that we are favorably positioned to
benefit from these trends. Furthermore, we believe we have developed and
successfully deployed a comprehensive post-acquisition integration strategy
which includes, among other things, establishing a common corporate culture,
providing a recognizable corporate appearance and consistent functionality to
our customers, implementing a common information technology platform and sharing
best practices among our operations. We have successfully completed nine
acquisitions since 1995. While we are currently in discussions with several
potential acquisition candidates, we do not have any agreement or understanding
with respect to any acquisition candidate.

Recent Acquisitions

- strong relationships with two leading OEMs in rapidly growing industries;

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<PAGE>
- a more diversified customer base, reducing our reliance on other major
customers;

- an expanded geographic presence into the western United States;

- a broadened range of service offerings through the addition of a
high-volume, low-cost manufacturing facility;

- access to advanced engineering capabilities, especially additional radio
frequency engineering capabilities; and

- expansion of our manufacturing capacity.

In the first half of 1999, we acquired two electronics design firms,
Electronic System Packaging and Ronlin Design, for an aggregate purchase price
of approximately $4.4 million. Electronic System Packaging and Ronlin Design
significantly enhance our product design services in North America. These
acquisitions allow us to establish relationships with OEMs in a broad range of
industries through involvement in earlier stages of their product development
cycles. We believe our enhanced offering of electronics design services will
strengthen existing customer relationships and help us win new business.

- a stronger relationship with a premier customer having a leadership
position in a growing market segment (retail point-of-sale systems);

- an enhanced range of service offerings including additional capabilities
in complex systems assembly, integration and testing services;

- a strengthening of our ability to provide order fulfillment services and
distribution of products to our customers' end-users on a global basis;
and

- an expanded geographic presence into the southeastern United States.

Our Services

We offer a comprehensive range of integrated services, providing our
customers with a total solution to take their products from initial design
through high volume production, test, distribution and after-market support.
While we currently derive substantially all of our net sales from printed
circuit board assembly, testing services, assembly of systems of electronics
products, which include multiple components and final products, and the
fulfillment and distribution of completed products, we believe that OEMs are
increasingly demanding an integrated outsourcing solution from electronics
manufacturing services companies. Some of the services that we offer OEMs
include:

PRODUCT DESIGN AND NEW PRODUCT INTRODUCTION SERVICES. We offer a wide range
of engineering, design, prototype, test development and related services that
shorten the time it takes

39
<PAGE>
our customers to introduce their products into the market and optimize their
products' design for commercial manufacturing. To support and manage new product
introductions, we provide design for manufacturability, design for testability
and design for procurement services. The purpose of design for manufacturability
is to achieve defect-free and cost-effective product designs, reduce product
development cycles, create high initial production yields and establish superior
product quality. Design for testability focuses on achieving the highest level
of fault detection and isolation before products are shipped. Design for
procurement identifies areas in which the overall cost of our customers'
products can be reduced through a decrease in material costs and effective
inventory management. In addition, unlike many of our customers, we have the
infrastructure necessary to produce the low volumes associated with prototype
manufacturing, thereby enabling our customers to avoid substantial investment in
specialized manufacturing equipment.

MATERIALS PROCUREMENT AND MANAGEMENT. Materials procurement and management
involves planning, purchasing and expediting the delivery of materials and
components used in the manufacturing process. We are becoming increasingly
involved in selecting and qualifying suppliers to meet our customers' needs. Our
global information system for materials management optimization enables us to
achieve competitive component pricing and greater sourcing flexibility. We
employ various inventory management techniques, such as just-in-time and
line-side stocking, in order to allow product shipments to be closely
coordinated with our customers' requirements. Just-in-time is an
inventory-control method of ordering materials only on an as-needed basis.
Line-side stocking is another inventory-control method which locates components
within our manufacturing facilities but the components are owned by the supplier
or customer until they are used in the manufacturing process. Both just-in-time
and line-side stocking eliminate much of the expense and managerial oversight of
maintaining inventory. We are also developing e-commerce solutions that will
further increase supply chain efficiency, resulting in lower costs and increased
responsiveness to our customers.

ASSEMBLY AND MANUFACTURING. Our assembly and manufacturing operations
include printed circuit board assembly, which are components of electronics
products, assembly of subsystems of electronics products, which include multiple
components, and the final assembly and integration of complete products that
incorporate printed circuit board assemblies, complex electromechanical
subassemblies, enclosures, power supplies and other components. As OEMs seek to
provide greater functionality in smaller products, they increasingly require
more sophisticated manufacturing technologies and processes. Our investment in
advanced manufacturing equipment and technology and our experience and expertise
in miniaturization, packaging and interconnect technologies enable our customers
to have access to a wide variety of advanced manufacturing solutions without
having to make substantial capital investments. We also have extensive
experience building a wide range of final products and believe we are well
positioned to take advantage of the anticipated acceleration in outsourcing of
final product assembly and integration. We have industry leading capabilities in
assembling smaller consumer electronics products and build millions of these
devices annually. We also have extensive experience assembling and integrating
larger, more complex systems. In addition, our build-to-order capabilities
complement our expertise in final product assembly by allowing us to postpone
the final configuration of our customers' products until actual end-user
specifications are received, thus reducing inventory levels for us and our
customers.

40
<PAGE>
TESTING SERVICES. We provide our customers with a comprehensive range of
testing services. We work with our customers to develop product-specific test
strategies, and in some cases we design and build specific test platforms for
our customers' products.

ORDER FULFILLMENT AND DISTRIBUTION. We offer a range of services related to
the configuration and shipment of our customers' products. We perform final
product packaging and distribution services for completed products, as well as
direct order fulfillment. We increasingly deliver final products directly into
our customers' distribution channels and to our customers' end-users. We believe
that these services complement our comprehensive manufacturing solution,
enabling our customers to be more responsive to changing market demands and to
get their products to market more quickly.

AFTER-MARKET SUPPORT. We provide a wide range of after-market support
services, including repair, refurbishment, remanufacturing, exchange, system
upgrades and spare part manufacturing. These services are supported by specific
information systems and testing technologies and can be tailored to meet the
specific requirements of each customer.

Customers

Our customers include leading OEMs primarily in the voice and data
communications equipment, computer and related peripherals, medical equipment
and industrial and consumer electronics industries. Within these industries, our
strategy is to establish long-term relationships with OEMs that seek to
outsource significant production volumes. During the fiscal quarter ended
April 2, 2000, sales to IBM and Palm represented 25% and 29%, respectively, of
our total net sales and net sales to our ten largest customers accounted for 90%
of our total net sales. In 1999, sales to IBM and Iomega represented 49% and
14%, respectively, of our total net sales and net sales to our ten largest
customers accounted for 88% of our total net sales. In 1998, net sales to IBM
and Iomega represented 51% and 20%, respectively, of our total net sales and net
sales to our ten largest customers accounted for 89% of our total net sales. As
a result of our acquisition of 3Com's Salt Lake City facility, we expect that
3Com and its subsidiary, Palm, will each become a top five customer in 2000,
significantly reducing the percentage of our total net sales represented by IBM
and Iomega. Our manufacturing contracts contain customer acceptance clauses.
However, we do not consider these clauses to be substantive because we can and
do replicate the customer acceptance test environment and perform the agreed
upon product testing prior to shipment. Accordingly, we recognize revenue upon
shipment of the product.

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<PAGE>
The following table lists alphabetically some of our significant customers
based on sales in the first fiscal quarter of 2000 and the products for which we
provide manufacturing services:

<TABLE>
<CAPTION>
Customer End Products
-------- ------------
<S> <C>
3Com Corporation......................... Modems, network interface cards
ADC Telecommunications, Inc. ............ Broadband access and transmission
products
Gilat Satellite Networks Ltd............. Satellite network terminals
Hewlett-Packard Company.................. Printers
International Business Machines
Corporation............................ Point-of-sale systems, industrial PCs
Iomega Corporation....................... Storage devices
LM Ericsson Telefon AB................... Mobile phones, PBX equipment and base
stations
LSI Logic Corporation.................... High end storage equipment
Palm, Inc. .............................. Palm III, Palm V and Palm VII devices
Rockwell International Corporation....... Industrial motion controls
</TABLE>

We customarily enter into supply arrangements in connection with our
acquisition of facilities from OEMs. These arrangements generally govern the
conduct of business between us and our new customers, including the manufacture
of products that were previously produced at that facility by the OEM. In some
instances these arrangements contain revenue, product volume or capacity
commitments and are generally for terms of one to three years.

Sales and Marketing

We are able to service all of the world's major electronics markets through
a direct sales force located in selected North American, European and Asian
cities. Our sales people have knowledge of local markets, which we believe is
critical to identifying new customers and developing new business opportunities.
Our direct sales force is complemented by several independent firms who serve as
our representatives in areas where we believe the most significant opportunities
exist, such as Silicon Valley, and in areas where we have no direct salespeople.
We intend to continue to expand our direct sales organization in response to
increased customer opportunities.

We seek to develop close, long-term relationships with our customers by
working with them throughout the entire product life-cycle, from product design
to after-market support. Electronics manufacturing services companies generally
face a long sales cycle and must perform satisfactorily on a trial basis prior
to obtaining significant orders from a potential customer. Therefore, we work
closely with our customers during the initial product design and development
stage. We support our existing customer relationships with cross-functional
customer focus teams that are led by dedicated program managers. Each team is
responsible for focusing on new programs, products and/or part numbers and
developing an in-depth understanding of our customers' requirements and
outsourcing needs. Customer focus teams for major global accounts are
complemented by seasoned account managers who coordinate a broad range of
services provided from multiple sites around the world.

We believe we differentiate ourselves from most of our competitors through
an active, focused marketing effort, designed to increase our brand awareness
and the likelihood of winning new business. We communicate important news about
our company to existing and potential customers

42
<PAGE>
through various news media, including national and local business publications
and industry trade journals. Our technical personnel and functional managers
often take industry leadership roles by publishing technical papers, speaking on
industry panels and maintaining active roles in industry and technical
associations. For example, one of our technical professionals recently presented
a paper discussing the use of process metrics to predict quality performance at
an industry conference. In addition, we have established ongoing relationships
with key industry analysts and trade journalists, and we periodically host
seminars on topics of interest to potential customers in our manufacturing
facilities. This past year we hosted a seminar at our Athlone facility which
focused on strategies for more efficient new product introductions. We also
maintain a website enabling potential customers to learn more about us.

Customer Satisfaction Approach

High customer satisfaction is critical for success in the electronics
manufacturing services industry, and we believe that we differentiate ourselves
from our competitors by adopting policies and procedures and making investments
that will result in consistently high levels of customer satisfaction.

Customer satisfaction starts with a service attitude that we constantly
reinforce and reward. We have developed management reports which, we believe,
summarize several key measurements of customer satisfaction, including, for
example percentage of on-time deliveries and the quality of our manufacturing
processes. Our senior managers receive these reports on a weekly basis, enabling
them to monitor our performance on a timely basis so that we can take specific
corrective actions, if necessary. Each customer has a dedicated program manager
who manages the day-to-day relationship with the customer. A significant portion
of a program manager's compensation is tied to improving customer satisfaction
scores, as measured by an independent consulting firm that conducts semi-annual
customer satisfaction surveys. These surveys also are reviewed at the highest
executive levels to ensure customer satisfaction issues are appropriately
addressed.

We have implemented processes, information systems and other tools that
enable our employees to provide high levels of customer service. One example is
our continuous process improvement program, in which we rigorously evaluate
operational processes relative to industry best practices and develop action
plans to improve our performance. This program ensures that best practices are
standardized across our global operations, leading to continuous improvement. In
addition, we will continue to invest in information systems that improve
customer satisfaction. We recently implemented a suite of software tools to help
us better control the quality of our manufacturing processes and provide timely
information to our customers. Our investments increasingly include e-business
solutions that reduce transaction costs and facilitate a more efficient flow of
information between us and our suppliers and customers.

Supply Chain Management

Supply chain management is critical for competing in the electronics
manufacturing services industry, as OEMs are increasingly outsourcing their
entire product supply chain to electronics manufacturing services companies.
Supply chain management involves the coordination of components and products
throughout the design, manufacturing and distribution functions, ensuring

43
<PAGE>
that the correct component or product is delivered to its appropriate
destination at the proper time and at the lowest overall cost. Through the use
of our highly trained professionals and our significant investment in
information systems, our supply chain management expertise reduces our
customers' total costs and increases our flexibility to respond to changing
customer demands.

We have strong relationships with a broad range of suppliers. We believe our
product design capabilities and scale of procurement enhance our ability to
obtain advantageous pricing on, and secure supply sources of, selected materials
and components. We believe we can reduce our customers' total costs by working
closely with them in their product development stages. For example, we help our
customers select components while a product is being designed to ensure
advantageous sourcing and pricing from preferred suppliers. We also utilize a
rigorous process for evaluating supplier performance based on our Total Cost of
Ownership solution. This approach realizes lower total costs for our customers
by focusing on improving our suppliers' quality, delivery, flexibility and
service.

Asset management is a critical element of efficient supply chain management.
We use inventory management techniques which closely integrate our manufacturing
processes with our customers' actual orders. As a result, we minimize our
inventory risk by ordering components and products only to the extent necessary.
One inventory management technique we utilize is demand-pull manufacturing,
which initiates production of our customers' products based upon their actual
inventory usage. Demand-pull manufacturing is complemented by our direct order
fulfillment process, whereby we ship products directly from our facilities to
our customers' distribution channel and end users. Direct order fulfillment
results in lower inventory levels for both ourselves and our customers and
permits faster delivery times for our customers' products.

We utilize information systems to improve the efficiency and flexibility of
the supply chain. Our enterprise resource planning system provides comprehensive
and timely information required for managing the logistical complexities in our
business. We also are implementing a component database and global information
system to optimize our materials management, allowing us to consolidate data on
historical purchases and perform worldwide searches for component inventory and
competitive pricing. We will continue to implement e-commerce solutions that
link us to our customers and suppliers, providing them with timely information
on specific orders, product demand, inventory and component lead times in order
to facilitate planning and increase the efficiency of the entire supply chain.

Information Systems

Information systems are a critical element for achieving our strategic
business objectives. We believe that our investment in information systems will
deliver competitive advantages for our customers by improving supply chain
management and increasing product quality and operational flexibility. We have
implemented a common technological infrastructure that allows our customers and
suppliers to communicate and transact with us globally in an easy and consistent
manner. We believe this increases the efficiency of the supply chain.

44
<PAGE>
Our information systems strategy consists of selecting leading software
applications and establishing strong relationships with our software suppliers.
Our enterprise resource planning system manages the entire order cycle from
receiving customer orders and planning production schedules to billing customers
and tracking their payments. Having a standard enterprise resource planning
platform allows us to quickly respond to fluctuations in our customers' orders
in different parts of the world and also facilitates simultaneous product
introduction in multiple regions.

Our standard suite of engineering applications focuses on reducing our
customers' new product introduction set-up time and controlling our
manufacturing processes. These engineering applications allow us to collect
customer design data in any format and automatically convert this information
into commands that run our production lines. These tools also monitor our
manufacturing operations and alert our technicians and operators to process
deviations. Early error detection minimizes rework and reduces repair and
customer returns.

Our global information system for material management optimization is based
on two integrated applications. Our strategic sourcing application consolidates
purchasing history from suppliers and future demand from our manufacturing
sites. This allows us to realize significant materials cost savings by
concentrating our purchases with a smaller number of preferred suppliers. The
component supplier application provides standardized component information that
is integrated with an industry database that enables our customers' designers to
select components from our preferred suppliers. This optimizes the selection of
components used in our customers' products and provides them with advantages in
pricing and sourcing of components.

Our information solutions portfolio increasingly includes a broad range of
e-business tools. Both customers and suppliers can communicate with us via a
comprehensive suite of electronic data interchange applications. In addition,
customers can obtain order status and product quality information, 24 hours a
day, through our secure web-based applications. We plan to make significant
further investments in e-business tools that will leverage the speed and
technology of the Internet to facilitate the flow of information and increase
the total efficiency of the supply chain.

Competition

The electronics manufacturing services industry is highly competitive. We
believe that the principal competitive factors in our industry are:

- service offerings;

- technological capabilities;

- geographic location and coverage;

- pricing;

- product quality;

- reliability in meeting product delivery schedules; and

- flexibility and timeliness in responding to design and schedule changes.

45
<PAGE>
We compete against numerous domestic and foreign electronics manufacturing
services providers, including:

<TABLE>
<S> <C>
Benchmark Electronics, Inc. Plexus Corporation
Celestica Inc. Sanmina Corporation
Flextronics International Ltd. SCI Systems, Inc.
Jabil Circuit, Inc. Solectron Corporation
NatSteel Electronics Limited Venture Manufacturing (Singapore)
Limited
</TABLE>

We believe that large publicly-traded OEMs prefer to enter into outsourcing
relationships with other public electronics manufacturing services companies
that present them with the opportunity to build a long-term relationship because
of their greater access to capital and resulting financial stability. Many of
our competitors are substantially larger and have greater financial, operating,
manufacturing and marketing resources than we do. Some of our competitors have
broader geographic breadth and range of services than we do. In addition, some
of our competitors may have more developed relationships with our existing
customers than we do. We also face competition from the manufacturing operations
of our current and potential customers, who continually evaluate the relative
benefits of internal manufacturing compared to outsourcing. As more OEMs dispose
of their manufacturing assets and increase their use of outsourcing, we face
increasing competitive pressures to grow our business in order to maintain our
competitive position.

International Operations

A key element in our business strategy is to expand our global presence in
order to provide product design, manufacturing and after-market support services
in locations that meet our customers' regional requirements. Consistent with
this strategy, we have established international manufacturing facilities in
Spain, Ireland, Singapore and Malaysia. We will continue to seek strategic
opportunities to acquire additional facilities throughout the world, especially
in low-cost regions, either through OEM divestitures or acquisitions of regional
electronics manufacturing services companies and other related companies.

Our facilities in Europe serve European customers as well as customers in
North America and Asia that have significant sales in Europe. Our Athlone
facility, acquired by us in 1995, is a former LM Ericsson site that provides
medium to high-volume, capital intensive manufacturing and related support
services. Our Valencia facility, acquired from IBM in 1995, offers a
comprehensive range of integrated services including design, low, medium and
high-volume production and highly complex assembly and manufacturing,
configuration-to-order and global order fulfillment. In addition, our Valencia
facility has a significant product repair capability. Both our Athlone and
Valencia facilities have strong technical capabilities, including radio
frequency engineering and test capabilities.

Our facilities in Asia, located in Johor Bahru, Malaysia, and in Singapore,
enable us to provide cost competitive manufacturing for global customers and a
range of regional manufacturing and support services. Both sites formerly
operated as independent contract manufacturers and were acquired by us in 1995.
The Singapore site was acquired from Connett Technologies and the Malaysian site
from Topas Electronics. Many OEMs recognize Southeast Asia as a competitive
region that offers both low-cost manufacturing and strong technical skills. Our
sites in Southeast

46
<PAGE>
Asia specialize in high-volume assembly and manufacturing, and we have a proven
ability to provide globally competitive pricing for these types of requirements.
Our Singapore site is increasingly offering a wider range of lower to
medium-volume and more complex assembly and manufacturing services and provides
engineering and business support for the Malaysian site. These sites have grown
rapidly since we acquired them and have undergone several major expansions to
support increased customer demand. In addition to our manufacturing sites, we
have an international procurement office in Singapore and a customer support
office in Tokyo to meet the specific needs of our Japanese customers.

We intend to further expand our international capabilities in product
design, new product introduction services, assembly and manufacturing and
after-market support services. We currently expect to establish operations in
Mexico, China and Central or Eastern Europe during the next several years. We
also intend to expand into other locations in Europe and Asia in order to
establish or enhance relationships with key customers, provide services to
important regional markets, expand our range of service offerings and improve
our ability to reduce our customers' time-to-global market and time-to-global
volume. See Note 16, "Business Segment Information," in our consolidated
financial statements for information relating to our international operations.

Research and Development

We engage in ongoing research and development activities to meet our
customers' increasingly sophisticated needs and maintain our leading-edge
capabilities. Changes in our customers' products drive our research and
development efforts. As our customers' products are both decreasing in size and
increasing in functionality, we must continually develop advanced technologies
such as chip scale packaging, flip-chip, ball grid array, micro-ball grid array
and ultra-fine pitch surface mount technology and the equipment to support them.
The evolution and extension of these technologies has placed additional demands
on process materials and chemistry, substrates for interconnecting devices and
the manufacturing environment.

We work with our customers, our suppliers and universities located near our
manufacturing facilities to develop and qualify advanced process capabilities
concurrent with, or prior to, our customers' needs. We are a member of an
industry consortium consisting of OEMs, equipment suppliers and other
electronics manufacturing services companies. This consortium supports process
development and provides access to manufacturing equipment, laboratory and
research and development personnel that complement our internal development
work. The development and refinement of new manufacturing processes are
performed primarily at our advanced engineering facility in Arden Hills,
Minnesota. At Arden Hills and our other facilities, new processes and equipment
are qualified through a rigorous process to ensure production readiness.

In addition to our process development focus for printed circuit board
assembly and testing technologies, we have an ISO 9001 certified center for
research and development in Valencia, Spain, which globally supports specific
customer requirements. In Valencia, we have over 30 engineers who use
state-of-the-art tools that can interface with customer design teams during the
product design and development phase. We also work with selected universities
and design firms to complement our services and provide a vehicle to continually
upgrade our skills in this dynamic industry environment. As a result of these
relationships, we have built strong design capabilities that can support
customers with wireless technology requirements.

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<PAGE>
For the three months ended ended April 2, 2000 and the years ended
December 31, 1997, 1998 and 1999, we spent $0.5 million, $1.6 million,
$2.5 million and $3.2 million, respectively, on research and development
activities.

Governmental Regulation

Our operations are subject to a variety of federal, state and local
regulatory requirements relating to environmental compliance and site cleanups,
waste management and health and safety matters. In particular, we are subject to
regulations promulgated by:

- the Occupational Safety and Health Administration, pertaining to health
and safety in the workplace;

- the Environmental Protection Agency, pertaining to the use, storage,
discharge and disposal of hazardous chemicals used in the manufacturing
processes; and

- corresponding state agencies.

To date the costs of compliance and workplace and environmental remediation
have not been material to us. Nevertheless, additional or modified requirements
may be imposed in the future. If such additional or modified requirements are
imposed on us, or if conditions requiring remediation are found to exist, we may
be required to incur substantial additional expenditures.

Legal Proceedings

In October 1998, Lockheed Martin Corporation commenced an action in the
Circuit Court for Montgomery County, Maryland, entitled LOCKHEED MARTIN
CORPORATION V. DLJ MERCHANT BANKING II, INC., DLJ MERCHANT BANKING PARTNERS, DLJ
MERCHANT BANKING, INC., DLJ MERCHANT BANKING PARTNERS, L.P., DLJ MERCHANT
BANKING PARTNERS II, L.P. AND MANUFACTURERS' SERVICES LIMITED, Case No. 193819.
The complaint alleges, among other things, that we breached an August 10, 1997
agreement to acquire a Lockheed subsidiary, Lockheed Martin Commercial
Electronics Company, and that we also breached an implied obligation of good
faith and fair dealing in exercising our contractual right to terminate the
agreement. In addition, the complaint alleges that the named DLJ Entities
breached their promise to finance the transaction. The complaint alleges that
the purchase price for the acquisition, inclusive of real estate, was $140
million, subject to purchase price adjustments, and, subsequent to the alleged
breach, Lockheed sold Lockheed Martin Commercial Electronics Company, exclusive
of real estate, for $70 million. Proceedings and discovery to date have largely
involved preliminary matters relating to jurisdiction and venue. There has been
no discovery to date on issues relating to the merits of the complaint. We
contend that a material adverse change in Lockheed Martin Commercial Electronics
Company business allowed us to terminate the agreement. On May 24, 2000 we
entered into a written settlement agreement with Lockheed. The settlement
agreement contains reciprocal releases and covenants not to sue. On the date of
execution of the settlement agreement, we paid Lockheed $1 million in cash. In
addition, we executed two fully assignable promissory notes. One note has a
principal amount of $2 million, does not bear interest and is due and payable on
August 1, 2000. The second note has a principal amount of $2 million, is due and
payable on August 1, 2001 and bears interest at a market rate, which will permit
the note to be sold at full face value on August 1, 2000. If the second note is
prepaid in full on or before August 1, 2000, no interest will be payable to
Lockheed. The settlement agreement also requires Donaldson, Lufkin & Jenrette
Securities Corporation to provide

48
<PAGE>
Lockheed and its affiliates with investment banking and financial consulting
services at a discount, with the maximum amount of the discount being
$1 million.

On July 22, 1999, we received written notice from legal counsel for the
Lemelson Medical, Education & Research Foundation, Limited Partnership alleging
that we are infringing specified patents held by the Lemelson Foundation
Partnership and offering to license such patents to us. Based on our
understanding of the terms that the Lemelson Foundation Partnership has made
available to current licensees, we believe that we can obtain a license from
them under the same or similar terms which would not have an adverse effect on
our financial condition. We estimate the cost to acquire the rights to use this
technology to be approximately $0.8 million.

We are party to other lawsuits in the ordinary course of business. We do not
believe that these other proceedings individually or in the aggregate will have
a material adverse effect on our financial position, results of operations and
cash flows.

Employees

As of April 2, 2000, we had approximately 3,305 full-time employees,
including 2,328 in production and quality, 326 in engineering, research and
development, 330 in procurement and materials management, 64 in information
systems, 52 in program management, 16 in sales and marketing and 189 in
executive and administrative functions. Given the variability in our business
and the quick response time required by our customers, it is critical that we be
able to quickly ramp-up and ramp-down our production to maximize efficiency.
Therefore, we use skilled temporary labor as required.

None of our employees are represented by a labor union or covered by a
collective bargaining agreement other than non-management employees in Spain and
Ireland. We consider our employee relations to be good, and we have not
experienced any significant problems with non-management employees in Spain and
Ireland.

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<PAGE>
Facilities

Our principal executive offices are located in Concord, Massachusetts. We
also have product design and manufacturing facilities in the United States,
Spain, Ireland, Singapore and Malaysia. Information about these facilities is
set forth below:

<TABLE>
<CAPTION>
Approximate
Location Principal Function Square Feet Leased/Owned
-------- -------------------- ----------- ---------------
<S> <C> <C> <C>
Concord, Massachusetts............. Headquarters 16,765 Leased

Arden Hills, Minnesota............. Manufacturing 154,000 Leased

Charlotte, North Carolina.......... Manufacturing 273,500 Leased

Newark, California................. Administrative 2,760 Leased

Salt Lake City, Utah............... Manufacturing 150,000 Owned

Westford, Massachusetts............ Design 6,000 Leased

Athlone, Ireland................... Manufacturing 55,000 Leased

Valencia, Spain.................... Manufacturing/Design 518,000 Leased/Owned(a)

Johor Bahru, Malaysia.............. Manufacturing 46,000 Leased

Singapore.......................... Manufacturing 52,225 Leased
</TABLE>

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

(a) We own approximately 418,000 square feet of manufacturing and logistics
space and lease approximately 100,000 square feet of warehouse space.

In addition, we lease office space in Tokyo, Japan, to provide customer
support and administrative services. Leases for our facilities expire between
April 2001 and April 2017. We currently expect to be able to extend the terms of
expiring leases or to find suitable replacement facilities on reasonable terms.
We believe that our facilities are well-maintained and suitable for their
respective operations. We anticipate that as our business grows we will need to
obtain additional facilities through acquisitions, leases or new construction.
We may encounter unforseen difficulties, costs or delays in expanding our
facilities.

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<PAGE>
MANAGEMENT

Directors and Executive Officers

The following table sets forth information with respect to our directors and
executive officers:

<TABLE>
<CAPTION>
Name Age Office
---- -------- ----------------------------------------------
<S> <C> <C>
Kevin C. Melia................. 52 Chairman, Chief Executive Officer and Director
Robert E. Donahue.............. 51 President, Chief Financial Officer and
Director
Rodolfo Archbold............... 46 Executive Vice President and Chief Technology
Officer
Albert A. Notini............... 43 Executive Vice President, Business Development
and General Counsel
James N. Poor.................. 56 Executive Vice President, Human Resources
Thompson Dean.................. 42 Director
Karl Wyss...................... 60 Director
George W. Chamillard........... 61 Director
John F. Fort, III.............. 58 Director
William J. Weyand.............. 55 Director
</TABLE>

We anticipate that one additional director who is not affiliated with us or
our principal shareholders, will be elected to our board of directors following
completion of this offering.

Kevin C. Melia, a founder of MSL, has been a director and our Chairman and
Chief Executive Officer since December 1994. From December 1994 to
February 1999, he also served as President. Prior to joining us, Mr. Melia was
acting President of Sun Microsystems Computer Corporation from 1992 to 1994.
Mr. Melia also served as Chief Financial Officer of Sun Microsystems Computer
Corporation from 1991 to 1994. Mr. Melia currently serves as a director of Iona
Technologies Plc and Horizon Technologies.

Robert E. Donahue has served as our President since February 1999 and as
Chief Financial Officer and a director since April 2000. Mr. Donahue joined us
in August 1997 as Chief Financial Officer and served in that capacity until his
promotion to President. Prior to joining us, Mr. Donahue served as Chief
Financial Officer of Stratus Computer, Inc. from 1990 to August 1997. Along with
his responsibilities as Chief Financial Officer, Mr. Donahue also served as
Chief Executive Officer of S2, a subsidiary of Stratus Computer, Inc., from
December 1995 to August 1997.

Rodolfo Archbold has served as our Executive Vice President and Chief
Technology Officer since July 1997. Prior to assuming his current position,
Mr. Archbold served as our Vice President of Technology from October 1995 to
July 1997. Before joining us, Mr. Archbold served as Group Manager,
Manufacturing for Digital Equipment Corporation from February 1992 to
September 1995.

Albert A. Notini has served as our Executive Vice President, Business
Development and General Counsel since May 2000. Prior to joining us, Mr. Notini
was the Executive Vice President, Corporate Development and Administration and
General Counsel of Wang Global, a worldwide provider of network services, from
January 1999 to June 1999. Wang Global was acquired by Getronics NV in June of
1999 and Mr. Notini served as Executive Vice President of Getronics until
February, 2000. Mr. Notini joined Wang Global in February 1994 as a Senior Vice
President. Prior to joining Wang Global, Mr. Notini was a Senior Partner at the
Boston law firm of Hale & Dorr LLP. Mr. Notini currently serves as a director of
ePresence, Inc., an Internet services company.

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<PAGE>
James N. Poor has served as our Executive Vice President, Human Resources
since March 1998. Prior to that he was the Director of Human Resources,
Worldwide Sales and Manufacturing for Stratus Computer, Inc. beginning in 1985.

Thompson Dean has been a director since January 1995. Mr. Dean has been a
Managing Director of DLJ Merchant Banking, Inc. since 1991. He currently serves
as Chairman of the Board of Von Hoffmann Press, Inc., Arcade Holding Corp. and
DeCrane Aircraft Holdings, Inc. and as a director of Formica Corp., Insilco
Holding Co., Phase Metrics, Inc., Mueller Holdings (N.A.), Inc., Amatek Ltd. and
Charles River Laboratories, Inc.

Karl Wyss has been a director since September 1997. Mr. Wyss has been a
Managing Director of DLJ Merchant Banking, Inc. since 1993. Mr. Wyss is a
director of Brand Scaffold Services, Inc., CommVault Systems, Inc., Localiza
Rent A Car S.A., Mallory S.A. and Von Hoffmann Press, Inc.

George W. Chamillard has been a director since May 2000. Mr. Chamillard has
served as Chief Executive Officer of Teradyne, Inc. since May 1997 and as
President and a director of Teradyne, Inc. since January 1996. Mr. Chamillard
served as Chief Operating Officer of Teradyne, Inc. from 1996 until May 1997 and
as Executive Vice President from January 1994 until January 1996. Prior to that
time, Mr. Chamillard served as a Vice President of Teradyne, Inc.

John F. Fort, III has been a director since November 1998. Mr. Fort retired
from his position as the Chairman of the Board of Tyco International Ltd. in
January 1993. He is currently a director of Tyco International Ltd., Insilco
Corporation, Roper Industries and Thermadyne Holdings. Mr. Fort also serves as a
consultant to Roper Industries and Thermadyne Holdings.

William J. Weyand has been a director since April 2000. Mr. Weyand has
served as President and Chief Executive Officer of Structural Dynamics Research
Corporation since June 1997 and was appointed Chairman of the Board in February
1998, in addition to his previous responsibilities. Prior to joining Structural
Dynamics Research Corporation, Mr. Weyand served as Executive Vice President of
Measurex Corporation. Mr. Weyand currently serves as a director of the
University of Maine and has served on the boards of Western Michigan University
and the Georgia Tech Institute of Paper Science Technology. He is also a past
Chairman of the Paper Industry Management Association.

Each director is elected and serves until his successor is duly elected and
qualified or until the earlier of his death, disability, retirement, resignation
or removal. All members of the board of directors set forth herein were elected
pursuant to a stockholders agreement that was entered into in connection with an
investment in us by entities affiliated with Donaldson, Lufkin & Jenrette, Inc.
in January 1995, later amended in connection with our sale of senior preferred
stock to similarly affiliated entities in November 1999, and further amended in
connection with our initial public offering. See "Relationships and Transactions
with Related Parties--Stockholders Agreement." There are no family relationships
between any of our directors or executive officers. Our executive officers are
elected by, and serve at the discretion of, our board of directors.

The number of directors is fixed at nine, and we currently have seven
directors serving. Prior to the completion of this offering, our board will be
divided into three classes, as nearly equal in number as possible, with each
director serving a three-year term and one class being elected at each annual
meeting of our stockholders. Our board of directors will consist of Class I
directors, whose

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<PAGE>
term of office will continue until the 2001 annual meeting of our stockholders,
Class II directors, whose term of office will continue until the 2002 annual
meeting of our stockholders, and Class III directors, whose term of office will
continue until the 2003 annual meeting of our stockholders. At each annual
meeting of our stockholders, successors to the class of directors whose term
expires at such meeting will be elected to serve for three-year terms or until
their respective successors are elected and qualified.

Director Compensation

Our directors, other than Messrs. Chamillard, Fort and Weyand, are not paid
fees for serving on our board. Directors are reimbursed for their out-of-pocket
expenses incurred in connection with their attendance at our board meetings.
Messrs. Chamillard, Fort and Weyand each receive $2,500 for every board meeting
they attend. In December 1998, we granted Mr. Fort options to purchase 12,500
shares of our common stock at an exercise price of $4.80 per share. In April
2000, we granted Mr. Weyand options to purchase 12,500 shares of our common
stock at an exercise price of $12.28 per share. In May 2000, we granted
Mr. Chamillard options to purchase 12,500 shares of our common stock at an
exercise price of $18.00 per share. These options vest over three years and will
become fully vested upon a change of control of MSL. Following this offering,
directors who are not our employees or who are not otherwise affiliated with us
or our principal stockholders will receive compensation that is commensurate
with arrangements offered to directors of companies that are similar to us.
Compensation arrangements for independent directors established by our board
could be in the form of cash payments and/or option grants under our 2000
Non-Employee Director Stock Option Plan.

Committees of the Board of Directors

Our board of directors has an audit committee and a compensation committee
and may also establish other committees to assist in the discharge of its
responsibilities.

The audit committee makes recommendations to our board of directors
regarding the independent auditor to be nominated for election by the
stockholders and reviews the independence of such auditor, approves the scope of
the annual audit activities of the independent auditor, approves the audit fee
payable to the independent auditor and reviews such audit results with the
independent auditor. The audit committee is currently comprised of Messrs. Fort
and Chamillard. We anticipate that within twelve months of this offering, our
audit committee will be comprised of three directors who are not otherwise
affiliated with us or any of our principal stockholders. PricewaterhouseCoopers
LLP presently serves as our independent auditor.

The duties of the compensation committee are to provide a general review of
our compensation and benefit plans to ensure that they meet corporate
objectives. In addition, the compensation committee reviews the chief executive
officer's recommendations on the compensation of all of our officers as well as
adoption of and changes to our major compensation policies and practices, and
reports its recommendations to our board of directors for approval and
authorization. The compensation committee also administers our stock plans. The
compensation committee is currently comprised of Messrs. Fort and Weyand and,
following this offering, is expected to continue to be

53
<PAGE>
comprised solely of two or more non-employee directors (as defined in
Rule 16b-3 under the Securities Exchange Act of 1934).

Compensation of Executive Officers

The following table sets forth information concerning the compensation for
the year ended December 31, 1999 for our Chief Executive Officer and our four
other most highly compensated executive officers at the end of our last fiscal
year. For ease of reference, we collectively refer to these executive officers
throughout this section as our "named executive officers."

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation ------------
-------------------------------------- Securities
Name and Principal Position Other Annual Underlying All Other
--------------------------- Salary Bonus Compensation (1) Options (#) Compensation (2)
<S> <C> <C> <C> <C> <C>
Kevin C. Melia, Chairman and
Chief Executive Officer... $350,000 $302,944 $1,920 437,500 $ 9,929

Robert E. Donahue, President
and Chief Financial
Officer................... 272,116 171,241 1,920 112,500 13,427

Rodolfo Archbold, Executive
Vice President and Chief
Technology Officer........ 169,327 83,801 1,908 31,250 4,107

Dale R. Johnson, former
Executive Vice President,
General Counsel and
Secretary(3).............. 190,000 127,512 1,108 18,750 8,830

James N. Poor, Executive
Vice
President, Human
Resources................. 138,077 68,504 864 10,000 2,138
</TABLE>

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

(1) Represents amount of matching contribution by us under our 401(k) plan.

(2) Represents insurance premiums that we paid for term life insurance and
long-term disability policies on behalf of the named executive officer.

(3) Mr. Johnson resigned from MSL in April 2000.

54
<PAGE>
Option Grants in Last Fiscal Year

The following table sets forth information regarding stock options granted
by us to our named executive officers during our last fiscal year. Stock options
are generally granted at 100% of the fair market value of our common stock as
determined by our board of directors on the date of grant. In reaching the
determination of fair market value at the time of each grant, our board of
directors considers a range of factors, including our current financial
position, recent revenues, results of operations and cash flows, assessment of
our competitive position in our markets and prospects for the future, the status
of our manufacturing capabilities and marketing efforts, current valuations for
comparable companies and the illiquidity of any investment in our common stock.

Option Grants in Fiscal 1999

<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Percent of Potential Realizable
Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees Exercise Option Term (1)
Name Options in Fiscal Price Per Expiration -----------------------
---- Granted (#) 1999 Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Kevin C. Melia.................. 156,250 11.9% $4.00 1/23/2009 $393,059 $996,089
281,250 21.4 20.00 1/23/2009 3,537,532 8,964,801

Robert E. Donahue............... 112,500 8.6 4.80 2/1/2009 339,603 860,621

Rodolfo Archbold................ 1,250 0.1 4.80 1/1/2009 3,773 9,562
5,000 0.4 4.80 8/1/2009 15,093 38,250
7,000 0.5 4.00 1/23/2009 17,609 44,625
18,000 1.4 20.00 1/23/2009 226,402 573,747

Dale R. Johnson(2).............. 6,250 0.5 4.80 1/1/2009 18,867 47,812
3,500 0.3 4.00 1/23/2009 8,805 22,312
9,000 0.7 20.00 1/23/2009 113,201 286,874

James N. Poor................... 5,000 0.4 4.80 1/1/2009 15,093 38,250
5,000 0.4 4.80 10/1/2009 15,093 38,250
</TABLE>

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

(1) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10% compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of our common stock, the optionholder's continued
employment through the option period and the date on which the options are
exercised.

(2) Mr. Johnson resigned from MSL in April 2000. All unvested options were
forfeited upon his resignation.

55
<PAGE>
Option Exercises During Fiscal Year 1999 and Fiscal Year-End Option Values

The following table sets forth information for the named executive officers
concerning stock option exercises during the year ended December 31, 1999 and
options outstanding at the end of our last fiscal year.

Aggregated Option Exercises in Fiscal 1999
and Fiscal Year-End Options Values

<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired On Value Underlying Unexercised In-The-Money Options
Exercise Realized (1) Options At Fiscal Year-End At Fiscal Year-End
Name ----------- ------------ --------------------------- ---------------------------
---- Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Kevin C. Melia........... 213,709 $357,967 196,791 296,875 $465,057 $1,293,750

Robert E. Donahue........ 26,852 20,000 69,792 153,357 542,042 1,187,108

Rodolfo Archbold......... -- -- 15,980 22,769 57,466 109,344

Dale R. Johnson(2)....... -- -- 25,594 14,406 174,031 77,649

James N. Poor............ -- -- 6,531 19,719 53,451 155,899
</TABLE>

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

(1) Value is based on the difference between the option exercise price and the
fair market value at the date of exercise.

(2) Mr. Johnson resigned from MSL in April 2000. All unvested options were
forfeited upon his resignation.

Employment Agreements

On January 20, 1995, we entered into an employment agreement with Kevin C.
Melia for an initial term of three years, after which the term was and will
continue to be automatically extended until terminated by either party upon
three months' prior written notice. The agreement provides that Mr. Melia will
serve as our Chief Executive Officer and will also serve on our board of
directors as Chairman. Under the agreement, we will pay Mr. Melia a base salary
of up to $350,000 plus annual bonuses based upon financial performance. The
agreement specifies that if we terminate Mr. Melia for cause (as defined
therein), all of Mr. Melia's options will terminate and we will have the right
to purchase all of Mr. Melia's shares of our common stock at the lesser of fair
market value or the initial cost of those shares. If we terminate Mr. Melia
without cause or if Mr. Melia terminates the agreement for good reason
(including if Mr. Melia terminates the agreement due to a change in control of
MSL), Mr. Melia will receive the sum of one year's base salary calculated at the
level of his base salary at the time of termination and an amount equal to his
previous year's bonus. In addition, Mr. Melia would be entitled to sell his
shares of our common stock to us at fair market value. If Mr. Melia terminates
the agreement for any other reason (other than death or disability), we will
have the right to purchase his shares of our common stock at fair market value.

The agreement also provides that during any period that Mr. Melia is
entitled to receive any severance payments, he will not enter into competitive
endeavors and will not undertake any commercial activity that is contrary to our
best interest or that of our affiliates, including accepting employment or
acquiring an interest in any entity (other than up to 2% of any publicly traded

56
<PAGE>
company) that derives more than 10% of its profits, revenues or earnings from
electronic contract manufacturing. In addition, the agreement requires
Mr. Melia to refrain from soliciting or hiring our employees for two years
following his termination.

We have also entered into employment letter agreements with Robert E.
Donahue, Rodolfo Archbold, Dale R. Johnson and James N. Poor. These agreements
provide that in addition to their base salaries and initial option grants, these
individuals will receive annual bonuses based on their personal performance and
our financial performance. These individuals' employment is on an at-will basis.
However, each of Mr. Donahue's and Mr. Poor's employment letter agreements, and
Mr. Johnson's severance letter, provide that if he is terminated for any reason
other than cause, death or disability, as defined therein, he will receive the
sum of one year's base salary, calculated at the level of his base salary at the
time of termination, and an amount equal to his previous year's bonus, provided
that the total amount payable shall not exceed two times his base salary for the
year of termination. In connection with their employment letter agreements,
Messrs. Donahue, Johnson and Poor also signed agreements which prohibit them
from competing with us or soliciting employees to compete with us for one year
following their termination.

2000 Cash Incentive Compensation Plan

We have established a Cash Incentive Compensation Plan for 2000 for
executives and key employees. Cash bonuses are paid under the plan based on the
achievement of corporate and site profitability objectives as well as personal
performance goals set at the beginning of the year. The target range of bonus is
between 5% and 100% of base compensation and payout is on a sliding scale based
on the level of achievement. Designated senior executives may achieve bonus
payments greater than their target if they exceed the specified profitability
and performance objectives.

Stock Plans

SECOND AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION PLAN

Our board of directors adopted a non-qualified stock option plan on
December 5, 1996, which was amended and restated on February 26, 1998 and again
on January 1, 1999. The stock option plan authorizes the granting of stock
options to our current and future employees, directors, consultants and
contractors and those of our subsidiaries. Under the stock option plan, our
board is authorized to sell or otherwise issue up to an aggregate of 3,000,000
shares of common stock, in quantity, price and terms subject to the conditions
established by our board. These shares include shares of common stock with
respect to which options may be granted, subject to adjustment upon the
occurrence of specified events to prevent any dilution or expansion of the
rights of participants that might otherwise result from the occurrence of such
events.

As of April 2, 2000, options to purchase an aggregate of 2,521,703 shares of
common stock, portions of which are still subject to vesting, with exercise
prices ranging from $4.00 to $20.00 per share, were outstanding. Such options
will vest and become exercisable in accordance with their terms. In the event
that an employee is terminated without cause, unvested time vesting options
granted prior to January 1, 1997, will continue to vest and remain exercisable
for six months following the vesting of such options, and all other unvested
options will terminate immediately. In the case of options granted on or after
January 1, 1997, all unvested options will terminate

57
<PAGE>
immediately. Vested but unexercised options will terminate immediately if the
optionee is terminated for cause or, after six months, if the optionee is
terminated without cause. All of the options granted have an exercise price
equal to the fair market value of our common stock on the date of grant as
determined by our board of directors.

2000 EQUITY INCENTIVE PLAN

The 2000 Equity Incentive Plan, or the 2000 Plan, was adopted by our board
of directors and approved by our stockholders in connection with the completion
of this offering. As of April 2, 2000, options to purchase 723,400 shares have
been awarded under the 2000 Plan. Following the effectiveness of the 2000 Plan,
no grants have been or will be made under our non-qualified stock option plan.

The 2000 Plan provides for the grant of incentive stock options to our
employees (including officers and employee directors) and for the grant of
nonstatutory stock options to our employees, directors and consultants. The
number of shares to be reserved for issuance under the 2000 Plan includes: (1)
2,668,750 shares of common stock, (2) any shares returned to the 2000 Plan as a
result of termination of options and (3) annual increases to be added on the
date of each annual meeting of our stockholders, commencing with the 2000 annual
meeting, equal to 1.0% of the outstanding shares of our common stock on that
date or such lesser amount as may be determined by our board of directors. Our
board of directors, or a committee appointed by our board of directors,
administers our 2000 Plan and has the power to determine the terms of each
option granted, including the exercise price of the option, the time at which
each option will vest, the number of shares subject to each option, the
exercisability thereof and the form of consideration payable upon such exercise.
In addition, our board of directors has the authority to amend, suspend or
terminate the 2000 Plan, provided that no such action may affect any share of
common stock previously issued and sold or any option previously granted under
the 2000 Plan.

Options granted under the 2000 Plan are generally not transferable by the
optionee, and each option is exercisable during the lifetime of the optionee.
Options granted under the 2000 Plan must generally be exercised within 3 months
after the end of an optionee's status as our employee, director or consultant,
or within 12 months after that optionee's death, but in no event later than the
expiration of the option term.

The exercise price of all incentive stock options granted under the 2000
Plan must be at least equal to the fair market value of the common stock on the
date of grant. The exercise price of nonstatutory stock options granted under
the 2000 Plan is determined by the administrator, but with respect to
nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code,
the exercise price must be at least equal to the fair market value of our common
stock on the date of grant. With respect to any participant who owns stock
representing more than 10% of the total combined voting power of all classes of
our outstanding capital stock, the exercise price of any incentive stock option
grant must be at least equal to 110% of the fair market value on the grant date,
and the term of such incentive stock option must not exceed five years. The term
of all other incentive stock options granted under the 2000 Plan may not exceed
ten years.

58
<PAGE>
The 2000 Plan provides that in the event we merge with or into another
corporation or sell substantially all of our assets, each option shall be
assumed, or an equivalent option substituted for, by the successor corporation.
If the outstanding options are not assumed, or substituted for, by the successor
corporation, all outstanding options shall vest and become exercisable
immediately prior to such a transaction and, unless otherwise determined by the
administrator, shall represent the right to receive the consideration to be paid
in such transaction for each share of our common stock, less the applicable
exercise price. All of these options will terminate upon the consummation of a
merger or sale of assets.

2000 EMPLOYEE STOCK PURCHASE PLAN

The 2000 Employee Stock Purchase Plan, or the stock purchase plan, was
adopted by our board of directors and approved by our stockholders in connection
with the completion of this offering. The stock purchase plan was established to
give eligible employees the opportunity to use voluntary, systematic payroll
deductions, up to 10% of each eligible employee's cash compensation, to purchase
shares of our common stock at a discounted price. We believe that ownership of
stock by our employees will foster greater employee interest in our success,
growth and development.

Subject to restrictions, each of our employees is eligible to participate in
the stock purchase plan if he or she has been employed by us for more than six
months and is employed for more than 20 hours per week. Our board of directors,
in its sole discretion, may waive any or all of the six-month waiting period. An
employee who owns or is deemed to own shares of stock representing 5% or more of
the combined voting power or value of all classes of our stock will not be
eligible to participate in the stock purchase plan. We have reserved 750,000
shares of common stock for issuance in connection with the stock purchase plan.
Elections to participate will be made on a semi-annual basis. Each participating
employee contributes to the stock purchase plan by choosing a payroll deduction
in any specified amount up to a maximum of 10% of his or her cash compensation.
Participating employees may increase or decrease the amount of their payroll
deduction, including a change to a zero deduction, semi-annually, beginning
September 1, 2000. Elected contributions will be credited to participants'
accounts semi-annually, beginning February 28, 2001. Every year, each eligible
employee will be permitted to purchase shares of our common stock with a maximum
fair market value of $25,000.

Set forth below is a summary of how the stock purchase plan will operate:

- Each participating employee's contributions will be used to purchase
shares for the employee's share account after the last day of each
semi-annual period and such participating employee will receive a
certificate evidencing such shares.

- The cost per share is 85% of the lower of the closing price of our common
stock on the New York Stock Exchange on the first or the last day of the
semi-annual period.

- The number of shares purchased on each employee's behalf and deposited in
his/her share account is based on the amount accumulated in that
participant's cash account and the purchase price for shares with respect
to any semi-annual period.

- Shares purchased under the stock purchase plan carry full rights to
receive dividends declared from time to time.

59
<PAGE>
- Share distributions and share splits will be credited to the participating
employee's share account as of the record date and effective date,
respectively.

Subject to applicable federal securities and tax laws, our board of
directors has the right to amend, suspend or terminate the stock purchase plan.
Amendments to the stock purchase plan will not affect a participating employee's
right to the benefit of contributions made prior to the date of any such
amendment. In the event our stock purchase plan is terminated, our board of
directors may immediately cancel the stock purchase plan and distribute all
amounts held in each participating employee's account or continue the stock
purchase plan until the end of the current semi-annual period or such earlier
date as our board of directors may specify.

2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

The 2000 Non-Employee Director Stock Option Plan, or the director option
plan, was adopted and approved by our board of directors and stockholders prior
to the consummation of this offering. The director option plan was established
to encourage stock ownership by our directors and to provide those individuals
with an additional incentive to manage MSL in the shareholders' best interests
and to provide a form of compensation that will attract and retain highly
qualified individuals as members of our board. We have reserved 225,000 shares
of our common stock for issuance in connection with the director option plan.
The director option plan will provide for the granting of options to
non-employee directors, as defined therein. The compensation committee or the
full board will be authorized under the director option plan to make
discretionary grants of options and determine the terms and conditions of such
options. In addition, the director option plan will provide for an initial
one-time grant of options to purchase 20,000 shares of our common stock to each
non-employee director who has not previously received an initial grant of
options and who is serving as a member of our board upon adoption and approval
of the director option plan or to any new non-employee director upon being
elected to our board. The director option plan will also provide for annual
option grants of 5,000 shares of our common stock upon each anniversary of such
director's election, which awards will be granted at our next annual meeting of
stockholders following such anniversary. The director option plan requires that
the exercise price of each option granted under the plan must equal 100% of the
fair market value of our common stock on the date the option is granted. The
initial one-time grants and annual grants will vest in three equal installments
commencing on the first anniversary of the grant date. Nothing contained in the
director option plan or any agreement to be executed pursuant to the director
option plan will obligate MSL, our board of directors or our stockholders to
retain an optionee as a director of MSL.

Compensation Committee Interlocks and Insider Participation

Prior to May 2000, the compensation committee was comprised of
Messrs. Dean, Melia and Wyss. Messrs. Dean and Wyss are each Managing Directors
of DLJ Merchant Banking, Inc. Mr. Melia is our Chairman of the Board and Chief
Executive Officer. Compensation for Mr. Melia for the year ended December 31,
1999 was established pursuant to the terms of his employment agreement with us.
The compensation committee is currently comprised of Messrs. Fort and Weyand,
who are each independent directors.

60
<PAGE>
RELATIONSHIPS AND TRANSACTIONS WITH RELATED PARTIES

Stockholders Agreement

The stockholders agreement dated January 20, 1995, as amended, by and among
DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ ESC II L.P.,
DLJ First ESC, L.P., DLJ Investment Partners II, L.P., DLJ Investment Funding
II, Inc. and DLJ Investment Partners, L.P. (collectively, the "DLJ Entities"),
specified trusts, Kevin C. Melia, Robert J. Graham, Julie Kent, some of our
other stockholders and MSL, restricts transfers of our common stock by some
members of our senior management. Under the stockholders agreement, DLJ Merchant
Banking Partners, L.P. has the right to appoint a majority of the members of our
board of directors for so long as the DLJ Entities own greater than 50% of our
outstanding common stock and, while shares of our senior preferred stock are
held by any of the DLJ Entities, DLJ Investment Partners, II, L.P. has the right
to elect one member of our board of directors. Under the terms of the
stockholders agreement, we have agreed to use our best efforts to retire the
outstanding senior preferred stock with the proceeds of this offering. In
addition, subject to limitations, the stockholders agreement provides some of
our stockholders with demand and piggyback registration rights and contains
indemnification provisions relating to registration statements. Further, under
the stockholders agreement, we were required to pay Donaldson, Lufkin & Jenrette
Securities Corporation an annual management fee equal to $200,000 plus expenses.
As of January 20, 2000, we were no longer obligated to pay this fee or related
expenses.

Interests of Donaldson, Lufkin & Jenrette, Inc. and its Affiliates

The DLJ Entities, Donaldson, Lufkin & Jenrette Securities Corporation and
DLJ Capital Funding, Inc. are affiliates of Donaldson, Lufkin & Jenrette, Inc.
In addition, Thompson Dean and Karl Wyss are Managing Directors of DLJ Merchant
Banking, Inc. Both of these individuals are members of our board of directors.
DLJ Capital Funding, Inc. acted as syndication agent and lender under our bank
credit facility, for which it will receive its pro rata share of any repayment
of amounts outstanding under our bank credit facility from the proceeds of this
offering. In addition, Donaldson, Lufkin & Jenrette Securities Corporation acted
as arranger under our bank credit facility, for which it received customary fees
and expenses and is acting as lead underwriter in this offering. Following this
offering, the DLJ Entities will own approximately 57.5% of our outstanding
common stock. However, a provision in our charter documents provides that some
of these entities may not vote approximately 26% of the shares held by the DLJ
Entities until they and we comply with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Since 1995, Donaldson,
Lufkin & Jenrette, Inc. and its affiliates have received fees in the aggregate
amount of approximately $7.8 million under the stockholders agreement and our
bank credit facility.

Additionally, affiliates of Donaldson, Lufkin & Jenrette, Inc. currently
hold approximately 75% of our outstanding senior preferred stock that we issued
in connection with the acquisition of selected inventory, manufacturing assets
and other intangibles in Salt Lake City, Utah, from 3Com. The senior preferred
stock was issued in November 1999 for cash consideration of $50.0 million.

61
<PAGE>
Approximately $57.0 million of the proceeds from this offering will be used to
retire all of the outstanding senior preferred stock.

Indemnification Agreements

In connection with this offering, we expect to enter into agreements to
provide indemnification for our directors and executive officers in addition to
the indemnification provided for in our Restated Certificate of Incorporation
and By-laws.

Transactions with Executive Officers

In January 2000, our board of directors approved the grant of 200,000 shares
of our common stock to Mr. Melia.

Issuance of Warrants

In connection with the issuance of our senior preferred stock, we issued
warrants to purchase 1,160,542 shares of our common stock to the DLJ Entities
purchasing our senior preferred stock, of which 222,730 were immediately
exercisable and 937,812 were placed into escrow. These warrants have an exercise
price of $4.80 per share and expire on November 26, 2006. On January 28, 2000,
the DLJ Entities sold 500,000 shares of our senior preferred stock and warrants
to purchase 290,136 shares of common stock, of which 55,683 were immediately
exercisable and 234,453 are held in escrow, to Magnetite Asset Investors L.L.C.
If shares of our senior preferred stock are still outstanding as of
November 26, 2000, the warrants that are in escrow will be released to the
holders of our senior preferred stock. Otherwise, the warrants will be returned
to us and canceled. In connection with our initial public offering, the exercise
price of the warrants beneficially owned by DLJ and its affiliates will be
adjusted to equal the public offering price of our shares of common stock in
this offering and the expiration date will be adjusted to be the fifth
anniversary of this offering. The warrants permit cashless exercise and contain
anti-dilution protection in the case of a stock split, combination,
reclassification or other changes to, or sales or issuances of, our common
stock, including future issuances of options, warrants or convertible
securities.

On August 31, 1995, we issued warrants to purchase an aggregate of 128,008
shares of our common stock, with an exercise price equal to $4.00 per share, to
Bank of America National Trust and Savings Association in connection with the
execution of our prior credit agreement. These warrants do not expire. The
warrants permit cashless exercise if a public market exists for our common stock
and contain various anti-dilution protections. In addition, the shares obtained
upon exercise of these warrants contain piggy-back registration rights and the
right to participate in certain transfers as if the holder were a party to our
stockholders agreement.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock as of April 2, 2000 and as adjusted to reflect the
sale of the shares offered by us in this offering for:

- each person who is known by us to own beneficially more than 5% of our
outstanding shares of common stock;

- each director and named executive officer; and

- all directors and executive officers as a group.

As of April 2, 2000, there were 19,947,770 shares of our common stock
outstanding prior to giving effect to the shares to be sold in this offering.
The number of shares to be sold by each of the selling stockholders is stated on
the assumption that the underwriters exercise their over-allotment option in
full. Unless otherwise indicated below, each entity or person listed below
maintains a mailing address of c/o Manufacturers' Services Limited, 300 Baker
Avenue, Suite 106, Concord, Massachusetts 01742.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock issuable pursuant to
options or warrants, to the extent those options or warrants are currently
exercisable or convertible within 60 days of April 2, 2000, are treated as
outstanding for purposes of computing the percentage of the person holding those
securities but are not treated as outstanding for purposes of computing the
percentage of any other person. Unless otherwise noted, to our knowledge, each
person or group identified possesses sole voting and investment power with
respect to the shares, subject to applicable community property laws. Beneficial
ownership percentage is based on 19,947,770 shares of our common stock
outstanding as of April 2, 2000 and 30,947,770 shares of our common stock
outstanding after completion of this offering after giving effect to the
issuance of 11,000,000 shares of our common stock in this offering.

<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to the Owned After the
Offering Offering
----------------------------------------------------- ---------------------
Name of Beneficial Owner Number Percent Number Percent
<S> <C> <C> <C> <C>
Principal and Selling Stockholders:
The DLJ Entities(1).......................... 17,875,382 88.9% 17,875,382 57.5%
Magnetite Asset Investors L.L.C.(2).......... 55,683 * 55,683 *
Directors and Executive Officers:
Kevin C. Melia(3)............................ 1,075,168 5.3 1,075,168 3.4
Robert E. Donahue(4)......................... 148,731 * 148,731 *
Rodolfo Archbold(5).......................... 30,137 * 30,137 *
Albert A. Notini............................. -- -- -- --
Dale R. Johnson(6)........................... 32,438 * 32,438 *
James N. Poor(7)............................. 13,875 * 13,875 *
Thompson Dean(8)............................. 17,875,382 88.9 17,875,382 57.5
Karl Wyss(8)................................. 17,875,382 88.9 17,875,382 57.5
George W. Chamillard......................... -- -- -- --
John F. Fort, III(9)......................... 4,167 * 4,167 *
William Weyand............................... -- -- -- --
All directors and executive officers
as a group (11 persons)(10)................. 19,179,898 93.4 19,179,898 60.8
</TABLE>

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

* Indicates beneficial ownership of less than 1% of our issued and outstanding
common stock.

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<PAGE>
(1) Includes 8,332,876, 3,341,993, 3,733,365, 216,459, 2,073,224 and 10,417
shares of our common stock held by DLJ Merchant Banking Partners, L.P., DLJ
Merchant Banking Funding, Inc., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ First ESC, L.P. and DLJ ESC II, L.P.,
respectively, and warrants to purchase 94,929, 42,184, 15,584 and 14,351
shares of our common stock held by DLJ Investment Partners II, L.P., DLJ
Investment Partners, L.P., DLJ Investment Funding II, Inc. and DLJ ESC II,
L.P., respectively. The table does not include 852,415, 378,788, 145,266 and
123,531 shares of our senior preferred stock held by such persons on
April 2, 2000, respectively, which will be retired using the proceeds of
this offering. See "Use of Proceeds." Pursuant to the terms of our restated
certificate of incorporation, DLJ Merchant Banking Partners, L.P., DLJ
Merchant Banking Funding, Inc. and DLJ International Partners, C.V. may not
vote 2,450,846, 973,215 and 1,098,049 shares of our common stock,
respectively, owned by such persons until they and we comply with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976. The address of each such person is c/o Donaldson Lufkin &
Jenrette, Inc., 277 Park Avenue, New York, New York 10172.

(2) The shares of common stock included in the table represent shares that can
be acquired upon the exercise of outstanding warrants. The table does not
include 500,000 shares of our senior preferred stock, which will be retired
using the proceeds of this offering. See "Use of Proceeds."

(3) The shares of common stock included in the table include 281,250 shares that
can be acquired upon the exercise of outstanding options.

(4) The shares of common stock included in the table include 71,879 shares that
can be acquired upon the exercise of outstanding options.

(5) The shares of common stock included in the table include 25,450 shares that
can be acquired upon the exercise of outstanding options.

(6) Mr. Johnson resigned from MSL in April 2000. The shares of common stock
included in the table include 31,188 shares that can be acquired upon the
exercise of outstanding options.

(7) The shares of common stock included in the table include 9,187 shares that
can be acquired upon the exercise of outstanding options.

(8) Messrs. Dean and Wyss are each Managing Directors of DLJ Merchant
Banking, Inc., the general partner of DLJ Merchant Banking Partners, L.P.
and may be considered to have beneficial ownership of the DLJ Entities'
interests in us. Each such person disclaims beneficial ownership of any
shares in which he does not have a pecuniary interest. The address of each
such person is c/o DLJ Merchant Banking, Inc., 277 Park Avenue, New York,
New York 10172.

(9) The shares of common stock included in the table represent shares that can
be acquired upon the exercise of outstanding options.

(10) Excluding the shares owned by the DLJ Entities attributed to Messrs. Dean
and Wyss, our directors and executive officers as a group are deemed to own
1,304,516 shares of our common stock following this offering, assuming no
exercise of the underwriters' over-allotment option, representing
approximately 4.2% of our outstanding common stock.

Selling Stockholders

Pursuant to the underwriting agreement, the underwriters have been granted
an option to purchase up to an aggregate of 1,650,000 shares of our common stock
from the selling stockholders for the purpose of covering over-allotments, if
any. The selling stockholders, DLJ Merchant Banking Partners, L.P., DLJ Merchant
Banking Funding, Inc., DLJ International Partners, C.V., DLJ Offshore Partners,
C.V., DLJ First ESC, L.P. and DLJ ESC II, L.P., have granted an over-allotment
option to the underwriters with respect to 776,428, 311,394, 347,862, 20,169,
193,176 and 971 shares of our common stock, respectively, and will own
7,556,448, 3,030,598, 3,385,503, 196,290, 1,880,048 and 9,447 shares of our
common stock, respectively, if the over-allotment option is exercised in full.

64
<PAGE>
DESCRIPTION OF INDEBTEDNESS

Bank Credit Facility

On August 21, 1998, we entered into a bank credit facility, which agreement
was amended on February 26, 1999 and further amended on November 23, 1999 (the
"bank credit facility") with a syndicate of financial institutions led by
Donaldson, Lufkin & Jenrette Securities Corporation, as arranger and syndication
agent, and Bank of America, N.A. as administrative and collateral agent. Our
bank credit facility provides for both a term loan facility and a revolving
credit facility. Our term loan facility is for a total of $50.0 million and has
a final maturity on July 31, 2004. On February 10, 2000, we amended our bank
credit facility to provide for an additional $25.0 million term loan facility
with a final maturity on July 31, 2004 and having the same terms as our
$50.0 million term loan facility. At April 2, 2000, we had $74.2 million
outstanding under our term loan facilities. Our revolving credit facility is for
a total of $75.0 million and has a termination date of July 31, 2002. At
April 2, 2000, we had $64.1 million outstanding under our revolving credit
facility.

The interest rate on our revolving credit facility is, at our option,
either:

- 2.00% per annum plus the base rate, which is the higher of:

-- the rate as publicly announced from time to time by Bank of America as
its "reference rate", or

-- the Federal Funds Effective Rate plus 0.50% per annum; or

- the reserve-adjusted London Interbank Offered Rate (Adjusted LIBOR) plus
3.00% per annum.

The applicable margins for our bank credit facility will be subject to
adjustment, +/-0.25%, based on the ratio of our consolidated total debt to
consolidated EBITDA (as defined in our bank credit facility). At April 2, 2000,
the interest rate on our revolving loans was between 9.13% and 11.00%. The
interest rate on our term loan facility is, at our option, either:

- the base rate plus 2.75% per annum; or

- the sum of Adjusted LIBOR plus 3.75% per annum.

At April 2, 2000, the interest rate on our term loan facilities was 9.94%.

We are able to repay and reborrow on our revolving credit facility.
Availability under our revolving credit facility is subject to a commitment fee
which equals 0.50% per annum, subject to reduction to 0.45% per annum based upon
our ratio of consolidated total debt to consolidated EBITDA, of the unused
portion of our bank credit facility on the date of determination. Such fee is
payable quarterly in arrears until termination of our revolving credit facility.

We pay a letter of credit fee for the pro rata account of each lender in an
amount equal to the dollar equivalent of the daily amount available to be drawn
under letters of credit, if any are outstanding, at a per annum rate equal to
3.00%, +/- 0.25%, depending on the ratio of consolidated total debt to
consolidated EBITDA. In addition, we pay a fronting fee equal to 0.25% of the
daily amount available to be drawn down under any letters of credit.

65
<PAGE>
The term loans under our bank credit facility are subject to quarterly
amortization payments over the life of our bank credit facility. In addition, if
we fail to comply with leverage covenants under our bank credit facility, we
would have to make partial repayments of our term loans and/or permanent
reduction in our revolving credit facility commitment, subject to exceptions,
with a portion of the:

- net proceeds from a sale of assets;

- net proceeds from an issuance of debt;

- net proceeds from an issuance of equity securities; and

- excess cash flow.

Once the term loans have been repaid under our bank credit facility, the term
loans will not be permitted to be reborrowed. Issuance of new equity securities
may require, depending upon the ratio of consolidated total debt to consolidated
EBITDA, a prepayment of our outstanding debt obligations up to an amount equal
to 50% of the proceeds of the new equity security offering.

We and all of our present and future direct and indirect U.S. subsidiaries
unconditionally guarantee payment under our bank credit facility. These
guarantees are secured by a pledge of and a perfected security interest in all
of the assets of such entities, including 100% of the stock of our subsidiaries.
In addition, all of our foreign subsidiaries have guaranteed payment of the
obligations of MSL Overseas Finance B.V. under our bank credit facility.

Our bank credit facility contains customary covenants and restrictions on
our ability and the ability of our subsidiaries to engage in some activities,
including, but not limited to:

- issuing new indebtedness;

- creating liens;

- incurring capital expenditures;

- making investments;

- declaring dividends, repurchasing or redeeming capital stock and prepaying
subordinated debt;

- entering into any merger, consolidation, acquisition, sale of assets or
lease; and

- entering into hedging transactions.

Our bank credit facility permits us to pay cash dividends of up to $7.0 million
on or prior to December 1, 2000 on our senior preferred stock.

Our bank credit facility also requires us and our subsidiaries to observe
customary financial covenants, including, but not limited to:

- a minimum interest coverage ratio,

- a maximum leverage ratio;

- a minimum consolidated EBITDA ratio;

66
<PAGE>
- a minimum consolidated net worth ratio;

- maximum capital expenditures; and

- maximum other indebtedness.

The availability of our revolving credit facility is further restricted based
upon a monthly "borrowing base" which is calculated by reference to eligible
receivables and inventory. Eligible receivables are generally limited to those
not in dispute and less than 90 days old. Our inventory is restricted to a
limited percentage of the total borrowing base.

Our bank credit facility contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross-defaults on other indebtedness, events of bankruptcy and insolvency, ERISA
defaults, judgment defaults, failure of any guaranty or security agreement
supporting our bank credit facility to be in full force and effect and change in
our control.

New Bank Credit Facility

Based upon discussions with our principal lender under our existing bank
credit facility, we expect to refinance our existing indebtedness under our
existing bank credit facility upon consummation of this offering. We expect that
the new bank credit facility will provide for borrowings of up to $150.0 million
and have a final maturity in 2004. We anticipate that the new bank credit
facility will be secured by substantially all of our assets and will generally
contain less restrictive covenants, more favorable pricing terms and a lower
interest rate than our existing bank credit facility. To date, no definitive
agreement has been executed, and no assurance can be given that the new bank
credit facility will be executed on these terms or entered into at all.

67
<PAGE>
DESCRIPTION OF CAPITAL STOCK

General Matters

Upon completion of this offering, the total amount of our authorized capital
stock will consist of 150,000,000 shares of common stock, 2,000,000 shares of
senior preferred stock due 2006 and 3,000,000 shares of one or more additional
series of preferred stock. As of April 2, 2000, we had outstanding 19,947,770
shares of common stock and 2,000,000 shares of senior preferred stock.

After giving effect to this offering, we will have 30,947,770 shares of
common stock and no other shares of any series of preferred stock outstanding.
As of April 2, 2000, we had 97 stockholders of record with respect to our common
stock and outstanding options to purchase 2,521,703 shares of our common stock,
of which 889,929 shares were exercisable. The following summarizes the material
provisions of our capital stock.

Our restated certificate and by-laws will contain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of our board of directors and which may have the effect of delaying,
deferring or preventing a future takeover or change in our control unless such
takeover or change in control is approved by our board of directors. These
provisions include a classified board of directors, elimination of stockholder
action by written consents, elimination of the ability of stockholders to call
special meetings, advance notice procedures for stockholder proposals and
supermajority vote requirements for amendments to our certificate of
incorporation and by-laws.

Common Stock

The issued and outstanding shares of common stock are, and the shares of
common stock to be issued by us in connection with the offering will be, validly
issued, fully paid and nonassessable. Subject to the prior rights of the holders
of any series of preferred stock, the holders of outstanding shares of our
common stock are entitled to receive dividends out of assets legally available
therefor at such time and in such amounts as our board of directors may from
time to time determine. See "Dividend Policy." Our shares of common stock are
not convertible and the holders thereof have no preemptive or subscription
rights to purchase any of our securities. Upon liquidation, dissolution or
winding up of MSL, the holders of our common stock are entitled to receive, pro
rata, our assets which are legally available for distribution, after payment of
all debts and other liabilities and subject to the prior rights of any holders
of any series of preferred stock then outstanding. Each outstanding share of our
common stock is entitled to one vote on all matters submitted to a vote of
stockholders. There is no cumulative voting. Except as otherwise required by law
or the restated certificate, the holders of our common stock vote together as a
single class on all matters submitted to a vote of stockholders.

Our common stock has been authorized for listing on the New York Stock
Exchange under the symbol "MSV."

Warrants

In connection with the issuance of our senior preferred stock, we issued
warrants to purchase 1,160,542 shares of our common stock to some of the DLJ
Entities, of which 222,730 were immediately exercisable and 937,812 were placed
into escrow. On January 28, 2000, the DLJ

68
<PAGE>

Entities sold 500,000 shares of our senior preferred stock and warrants to
purchase 290,136 shares of our common stock, of which 55,683 were immediately
exercisable and 234,453 are held in escrow, to Magnetite Asset Investors L.L.C.
These warrants have an exercise price of $4.80 per share and expire on
November 26, 2006. If shares of our senior preferred stock are still outstanding
as of November 26, 2000, the warrants that are in escrow will be released to the
holders of our senior preferred stock. Otherwise, the warrants will be returned
to us and canceled. In connection with our initial public offering, the exercise
price of the warrants beneficially owned by DLJ and its affiliates will be
adjusted to equal the public offering price of our shares of common stock in
this offering and the expiration date will be adjusted to be the fifth
anniversary of this offering. The warrants permit cashless exercise and contain
anti-dilution protection in the case of a stock split, combination,
reclassification or other changes to, or sales or issuances of, our common
stock, including future issuances of options, warrants or convertible
securities.

On August 31, 1995, we issued warrants to purchase an aggregate of 128,008
shares of our common stock with an exercise price equal to $4.00 per share to
Bank of America National Trust and Savings Association in connection with the
execution of our prior credit agreement. These warrants do not expire. The
warrants permit cashless exercise if a public market exists for our common stock
and contain various anti-dilution protections. In addition, the shares obtained
upon exercise of these warrants contain piggy-back registration rights and the
right to participate in certain transfers as if the holder were a party to our
stockholders agreement.

Senior Preferred Stock Due 2006

On November 26, 1999, we issued 2,000,000 shares of senior preferred stock
due 2006 at $25.00 per share to some of the DLJ Entities. On January 28, 2000,
the DLJ Entities sold 500,000 shares of our senior preferred stock to Magnetite
Asset Investors L.L.C., at cost plus accrued and unpaid dividends. The holders
of our senior preferred stock are entitled to cumulative dividends at a rate of
14% per annum, payable quarterly in cash, through November 26, 2000 and,
thereafter, at a rate of 15% per annum, payable in cash at the mandatorily
redeemable date or in additional shares of senior preferred stock. In the event
that we fail to redeem our senior preferred stock upon a change of control of
MSL, or if we have not redeemed our senior preferred stock by November 26, 2006,
the dividend rate will increase by 0.5% per quarter, up to a maximum dividend
rate of 25% per annum.

So long as any shares of our senior preferred stock are outstanding, we
cannot pay cash dividends on our common stock, nor may we redeem, purchase or
otherwise acquire our common stock, except in connection with an employee
incentive or benefit plan. In addition, so long as any shares of our senior
preferred stock are outstanding, dividends on other shares of preferred stock
must be paid ratably in proportion to the respective amounts of dividends
accumulated and unpaid.

If we fail to satisfy our obligations under the terms of our senior
preferred stock relating to payment of dividends and redemption obligations and
for so long as this failure continues, the holders of our senior preferred stock
will have the right to elect two additional directors to our board of directors.
In connection with the sale by the DLJ Entities of 500,000 shares of our senior
preferred stock to Magnetite Asset Investors L.L.C., Magnetite was given the
right to nominate one of these additional directors.

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<PAGE>
In the event of any liquidation, dissolution or winding up of MSL, the
holders of our senior preferred stock shall be entitled to receive an amount
equal to $25.00 plus the value of all accrued and unpaid cash and in-kind
dividends. Until November 26, 2000, we may redeem all of our senior preferred
stock at 114% of its liquidation value, or $57.0 million. Thereafter, we may
redeem the shares at 115% of liquidation value. All redemptions of our senior
preferred stock shall include accrued and unpaid dividends payable thereon. We
intend to retire all of the outstanding shares of our senior preferred stock
with the proceeds from this offering. See "Use of Proceeds."

Other Preferred Stock

Our board of directors may, without further action by our stockholders, from
time to time, direct the issuance of shares of preferred stock in series and
may, at the time of issuance, determine the rights, preferences and limitations
of each series, including voting rights, dividend rights and redemption and
liquidation preferences. Satisfaction of any dividend preferences of outstanding
shares of preferred stock would reduce the amount of funds available for the
payment of dividends on shares of our common stock. Holders of shares of
preferred stock may be entitled to receive a preference payment in the event of
any liquidation, dissolution or winding-up of MSL before any payment is made to
the holders of shares of our common stock. In some circumstances, the issuance
of shares of preferred stock may render more difficult or tend to discourage a
merger, tender offer or proxy contest, the assumption of control by a holder of
a large block of our securities or the removal of incumbent management. Upon the
affirmative vote of a majority of the total number of directors then in office,
our board of directors, without stockholder approval, may issue shares of
preferred stock with voting and conversion rights which could adversely affect
the holders of shares of our common stock. Following this offering and the
application of the net proceeds therefrom, as described under "Use of Proceeds,"
there will be no shares of preferred stock outstanding.

We have no current intention to issue any of our unissued, authorized shares
of preferred stock. However, the issuance of any shares of preferred stock in
the future could adversely affect the rights of the holders of our common stock.

Registration Rights

Pursuant to the stockholders agreement, in the event we propose to file a
registration statement under the Securities Act with respect to an offering by
us for our own account or the account of another person, or both, some of our
stockholders, including the DLJ Entities, will be entitled to include shares
held by them in a registration, subject to the right of the managing underwriter
of the offering to exclude some or all of the shares from the registration if
and to the extent the inclusion of the shares would adversely affect the
marketing of the shares to be sold by us. The agreement also provides that,
following the closing of our initial public offering of common stock, some of
our stockholders, including the DLJ Entities, may require us to register shares
having a fair market value of at least $5.0 million, except that we are not
required to effect such registration more than:

- four times on behalf of the DLJ Merchant Banking Partners, L.P., DLJ
International Partners, C.V., DLJ Offshore Partners, C.V. or DLJ Merchant
Banking Funding, Inc.;

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<PAGE>
- three times on behalf of DLJ Investment Partners II, L.P., DLJ Investment
Funding II, Inc., DLJ ESC II L.P. or DLJ Investment Partners, L.P., and we
may be required to register shares having a fair market value of less than
$5.0 million if such amount represents all of their shares; or

- once on behalf of the other stockholders party to the stockholders
agreement.

The agreement also provides that we will pay all expenses incurred in connection
with these registrations. We are not required, however, to effect any such
registration within six months after the effective date of a prior demand
registration. In addition, all holders of registerable securities are entitled
to request the inclusion of any shares of our common stock subject to the
stockholders agreement in any registration statement at our expense whenever we
propose to register any of our securities under the Securities Act, subject to
some conditions. In connection with all such registrations, we have agreed to
indemnify all holders of registerable securities against specified liabilities,
including liabilities under the Securities Act. In addition, Bank of America
National Trust and Savings Association is entitled to request the inclusion of
shares of our common stock issuable upon exercise of its warrant in any
registration statement on terms substantially similar to those described above.

Other Provisions of Our Restated Certificate of Incorporation and By-laws

CLASSIFIED BOARD. Our restated certificate provides for our board to be
divided into three classes, as nearly equal in number as possible, serving
staggered terms. Approximately one-third of our board will be elected each year.
Under the Delaware General Corporation Law, directors serving on a classified
board can only be removed for cause. Our restated certificate provides that an
affirmative vote of the holders of at least 75% of the shares of our capital
stock entitled to vote is required to remove a director without cause. The
provision for a classified board could prevent a party who acquires control of a
majority of our outstanding voting stock from obtaining control of the board
until our second annual stockholders meeting following the date the acquiror
obtains the controlling stock interest. The classified board provision could
have the effect of discouraging a potential acquiror from making a tender offer
or otherwise attempting to obtain control of MSL and could increase the
likelihood that incumbent directors will retain their positions.

ELIMINATION OF STOCKHOLDER ACTION THROUGH WRITTEN CONSENTS. Our by-laws
provide that stockholder action can be taken only at an annual or special
meeting of stockholders and cannot be taken by written consent in lieu of a
meeting.

ELIMINATION OF THE ABILITY TO CALL SPECIAL MEETINGS. Our restated
certificate and by-laws provide that, except as otherwise required by law,
special meetings of our stockholders can only be called pursuant to a resolution
adopted by a majority of our board of directors or by our chief executive
officer or the chairman of our board of directors. Stockholders are not
permitted to call a special meeting or to require our board to call a special
meeting.

ADVANCED NOTICE PROCEDURES FOR STOCKHOLDER PROPOSALS. Our by-laws establish
an advance notice procedure for stockholder proposals to be brought before an
annual meeting of our stockholders, including proposed nominations of persons
for election to our board. Stockholders at our annual meeting may only consider
proposals or nominations specified in the notice of meeting

71
<PAGE>
or brought before the meeting by or at the direction of our board or by a
stockholder who was a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has given to our secretary timely
written notice, in proper form, of the stockholder's intention to bring that
business before the meeting. Although our by-laws do not give our board the
power to approve or disapprove stockholder nominations of candidates or
proposals regarding other business to be conducted at a special or annual
meeting, our by-laws may have the effect of precluding the conduct of some
business at a meeting if the proper procedures are not followed or may
discourage or defer a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of us.

AMENDMENTS TO THE RESTATED CERTIFICATE AND BY-LAWS. Our restated
certificate and by-laws provide that the affirmative vote of holders of at least
75% of the total votes eligible to be cast in the election of directors is
required to amend, alter, change or repeal some of their provisions. This
requirement of a super-majority vote to approve amendments to the restated
certificate and by-laws could enable a minority of our stockholders to exercise
veto power over any such amendments.

Provisions of Delaware Law Governing Business Combinations

Following the consummation of this offering, we will be subject to the
"business combination" provisions of the Delaware General Corporation Law. In
general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless:

- the transaction is approved by the board of directors prior to the date
the "interested stockholder" obtained such status;

- upon consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or

- on or subsequent to such date the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested
stockholder."

A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. In general,
an "interested stockholder" is a person who, together with affiliates and
associates, owns 15% or more of a corporation's voting stock or within three
years did own 15% or more of a corporation's voting stock. However, Donaldson,
Lufkin & Jenrette, Inc. and its affiliates will not be deemed to be "interested
stockholders" regardless of the percentage of our voting stock owned by them.
The statute could prohibit or delay mergers or other takeover or change in
control attempts with respect to us and, accordingly, may discourage attempts to
acquire us.

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Limitations on Liability and Indemnification of Officers and Directors

Our restated certificate of incorporation limits the liability of our
directors to the fullest extent permitted by the Delaware General Corporation
Law and provides that we will indemnify them to the fullest extent permitted by
such law. We expect to enter into indemnification agreements with our current
directors and executive officers prior to the completion of this offering and
expect to enter into a similar agreement with any new directors or executive
officers. We expect to increase our director's and officer's liability insurance
coverage prior to the completion of this offering.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

The sale of a substantial amount of our common stock in the public market
after this offering could adversely affect the prevailing market price of our
common stock. Furthermore, because no shares will be available for sale shortly
after this offering due to the contractual and legal restrictions on resale
described below, the sale of a substantial amount of our common stock in the
public market after these restrictions lapse could adversely affect the
prevailing market price of our common stock and our ability to raise equity
capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of
30,947,770 shares of our common stock, assuming no exercise of outstanding
options. Of these shares, all of the shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
unless the shares are purchased by "affiliates" as that term is defined in
Rule 144 under the Securities Act. Any shares purchased by an affiliate may not
be resold except pursuant to an effective registration statement or an
applicable exemption from registration, including an exemption under Rule 144 of
the Securities Act. The remaining shares of our common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. These restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These rules
are summarized below.

In connection with this offering, our existing officers and directors and
other persons who will own an aggregate of 18,589,729 shares of our common stock
after this offering, have agreed with the underwriters that, subject to
exceptions, they will not sell or dispose of any of their shares for 180 days
after the date of this prospectus. Donaldson, Lufkin & Jenrette Securities
Corporation may, in its sole discretion and at any time without notice, release
all or any portion of the shares subject to such restrictions. The shares of our
common stock outstanding upon closing of this offering will be available for
sale in the public market as follows:

<TABLE>
<CAPTION>
Approximate
Number of Shares Description
---------------- ------------------------------------------------------------
<S> <C>
11,000,000 After the date of this prospectus, freely tradeable shares
sold in this offering.

19,588,897 After December 31, 2000, these shares will be saleable under
Rule 144 (subject, in some cases, to volume limitations).

19,947,770 After June 30, 2001, these shares will be saleable under
Rule 144 (subject, in some cases, to volume limitations).
</TABLE>

Lock-up Agreements

We, our executive officers, directors, substantially all of our existing
stockholders and many of our optionholders who are senior officers have agreed
not to offer, sell, contract to sell or otherwise dispose of any shares of our
common stock for a period of 180 days after the date of this prospectus without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. In addition, the DLJ Entities have agreed to a one year lock-up
agreement on similar terms with respect to the warrants to purchase shares of
our common stock beneficially owned by DLJ and its affiliates and issued in
connection with the sale of our senior preferred stock. However,

74
<PAGE>

this restriction does not apply to the shares of common stock to be issued by us
in connection with this offering or pursuant to employee benefit plans existing
on the date of this prospectus, sales or dispositions to us, permitted transfers
to related parties that agree to be bound by the foregoing restrictions or
permitted sales of shares acquired in the open market following the completion
of this offering.

Rule 144

In general, under Rule 144 as currently in effect, beginning ninety (90)
days after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year from the later of the date
those shares of common stock were acquired from us or from an affiliate of ours
would be entitled to sell within any three-month period, a number of shares that
does not exceed the greater of:

- one percent of the number of shares of our common stock then outstanding,
which will equal approximately 309,500 shares immediately after this
offering; or

- the average weekly trading volume of our common stock on the New York
Stock Exchange during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale of any shares of common stock.

The sales of any shares of our common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years from the later of the date
such shares of our common stock were acquired from us or from an affiliate of
ours, including the holding period of any prior owner other than an affiliate,
is entitled to sell those shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted pursuant to the lock-up agreements or
otherwise, those shares may be sold immediately upon the completion of this
offering.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares ninety (90) days after the effective date of this
offering in reliance on Rule 144, but without compliance with some of the
restrictions, including the holding period, contained in Rule 144. No precise
prediction can be made as to the effect, if any, that market sales of shares or
the availability of shares for sale will have on the market price of our common
stock prevailing from time to time. We are unable to estimate the number of our
shares that may be sold in the public market pursuant to Rule 144 or Rule 701
because this will depend on the market price of our common stock, the personal
circumstances of the sellers and other factors. Nevertheless, sales of
significant amounts of our common stock in the public market could adversely
affect the market price of our common stock.

75
<PAGE>
Stock Plans

We intend to file registration statements under the Securities Act covering
6,418,750 shares of common stock reserved for issuance under our non-qualified
stock option plan, 2000 Plan and stock purchase plan and any shares reserved for
issuance under our director option plan. These registration statements are
expected to be filed as soon as practicable after the effective date of this
offering.

As of April 2, 2000, there were options to purchase 2,521,703 shares
outstanding under our stock option plans. All of these shares will be eligible
for sale in the public market from time to time, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some of the options, the expiration of lock-up agreements.

Registration Rights

Pursuant to the stockholders agreement, in the event we propose to file a
registration statement under the Securities Act with respect to an offering by
us for our own account or the account of another person, or both, some of our
stockholders, including the DLJ Entities, will be entitled to include shares
held by them in a registration, subject to the right of the managing underwriter
of the offering to exclude some or all of the shares from the registration if
and to the extent the inclusion of the shares would adversely affect the
marketing of the shares to be sold by us. In addition, Bank of America National
Trust and Savings Association has the right to require us to register the shares
of our common stock issuable upon exercise of its warrant on substantially
similar terms. See "Description of Capital Stock--Registration Rights."
Beginning 180 days after the date of the prospectus, the holders of an aggregate
of 17,708,334 shares of our outstanding common stock will have demand
registration rights pursuant to the stockholders agreement.

76
<PAGE>
UNDERWRITING

Subject to the terms and conditions contained in the underwriting agreement
dated , 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Banc of America Securities
LLC, FleetBoston Robertson Stephens Inc., Thomas Weisel Partners LLC and
DLJDIRECT Inc., have severally agreed to purchase from us the respective number
of shares of common stock set forth opposite their names below.

<TABLE>
<CAPTION>
Underwriters Number of Shares
<S> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation.......................................
Banc of America Securities LLC......................
FleetBoston Robertson Stephens Inc..................
Thomas Weisel Partners LLC..........................
DLJDIRECT Inc.......................................
-------------
Total........................................... 11,000,000
=============
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of our common stock
included in this offering are subject to approval of legal matters by their
counsel and to customary conditions. The underwriters are obligated to purchase
and accept delivery of all the shares of our common stock offered in this
prospectus, other than those covered by the over-allotment option described
below, if they purchase any of the shares of our common stock.

The underwriters propose to initially offer some of the shares of our common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and some of the shares of our common stock to
dealers (including the underwriters) at the initial public offering price less a
concession not in excess of $ per share. The underwriters may allow, and
those dealers may re-allow, a concession not in excess of $ per share on
sales to other dealers. After the initial public offering of our shares to the
public, the representatives of the underwriters may change the public offering
price and such concessions at any time without notice. The underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead or co-managing
underwriter in 165 filed public offerings of equity securities, of which 112
have been completed, and has acted as a syndicate member in an additional 91
public offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with us
pursuant to the underwriting agreement entered into in connection with this
offering.

DLJDIRECT Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in this offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJDIRECT for sale to its
brokerage account holders. An electronic prospectus is available on the Internet
site

77
<PAGE>
maintained by DLJDIRECT Inc. Other than the prospectus in electronic format, the
information on the Internet site relating to our offering is not a part of this
prospectus, has not been approved or endorsed by us or any underwriter and
should not be relied on by prospective purchasers.

The following table shows the underwriting discount we will pay to the
underwriters in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of our common stock.

<TABLE>
<CAPTION>
Fees Paid by Fees Paid by
Manufacturers' the Selling
Services Limited Stockholders
------------------- ------------
No Full Full
Exercise Exercise Exercise
<S> <C> <C> <C>
Per share.............................. $ $ $
Total.................................. $ $ $
</TABLE>

The selling stockholders have granted to the underwriters an option,
exercisable for 30 days after the date of the underwriting agreement, to
purchase up to 1,650,000 additional shares of our common stock at the initial
public offering price less the underwriting fees. The underwriters may exercise
their option solely to cover over-allotments, if any, made in connection with
this offering. To the extent that the underwriters exercise their option, each
underwriter will become obligated, subject to conditions, to purchase a number
of additional shares approximately proportionate to their initial purchase
commitment. We have agreed that if any of the selling stockholders fail to
deliver their shares upon the exercise of the over-allotment option, we will
sell to the underwriters that number of shares of our common stock at the same
price. We will pay all of the offering expenses, estimated to be $1.5 million.

We and the selling stockholders have agreed to indemnify the underwriters
against specified civil liabilities, including liabilities under the Securities
Act, or to contribute to payments that the underwriters may be required to make
in respect of any of those liabilities.

We, our executive officers and directors and substantially all of our
stockholders have agreed, for a period of 180 days after the date of this
prospectus, not to, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock; or

- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock, regardless of whether any of the transactions described in these
clauses are to be settled by the delivery of common stock, or such other
securities, in cash or otherwise.

However, we may:

- grant stock options or stock awards under our existing benefit or
compensation plans;

78
<PAGE>
- issue shares of our common stock upon the exercise of options, warrants or
rights or the conversion of currently outstanding securities; and

- issue, offer and sell shares of our common stock or securities convertible
into, or exercisable or exchangeable for, our common stock in transactions
not involving a public offering, or in connection with future
acquisitions, as long as each recipient of the securities agrees in
writing to be bound by the restrictions in this paragraph.

In addition, during this period, we have agreed not to file any registration
statement with respect to, and each of our executive officers and directors and
a significant majority of our stockholders have agreed not to make any demand
for, or exercise any right with respect to, the registration of any shares of
common stock or any securities convertible into or exercisable or exchangeable
for common stock (other than a registration statement registering options or
shares granted under a stock option plan) without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. In addition, the DLJ
Entities have agreed to a one year lock-up agreement on similar terms with
respect to the warrants to purchase shares of our common stock beneficially
owned by DLJ and its affiliates and issued in connection with the sale of our
senior preferred stock.

Prior to this offering, there was no established trading market for our
common stock. The initial public offering price for our common stock will be
determined by negotiation among us and the representatives of the underwriters.
The factors to be considered in determining the initial public offering price
include:

- the history of and the prospects for the industry in which we compete;

- the ability of our management;

- our past and present operations;

- our prospects for future earnings;

- the general condition of the securities markets at the time of this
offering; and

- the recent market prices of securities of generally comparable companies.

Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of our common
stock offered in this prospectus in any jurisdiction where action for that
purpose is required. The shares of our common stock offered in this prospectus
may not be offered or sold, directly or indirectly, nor may this prospectus or
any other offering material or advertisements in connection with the offer and
sale of any shares of our common stock be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of the jurisdiction. Persons who receive this
prospectus are advised to inform themselves about and to observe any
restrictions relating to the offering of our common stock and the distribution
of this prospectus. This prospectus is not an offer to sell or a solicitation of
an offer to buy any shares of our common stock included in this offering in any
jurisdiction where that would not be permitted or legal.

In connection with this offering, some underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of our
common stock. Specifically, the underwriters may over-allot this offering,
creating a syndicate short position. In addition, the underwriters may bid for

79
<PAGE>
and purchase shares of our common stock in the open market to cover syndicate
short positions or to stabilize the price of our common stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members
and selected dealers if they repurchase previously distributed shares of our
common stock in syndicate covering transactions, stabilizing transactions or
otherwise. These activities may stabilize or maintain the market price of our
common stock above independent market levels. The underwriters are not required
to engage in these activities and may end any of these activities at any time.

At our request, Donaldson, Lufkin & Jenrette Securities Corporation has
reserved up to five percent of the shares offered by this prospectus for sale at
the initial public offering price to our employees, officers, directors and
other individuals associated with us and members of their families. The number
of shares of common stock available for sale to the general public will be
reduced to the extent any reserved shares are purchased. Any reserved shares not
so purchased will be offered by Donaldson, Lufkin & Jenrette Securities
Corporation on the same basis as the other shares of our common stock. Any
employees, directors or other persons purchasing such reserved shares will be
prohibited from selling, transferring, assigning, pledging or hypothecating such
shares for a period of three months following the effective date of this
offering.

Our common stock has been authorized for listing on the New York Stock
Exchange under the symbol "MSV."

DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ
ESC II, L.P., DLJ First ESC, L.P., DLJ Merchant Banking Funding, Inc., DLJ
Offshore Partners, C.V., DLJ Investment Partners II, L.P., DLJ Investment
Partners, L.P. and DLJ Investment Funding II, L.P., each of which are affiliates
of Donaldson, Lufkin & Jenrette Securities Corporation, are stockholders of MSL.
In addition, DLJ Merchant Banking Partners, L.P., has the right to appoint a
majority of the members of our board of directors. So long as shares of our
senior preferred stock are held by any of the DLJ Entities, DLJ Investment
Partners II, L.P. has the right to elect one member of our board of directors
pursuant to the terms of the stockholders agreement. DLJ Capital Funding, Inc.
acted as syndication agent and is a lender under our bank credit facility and is
expected to be the syndication agent and a lender under our new bank credit
facility. In addition, affiliates of some of the underwriters are lenders under
our bank credit facility and will receive proceeds from this offering upon
repayment of this indebtedness. Prior to this offering, Donaldson, Lufkin &
Jenrette Securities Corporation and its affiliates and employees own an
aggregate of approximately 90% percent of the issued and outstanding shares of
our common stock. See "Principal and Selling Stockholders."

The offering is being conducted in accordance with Rule 2720 of the Conduct
Rules of the NASD, which provides that, among other things, when an NASD member
participates in the underwriting of its parent's equity securities, the initial
public offering price can be no higher than that recommended by a "qualified
independent underwriter" meeting specified standards. In accordance with this
requirement, Banc of America Securities LLC will serve in this role and will
recommend a price in compliance with the requirements of Rule 2720. In
connection with this offering, Banc of America Securities LLC, in its role as
qualified independent underwriter, has exercised its usual standards of "due
diligence" and has reviewed and participated in the preparation of this
prospectus and the registration statement of which this prospectus forms a part

80
<PAGE>
and will recommend the maximum price at which our common stock may be offered
hereby. Banc of America Securities LLC will receive a separate fee of $5,000 for
its services as qualified independent underwriter. In addition, the underwriters
may not confirm sales to any discretionary account without the prior specific
written approval of the customer.

LEGAL MATTERS

The validity of the shares of our common stock offered hereby will be passed
upon for us by Ropes & Gray, Boston, Massachusetts. Various legal matters
related to the sale of our common stock offered hereby will be passed upon for
the underwriters by Davis, Polk & Wardwell, New York, New York.

EXPERTS

The financial statements as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus and the financial statement schedules included in the registration
statement have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For further
information about us and our common stock, you should refer to the registration
statement. With respect to each such contract, agreement or other document filed
as an exhibit to the registration statement you should refer to the exhibit for
a more complete description of the matter involved.

You may read and copy all or any portion of the registration statement or
any reports, statements or other information in the files at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C., 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents upon payment of a duplicating fee by writing
to the Commission. You may call the Commission at 1-800-SEC-0330 for further
information on the operation of its public reference rooms. Our filings,
including the registration statement, will also be available to you on the
Internet site maintained by the Commission at http://www.sec.gov.

We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can request copies of these documents,
for a copying fee, by writing to the SEC. We intend to furnish our stockholders
with annual reports containing financial statements audited by our independent
auditors.

81
<PAGE>
MANUFACTURERS' SERVICES LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended
December 31, 1997, 1998 and 1999.......................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to the Consolidated Financial Statements.............. F-7
Consolidated Balance Sheets as of December 31, 1999 and
April 2, 2000 (unaudited)................................. F-30
Consolidated Statements of Operations for the three months
ended April 4, 1999 and April 2, 2000 (unaudited)......... F-31
Consolidated Statements of Stockholders' Equity for the
three months ended April 4, 1999 and April 2, 2000
(unaudited)............................................... F-32
Consolidated Statements of Cash Flows for the three months
ended April 4, 1999 and April 2, 2000 (unaudited)......... F-33
Notes to Interim Consolidated Financial Statements
(unaudited)............................................... F-34
</TABLE>

F-1
<PAGE>
Report of Independent Accountants

To the Board of Directors and Stockholders of
Manufacturers' Services Limited

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of
Manufacturers' Services Limited and its subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP
Boston, Massachusetts

February 2, 2000, except as to
the reverse stock split
described in Note 13 which is
as of May 2, 2000

F-2
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
December 31,
-------------------
ASSETS 1998 1999
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 23,969 $ 24,182
Accounts receivable, less allowance for doubtful accounts
of $698 and $728
at December 31, 1998 and 1999, respectively............. 118,513 131,301
Inventories............................................... 87,487 125,164
Deferred tax asset........................................ 824 1,068
Prepaid expenses and other current assets................. 4,241 17,550
-------- --------
Total current assets.................................... 235,034 299,265

Property and equipment, net............................... 33,786 62,814
Goodwill and other intangibles............................ 676 37,949
Deferred tax asset........................................ 763 121
Other assets.............................................. 7,349 11,634
-------- --------
Total assets............................................ $277,608 $411,783
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations............................................. $ 4,939 $ 5,414
Accounts payable.......................................... 146,619 164,261
Accrued expenses and other current liabilities............ 21,953 26,177
Restructuring reserve..................................... 4,671 668
Income taxes payable...................................... 2,512 4,472
-------- --------
Total current liabilities............................... 180,694 200,992

Long-term debt and capital lease obligations................ 57,188 121,929
Other liabilities........................................... 552 1,037
-------- --------
Total liabilities....................................... 238,434 323,958

Commitments and contingencies (Note 10)

Senior redeemable preferred stock, 2,000,000 shares
authorized; 0 and
2,000,000 shares issued and outstanding at December 31,
1998 and 1999,
respectively; redemption value of $25 per share........... -- 39,204

Stockholders' equity:
Preferred stock, $0.001 par value, 3,000,000 shares
authorized; no shares
issued and outstanding.................................. -- --
Common stock, $0.001 par value; 150,000,000 shares
authorized;
18,849,480 and 19,588,897 shares issued and outstanding
at
December 31, 1998 and 1999, respectively................ 19 20
Additional paid in capital................................ 75,455 88,471
Accumulated deficit....................................... (32,371) (30,361)
Accumulated other comprehensive loss...................... (3,929) (9,509)
-------- --------
Total stockholders' equity.............................. 39,174 48,621
-------- --------
Total liabilities and stockholders' equity.............. $277,608 $411,783
======== ========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-3
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Net sales...................................... $ 562,666 $ 837,993 $ 920,722
Cost of goods sold............................. 526,787 792,734 865,489
----------- ----------- -----------
Gross profit................................... 35,879 45,259 55,233
Operating expenses:
Selling, general and administrative.......... 28,037 29,835 38,042
Restructuring and other asset writedowns..... 12,094 6,729 780
----------- ----------- -----------
40,131 36,564 38,822
----------- ----------- -----------
Operating income (loss)........................ (4,252) 8,695 16,411
Interest expense, net.......................... (7,723) (10,161) (8,081)
Foreign exchange gain (loss)................... (931) 721 (2,510)
----------- ----------- -----------
Income (loss) before provision for income taxes
and extraordinary loss....................... (12,906) (745) 5,820
Provision for income taxes..................... 4,372 3,294 3,810
----------- ----------- -----------
Income (loss) before extraordinary loss........ (17,278) (4,039) 2,010
Extraordinary loss............................. -- (2,202) --
----------- ----------- -----------
Net income (loss).............................. $ (17,278) $ (6,241) $ 2,010
=========== =========== ===========
Net income (loss) applicable to common stock... $ (17,278) $ (6,241) $ 1,201
=========== =========== ===========
Basic income (loss) per share:
Income (loss) before extraordinary loss...... $ (1.07) $ (0.21) $ 0.06
Extraordinary loss........................... $ -- $ (0.12) $ --
Net income (loss)............................ $ (1.07) $ (0.33) $ 0.06
Weighted average shares outstanding.......... 16,171,809 18,745,786 19,384,277

Diluted income (loss) per share:
Income (loss) before extraordinary loss...... $ (1.07) $ (0.21) $ 0.06
Extraordinary loss........................... $ -- $ (0.12) $ --
Net income (loss)............................ $ (1.07) $ (0.33) $ 0.06
Weighted average shares outstanding.......... 16,171,809 18,745,786 19,608,168
</TABLE>

See accompanying notes to the consolidated financial statements.

F-4
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

<TABLE>
<CAPTION>
Common stock Accumulated
-------------------- Additional other Total
Number paid in Accumulated comprehensive Comprehensive stockholders'
of shares Amount capital deficit income (loss) income (loss) equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................. 13,253 $13 $49,242 $ (8,852) $(1,071) $ 39,332
Net loss................ (17,278) $(17,278) (17,278)
Issuance of stock....... 5,208 5 24,995 25,000
Fees associated with
stock issuance........ (300) (300)
Exercise of stock
options............... 163 1 650 651
Redemption of preferred
stock of subsidiary... (171) (171)
Translation
adjustment............ (5,137) (5,137) (5,137)
------ --- ------- -------- ------- -------- --------
Comprehensive income
(loss)................ $(22,415)
--------
Balance at December 31,
1997.................. 18,624 $19 $74,416 $(26,130) $(6,208) $ 42,097
Net loss................ (6,241) (6,241) (6,241)
Issuance of stock....... 71 341 341
Exercise of stock
options............... 54 217 217
Purchase of shares...... 100 481 481
Translation
adjustment............ 2,279 2,279 2,279
------ --- ------- -------- ------- -------- --------
Comprehensive income
(loss)................ $ (3,962)
--------
Balance at December 31,
1998.................. 18,849 $19 $75,455 $(32,371) $(3,929) $ 39,174
Net income.............. 2,010 2,010 2,010
Issuance of stock....... 90 430 430
Exercise of stock
options............... 559 1 2,236 2,237
Purchase of shares...... 91 436 436
Dividends declared on
preferred shares...... (671) (671)
Issuance of warrants.... 10,723 10,723
Accretion of preferred
stock................. (138) (138)
Translation
adjustment............ (5,580) (5,580) (5,580)
------ --- ------- -------- ------- -------- --------
Comprehensive income
(loss)................ $ (3,570)
--------
Balance at December 31,
1999.................. 19,589 $20 $88,471 $(30,361) $(9,509) $ 48,621
====== === ======= ======== ======= ========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-5
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Cash flows relating to operating activities:
Net income (loss)......................................... $(17,278) $ (6,241) $ 2,010
Adjustments to reconcile net income to net cash provided
by
(used in) operating activities:
Depreciation and amortization......................... 8,376 10,933 14,433
Amortization of capitalized finance fees.............. 1,419 1,800 777
Write off of capitalized bank fees.................... -- 2,202 --
Additions to allowance for doubtful accounts.......... 232 319 339
Issuance of shares to founders........................ -- 341 422
Non cash charge for option issuance................... -- -- 40
Foreign exchange (gain) loss.......................... 870 (485) 2,249
Deferred taxes........................................ 1,189 1,196 370
Writedowns and loss on disposal of fixed assets....... 5,184 1,302 1,854
Changes in operating assets and liabilities:
Accounts receivable..................................... (51,199) (3,282) (16,094)
Inventories............................................. (20,297) 5,284 (42,591)
Prepaid expenses and other assets....................... (2,577) (1,447) (13,910)
Accounts payable........................................ 44,545 26,700 20,122
Accrued expenses and other liabilities.................. 12,140 2,448 4,858
-------- -------- --------
Net cash provided by (used in) operating activities......... (17,396) 41,070 (25,121)
-------- -------- --------
Cash flows relating to investing activities:
Acquisition of businesses, net of cash acquired........... -- -- (1,844)
Intangible assets acquired................................ -- -- (35,287)
Proceeds from sale of fixed assets........................ -- 785 406
Purchases of property and equipment....................... (25,780) (2,774) (39,094)
Cost of internal use software............................. (198) (2,494) (5,956)
-------- -------- --------
Net cash used in investing activities....................... (25,978) (4,483) (81,775)
-------- -------- --------
Cash flows relating to financing activities:
Proceeds from long-term debt.............................. 37,195 50,000 --
Net proceeds from (payments on) new revolving line of
credit.................................................. (2,057) 3,500 64,600
Repayment of old revolving line of credit................. -- (22,000) --
Repayments of long-term debt and capital lease
obligations............................................. (9,233) (52,599) (6,268)
Debt issuance and amendment costs......................... (365) (3,104) (894)
Proceeds from exercise of stock options................... 651 217 2,237
Proceeds from issuance of common stock.................... 24,700 481 436
Proceeds from issuance of preferred stock and warrants.... -- -- 50,000
Issuance costs of preferred stock and warrants............ -- -- (882)
Redemption of preferred stock of subsidiary............... (671) -- --
-------- -------- --------
Net cash provided by (used in) financing activities......... 50,220 (23,505) 109,229
-------- -------- --------
Effect of foreign exchange rate changes on cash............. (980) 1,374 (2,120)
-------- -------- --------
Net increase in cash........................................ 5,866 14,456 213
Cash and cash equivalents at beginning of year.............. 3,647 9,513 23,969
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 9,513 $ 23,969 $ 24,182
======== ======== ========
Supplemental cash flow data:
Interest paid............................................. $ 5,782 $ 8,417 $ 8,140
======== ======== ========
Taxes paid................................................ $ 4,804 $ 1,826 $ 1,342
======== ======== ========
Assets acquired under capital leases...................... $ 6,021 $ 2,578 $ 2,861
======== ======== ========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-6
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

1. Description of Operations

Manufacturers' Services Limited (the "Company" or "MSL") is a leading global
provider of advanced electronics design, manufacturing and related services to
original equipment manufacturers ("OEMs") primarily in the voice and data
communications, computer and related peripherals, medical equipment and
industrial and consumer electronics industries. The Company provides OEMs with a
range of services including product design and new product introduction
services, material procurement and management, assembly and manufacturing,
testing services, order fulfillment and distribution, and after-market support.
The Company has established a network of manufacturing facilities in the world's
major electronics markets, including North America, Europe and Asia.

2. Summary of Significant Accounting Policies

CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany accounts and transactions.

CASH EQUIVALENTS

The Company considers all highly liquid financial instruments purchased with
a remaining maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or market with cost being
determined on the FIFO basis.

INCOME TAXES

Income taxes for financial reporting purposes are recorded in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax bases of the Company's assets and liabilities. The measurement of deferred
tax assets is reduced, if necessary, by a valuation allowance.

U.S. income taxes have not been provided on a portion of undistributed
earnings of foreign subsidiaries as such earnings are expected to be permanently
reinvested. Such earnings would become taxable upon the sale or liquidation of
these foreign subsidiaries or upon the remittance of dividends. It is not
practicable to estimate the amount of the deferred tax liability on foreign
undistributed earnings that are intended to be permanently reinvested.

F-7
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed based
on the estimated useful lives of the respective assets, using the straight-line
method. Estimated useful lives are as follows:

<TABLE>
<S> <C>
Machinery and equipment............................... 1 to 10 years
Land improvements..................................... 5 to 15 years
Building improvements................................. 5 to 15 years
Buildings............................................. 45 years
</TABLE>

Repair and maintenance costs are expensed as incurred.

OTHER ASSETS

Debt issuance costs associated with the Company's credit agreements are
capitalized and amortized on a straight line basis over the life of the
agreement. Amortization of these assets is included in interest expense.
Straight line amortization is not considered to be materially different from
amortization under the interest method.

The Company capitalizes the cost of software for internal use in accordance
with Statement of Position No. 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." In compliance with SOP 98-1,
the Company expenses costs incurred in the preliminary project stage and
capitalizes costs incurred to develop or obtain internal use software. Certain
costs, such as maintenance and training, are expensed as incurred. Capitalized
costs are amortized over a period of three to five years and include direct
materials and external consultant costs.

OTHER INTANGIBLE ASSETS

In connection with a current year asset acquisition (see Note 9), the
Company acquired the following intangible assets:

<TABLE>
<S> <C>
Customer relationships..................................... $32,784
Workforce in place......................................... 1,155
Internal use software...................................... 1,348
-------
$35,287
=======
</TABLE>

These assets are being amortized over their estimated useful lives, ranging
from four to six years. The amortization expense recorded in 1999 relating to
these assets amounted to $497.

GOODWILL

The excess of cost over fair value of the net assets of businesses acquired
is amortized on a straight-line basis over periods ranging from five to ten
years. Goodwill amortization during the

F-8
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

years ended 1997, 1998 and 1999 was $1,415, $397 and $575, respectively.
Accumulated amortization as of December 31, 1997, 1998 and 1999 was $2,533,
$2,930 and $3,505, respectively.

In a 1995 acquisition, the estimated fair values of assets acquired exceeded
the purchase price. The excess was applied ratably to reduce the carrying value
of the long-term assets and the residual value was recorded as negative goodwill
in other long-term liabilities and was amortized over three years. Negative
goodwill amortized during the years ended December 31, 1997 and 1998 was $1,265
and $844, respectively. Net negative goodwill was fully amortized as of
December 31, 1998.

IMPAIRMENT OF ASSETS

The Company evaluates long-lived assets and intangibles whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposal are less than its carrying amount. In such instances, the
carrying value of long-lived assets is reduced to the estimated fair value as
determined using an appraisal or discounted cash flow, as appropriate. During
1997, the Company wrote-off the remaining value of goodwill relating to the
Company's subsidiary in Athlone, Ireland, of $838 as this subsidiary continued
to generate negative cash flows. This amount was recorded as amortization in
operating income in 1997.

FOREIGN CURRENCY CONTRACTS

The Company has from time to time entered into forward foreign exchange and
option contracts to hedge firm commitments and existing transactions. The
Company does not engage in currency speculation. These financial instruments are
designed to minimize exposure and reduce risk from exchange rate fluctuations in
the regular course of business. These contracts have maturities which do not
exceed six months. Gains and losses on these contracts are accounted for as part
of the underlying transaction being hedged.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This pronouncement will require the
Company to recognize derivatives on its balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company is continuing to evaluate the
impact that this new standard will have on its results of operations. Statement
of Financial Accounting Standards No. 137 "Accounting For Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of SFAS 133"
("SFAS 137") deferred the effective date of SFAS 133 to fiscal years beginning
after June 15, 2000, which is fiscal year 2001 for the Company.

F-9
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

The Company enters into forward foreign currency agreements to hedge certain
foreign currency transactions. Realized and unrealized gains and losses arising
from forward currency contracts are recognized as adjustments to the gains and
losses resulting from the underlying hedged transactions. The table below
summarizes the notional amounts and fair values of the Company's foreign
exchange contracts which have been entered into by the Company's Spanish
subsidiary:

<TABLE>
<CAPTION>
Currency Notional Amount Buy (Sell) Fair Value
-------- -------------------------- ----------
<S> <C> <C>
US Dollar................................... $(12,000) $(113)
US Dollar................................... $ 6,500 $ 55
</TABLE>

The fair values of the Company's forward foreign exchange contracts are the
estimated amounts the Company would receive or pay to terminate the agreements
based on quoted market prices obtained from brokers.

REVENUE RECOGNITION

The Company's manufacturing contracts contain customer acceptance clauses.
However, the Company does not consider these clauses to be substantive because
it can and does replicate the customer acceptance test environment and perform
the agreed upon product testing prior to shipment. Accordingly, the Company
recognizes revenue upon shipment of the product. Service revenues are recognized
as such services are rendered.

RESEARCH AND DEVELOPMENT

Research and development costs related to the Company's manufacturing
processes are expensed currently. Costs related to manufacturing design services
provided to customers are charged to cost of goods sold as services are
rendered. Total expenditures on research and development for the years ended
December 31, 1997, 1998 and 1999 were $1,600, $2,500 and $3,200, respectively.

FOREIGN CURRENCY

Monetary assets and liabilities of foreign subsidiaries with the US dollar
as the functional currency are remeasured at year-end exchange rates and
non-monetary assets and liabilities are remeasured at historical rates. Foreign
subsidiaries with functional currencies other than the US dollar translate
assets and liabilities at year-end exchange rates; income, expenses and cash
flows at average exchange rates; and stockholders' equity at historical rates.
The effects of these translation adjustments are reported as accumulated other
comprehensive income or loss in stockholders' equity. Foreign exchange gains and
losses arising from transactions denominated in a currency other than the
functional currency of the entity involved are included in income.

EARNINGS (LOSS) PER SHARE

In accordance with Statement of Financial Accounting Standards No. 128
"Earnings per Share," ("SFAS 128"), the Company presents basic and diluted
earnings (loss) per share ("EPS")

F-10
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

amounts. Basic EPS is calculated based on net earnings (loss) available to
common stockholders and the weighted average number of shares outstanding during
the reported period. Diluted EPS gives effect to all dilutive potential common
shares that were outstanding during the period.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially expose the Company to concentrations
of credit risk include foreign exchange contracts and accounts receivable.

The exposure to credit risk from foreign exchange contracts is minimized
since they are held with major financial institutions and because the impact of
movements in currency exchange rates on such contracts offsets the related
impact of such movements on other transactions and balances.

Potential concentrations of credit risk in the Company's trade accounts
receivable are substantially mitigated by the Company's credit evaluation
process, reasonably short collection terms and geographical dispersion of sales
transactions. Collateral is generally not required by the Company. The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of trade receivables, other current assets, accounts
payable, and accrued expenses and other current liabilities approximate their
fair value due to their current nature.

PERVASIVENESS OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.

SEGMENT REPORTING

The Company has adopted Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information,"
which requires financial and descriptive information about an enterprise's
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available and regularly
evaluated by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The Company operates in one business
segment, electronics design and manufacturing services.

F-11
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

RECLASSIFICATIONS

Certain amounts in prior year financial statements have been reclassified to
conform to the current year presentation.

3. Inventories

Inventories are comprised of the following:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Raw materials and purchased inventory.................. $65,595 $ 91,944
Work-in-process........................................ 17,997 29,623
Finished goods......................................... 3,895 3,597
------- --------

$87,487 $125,164
======= ========
</TABLE>

4. Prepaid and Other Current Assets

Prepaids and other current assets are comprised of the following:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Non-trade receivables.................................... $ -- $ 8,954
Value added tax receivables.............................. -- 3,701
Other.................................................... 4,241 4,895
------ -------

$4,241 $17,550
====== =======
</TABLE>

5. Property and Equipment

Property and equipment are comprised of the following:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Land, buildings and leasehold improvements............. $ 4,560 $ 19,608
Machinery, equipment, computer equipment,
furniture and fixtures............................... 49,028 73,742
-------- --------

53,588 93,350

Less accumulated depreciation.......................... (19,802) (30,536)
-------- --------

$ 33,786 $ 62,814
======== ========
</TABLE>

Depreciation expense totaled $7,575, $10,686 and $11,686 for the periods
ended December 31, 1997, 1998 and 1999, respectively. Gross value of equipment
under capital leases, primarily machinery and equipment was $13,092 and $8,673
and the related accumulated depreciation on those assets totaled $5,695 and
$5,252 at December 31, 1998 and 1999, respectively.

F-12
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

6. Other Assets

Other assets are comprised of the following:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Debt issuance costs...................................... $2,683 $ 2,800
Internal use software costs, net......................... 4,001 8,332
Other.................................................... 665 502
------ -------

$7,349 $11,634
====== =======
</TABLE>

Amortization of debt issuance costs for the periods ended December 31, 1997,
1998 and 1999 was $1,419, $1,800 and $777, respectively. In 1998, the Company
wrote off $2,202 of debt issuance costs related to the old credit facility (see
Note 8).

The gross cost of internal use software at December 31, 1998 and 1999 was
$5,267 and $11,223, respectively. Amortization of internal use software costs
for the periods ended December 31, 1997, 1998 and 1999 was $651, $694 and
$1,675, respectively.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the
following:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Payroll and other employee costs........................ $10,084 $12,363
Value added tax and withholding tax payable............. 3,677 3,054
Other................................................... 8,192 10,760
------- -------
$21,953 $26,177
======= =======
</TABLE>

F-13
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

8. Long-Term Debt and Capital Lease Obligations

Long-term debt and capital lease obligations are comprised of the following:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Revolving Facility..................................... $ 3,500 $ 68,100

Term Loans............................................. 49,875 49,375

Unsecured non-interest bearing obligation due to former
owner of an acquired subsidiary. Payments are due in
equal annual installments of approximately $245,
beginning January 1998 and continuing through
January 2001......................................... 735 490

Unsecured interest bearing obligations due to former
owners of acquired businesses with an interest rate
of 5%. Payments are due in annual installments of
approximately $700, beginning April 2000 and
continuing through June 2002......................... -- 1,916

Obligations under capital leases....................... 8,017 7,462
------- --------

62,127 127,343

Less: Current portion.................................. 4,939 5,414
------- --------

$57,188 $121,929
======= ========
</TABLE>

CREDIT AGREEMENT

On August 21, 1998, the Company and one of its Dutch finance subsidiaries
(MSL Overseas Finance B.V., herein "Overseas") entered into a six year credit
agreement (the "Credit Agreement") with a consortium of banks, including an
affiliate of a significant stockholder. The Credit Agreement contains two
facilities: a $50,000 bank term loan facility (the "Term Loans") and a $75,000
revolving credit facility (the "Revolving Facility").

On August 28, 1998, MSL borrowed $15,000 and Overseas borrowed $35,000 in
Term Loans. There are regular quarterly principal payments of $125, split $38 by
MSL and $87 by Overseas through the quarter ended May 31, 2004, with the
remaining balance of $47,125 split $14,137 by MSL and $32,988 by Overseas due on
July 31, 2004. At December 31, 1999, $14,810 of the Term Loans was owed by MSL
and $34,565 was owed by Overseas.

In November 1999, the Company entered into an amendment to the Credit
Agreement (the "Amendment"). The Amendment served to modify the Company's
borrowing base on the revolving credit facility and to modify the spread used in
calculating interest on the outstanding borrowings. In 1999, the Company
incurred $894 of debt issuance costs in association with the closing of the
Amendment.

F-14
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

The cost of borrowings under the Term Loans is the applicable spread plus
the underlying cost of funds option (base rate or Adjusted LIBOR). The spread on
the base rate loans is 2.75% and the spread on the Adjusted LIBOR loans is
3.75%. All interest is payable in arrears quarterly. At December 31, 1999, the
interest rate on the Term Loans was 9.938%.

Borrowings under the Revolving Facility are limited to (i) between 80% and
90% of the Company's eligible accounts receivable (dependent on the customer)
plus 35% of the Company's eligible inventory, to the extent that inventory does
not represent more than 50% of the total borrowing base, less (ii) the total
amounts outstanding under the Term Loans. The Company must calculate these
restrictions separately for MSL and Overseas. The Revolving Facility expires on
July 31, 2002 and provides for a commitment fee of between 0.45% and 0.50% on
the unused portion of the Revolving Facility, payable in arrears quarterly. On
December 31, 1999, the Company had available credit of $6,900 under the
Revolving Facility.

The cost of borrowings under the Revolving Facility is the applicable spread
plus the underlying cost of funds option (either the base rate or Adjusted
LIBOR). The spread on the base rate loans varies between 1.75% and 2.25%, based
on the Company's consolidated leverage ratio. The spread on the Adjusted LIBOR
loans is between 2.75% and 3.25%, based on the Company's consolidated leverage
ratio. All interest is payable in arrears quarterly. At December 31, 1999, the
interest rate on the Revolving Facility was between 9.188% and 10.50%.

Up to $10,000 of the Revolving Facility is available to MSL or Overseas in
the form of either financial or performance standby letters of credit.
Outstanding letters of credit are subject to a one-time issuance fee and to an
amount, payable quarterly, calculated on the available amount to be drawn. The
Company had no letters of credit outstanding at December 31, 1999.

Borrowings by either MSL or Overseas under the Credit Agreement are
collateralized by the assets of all domestic subsidiaries of the Company while
assets of all foreign subsidiaries secure only the borrowings by Overseas. The
borrowings are subject to certain restrictive covenants, including the
maintenance of key financial ratios, limitations on capital expenditures and a
limitation on paying dividends on Common Stock.

In 1998, the Company wrote off $2,202 of unamortized debt issuance costs in
conjunction with the cancellation of a prior facility that was replaced with the
Credit Agreement. This writeoff is classified as an extraordinary loss on the
statement of operations. A valuation allowance was provided on the tax benefit
associated with this writeoff.

F-15
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

Principal due on long-term debt for each of the years following
December 31, 1999 is as follows:

<TABLE>
<S> <C>
2000........................................................ $ 1,449
2001........................................................ 1,384
2002........................................................ 69,171
2003........................................................ 503
2004........................................................ 47,374
--------

$119,881
========
</TABLE>

CAPITAL LEASES

The Company leases certain equipment under capital lease arrangements.
Future minimum lease payments under capitalized leases for each of the years
following December 31, 1999 are as follows:

<S> <C>
2000........................................................ $4,203
2001........................................................ 2,213
2002........................................................ 1,474
2003........................................................ 2
------

Future minimum payments..................................... 7,892

Less amounts representing interest.......................... 430
------

Present value of future minimum lease payments
(including current portion of $3,965)..................... $7,462
======
</TABLE>

9. Acquisitions

BUSINESS ACQUISITIONS

In April 1999, MSL acquired the assets of Electronic System Packaging, Inc.,
a privately held company located in Massachusetts, which provides electronics
design services, for a purchase price of $2,850. The purchase price consisted of
cash of $2,600 and 52,000 shares of the Company's Common Stock.

In June 1999, MSL acquired the assets of Ronlin Design Co., Inc., a
privately held company located in Massachusetts, which provides electronics
design services, for a total purchase price of $1,596. The purchase price
consisted of cash of $1,416 and 37,500 shares of the Company's Common Stock.

With respect to the cash component of these acquisitions, $2,100 was paid on
the dates of the transactions, with the remaining balances of $1,916 to be paid
in future installments (see Note 8).

F-16
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

These acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition.

ASSET ACQUISITIONS

In June 1998, the Company entered into a three-year outsourcing agreement to
perform and manage certain manufacturing, fulfillment, integration and other
services to IBM. As part of this agreement, MSL purchased certain machinery and
equipment at its estimated fair value of $125 and leased a manufacturing
facility from IBM. In addition, MSL purchased certain inventory at its estimated
fair value of $30,000.

In November 1999, the Company acquired certain assets from 3Com Corporation
("3Com") used in the production of Palm handheld computing devices and modems
and network interface cards for total consideration of $79,480, including
approximately $776 of assumed liabilities. These assets consisted primarily of a
manufacturing facility, other fixed assets, inventory and certain intangible
assets, consisting primarily of customer relationships, workforce in place and
internal use software. The transaction was accounted for as a purchase of
assets, and the purchase price was allocated to the assets acquired based on the
relative fair values of the tangible and intangible assets at the date of
acquisition, as follows:

<S> <C>
Land and buildings.......................................... $16,510
Other fixed assets.......................................... 15,025
Inventory................................................... 12,658
Intangible assets........................................... 35,287
-------
$79,480
=======
</TABLE>

Under the terms of related supply agreements with 3Com and Palm, Inc, a
subsidiary of 3Com, the Company will provide a full range of manufacturing
services related to the production of Palm handheld computing devices and modems
and network interface cards for an initial term of two years.

F-17
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

10. Commitments and Contingencies

OPERATING LEASES

The Company leases certain facilities and equipment under operating leases
extending until the year 2017. Future minimum commitments under these leases for
each of the years following December 31, 1999 are summarized as follows:

<TABLE>
<S> <C>
2000....................................................... $ 8,146
2001....................................................... 3,952
2002....................................................... 1,830
2003....................................................... 1,248
2004....................................................... 1,209
Thereafter................................................. 2,556
-------
Future minimum payments.................................... $18,941
=======
</TABLE>

Total rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $3,516, $7,743 and $8,109, respectively.

LITIGATION

In 1998, Lockheed Martin Corporation ("LM") filed a complaint against the
Company and certain principal stockholders. The complaint alleges that the
Company failed to complete the acquisition of one of LM's subsidiaries under a
purchase agreement signed in 1997. The complaint alleges unspecified damages,
which may exceed $70 million based on the ultimate selling price of LM's
subsidiary to another unrelated party. It is the Company's position that a
material adverse change to the subsidiary's business relieved the Company of the
obligation to close the purchase agreement. Although no assurance can be given
as to the ultimate outcome with respect to this lawsuit, the Company believes
that it has meritorious defenses and, accordingly, that the outcome of this
action will not have a material adverse effect on the Company's financial
position or its results of operations.

In addition, the Company is from time to time subject to legal proceedings
and claims which arise in the normal course of its business. In the opinion of
management, the amount of ultimate liability with respect to these actions will
not have a material adverse effect on the Company's financial position or its
results of operations. See Note 21 for discussion of the settlement of this
litigation subsequent to the original issuance of these financial statements.

F-18
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

11. Income Taxes

Worldwide income (loss) before income taxes consisted of the following:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Domestic................................. $(15,824) $(2,478) $(5,368)
Foreign.................................. 2,918 1,733 11,188
-------- ------- -------
$(12,906) $ (745) $ 5,820
======== ======= =======
</TABLE>

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Current:
Federal................................... $ -- $ -- $ --
State..................................... -- -- 150
Foreign................................... 3,197 1,960 3,487
------ ------ ------
3,197 1,960 3,637
Deferred:
Federal................................... -- -- --
State..................................... -- -- --
Foreign................................... 1,175 1,334 173
------ ------ ------
1,175 1,334 173
------ ------ ------
$4,372 $3,294 $3,810
====== ====== ======
</TABLE>

The overall effective income tax rate differs from the expected federal U.S.
income tax rate as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Income tax (benefit) expense at expected
rate of 34%.............................. $(4,388) $ (253) $ 1,979
Change in valuation allowance.............. 8,904 978 1,482
Foreign tax credits........................ (1,998) (192) (1,668)
Deemed remittance of foreign earnings...... 81 -- 1,526
Income of foreign subsidiaries taxed
at different rates....................... 1,225 1,997 (97)
Other...................................... 548 764 588
------- ------ -------
Income tax expense......................... $ 4,372 $3,294 $ 3,810
======= ====== =======
</TABLE>

F-19
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

The tax effects of temporary differences that give rise to significant
portions of the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Deferred tax assets:
Accruals, allowances and reserves.............. $ 8,016 $ 7,904
NOL carryforwards.............................. 10,028 10,894
Plant and equipment............................ 653 942
Foreign Tax Credits............................ 1,880 3,431
Other.......................................... 38 73
-------- --------
Total deferred tax assets........................ 20,615 23,244
-------- --------
Deferred tax liabilities:
Plant and equipment............................ (873) (1,977)
Other.......................................... (457) (93)
-------- --------
Total deferred tax liabilities................... (1,330) (2,070)
-------- --------
Deferred tax valuation allowance................. (17,698) (19,985)
-------- --------
Net deferred tax assets.......................... $ 1,587 $ 1,189
======== ========
</TABLE>

Management believes that it is more likely than not that it will generate
taxable income in certain jurisdictions sufficient to realize a portion of the
tax benefit associated with the future deductible temporary differences
identified above. This belief is based upon a review of all available evidence,
including historical operating results and projections of future taxable income.
The valuation allowance relates primarily to net deferred tax assets generated
in the United States and Ireland as more fully disclosed below.

The Company's provision for income taxes results from the mix of profits and
losses experienced across the jurisdictions in which it operates. Losses in the
United States and Ireland provide no income tax benefit while profits in Spain
and Singapore require tax provisions. At December 31, 1999, the Company had
gross operating loss carryforwards of $22,350 for federal and state income tax
purposes and $18,843 for foreign tax purposes. The federal and state
carryforwards expire between 2011 and 2018. The foreign carryforwards do not
expire. A change in ownership of the Company may reduce the amount of operating
loss carryforwards the Company is able to utilize. The Company also has foreign
tax credit carryovers of $3,431 which expire between 2002 and 2004.

The Company has not provided for U.S. federal and foreign withholding taxes
on approximately $30,700 of its foreign subsidiaries' undistributed earnings as
of December 31, 1999 because such earnings are intended to be permanently
reinvested.

F-20
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

12. Senior Redeemable Preferred Stock

In conjunction with the asset acquisition from 3Com (see Note 9), the
Company issued 2,000,000 shares of preferred stock with a par value of $0.001
per share and warrants to purchase Common Stock (see Note 14). The total
consideration received of $49,118, net of issuance costs incurred of $882, has
been allocated to the preferred stock and the warrants based on their fair
values, as determined by the Company based on its consideration of various
factors including appraisals, market comparables and the use of generally
accepted valuation models, of $38,395 and $10,723, respectively. The preferred
stock is mandatorily redeemable on November 26, 2006 at its liquidation value of
$25 per share plus accumulated dividends. The securities are callable by the
Company at 114% of the liquidation value prior to November 26, 2000 and at 115%
from that date up through the date of mandatory redemption.

Holders of the securities are entitled to cumulative cash dividends at an
annual rate of 14% through November 26, 2000. Subsequent to that date, dividends
will accrue at an annual rate of 15% and will be paid in cash on the redemption
date or paid in additional shares of preferred stock prior to that date. The
securities are convertible, at the option of the Company, to Subordinated
Exchange Debentures with an annual interest rate of 14% through November 26,
2000 and 15% thereafter. Such conversion is, however, subject to certain
restrictions including the Company's inability to convert the preferred stock as
long as the initial purchaser continues to hold it. The preferred stock (and
debentures, if converted) ranks senior to all other subordinated debt, preferred
stock and common equity of the Company.

The discount on the preferred stock of $11,605 is being accreted, using the
interest method, through the mandatory redemption date and is recorded as a
charge against additional paid in capital. The amount of accretion recorded
against additional paid in capital in 1999 was $138.

In the event that the Company elects to call the preferred stock in advance
of the mandatory redemption date, accretion of the remaining discount as well as
accretion of the call premium will occur. Such amounts would be deductible from
net income available to common stockholders, for purposes of earnings per share
calculations, in the period in which the call is exercised.

13. Common Stock

On April 27, 2000, the Company's Board of Directors declared a four-for-one
reverse stock split of the Company's Common Stock. This reverse stock split was
effective May 2, 2000. All earnings per common share amounts, references to
common stock and stockholders' equity amounts have been restated as if the
reverse stock split had occurred as of the earliest period presented.

In 1998, the Company issued an aggregate of 71,000 shares of Common Stock to
three founders of the Company in connection with their shareholder agreements.
In 1999 the Company was obligated to issue an additional 34,341 shares of Common
Stock to the three founders of the Company. These shares will be issued in
fiscal 2000. A non-cash charge of $341 and $422 was recorded in selling, general
and administrative expenses related to the above shares, representing the fair
value of $4.80 and $12.28 per share at the time of the obligation to issue
shares, in 1998 and

F-21
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

1999, respectively. At December 31, 1999, $422 has been included in accrued
expenses related to the shares to be issued in 2000.

In the first quarter of 2000, the Board of Directors approved a grant of
200,000 shares of Common Stock to the Company's Chief Executive Officer. In
connection with this grant, the Company expects to record a one time non-cash
charge of approximately $2,456 in the first quarter of 2000.

14. Warrants

The Company issued warrants to purchase 1,160,542 shares of Common Stock in
conjunction with the issuance of the senior redeemable preferred stock (see
Note 12). The warrants, which have an exercise price of $4.80 per share, were
issued in two tranches. The first tranche is comprised of warrants, which are
immediately exercisable to purchase 222,730 shares of Common Stock. The second
tranche is comprised of warrants, which are held in escrow, to purchase 937,812
shares of Common Stock. The second tranche of warrants will be released from
escrow on November 26, 2000 if the preferred stock remains outstanding at that
date.

In conjunction with a prior credit agreement entered into in August 1995,
the Company issued a stock purchase warrant to a lending bank entitling the
holder to purchase shares of the Company's Common Stock. The warrant is
exercisable at any time, has no expiration date and, using a generally accepted
valuation model, was determined to have an insignificant value at its time of
issuance. The number of shares that can be acquired at an exercise price of
$4.00 per share is 128,008.

15. Option Plan

Effective December 4, 1996, the Board of Directors adopted a non-qualified
stock option plan (the "Plan"). Under the terms of the Plan, the Board of
Directors, or its designee, shall have the ability to grant two types of options
("Share Value" and "Ordinary") to employees of the Company to purchase the
Company's Common Stock at an exercise price which will be determined by the
Board of Directors or its designee at the date of grant. The Company has
reserved 312,500 common shares for issuance of Share Value options and 2,687,500
common shares for issuance of Ordinary options. The Plan terminates in
November 2006.

For Ordinary options granted, one-half of the award will vest ratably over
four years following the date of grant. The remainder of the grant vests eight
years from the date of grant, with provisions for acceleration based on
pre-established financial performance goals. Ordinary options expire ten years
from the date of grant.

Share Value options have been issued by the Company at exercise prices of
$4.00 and $20.00. Under the original terms of the plan, these options vest based
on certain pre-established financial performance goals, which were measured
through January 2000. Prior to January 1, 1999, none of the pre-established
financial goals were met and, as such, none of the options vested and no
compensation was recognized. In January 1999, the Plan was amended to convert
the Share Value

F-22
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

options with a $20.00 exercise price to Ordinary options, with fifty percent
vested as of January 1999 and the remaining vesting in January 2000. In
addition, the vesting of the Share Value options with a $4.00 exercise price was
adjusted to provide for vesting four years from the modification date, subject
to acceleration based on pre-established Company share price goals. A non-cash
compensation charge of $40 was recognized in selling, general and administrative
expenses due to this modification.

A summary of stock option activity for the Company's option Plan is as
follows:

<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Option Price Exercise Price
<S> <C> <C> <C>
Outstanding at December 31, 1996............... 1,414,425 $ 4.00 $ 4.00
Granted...................................... 1,045,603 4.00-20.00 11.52
Exercised.................................... (162,778) 4.00 4.00
Forfeited.................................... (311,476) 4.00 4.00
----------

Outstanding at December 31, 1997............... 1,985,774 4.00-20.00 7.96
Granted...................................... 265,500 4.00-20.00 5.04
Exercised.................................... (54,459) 4.00 4.00
Forfeited.................................... (106,468) 4.00-20.00 10.16
----------

Outstanding at December 31, 1998............... 2,090,347 4.00-20.00 7.60
Granted...................................... 1,315,514 4.00-12.28 10.88
Exercised.................................... (559,292) 4.00-4.80 4.00
Forfeited.................................... (866,628) 4.00-20.00 12.16
----------

Outstanding at December 31, 1999............... 1,979,941 $4.00-20.00 $ 8.48
==========
Exercisable at December 31, 1999............... 733,646 $4.00-20.00 $ 9.04
==========
</TABLE>

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ -----------------------------------
Number Weighted Number Weighted
outstanding at Weighted average average exercisable at average
Exercise price December 31, 1999 remaining years exercise price December 31, 1999 exercise price
<S> <C> <C> <C> <C> <C>
$ 4.00 801,298 7 $ 4.00 406,413 $ 4.00
$ 4.80 580,105 9 $ 4.80 100,320 $ 4.80
$12.28 152,313 10 $12.28 1,551 $12.28
$20.00 446,225 8 $20.00 225,362 $20.00
--------- ---------
1,979,941 733,646
========= =========
</TABLE>

As permitted, the Company applied Accounting Principles Board Opinion 25 and
related Interpretations in accounting for its stock-based compensation plan. If
compensation cost for the Company's stock-based compensation plan had been
determined based on the fair value of the options at the grant dates of the
awards consistent with the alternative method of Statement of

F-23
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's pro forma net income (loss) would have been as
follows:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Net income (loss) available to common stockholders:
As reported............................................... $(17,278) $(6,241) $1,201
Pro forma................................................. $(18,387) $(6,630) $ 370

Diluted net income (loss) per share:
As reported............................................... $ (1.07) $ (0.33) $ 0.06
Pro forma................................................. $ (1.14) $ (0.35) $ 0.02
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for options granted in 1997: risk free interest rate of 6.49%;
expected life of 7 years; volatility of 41% and no dividend declarations. The
weighted average assumptions for options granted in 1998 are as follows: risk
free interest rate of 5.74%; expected life of 7 years; volatility of 42% and no
dividend declarations. The weighted average assumptions for options granted in
1999 are as follows: risk-free interest rate of 5.78%; expected life of 7 years;
volatility of 51% and no dividend declarations.

16. Earnings Per Share

The following table illustrates the reconciliation of the numerator and
denominator of basic and diluted income (loss) per share before extraordinary
loss computations as required by SFAS 128:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Numerator--basic and diluted earnings per share:
Income (loss) before extraordinary loss................ $ (17,278) $ (4,039) $ 2,010
Dividends on senior redeemable preferred stock......... -- -- (671)
Accretion of senior redeemable preferred stock......... -- -- (138)
---------- ---------- ----------
Income (loss) available to common stockholders before
extraordinary loss................................... $ (17,278) $ (4,039) $ 1,201
========== ========== ==========
Denominator:
Basic income (loss) per share--weighted average shares
outstanding.......................................... 16,171,809 18,745,786 19,384,277
Effect of dilutive securities--stock options and
warrants............................................. -- -- 223,891
---------- ---------- ----------
Diluted income (loss) per share--weighted average
shares outstanding................................... 16,171,809 18,745,786 19,608,168
========== ========== ==========

Basic income (loss) per share.......................... $ (1.07) $ (0.21) $ 0.06
Diluted income (loss) per share........................ $ (1.07) $ (0.21) $ 0.06
</TABLE>

For the years ended December 31, 1997, December 31, 1998 and December 31,
1999 anti-dilutive options and warrants of 499,225, 2,218,347 and 1,752,830,
respectively, have been excluded

F-24
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

from the calculation of EPS as either the Company had a net loss for the year or
the options' exercise price was greater than the estimated fair market price of
the common shares. In addition, options and warrants to purchase Common Stock of
1,670,800 were excluded for 1997 as the exercise price of the options and
warrants was equal to the estimated fair market price of the common shares and
therefore had no impact on the dilutive weighted shares outstanding.

17. Retirement and Benefit Programs

The Company sponsors a defined contribution plan covering its eligible U.S.
employees. The plan permits the Company to make non-discretionary contributions
on behalf of its employees. In 1997, 1998 and 1999, the Company made
contributions to the plan of $0, $282 and $636, respectively.

Employees of certain foreign operations participate in various local defined
benefit and defined contribution plans which, in the aggregate, are not
significant to the consolidated financial statements. Amounts charged to pension
expense for 1997, 1998 and 1999 under these plans were $223, $216 and $228,
respectively.

In 1997, the Company terminated a defined benefit plan in Athlone, Ireland,
which resulted in a gain of $1,378. In 1999, the Company curtailed its defined
benefit plan in Valencia, Spain. There was no significant gain or loss recorded
in relation to this curtailment.

18. Business Segment Information

The Company's operations comprise a single line of business, providing
electronics design and manufacturing services. Information about the Company's
operations in different geographic regions is presented in the table below:

<TABLE>
<CAPTION>
Operating Identifiable
Net sales income (loss) assets
<S> <C> <C> <C>
Year Ended December 31, 1997
United States -- Corporate................................ $ -- $(13,157) $ 12,683
-- Operations.................................. 97,765 (9,277) 43,005
Europe.................................................... 336,964 16,357 133,347
Asia...................................................... 127,937 1,825 77,894
-------- -------- --------
$562,666 $ (4,252) $266,929
======== ======== ========
Year Ended December 31, 1998
United States -- Corporate................................ $ -- $(14,639) $ 10,041
-- Operations.................................. 301,011 6,863 87,720
Europe.................................................... 349,229 9,292 122,615
Asia...................................................... 187,753 7,179 57,232
-------- -------- --------
$837,993 $ 8,695 $277,608
======== ======== ========
</TABLE>

F-25
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

<TABLE>
<CAPTION>
Operating Identifiable
Net sales income (loss) assets
<S> <C> <C> <C>
Year Ended December 31, 1999
United States -- Corporate................................ $ -- $(23,044) $ 14,167
-- Operations.................................. 457,390 15,432 236,705
Europe.................................................... 289,611 13,993 99,610
Asia...................................................... 173,721 10,030 61,301
-------- -------- --------
$920,722 $ 16,411 $411,783
======== ======== ========
</TABLE>

Identifiable assets are those assets used in the Company's operations in
each location.

19. Major Customers

The Company had sales to two customers aggregating 51% and 19% of total
sales for the year ended December 31, 1997. Accounts receivable from these two
customers represented 44% and 34%, respectively, of total accounts receivable at
December 31, 1997.

The Company had sales to two customers totaling 51% and 20%, respectively,
of total sales for the year ended December 31, 1998. Accounts receivable from
these customers represented 46% and 23%, respectively, of total accounts
receivable at December 31, 1998.

The Company had sales to two customers totaling 49% and 14%, respectively,
of total sales for the year ended December 31, 1999. Accounts receivable from
these customers represented 19% and 13%, respectively, of total accounts
receivable at December 31, 1999.

20. Restructuring and Other Asset Writedowns

The Company enters into business acquisitions or asset acquisitions and
related supply agreements with the intention of improving the existing
manufacturing operations to reduce costs and improve operating margins. In order
to do this, the Company typically assesses the manufacturing processes and
employee base and restructures the operations to achieve the expected operating
margins.

In the fourth quarter of 1997, management approved a plan to restructure
certain operations in the United States and Spain. Pursuant to the restructuring
plan, the Company's Fremont, California facility was closed during the first
quarter of 1998. During the year ended December 31, 1997, the facility generated
revenues of $19,009 and a net operating loss, excluding the restructuring
charge, of $5,446. Restructuring costs totaling $7,198 were recorded for the
closing of this facility. These costs related primarily to the writeoff of
machinery and equipment, lease termination costs and severance costs for
approximately 103 manufacturing and managerial employees. The fixed asset
impairment totaled $4,932. Assets were written down to their estimated fair
market value and were disposed of during the first quarter of 1998. All 103
employees were terminated in 1998. Also included in the 1997 restructuring plan
were charges of $4,896 related to the severance for approximately 40 managerial
and manufacturing employees located at the Company's facility in Spain. All of
these employees were terminated in 1998.

F-26
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

In the fourth quarter of 1998, management approved a plan to restructure
certain operations in the United States, Spain and Asia. The total charge
recorded for this plan was $6,729, which was comprised primarily of the
write-off of certain capitalized assets in Asia of $1,135, lease termination
costs in Asia, Europe and the United States of $1,921, and the severance related
to personnel reductions of approximately 72 managerial and manufacturing
employees in both the United States and Spain of $3,672. The impairment of
capitalized assets in Asia related to manufacturing machinery and equipment and
resulted from a significant reduction in the demand from one customer. The
assets, which were taken out of service in 1998, were written down to their fair
market value and were treated as held for disposal. Depreciation on these assets
ceased. The assets were disposed during 1999.

During the fourth quarter of 1999, management approved a restructuring plan
designed to improve its manufacturing operations at its Charlotte facility. This
restructuring plan, which is expected to be substantially complete over the next
twelve months, is comprised primarily of severance costs of $780 related to
personnel reductions of approximately 33 manufacturing and managerial employees.

The major components of the restructuring plans are as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Employee severance.................................. $ 5,387 $3,673 $780
Asset writedowns.................................... 4,932 1,135 --
Lease terminations.................................. 1,000 1,921 --
Other............................................... 775 -- --
------- ------ ----
$12,094 $6,729 $780
======= ====== ====
</TABLE>

Certain severance charges are being paid over periods that extend beyond one
year. Asset writedowns relate primarily to the closing of facilities and the
losses resulting from equipment dispositions. Other charges include
miscellaneous costs and other commitments.

F-27
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

The following table sets forth the activity in the restructuring reserves
through December 31, 1999:

<TABLE>
<CAPTION>
1997 1998 1999 Total
<S> <C> <C> <C> <C>
Restructuring provision..................... $12,094 $ -- $ -- $12,094
Cash payments............................... -- --
Asset writedowns............................ 4,932 -- -- 4,932
------- ------ ---- -------
Balance at December 31, 1997................ 7,162 -- -- 7,162

Restructuring provision..................... -- 6,729 -- 6,729
Cash payments............................... 6,958 1,127 -- 8,085
Asset writedowns............................ -- 1,135 -- 1,135
------- ------ ---- -------
Balance at December 31, 1998................ 204 4,467 -- 4,671

Restructuring provision..................... -- -- 780 780
Cash payments............................... 204 3,819 266 4,289
Asset writedowns............................ -- 494 -- 494
------- ------ ---- -------
Balance at December 31, 1999................ $ -- $ 154 $514 $ 668
======= ====== ==== =======
</TABLE>

Reserves remaining at December 31, 1999 primarily represent liabilities for
severance payments under the 1999 restructuring plan. The remaining balance of
$668 will be fully utilized during the year 2000.

F-28
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)

21. Subsequent Events (unaudited)

CREDIT AGREEMENT

During the quarter ended April 2, 2000, the Company amended its credit
facility to increase the borrowings under the term loan by $25.0 million. These
additional borrowings are subject to the same terms and conditions, including
debt covenants and interest rate arrangements, as the prior borrowings under the
facility. The Company capitalized $540 of debt issuance costs incurred in
connection with the closing of this amendment.

LITIGATION

In 1998, Lockheed Martin Corporation ("LM") filed a complaint against the
Company and certain principal stockholders. The complaint alleged that the
Company failed to complete the acquisition of one of LM's subsidiaries under a
purchase agreement signed in 1997. The complaint alleged unspecified damages,
which could have exceeded $70 million based on the ultimate selling price of
LM's subsidiary to another unrelated party. It was the Company's position that a
material adverse change to the subsidiary's business relieved the Company of the
obligation to close the purchase agreement.

In April 2000, the Company and LM agreed to terms of an out of court
settlement, whereby the Company will pay LM $5 million in three separate
payments: $1 million in cash on May 1, 2000; a $2 million non-interest bearing
note due on August 1, 2000; and a $2 million note due and payable on August 1,
2001, which will bear interest at a market rate at the time of issuance. In
addition, the Company's major shareholder has agreed to provide services to LM
with a fair market value of $1 million.

F-29
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
December 31, April 2,
------------ -----------
ASSETS 1999 2000
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 24,182 $ 11,736
Accounts receivable, less allowance for doubtful accounts
of $728 and $1,026 at December 31, 1999 and April 2,
2000, respectively...................................... 131,301 174,579
Inventories............................................... 125,164 133,904
Deferred tax asset........................................ 1,068 1,068
Marketable securities..................................... -- 448
Prepaid expenses and other current assets................. 17,550 10,879
-------- --------
Total current assets.................................... 299,265 332,614

Property and equipment, net............................... 62,814 68,321
Goodwill and other intangibles............................ 37,949 36,745
Deferred tax asset........................................ 121 121
Other assets.............................................. 11,634 13,435
-------- --------
Total assets............................................ $411,783 $451,236
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations............................................. $ 5,414 $ 7,500
Accounts payable.......................................... 164,261 193,986
Accrued expenses and other current liabilities............ 26,177 23,487
Restructuring reserve..................................... 668 299
Income taxes payable...................................... 4,472 4,398
-------- --------
Total current liabilities............................... 200,992 229,670

Long-term debt and capital lease obligations................ 121,929 142,215
Other liabilities........................................... 1,037 559
-------- --------
Total liabilities....................................... 323,958 372,444
-------- --------

Commitments and contingencies (Note 3)

Stockholders' equity:
Preferred stock, $0.001 par value, 3,000,000 shares
authorized; no shares
issued and outstanding.................................. -- --
Common stock, $0.001 par value; 150,000,000 shares
authorized;
19,588,897 and 19,947,770 shares issued and outstanding
at
December 31, 1999 and April 2, 2000, respectively....... 20 20
Additional paid in capital................................ 88,471 92,042
Accumulated deficit....................................... (30,361) (41,184)
Accumulated other comprehensive loss...................... (9,509) (11,681)
-------- --------
Total stockholders' equity.............................. 48,621 39,197
-------- --------
Total liabilities and stockholders' equity.............. $411,783 $451,236
======== ========
</TABLE>

See accompanying notes to the interim consolidated financial statements.

F-30
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS -- Unaudited
(In thousands, except share data)

<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
April 4, 1999 April 2, 2000
------------- -------------
<S> <C> <C>
Net sales.................................................. $ 206,964 $ 332,820
Cost of goods sold......................................... 195,879 316,505
----------- -----------
Gross profit............................................... 11,085 16,315
Operating expenses:
Selling, general and administrative...................... 7,928 16,702
Legal settlement......................................... -- 6,000
----------- -----------
Operating income (loss).................................... 3,157 (6,387)
Interest expense, net...................................... (1,702) (3,476)
Foreign exchange gain (loss)............................... (1,160) (673)
----------- -----------
Income (loss) before provision for income taxes............ 295 (10,536)
Provision for income taxes................................. 192 287
----------- -----------
Net income (loss).......................................... $ 103 $ (10,823)
=========== ===========
Net income (loss) applicable to common stock............... $ 103 $ (12,954)
=========== ===========
Basic income (loss) per share:
Net income (loss)........................................ $ 0.01 $ (0.66)
Weighted average shares outstanding...................... 19,053,219 19,673,082

Diluted income (loss) per share:
Net income (loss)........................................ $ 0.01 $ (0.66)
Weighted average shares outstanding...................... 19,208,317 19,673,082
</TABLE>

See accompanying notes to the interim consolidated financial statements.

F-31
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- Unaudited

(In thousands)

See accompanying notes to the interim consolidated financial statements.

F-32
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS--Unaudited
(In thousands)

<TABLE>
<CAPTION>
Three Months
Ended
-------------------
April 4, April 2,
1999 2000
<S> <C> <C>
Cash flows relating to operating activities:
Net income (loss)......................................... $ 103 $(10,823)
Adjustments to reconcile net income to net cash provided
by
(used in) operating activities:
Depreciation and amortization......................... 2,921 6,084
Amortization of capitalized finance fees.............. 167 282
Additions to allowance for doubtful accounts.......... 78 (91)
Non cash charge for stock issuance.................... -- 3,826
Foreign exchange (gain) loss.......................... 1,160 614
Deferred taxes........................................ 41 --
Writedowns and loss on disposal of fixed assets....... -- (21)
Gain on sale of securities............................ (8) --
Litigation settled by shareholder..................... -- 1,000
Changes in operating assets and liabilities:
Accounts receivable..................................... 173 (43,241)
Inventories............................................. 7,382 (10,686)
Prepaid expenses and other assets....................... (4,199) 3,564
Accounts payable........................................ (13,214) 31,392
Accrued expenses and other liabilities.................. (3,385) (2,614)
-------- --------
Net cash used in operating activities....................... (8,781) (20,714)
-------- --------
Cash flows relating to investing activities:
Proceeds from sale of fixed assets........................ 13 43
Purchases of property and equipment....................... (2,178) (6,222)
Cost of internal use software............................. (2,275) (2,627)
-------- --------
Net cash used in investing activities....................... (4,440) (8,806)
-------- --------
Cash flows relating to financing activities:
Proceeds from long-term debt.............................. -- 25,000
Net proceeds from (payments on) new revolving line of
credit.................................................. 15,500 (4,000)
Repayments of long-term debt and capital lease
obligations............................................. (2,664) (1,596)
Debt issuance and amendment costs......................... (81) (540)
Proceeds from exercise of stock options................... -- 455
Proceeds from issuance of common stock.................... 1,107 --
Dividend payments on preferred stock...................... -- (1,750)
-------- --------
Net cash provided by financing activities................... 13,862 17,569
-------- --------
Effect of foreign exchange rate changes on cash............. (1,497) (495)
-------- --------
Net increase in cash........................................ (856) (12,446)
Cash and cash equivalents at beginning of year.............. 23,969 24,182
-------- --------
Cash and cash equivalents at end of year.................... $ 23,113 $ 11,736
======== ========
Supplemental cash flow data:
Interest paid............................................. $ 1,213 $ 3,758
======== ========
Taxes paid................................................ -- 361
======== ========
Assets acquired under capital leases...................... $ 698 $ 80
======== ========
</TABLE>

See accompanying notes to the interim consolidated financial statements.

F-33
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
(In thousands, except per share data)

1. Basis of Presentation

The consolidated balance sheet at April 2, 2000 and the consolidated
statements of income, of cash flow and of stockholders' equity for the three
months ended April 4, 1999 and April 2, 2000 are unaudited, and certain
information and footnote disclosure related thereto normally included in
financial statements prepared in accordance with generally accepted accounting
principles, has been omitted in accordance with Rule 10-01 of Regulation S-X. In
the opinion of management, the accompanying unaudited consolidated financial
statements were prepared following the same policies and procedures used in the
preparation of the audited financial statements and reflect all adjustments
(consisting of normal recurring adjustments) considered necessary to present
fairly the financial position of the Company. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.

2. Supplemental Balance Sheet Information

Inventories are comprised of the following:

<TABLE>
<CAPTION>
December 31, April 2,
1999 2000
------------ --------
<S> <C> <C>
Raw materials and purchased inventory....................... $ 91,944 $107,277
Work-in-process............................................. 29,623 22,889
Finished goods.............................................. 3,597 3,738
-------- --------
$125,164 $133,904
======== ========
</TABLE>

3. Long-Term Debt and Capital Lease Obligations

Long-term debt and capital lease obligations are comprised of the following:

<TABLE>
<CAPTION>
December 31, April 2,
1999 2000
------------ --------
<S> <C> <C>
Revolving Facility.......................................... $ 68,100 $ 64,100
Term Loans.................................................. 49,375 74,250
Unsecured non-interest bearing obligation due to former
owner of an acquired subsidiary. Payments are due in equal
annual installments of approximately $245, beginning
January 1998 and continuing through January 2001.......... 490 245
Unsecured interest bearing obligations due to former owners
of acquired businesses with an interest rate of 5%.
Payments are due in annual installments of approximately
$700, beginning April 2000 and continuing through June
2002...................................................... 1,916 1,915
Obligations under capital leases............................ 7,462 9,205
-------- --------
127,343 149,715
Less: Current portion....................................... (5,414) (7,500)
-------- --------
121,929 142,215
======== ========
</TABLE>

F-34
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
(In thousands, except per share data)

CREDIT AGREEMENT

During the quarter ended April 2, 2000, the Company amended its credit
facility to increase the borrowings under the term loan by $25.0 million. These
additional borrowings are subject to the same terms and conditions including
debt covenants and interest rate arrangements as the prior borrowings under the
facility. The Company capitalized $540 of debt issuance costs incurred in
connection with the closing of this amendment.

At April 2, 2000, the interest rate for the term loan facility was 9.9375%
and the revolving credit facility was between 9.125% and 11.00%.

4. Accounts Receivable

As of April 2, 2000, the Company had outstanding receivables with a
significant customer of $6,900 which are being disputed by that customer. The
dispute involves inventory that was purchased by the Company at a premium in
order to meet the customers' increase in forecast demand. The Company purchased
the inventory with the full knowledge and agreement of the customer that the
customer would bear the expense of the premium price.

The Company is in the process of resolving this issue with the customer and
has not provided a reserve as of April 2, 2000 as management believes that the
receivable is valid and that the amount will ultimately be collected.

LITIGATION

In April 2000, the Company and LM agreed to terms on an out of court
settlement, whereby the Company will pay LM $5 million in three separate
payments: $1 million in cash on May 1, 2000; a $2 million non-interest bearing
note due on August 1, 2000; and a $2 million note due and payable on August 1,
2001, which will bear interest at a market rate at the time of issuance. In
addition, the Company's major shareholder has agreed to provide service to LM
with a fair market value of $1 million. The Company has recorded a $6 million
charge with a corresponding $5 million liability and a $1 million capital
contribution in the accompanying condensed consolidated financial statements as
of and for the three months ended April 2, 2000.

F-35
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
(In thousands, except share data)

5. Asset Acquisitions

In November 1999, the Company acquired certain assets from 3Com Corporation
used in the production of Palm handheld computing devices and modems and network
interface cards for total consideration of $79,480. In the first quarter of
2000, the Company finalized the purchase price allocation, resulting in an
increase of $1,273 to the long-term assets acquired in the transaction.

6. Forward Foreign Currency Contracts

The Company enters into forward foreign currency agreements to hedge certain
foreign currency transactions. Realized and unrealized gains and losses arising
from forward currency contracts are recognized as adjustments to the gains and
losses resulting from the underlying hedged transactions. The table below
summarizes the notional amounts and fair values of the Company's foreign
exchange contracts, which have been entered into by the Company's Spanish
subsidiary:

<TABLE>
<CAPTION>
Currency Notional Amount Buy (Sell) Fair Value
-------- -------------------------- ----------
<S> <C> <C>
US Dollar................................... $(17,700) $ 714
US Dollar................................... $ 9,000 $(351)
</TABLE>

7. Business Segment Information

<TABLE>
<CAPTION>
Operating
Net sales income (loss)
<S> <C> <C>
Three Months Ended April 2, 2000
United States -- Corporate................................ $ -- $(15,798)
-- Operations.................................. 233,551 6,415
Europe.................................................... 63,759 2,184
Asia...................................................... 35,510 812
-------- --------
332,820 $ (6,387)
======== ========
Three Months Ended April 4, 1999
United States -- Corporate................................ -- (4,419)
-- Operations.................................. 100,567 2,945
Europe.................................................... 60,731 1,797
Asia...................................................... 45,666 2,834
-------- --------
206,964 3,157
======== ========
</TABLE>

F-36
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
(In thousands, except share data)

<TABLE>
<CAPTION>
December 31, April 2,
1999 2000
------------ --------
<S> <C> <C>
Identifiable Assets
United States -- Corporate................................ $ 14,167 $ 4,933
-- Operations.................................. 236,705 266,742
Europe.................................................... 99,610 103,186
Asia...................................................... 61,301 76,375
-------- --------
$411,783 $451,236
======== ========
</TABLE>

8. Option Plan

The stockholders approved the 2000 Equity Incentive Plan (the "2000 Plan")
in January 2000. The 2000 Plan is administered by the board of directors and
selected employees, directors and non-employees, who provide services to the
Company, are eligible to participate. The 2000 Plan provides for the award of a
broad variety of stock-based compensation alternatives, such as non-qualified
stock options, incentive stock options, restricted stock, performance awards and
stock appreciation rights. The 2000 Plan provided 2,668,750 shares of common
stock to be offered from either authorized and unissued shares or issued shares
which have been reacquired by the Company.

For options granted under the 2000 Plan, which totalled 404,543, one-half of
the award will vest ratably over four years following the date of grant. The
remainder of the grant vests eight years from the date of grant, with provisions
for acceleration based on pre-established financial performance goals.

During the first quarter of 2000, all remaining shares available for awards
under the Company's previous non-qualified stock option plan were granted.

A summary of stock option activity for the Company's option Plan is as follows:

<TABLE>
<CAPTION>
For the Three Months Ended April 2, 2000
----------------------------------------------------
Weighted
Number of Average
Shares Option Price Exercise Price
<S> <C> <C> <C>
Outstanding at December 31, 1999.................... 1,979,941 $ 4.00--$20.00 $ 8.48
Granted........................................... 745,900 $ 12.28 $12.28
Exercised......................................... (112,034) $ 4.00--$ 4.80 $ 4.08
Forfeited......................................... (92,104) $ 4.00--$12.28 $ 5.36
-----------

Outstanding at April 2, 2000........................ 2,521,703 $ 4.00--$20.00 $ 9.88
===========
Exercisable at April 2, 2000........................ 889,929 $ 4.00--$20.00 $12.12
===========
</TABLE>

Compensation expense of $162 was recognized during the quarter ended
April 2, 2000 to account for the vesting of options granted below the fair
market price of the Company's Common Stock.

F-37
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
(In thousands, except share data)

In the quarter ended April 2, 2000, the Board of Directors approved a grant
of 200,000 shares of Common Stock to the Company's Chief Executive Officer, and
a grant of 12,500 shares of Common Stock to senior management of the Company. In
connection with this grant, the Company recorded a one time non-cash charge of
$3,825, based upon the number of shares awarded and the fair value of $18 per
share, as determined by the Company. This one-time non-cash charge of $3,825 has
been included in selling, general and administrative in the accompanying
consolidated statement of operations for the three months ended April 2, 2000.

9. Earnings Per Share

The following table illustrates the reconciliation of the numerator and
denominator of basic and diluted income (loss) per share before extraordinary
loss computations as required by SFAS 128:

<TABLE>
<CAPTION>
Three Months Ending
------------------------
April 4, April 2,
1999 2000
----------- ----------
<S> <C> <C>
Numerator--basic and diluted earnings per share:
Income (loss)............................................ $ 103 (10,823)
Dividends on senior redeemable preferred stock........... -- (1,783)
Accretion of senior redeemable preferred stock........... -- (348)
----------- ----------
Income (loss) available to common stockholders........... $ 103 (12,954)
=========== ==========
Denominator:
Basic income (loss) per share--weighted average shares
outstanding............................................ 19,053,219 19,673,082
Effect of dilutive securities--stock options and
warrants............................................... 155,098 --
----------- ----------
Diluted income (loss) per share--weighted average shares
outstanding............................................ 19,208,317 19,673,082
=========== ==========

Basic income (loss) per share............................ $ 0.01 $ (0.66)
Diluted income (loss) per share.......................... $ 0.01 $ (0.66)
</TABLE>

For the three months ended April 4, 1999 and April 2, 2000, anti-dilutive
options and warrants of 840,127 and 3,810,253, respectively, have been excluded
from the calculation of EPS as either the Company had a net loss for the year or
the exercise price was greater than the estimated fair market price of the
common shares.

10. Restructuring and Other Asset Writedowns

The following table sets forth the activity in the restructuring reserves
through April 2, 2000:

<TABLE>
<S> <C>
Balance at December 31, 1999................................ $668
Cash payments............................................... 369
Asset writedowns............................................ --
----

Balance at April 2, 2000.................................... $299
====
</TABLE>

The restructuring reserve relates primarily to severance at the Company's
Charlotte facility and is expected to be fully utilized in the Company's second
quarter of 2000.

F-38
<PAGE>
Report of Independent Accountants on Financial Statement Schedules

To the Board of Directors
of Manufacturers' Services Limited

Our audits of the consolidated financial statements referred to in our report
dated February 2, 2000, except as to the reverse stock split described in
Note 13 which is as of May 2, 2000, appearing in the Form S-1 Registration
Statement of Manufacturers' Services Limited also included an audit of the
financial statement schedule listed in Item 16 of this Form S-1. In our opinion,
this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 2, 2000, except as to
the reverse stock split
described in Note 13 which
is as of May 2, 2000

S-1
<PAGE>
Valuation and Qualifying Accounts
(In thousands)

<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1999.................................. $ 698 339 700 (1,009) $ 728
1998.................................. $ 1,942 319 -- (1,563) $ 698
1997.................................. $ 1,724 232 -- (14) $ 1,942
Deferred tax asset valutation allowance:
1999.................................. $17,698 1,482 805 -- $19,985
1998.................................. $13,960 978 2,760 -- $17,698
1997.................................. $ 6,936 8,904 -- (1,880) $13,960
</TABLE>

S-2
<PAGE>

Pictures of employees in their work environments below the caption "...with
technology, people and innovation," Address telephone number and website
address for MSL with MSL's logo.

<PAGE>
---------------------------------------------------------
---------------------------------------------------------

, 2000

[LOGO]

MANUFACTURERS' SERVICES LIMITED

11,000,000 Shares of Common Stock

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

P R O S P E C T U S

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

DONALDSON, LUFKIN & JENRETTE

BANC OF AMERICA SECURITIES LLC

ROBERTSON STEPHENS

THOMAS WEISEL PARTNERS LLC

DLJDIRECT INC.

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of
Manufacturers' Services Limited have not changed since the date hereof.

Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter in this offering and when selling
previously unsold allotments or subscriptions.
--------------------------------------------------------------------------------
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee..... $ 63,453
National Association of Securities Dealers, Inc. filing
fee................................................... 24,535
New York Stock Exchange listing fee..................... 105,600
Printing and engraving expenses......................... 275,000
Legal fees and expenses................................. 500,000
Accounting fees and expenses............................ 435,000
Blue sky fees and expenses.............................. 5,000
Transfer Agent and Registrar fees....................... 18,000
Miscellaneous........................................... 113,412
----------
Total................................................. $1,540,000
==========
</TABLE>

Item 14. Indemnification of Directors and Officers.

The Registrant's Restated Certificate of Incorporation provides that the
Registrant's Directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that the exculpation from liabilities is not permitted under the Delaware
General Corporation Law as in effect at the time such liability is determined.
The Amended and Restated By-Laws provide that the Registrant shall indemnify its
directors to the full extent permitted by the laws of the State of Delaware.

Prior to the consummation of this offering, the Company will enter into
indemnification agreements with each of its directors and executive officers
that provide for indemnification and expense advancement to the fullest extent
permitted under the Delaware General Corporation Law.

Item 15. Recent Sales of Unregistered Securities.

In the three years preceding the filing of this Registration Statement, the
Registrant has issued the following securities which were not registered under
the Securities Act of 1933, as amended:

(1) On June 13, 1997, MSL issued:

(a) an aggregate of 5,208,334 shares of common stock to the DLJ Entities
for an aggregate of $25 million; and

(b) 157,250 shares of common stock to Kevin C. Melia pursuant to the
exercise of outstanding options for an aggregate of $629,000.

II-1
<PAGE>
(2) Between April 4, 1998 and April 2, 2000, MSL sold an aggregate of
623,069 shares of common stock to employees and persons having business
relationships with MSL for an aggregate of $1,464,598.

(3) On November 26, 1999, MSL sold an aggregate of 2,000,000 shares of
senior exchangeable preferred stock due 2006 to investment entities affiliated
with Donaldson, Lufkin & Jenrette, Inc. for an aggregate of $50 million.

(4) Between November 4, 1997 and April 2, 2000, MSL sold an aggregate of
693,800 shares of common stock to employees of MSL pursuant to the exercise of
outstanding options for an aggregate of $2,782,754 and in consideration of
services rendered.

The sales and issuances listed above in paragraphs (1), (2) and (3) were
deemed exempt from registration under the Securities Act by virtue of Section
4(2) thereof, as transactions not involving a public offering. The issuances of
securities listed in paragraph (4) were deemed exempt from registration under
the Securities Act by virtue of Rule 701. Defined terms used herein not
otherwise defined have the meanings ascribed to them in the prospectus, which
forms a part of this Registration Statement.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits:

II-2
<PAGE>

<TABLE>
<C> <S>
**4.2 Stockholders Agreement Amendment dated as of November 26,
1999 by and among MSL and the stockholders names therein.
**4.3+ Credit Agreement dated August 21, 1998 among MSL, MSL
Overseas Finance B.V. and the lenders named therein.
**4.4 First Amendment to Credit Agreement and Limited Waiver dated
as of February 26, 1999 by and among MSL, MSL Overseas
Finance B.V. and the lenders named in the Credit
Agreement.
**4.5 Second Amendment to Credit Agreement and Consent dated as of
November 23, 1999 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
**4.6 Third Amendment to Credit Agreement and Consent dated as of
February 10, 2000 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
4.7 Form of Amended and Restated Stockholders Agreement by and
among MSL and the stockholders named therein.
**5.1 Opinion of Ropes & Gray.
**10.1 Employment Agreement dated as of January 20, 1995 by and
between MSL and Kevin C. Melia.
**10.2 Employment Letter dated as of June 20, 1997 by and between
MSL and Robert E. Donahue.
**10.3 Employment Letter dated as of September 27, 1995 by and
between MSL and Rodolfo Archbold.
**10.4 Employment Letter dated as of January 4, 1996 by and between
MSL and Dale R. Johnson.
**10.5 Severance Letter dated June 25, 1996 by and between MSL and
Dale R. Johnson.
**10.6 Employment Letter dated as of January 23, 1998 by and
between MSL and James N. Poor.
**10.7 Second Amended and Restated Non-Qualified Stock Option Plan.
**10.8 Form of 2000 Equity Incentive Plan.
**10.9 Form of 2000 Employee Stock Purchase Plan.
**10.10 Form of Indemnification Agreement.
**10.11 Office/Warehouse Lease dated as of April 14, 1997 by and
between Amberjack, Ltd. and Manufacturers' Services
Limited - Roseville, Inc.
**10.12 Lease dated as of May 5, 1998 by and between International
Business Machines Corporation and Manufacturers' Services
Western U.S. Operations, Inc.
**X10.13 Supply Agreement dated as of November 27, 1999 by and
between MSL and 3Com Corporation.
**X10.14 Outsourcing Agreement dated as of June 1, 1998 by and
between International Business Machines Corporation and
Manufacturers' Services Western US Operations, Inc.
**X10.15 Manufacturing, Integration and Fulfillment Contract dated as
of June 26, 1998 by and between International Business
Machines S.A. and Global Manufacturers' Services -
Valencia.
</TABLE>

II-3

<PAGE>

<TABLE>
<C> <S>
**X10.16 Global Requirements Agreement No. MSL 183G dated as of
July 30, 1997 by and between MSL and Iomega Corporation.
**X10.17 Supply Agreement dated as of November 27, 1999 by and
between MSL and Palm Computing, Inc.
**X10.18 Manufacturing Services Agreement dated as of June 1, 1999 by
and between Hewlett-Packard Singapore Pte Ltd. and
Manufacturers' Services Singapore Pte Ltd.
**10.19 2000 Cash Incentive Compensation Plan.
10.20 Form of 2000 Non-Employee Director Stock Option Plan.
**21.1 Subsidiaries of MSL.
23.1 Consent of PricewaterhouseCoopers LLP.
**23.2 Consent of Ropes & Gray (included in the opinion filed as
Exhibit 5.1).
**23.3 Consent of Technology Forecasters, Inc.
**24.1 Power of attorney pursuant to which amendments to this
registration statement may be filed (included on the
signature page in Part II).
**27.1 Financial Data Schedule.
</TABLE>

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

** Previously filed.

X Confidential treatment requested on portions of this exhibit. An unredacted
version of this exhibit has been filed separately with the Commission.

+ MSL agrees to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to such agreement upon request by the Commission.

(b) Financial Statement Schedules.

The following financial statement schedule of the Company is included in
Part II of the Registration Statement:

<TABLE>
<S> <C>
Report of Independent Accountants on Financial Statement
Schedules................................................. S-1
Schedule II - Valuation and Qualifying Accounts............. S-2
</TABLE>

All other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such manner as requested by the underwriters to
permit prompt delivery to each purchaser.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to

II-4
<PAGE>
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14--Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Manufacturers' Services Limited has duly caused this Amendment No. 8 to the
Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Concord, Commonwealth of
Massachusetts, on this 20th day of June, 2000.

<TABLE>
<S> <C> <C>
MANUFACTURERS' SERVICES LIMITED

By: /s/ KEVIN C. MELIA
--------------------------------------
Name: Kevin C. Melia
Title: CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
</TABLE>

* * * *

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 8 to the Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
Chairman of the Board,
/s/ KEVIN C. MELIA Chief Executive Officer
---------------------------------------- (Principal Executive June 20, 2000
KEVIN C. MELIA Officer) and Director
President, Chief Financial
* Officer (Principal Financial
---------------------------------------- and Accounting Officer) and June 20, 2000
ROBERT E. DONAHUE Director
*
---------------------------------------- Director June 20, 2000
THOMPSON DEAN
*
---------------------------------------- Director June 20, 2000
KARL WYSS
*
---------------------------------------- Director June 20, 2000
GEORGE W. CHAMILLARD
*
---------------------------------------- Director June 20, 2000
WILLIAM WEYAND
*
---------------------------------------- Director June 20, 2000
JOHN F. FORT, III
</TABLE>

The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 8 pursuant to the Powers of Attorney executed by the above named
directors and officer of the

II-6
<PAGE>

Registrant and previously filed with the Securities and Exchange Commission on
behalf of such directors and officer.

<TABLE>
<S> <C> <C> <C>
*By: /s/ KEVIN C. MELIA
------------------------------------- Attorney-in-Fact June 20, 2000
KEVIN C. MELIA
</TABLE>

II-7
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<C> <S>
**1.1 Form of Underwriting Agreement.
**2.1+ Securities Purchase Agreement dated as of January 20, 1995
by and among MSL and the parties listed therein.
**2.2 Warrant Agreement dated as of August 31, 1995 by and among
MSL, Bank of America National Trust and Savings
Association and the parties listed therein.
**2.3+ Preferred Stock and Warrant Subscription Agreement dated as
of November 26, 1999 by and among MSL and the parties
listed therein.
**2.4 Escrow Agreement dated as of November 26, 1999 by and among
MSL and the parties listed therein.
**2.5+ Asset Purchase Agreement dated as of November 19, 1999,
among 3Com Corporation, Manufacturers' Services Limited
and Manufacturers' Services Salt Lake City
Operations, Inc.
**2.6 Securities Purchase Agreement dated as of May 19, 1995 by
and among MSL and the parties listed therein.
**2.7 Securities Purchase Agreement dated as of September 1, 1995
by and among MSL and the parties listed therein.
**2.8 Securities Purchase Agreement dated as of June 11, 1997 by
and among MSL and the parties listed therein.
**3.1 Restated Certificate of Incorporation of MSL.
**3.2 Amended and Restated By-laws of MSL.
**3.3 Form of certificate representing shares of common stock,
$.001 par value per share.
**4.1 Stockholders Agreement dated as of January 20, 1995 by and
among MSL and the stockholders named therein.
**4.2 Stockholders Agreement Amendment dated as of November 26,
1999 by and among MSL and the stockholders names therein.
**4.3+ Credit Agreement dated August 21, 1998 among MSL, MSL
Overseas Finance B.V. and the lenders named therein.
**4.4 First Amendment to Credit Agreement and Limited Waiver dated
as of February 26, 1999 by and among MSL, MSL Overseas
Finance B.V. and the lenders named in the Credit
Agreement.
**4.5 Second Amendment to Credit Agreement and Consent dated as of
November 23, 1999 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
**4.6 Third Amendment to Credit Agreement and Consent dated as of
February 10, 2000 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
4.7 Form of Amended and Restated Stockholders Agreement by and
among MSL and the stockholders named therein.
**5.1 Opinion of Ropes & Gray.
**10.1 Employment Agreement dated as of January 20, 1995 by and
between MSL and Kevin C. Melia.
**10.2 Employment Letter dated as of June 20, 1997 by and between
MSL and Robert E. Donahue.
</TABLE>

<PAGE>

<TABLE>
<C> <S>
**10.3 Employment Letter dated as of September 27, 1995 by and
between MSL and Rodolfo Archbold.
**10.4 Employment Letter dated as of January 4, 1996 by and between
MSL and Dale R. Johnson.
**10.5 Severance Letter dated June 25, 1996 by and between MSL and
Dale R. Johnson.
**10.6 Employment Letter dated as of January 23, 1998 by and
between MSL and James N. Poor.
**10.7 Second Amended and Restated Non-Qualified Stock Option Plan.
**10.8 Form of 2000 Equity Incentive Plan.
**10.9 Form of 2000 Employee Stock Purchase Plan.
**10.10 Form of Indemnification Agreement.
**10.11 Office/Warehouse Lease dated as of April 14, 1997 by and
between Amberjack, Ltd. and Manufacturers' Services
Limited - Roseville, Inc.
**10.12 Lease dated as of May 5, 1998 by and between International
Business Machines Corporation and Manufacturers' Services
Western U.S. Operations, Inc.
**X10.13 Supply Agreement dated as of November 27, 1999 by and
between MSL and 3Com Corporation.
**X10.14 Outsourcing Agreement dated as of June 1, 1998 by and
between International Business Machines Corporation and
Manufacturers' Services Western US Operations, Inc.
**X10.15 Manufacturing, Integration and Fulfillment Contract dated as
of June 26, 1998 by and between International Business
Machines S.A. and Global Manufacturers' Services -
Valencia.
**X10.16 Global Requirements Agreement No. MSL 183G dated as of
July 30, 1997 by and between MSL and Iomega Corporation.
**X10.17 Supply Agreement dated as of November 27, 1999 by and
between MSL and Palm Computing, Inc.
**X10.18 Manufacturing Services Agreement dated as of June 1, 1999 by
and between Hewlett-Packard Singapore Pte Ltd. and
Manufacturers' Services Singapore Pte Ltd.
**10.19 2000 Cash Incentive Compensation Plan.
10.20 Form of 2000 Non-Employee Director Stock Option Plan.
**21.1 Subsidiaries of MSL.
23.1 Consent of PricewaterhouseCoopers LLP.
**23.2 Consent of Ropes & Gray (included in the opinion filed as
Exhibit 5.1).
**23.3 Consent of Technology Forecasters, Inc.
**24.1 Power of attorney pursuant to which amendments to this
registration statement may be filed (included on the
signature page in Part II).
**27.1 Financial Data Schedule.
</TABLE>

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

** Previously filed.

X Confidential treatment requested on portions of this exhibit. An unredacted
version of this exhibit has been filed separately with the Commission.

+ MSL agrees to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to such agreement upon request by the Commission.