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

----------------------------------------
FORM 10-K
----------------

(MARK ONE)
{X}[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.1934

FOR THE FISCAL YEAR ENDED MARCH 31, 1999.2001

{ }[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.1934

FOR THE TRANSITION PERIOD FROM ___________________________ TO _______________.____________ .

COMMISSION FILE NUMBER: 0-21272

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------NUMBER 000-23354

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

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

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

514 CHAI CHEE LANE #04-13
BEDOK11 UBI ROAD 1, #07-01/02
MEIBAN INDUSTRIAL ESTATEBUILDING
SINGAPORE 469029408723
(65) 449-5255844-3366
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

MICHAEL E. MARKS
CHIEF EXECUTIVE OFFICER
FLEXTRONICS INTERNATIONAL LTD.
514 CHAI CHEE LANE #04-13
BEDOK INDUSTRIAL ESTATE
SINGAPORE 469029
(65) 449-5255
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE,SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF AGENT FOR SERVICE)

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

1
THE ACT: NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
ORDINARY SHARES, S$0.01 PAR VALUE

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

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

As of June 21, 2001, 482,431,643 shares of the Registrant's common stock
were outstanding. The aggregate market value of votingthe common stock held by
non-affiliatesshareholders other than our executive officers, directors and 10% or greater
shareholders of the Registrant as of June 21, 2001 was approximately $2,737 million, based upon the closing price of the Registrant's
Common Stock reported for such date on the Nasdaq National Market. Shares of
Common Stock held by each executive officer and director and by each person who
owns 10% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. The determination of affiliate status is
not necessarily a conclusive determination for other purposes. As of June 15,
1999, the Registrant had 48,122,058 outstanding shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

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

===============================================================================$10.8
billion.

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FLEXTRONICS INTERNATIONAL LIMITED
1999 FORM 10-K

TABLE OF CONTENTS

Part
PAGE
----
PART I

Item 1. Business................................................................................... 3
Item 2. Properties................................................................................. 15
Item 3. Legal Proceedings.......................................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders........................................ 16

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.................. 16
Item 6. Selected Financial Data.................................................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................. 28
Item 8. Financial Statements and Supplementary Data................................................ 30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 56

PART III

Item 10. Directors and Executive Officers of the Registrant......................................... 56
Item 11. Executive Compensation..................................................................... 58
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 61
Item 13. Certain Relationships and Related Transactions............................................. 63

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................... 65
3
PART I

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

Part II

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

Part III

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

Part IV

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

PART IBUSINESS

Except for historical information contained herein, the matters discussed
in this annual report on Form 10-K are forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 as amended, and Section 27A of
the Securities Act of 1933, as amended.1933. The words "expects,"will," "may," "designed to," "outlook,"
"believes," "should," "anticipates," "believes,"plans," "expects," "intends," "plans""estimates"
and similar expressions identify forward-looking statements, which speak only as
of the date hereof.of this annual report. These forward-looking statements are
contained principally under Item 1, "Business," and Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Because these forward-looking statements are subject to certain risks and
uncertainties, including, without limitation, those discussedactual results could differ materially from the expectations
expressed in "Item 1-Business--Risk
Factors,"the forward-looking statements. Important factors that could cause
futureactual results to differ materially from historical
resultsthe expectations reflected in the
forward-looking statements include those described in this section under "Risk
Factors," including,

- our ability to integrate acquired companies and manage change in
our operations;

- fluctuations in our customers' requirements and demand for their
products;

- increased competition;

- tax matters; and

- currency fluctuations.

We undertake no obligation to update or those anticipated.

Item 1. BUSINESSrevise these forward-looking statements
to reflect subsequent events or circumstances.

OVERVIEW

Flextronics International Ltd. is("Flextronics") was incorporated in the
Republic of Singapore in May 1990. We are a leading provider of advanced electronics
manufacturing services to original equipment manufacturers ("OEM""OEMs"), primarily
in the telecommunications, networking, computer, consumer electronics and medical devicecomputer
industries. We provide a wide rangenetwork of integrated services, from
initialdesign, engineering and manufacturing
operations in 27 countries across four continents. Our strategy is to provide
customers with end-to-end solutions where we take responsibility for
engineering, new product design to volume productionintroduction and fulfillment.implementation, manufacturing, supply
chain management and logistics management, with the goal of delivering a
complete packaged product.

Our manufacturing services range from printed circuit boardinclude the fabrication and assembly toof plastic
and metal enclosures, printed circuit boards or PCBs, backplanes and the
assembly of complete product assemblysystems and test. We believe that we have developed particular
strengths in advanced interconnect, miniaturization and packaging technologies.products. In addition, through our photonics
division, we provide advanced engineering services, including product design,manufacture and assemble photonics components and integrate them
into PCB layout, quick-turn prototypingassemblies and test development.other systems. Throughout the production process, we
offer design and technology services; logistics services, such as materials
procurement, inventory management, vendor management, packaging and
distribution.distribution; and automation of key components of the supply chain through
advanced information technologies. In addition, we have added other after-market
services such as network installation.

Through a combination of internal growth and acquisitions, we have become
one of the fourthworld's largest provider of electronics manufacturing services ("EMS") providers,
with revenues of $1.8$12.1 billion and EBITDA (earnings before interest, tax,
depreciation and amortization, excluding unusual charges) of $838.0 million in
fiscal 1999. We believe that2001. In addition, we have increased our size, global presence and
expertise enable usmanufacturing square footage
from 1.5 million square feet on April 1, 1998 to win large outsourced manufacturing programs from leading
multinational OEMs.over 16.0 million square feet
on March 31, 2001. We offer a complete and flexible manufacturing solution that
provides accelerated time-to-market and time-to-volume production, as well as
reduced
production costs.costs and advanced engineering and design capabilities. By working
closely with and being highly responsive to customers throughout the design,
manufacturing and distribution process, and by offering highly
responsive services, we believe that we can becomebe an integral
part of their operations. We believe that our size, global presence, broad
service offerings and expertise enable us to win large programs from leading
multinational OEMs for the manufacture of electronic products.

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Our customers include industry leaders such as Alcatel, Bay Networks,Cabletron Systems,
Cisco Compaq,Systems, Inc., Ericsson Telecom AB ("Ericsson"), Hewlett-Packard Company,
Microsoft Corporation, Motorola, Inc. ("Motorola"), Nokia Corporation, Palm,
Inc., Philips SonyElectronics and 3Com. In addition, we recently entered into relationships with a number of new
customers, including Kodak, Intel, Qualcomm, Lucent and Rockwell.Siemens AG. Due to our focus on high growth
technology sectors, our prospects are influenced by certainsuch major trends such as the
buildoutupgrade of the communications and Internet infrastructure, the proliferation of
wireless and optical devices, increasing product miniaturization and other
trends in electronics technologies. In addition, our growth is drivenaffected by the accelerating
pace at which leading OEMs are adoptingcontinuing to adopt outsourcing as a core
business strategy.

We have established an extensive network of manufacturing facilities in the
world's major electronics markets, - Asia, the Americas, Asia and Europe, -in order to
serve the increased outsourcing needs of both multinational and regional OEMs.
WeMoreover, we strategically locate facilities near our customers'customers and their end
marketsmarkets. In fiscal 2001, production in the Americas, Asia and Europe,
represented 42%, 21% and 37% of our net sales, respectively. We have locatedalso
established fully integrated, high volume manufacturing facilities in low cost regions
worldwide. We have established industrial parks in China, Hungary and Mexico and
are planning anlow-cost regions
near our customers' end markets. These industrial park in Brazil. These self-contained facilitiesparks provide a total manufacturing and fulfillment solution from a single sitesupply
chain management by 4

locatingco-locating our manufacturing and distribution operations
andwith our suppliers together.at a single location. This
integrated approach to production and
distribution benefitsis designed to benefit our customers by reducing logistical
barriers and costs, improving supply-chain management, increasing flexibility, lowering transportation costs and
reducing turnaround times. Since March 31, 1997,Our industrial parks are located in Brazil, China,
Hungary, Mexico and Poland. In addition to our industrial parks, we have
increased overall capacity by approximately
2.1 million square feet through internal growthestablished product introduction centers which provide engineering expertise in
developing new products and acquisitions. As a result,
we havepreparing them for high volume manufacturing.

INDUSTRY OVERVIEW

With electronic products growing in technical complexity and experiencing
shorter product lifecycles in response to customer requirements, the demand for
advanced manufacturing capabilities and related services has grown to approximately 3.5 million square feet of capacity on four
continents.

Industry Overviewrapidly. Many
OEMs in the electronics industry are increasingly utilizing electronics manufacturing serviceEMS providers in
their business and manufacturing strategies, and are seeking to outsource a broad range of manufacturing and
related engineering services.strategies. Outsourcing allows OEMs to take
advantage of the manufacturing expertise and capital investments of electronics manufacturing
serviceEMS
providers, thereby enabling OEMs to concentrate on their core competencies, such
as product development, marketing and sales. We believe that by developing
strategic relationships with EMS providers, OEMs utilize
electronics manufacturing service providers tocan enhance their competitive
position by:

o- reducing production costs;

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

o- accessing advanced manufacturing, design and designengineering
capabilities;

o- reducing capital investment requirements and fixed overhead costs;

o- improving inventory management and purchasing power; and

o- accessing worldwide manufacturing capabilities.

AsWe believe that the market for electronics manufacturing services will
continue to grow, driven largely by OEMs' need for increasing flexibility to
respond to rapidly changing markets, technologies and accelerating product life
cycles, in addition to advanced manufacturing and engineering capabilities as a
result of these factors, industry sources estimate that the overall
market forincreased complexity and reduced size of electronic manufacturing services has grown at an average annual rate
of 25% from 1988 to 1997, reaching an estimated $73 billion in 1997.

Strategyproducts.

STRATEGY

Our objective is to enhance our position asprovide customers with the ability to outsource, on a
top tier provider of advanced
electronics manufacturing services. Our strategyglobal basis, a complete product. We intend to meetachieve this objective includesby taking
responsibility for the engineering, assembly, integration, test, supply chain
management and logistics management to accelerate their time-to-market and
time-to-volume. To achieve this objective, we will continue to implement the
following key elements:

Serve Major Markets From Strategic, Low Cost Regions. We have established
an extensive network of manufacturing facilities in the world's major
electronics markets - Asia, the Americasstrategies:

Enhance Our Customers' Product Development and Europe - to serve the increased
outsourcing needs of both multinational and regional OEMs. We strategically
locate facilities near our customers' end markets and have located fully
integrated, high volume manufacturing facilities in low cost regions worldwide.
By operating in low cost areas, we are able to realize savings in lower labor,
overhead, tax and transportation costs, which we can pass on to our customers.

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

Establish Close Relationships with Customers. We
believe we can become an integral part of our customers' operations by working
closely with them throughout the design, manufacturing and distribution process,
and by offering flexible, highly responsive services. We believe we develop strongour customer
relationships

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5
are strengthened through a management approach which fosters rapid
decision-making and a customer service orientation that responds quickly to
frequently changing customer design specifications and production requirements.
In many cases,Our approach allows our customers to focus on their core competencies and thus
enables them to accelerate their time-to-market and time-to-volume production.

Leverage Our Global Presence. We have established an extensive network of
design and manufacturing facilities in the world's major electronics markets,
the Americas, Asia and Europe, to serve the increased outsourcing needs of both
multinational and regional OEMs. Our global network of manufacturing facilities
in 27 countries gives us the flexibility to transition customer projects to any
of our locations. This flexibility allows design, prototyping and initial
production to be located near the customer's own research and development
centers, so that manufacturing can then be moved to locations closer to their
end markets, or transitioned to low-cost regional manufacturing facilities or
industrial parks as volumes increase over the product life-cycle.

Expand Our Industrial Parks Strategy. Our industrial parks are
self-contained facilities that co-locate our manufacturing and distribution
operations with our suppliers in low-cost regions near our customers' end
markets. Our industrial parks provide a total supply chain management. This
approach to production and distribution benefits our customers by reducing
logistical barriers and costs, improving communications, increasing flexibility,
lowering transportation costs and reducing turnaround times. We have
strategically established large industrial parks in Brazil, China, Hungary,
Mexico and Poland.

Offer Comprehensive Solutions. We offer a comprehensive range of
engineering, assembly, integration, test, supply chain management and logistics
management services to our customers that simplify the global product
development process and provide them meaningful cost savings. Our capabilities
help our customers improve product quality and performance, reduce costs and
accelerate time-to-market.

Streamline Business Processes Through Information Technologies. We utilize
new information technologies to streamline business processes for our customers.
For example, we closely integrateuse innovative Internet supply chain solutions to improve order
placement, tracking and fulfillment. We are also able to provide our customers
with online access to product design and manufacturing process information.
Integrating our information systems with those of our customers. This
customer-focused approachcustomers allows us to
accelerateassist our customers' time-to-marketcustomers in improving their communications and time-to-volume productionrelationships across
their supply chain.

Pursue Strategic Opportunities. We have actively pursued acquisitions and
helps them to respond quickly to change.

Deliver Complete Manufacturing Solution. We believe OEMs are increasingly
requiring a wider rangepurchases of advanced engineering and manufacturing services in
order to reduce their costs and accelerate their time to market. Building on our
integrated engineering and manufacturing capabilities, we provide services from
initial product design and test to final product assembly and distribution to
the OEM's customers. In addition, our global network of industrial parks,
manufacturing and technology centers, regional manufacturing facilities to expand our worldwide operations,
broaden our service offering, diversify and product introduction centers provides customers with a scalable, flexible
solutionstrengthen our customer
relationships and enhance our management depth. We will continue to support their needs as their products move from designreview
opportunities and initial
introductionare currently in preliminary discussions to high volume productionacquire
manufacturing operations and distribution.

Leverage Advanced Technological Capabilities. Our strengths in advanced
miniaturization, packaging and interconnect technologies enable usenter into business combinations. We cannot assure
the terms of, or that we will complete, such transactions. We will continue to
offer
customers advanced design, technology and manufacturing solutions for their
leading-edge products. Our product introduction centers are located in North
America and Europe and provide a high level of engineering expertise to the
customer. Our technological capabilities helpselectively pursue strategic transactions that we believe will further our
customers to shrink product
size, improve product performance and reduce costs.

Therebusiness objectives.

We cannot assure that our strategies can be no assurance that our strategy, even if successfully implemented, or
will reduce the risks associated with our business.

EXPANSION

We have actively pursued mergers and other business acquisitions to expand
our global reach, manufacturing capacity and service offerings, in addition to
diversifying and strengthening customer relationships. These acquisitions have
enabled us to provide more integrated outsourcing technology solutions with
time-to-market and lower cost advantages. Acquisitions have also played an
important part in expanding our presence in the Company's business. See
"- Risk Factors.global electronics marketplace.
We have completed several significant business combinations since the end of
fiscal 2000. In fiscal 2001, we acquired all the outstanding shares of The DII
Group, Inc. ("DII"), Palo Alto Products International Pte. Ltd. ("Palo Alto
Products International"), Chatham Technologies, Inc. ("Chatham"), Lightning
Metal Specialties and related entities ("Lightning") and JIT Holdings Ltd.
("JIT"). Each of these acquisitions were accounted for as pooling of interests.
Additionally, we have completed other immaterial pooling of interests
transactions in fiscal 2001. We have also made a number of business acquisitions
which were accounted for using the purchase method. In addition, we have
purchased a number of manufacturing facilities and related assets from customers
and simultaneously entered into manufacturing agreements to provide electronics
design, assembly and test services to these customers. In fiscal 2001, we
purchased a facility in Italy from Siemens Mobile, a facility in

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Switzerland from Ascom, a facility in Denmark from Bosch Telecom GmbH and a
facility in Sweden from Ericsson Radio AB. In the first quarter of fiscal 2002,
we commenced management of the operations of Ericsson's mobile telephone
operations using facilities owned by Ericsson in Brazil, Great Britain, Malaysia
and Sweden, as well as our own facilities. In connection with this relationship,
we purchased certain equipment, inventory and other assets, and assumed certain
accrued expenses, from Ericsson at their net book value of approximately $450.0
million. Additionally, in the first quarter of fiscal 2002, we announced our
intentions to purchase a manufacturing facility and related assets from Alcatel
located in Laval, France.

By enhancing our capability to provide a wide range of related electronics
design and manufacturing services to a global market that is increasingly
dependent on outsourcing providers, these acquisitions have enabled us to
enhance our competitive position as a leading provider of comprehensive
outsourcing technology solutions. For more information on our acquisitions,
please see Item 7, " Customers

The Company'sManagement's Discussion and Analysis of Financial Condition
and Results of Operations--Acquisitions."

CUSTOMERS

Our customers consist of a select group of OEMs primarily in the
telecommunications, networking, computer, consumer electronics and medical
devicecomputer industries.
Within these industries, the Company'sour strategy is to seek
long-termestablish relationships with leading
companies that seek to outsource significant production volumes of complex
products. The Company hasWe have focused on building long-term relationships with these
customers and expanding our relationship to include additional product lines and
services. We have increasingly focused on sales to larger companies and to
customers in the telecommunications, networking, consumer electronics and
consumercomputer industries. In fiscal 1998 and fiscal 1999, the
Company's five2001, our ten largest customers accounted for
approximately 57% and 62%,
respectively,59% of our net sales. No customer accounted for more than 10% of
net sales. The loss of one or more major customers would have a
material adverse effect on the Company, its results of operations, prospects or
debt service ability. See "Risk Factors -- Customer Concentration; Dependence

on Electronics Industry" and "-- Variability of Customer Requirements and
Operating Results."sales in fiscal 2001.

The following table lists in alphabetical order the Company'ssome of our largest
customers in fiscal 19992001 and the products of those customers for which we
provide manufacturing services:

CUSTOMER END PRODUCTS
- -------- ------------

Alcatel Cellular phones, accessories and telecommunications infrastructure
Cabletron Systems Data communications products
Cisco Systems, Inc. Data communications products
Ericsson Telecom AB Cellular phones, business telecommunications systems and GSM infrastructure
Hewlett-Packard Company Inkjet printers and storage devices
Motorola, Inc. Cellular phones, set-top boxes and telecommunications infrastructure
Nokia Corporation Cellular phone accessories, cellular phones, office phones and
telecommunications infrastructure
Palm, Inc. Pilot electronic organizers
Philips Electronics Consumer electronics products
Siemens AG Cellular phones and telecommunications infrastructure

On May 30, 2000, we entered into a strategic alliance for product
manufacturing with Motorola. In connection with this strategic alliance,
Motorola paid $100.0 million for an equity instrument that provided it with
incentives to purchase products and services from us by entitling it to acquire
22,000,000 of our ordinary shares at any time through December 31, 2005 upon
meeting targeted purchase levels of up to $32.0 billion or making additional
payments to us. In June 2001, we entered into an agreement with Motorola under
which we repurchased this equity instrument for $112.0 million. No current or
planned manufacturing programs are affected by this repurchase and we anticipate
that Motorola will continue to be a customer following the Company provides
manufacturing services.

CUSTOMER END PRODUCTS
- ------------------------------------------- -----------------------------------
3Com/US Robotics........................... Pilot electronic organizers
Advanced Fibre Communications.............. Local line loop carriers
Alcatel ................................... Business telecommunications systems
Cisco ..................................... Data communications products
Ericsson................................... Business telecommunications system
Hewlett Packard ........................... Printers
Lifescan (a Johnson & Johnson company)..... Portable glucose monitoring system
Microsoft.................................. Computer peripheral devices and
internet access devices
Nortel Networks............................ Data communications products
Philips.................................... Consumer electronics productsrepurchase, although
our future revenue from Motorola may be less than it would have been had this
instrument remained in effect.

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In addition, the Company recently began manufacturing products forApril 2001, we entered into a number
of new customers, including Intel (mother boards), Kodak (reusable cameras),
Lucent (data communications products), Qualcomm (cellular phones) and Rockwell
(modems). None of these customers represent more than 10%definitive agreement with Ericsson with
respect to our management of the Company's net
salesoperations of Ericsson's mobile telephone
operations. Operations under this arrangement commenced in the first quarter of
fiscal 1999.

The Company's largest customers during fiscal 1999 were Philips,2002. Under this agreement, we are to provide a substantial portion of
Ericsson's mobile phone requirements. We assumed responsibility for product
assembly, new product prototyping, supply chain management and logistics
management, in which we process customer orders from Ericsson and Cisco accounting for approximately 18%, 16%configure and
13%of consolidated net
sales, respectively. No other customer accounted for more than 10% of
consolidated net sales in fiscal 1999.

Salesship products to Ericsson's customers. We expect to also provide PCBs and
Marketing

The Company achievesplastics, primarily from our Asian operations.

SALES AND MARKETING

We achieve worldwide sales coverage through a direct sales force, which
focuses on generating new accounts, and through program managers, who are
responsible for managing relationships with existing customers and making
follow-on sales. The Company'sOur Asian sales offices are located in SingaporeHong Kong and Hong Kong.Singapore.
In North America, the Company maintainswe maintain sales offices in California, Florida,
Massachusetts and Massachusetts.Texas. In Europe, the Company maintainswe maintain sales offices in England,
France, Germany, the Netherlands and Sweden. In addition to itsour sales force, the Company'sour
executive staff plays an integral role in the Company's
marketingour sales efforts.

Services

Flextronics offersSERVICES

We offer a broad range of integrated services, providing customers with a
total design and manufacturing solution to takethat takes a product from its initial
design through volume production, test, distribution and distribution into post-sales service
and support. Engineering Services. Our product introduction centers coordinateWe operate and integrate our worldwide design, prototype, test developmentare managed internally by four geographic business
segments, including Asia, the Americas, Western Europe and other
engineering capabilities. ThroughCentral Europe. For
additional information on these product introduction centers, we provide
a broad range of engineering services and, in certain locations, dedicated
production lines for prototypes. These services strengthen our relationships
with manufacturing customers and attract new customers requiring advanced
engineering services.

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

Materials Procurement and Management. Materials procurement and management
consistsgeographic business segments, please see Note
12, "Segment Reporting," of the planning, purchasing, expeditingNotes to Consolidated Financial Statements in
Item 8, "Financial Statements and warehousing of components
and materials.Supplementary Data."

Our inventory management expertise and volume procurement
capabilities contribute to cost reductions and reduce total cycle time. Our
industrial parks in China, Hungary and Mexicointegrated services include providers of many of the custom components that we use, thus reducing material and transportation costs,
simplifying logistics and facilitating inventory management.

Assembly and Manufacturing.following:

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

Test.of wireless communications products
employing radio frequency technology.

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

Multek. Multek provides PCB and backpanel fabrication services. PCBs and
backpanels are platforms which provide interconnection for integrated circuits
and other electronic components. Backpanels also provide interconnection for
other printed circuit boards. Semiconductor designs are currently so complex
that they often require printed circuit boards with many layers of narrow,
densely spaced wiring. We eithermanufacture high density, complex multilayer printed
circuit boards and backpanels on a low-volume, quick-turn basis, as well as on a
high-volume production basis. Our quick-turn prototype service allows us to
provide small test quantities to customers' product development groups in as
short as 24 hours. We are one of only a few independent manufacturers who can
respond to our customers' demands for an accelerated transition from prototype
to volume production, and are the only major PCB supplier with fabrication
service capabilities on four major continents (North America, South America,
Europe and Asia).

The manufacture of complex multilayer interconnect products often requires
the use of sophisticated circuit interconnections between layers, referred to as
vias, and adherence to strict electrical characteristics to maintain

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8
consistent circuit transmission speeds. Our production of microvias, by laser
ablation and our surface laminar circuit technology, a photo generated microvia
capability, provides our customers with proven high volume production capacity
in both of the major high density interconnect process solutions.

Flextronics Enclosures. We offer a comprehensive set of custom
electronic enclosures and related products and services worldwide. Our services
include design, manufacturing and integration of electronics packaging systems
from custom enclosure systems, power and thermal subsystems to interconnect
subsystems, cabling and cases. In addition to the typical sheet metal and
plastic fabrication, we assist in the design of electronic packaging systems
that protect sensitive electronics and enhance functionality. Our enclosure
design services focus on functionality, manufacturability and testing. These
services are integrated with our other services to provide our customers with
greater responsiveness, improved logistics and overall improved supply chain
management.

Flextronics Design Services. We offer a comprehensive spectrum of
value-added design services for products we manufacture for our customers from
product design services (hardware, software, mechanical and test) to
semiconductor design. Products designed by this group range from commercial and
military applications, including radio frequency analog, high-speed digital,
multi-chip module and flex circuits to high volume consumer products and small
quantity prototypes. We work with our customers to develop product-specific test
strategies and can custom design test equipment and software ourselves or use
test equipment and software provided by our customers. In addition,Additionally, a
significant competitive differentiator we possess is our semiconductor design
group. We provide ASIC design services to our OEM customers, which include:

- Conversion services from field programmable gate arrays to ASICs.
These services focus on designs that utilize primarily digital
signals, with only a small amount of analog signals.

- Design services for mixed-signal ASICs. These services focus on
designs that utilize primarily analog signals, with only a small
amount of digital signals.

- Silicon integration design services. These services utilize
silicon design modules that are used to accelerate complex ASIC
designs, including system-on-a-chip.

Our semiconductor design group utilizes external foundry suppliers for
its customers' silicon manufacturing requirements, thereby using a "fabless"
manufacturing approach. This enables us to take advantage of the suppliers' high
volume economies of scale and access to advanced process technology.

We believe that our semiconductor design expertise provides us with a
competitive advantage by enabling us to offer our customers reduced costs
through the consolidation of components onto silicon chips. Additionally, by
integrating the combined capabilities of design, engineering and semiconductor
services, we can compress the time from product concept to market introduction
and minimize product development costs.

To assist customers with initial design, we provide computer-aided
engineering and computer-aided design, engineering for manufacturability,
printed circuit board layout and test development. At our product introduction
centers, we employ hundreds of advanced engineers to provide the engineering
expertise in developing new products and preparing them for high volume
manufacturing. These centers coordinate and integrate our worldwide design,
prototype, test development practices and, in some locations, provide dedicated
production lines for prototypes.

Flextronics Photonics. We provide design, industrialization, supply
chain management and manufacturing services for the optical component and
optical networking industries. We offer a broad range of photonic packaging
design and industrialization services to assist in bringing products from
schematics to shipment while meeting our customers time-to-market objectives. As
the world's largest non-captive photonic component manufacturer, we offer
leading edge process development and volume manufacturing of active and passive
photonic devices.

Flextronics Network Services. We offer network installation services to
OEMs in the data and telecommunications industries. Our services include project
planning, documentation, engineering, production, installation and commissioning
of equipment. We have expertise in the installation of public and mobile
telecommunications systems, exchanges, corporate networks and peripheral
equipment.

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9
Supply Chain Services. We provide materials procurement, information
technology solutions and logistics. Materials procurement and management consist
of the planning, purchasing, expediting and warehousing of components and
materials used in the manufacturing process. Our inventory management expertise
and volume procurement capabilities contribute to cost reductions and reduce
total cycle time. Our industrial parks include providers of many of the custom
components that we use to reduce material and transportation costs, simplify
logistics and facilitate inventory management. We also provide environmental stress
testsuse sophisticated
automated manufacturing resources planning systems and enhanced electronic data
interchange capabilities to ensure inventory control and optimization. Through
our manufacturing resources planning system, we have real-time visibility on
material availability and real-time tracking of board or system assemblies.

Distribution.work in process. We also utilize
electronic data interchange with our customers and suppliers to implement a
variety of supply chain management programs. Electronic data interchange allows
customers to share demand and product forecasts and deliver purchase orders
while also assisting suppliers with just-in-time delivery and supplier-managed
inventory.

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

CompetitionFlextronics Logistics. We provide global logistics services and turnkey
supply chain solutions for our customers. Our worldwide logistics services
include freight forwarding, warehousing/inventory management and
outbound/e-commerce solutions through our global supply chain network. We
leverage new technologies such as XML links to factories, extranet-based
management, vendor managed inventory and build-to-order programs, to
simultaneously connect suppliers, manufacturing operations and OEM customers. By
joining these logistics solutions with worldwide manufacturing operations and
total supply chain management, we can significantly reduce market costs and can
create tightly integrated processes and facilities worldwide. Moreover, the
combination of these capabilities allows us to react quickly to demand signals
from our customers worldwide, creating innovative links to suppliers while
serving the world market.

BACKLOG

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

COMPETITION

The electronics manufacturing servicesEMS industry is extremely competitive and includes hundreds of
companies, several of whom have achieved substantial market share. The Company competesWe compete
with different companies, depending on the type of service or geographic area.
We compete against numerous domestic and foreign electronics manufacturing servicesEMS providers, and current and
prospective customers also evaluate the Company'sour capabilities against the merits of
internal production. In addition, in recent years the electronics manufacturingEMS industry has attracted
a significant number of new entrants, including large 8
OEMs with excess
manufacturing capacity, and many existing participants, including the Company,us, have
significantly increased their manufacturing capacity by expanding their
facilities and adding new facilities. In the event of a decrease in overall
demand for electronics manufacturing services, this increased capacity could
result in substantial pricing pressures which could adversely affect the Company'sharm our operating results.
CertainSome of the Company'sour competitors, including Solectron, SCI Systems and Celestica,may have substantially greater manufacturing, financial research and development and marketingor other
resources than the Company.us. As competitors increase the scale of their operations, they
may increase their ability to realize economies of scale, to reduce their prices
and to more effectively meet the needs of large OEMs. The
Company believesWe believe that the
principal competitive factors in the segments of the electronics manufacturing servicesEMS industry in which it operateswe
operate are cost, technological capabilities, responsiveness and flexibility,
delivery cycles, location of facilities, product quality and range of services
available. Failure to satisfy any of the foregoing requirements could materially adversely affectseriously
harm our business.

ENVIRONMENTAL REGULATION

Our operations are subject to certain federal, state and local
regulatory requirements relating to the Company'suse, storage, discharge and disposal of
hazardous chemicals used during their manufacturing processes. We believe that
our operations are currently in compliance with applicable regulations and do
not believe that costs of compliance with these laws and regulations will have a
material effect upon our capital expenditures, operating results or

9
10
competitive position, itsposition. Currently we have no commitments with environmental
authorities regarding any compliance related matters.

We determine the amount of our accruals for environmental matters by
analyzing and estimating the range of possible costs in light of information
currently available. The imposition of more stringent standards or requirements
under environmental laws or regulations, the results of operations, prospectsfuture testing and
analysis undertaken by us at our operating facilities, or debt
service ability.

Employeesa determination that
we are potentially responsible for the release of hazardous substances at other
sites could result in expenditures in excess of amounts currently estimated to
be required for such matters. No assurance can be given that actual costs will
not exceed amounts accrued or that costs will not be incurred with respect to
sites as to which no problem is currently known. Further, there can be no
assurance that additional environmental matters will not arise in the future.

EMPLOYEES

As of March 31, 1999, the Company employed2001, our global workforce totaled approximately 18,147 persons.
The Company has75,000
employees. We have never experienced a work stoppage or strike and the Company
believeswe believe
that itsour employee relations are good.

The Company'sOur success depends to a large extent upon the continued services of
key managerial and technical employees. The loss of such personnel could
have
a material adverse effect on the Company, itsseriously harm our business, results of operations, prospects orand debt service
ability. See "- Risk Factors -- DependenceTo date, we have not experienced significant difficulties in attracting
or retaining such personnel. Although we are not aware that any of Key Personnel."

Recent Acquisitions

In June 1999, Flextronics entered into an agreementour key
personnel currently intend to acquire Kyrel EMS
Oyj, a providerterminate their employment, we cannot assure you
of electronics manufacturing services with two facilities in
Finland and one in Luneville, France. Kyrel employs approximately 900 people and
its 1998 revenues were $230 million. Flextronics expects to issue approximately
1.9 million shares in the acquisition. Government approval is required in
Finland and the transaction is expected to close in the second quarter of fiscal
2000. The acquisition of Kyrel Ems Oyj will be accounted for as a
pooling-of-interests.

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

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

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

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

The ability of the Company to obtain the benefits of its recent
acquisitions are subject to a number of risks and uncertainties, including the
Company's ability to successfully integrate the acquired operations and its
ability to maintain, and increase, sales to customers of the acquired companies.
See "-Risk Factors - Risk of Acquisitions" and "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview.their future services.

RISK FACTORS

Risks of Expansion of OperationsIF WE DO NOT MANAGE EFFECTIVELY THE EXPANSION OF OUR OPERATIONS, OUR BUSINESS
MAY BE HARMED.

We have grown rapidly in recent periods,periods. Our workforce has more than
doubled in size over the last year as a result of internal growth and
thisacquisitions. This growth may not continue.
Internal growth will require usis likely to develop new customer relationshipsstrain considerably our management
control systems and expand
existing ones, improve our operational andresources, including decision support, accounting
management, information systems and furtherfacilities. If we do not continue to improve
our financial and management controls, reporting systems and procedures to
manage our employees effectively and to expand our manufacturing capacity.facilities, our business
could be harmed.

We plan to further expandincrease our manufacturing capacity in low-cost regions by
expanding our facilities and by adding new equipment. SuchThis expansion involves
significant risks. For example:

orisks, including, but not limited to, the following:

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

o- we may not efficiently and effectively integrate new operations
and information systems, expand our existing onesoperations and manage
geographically dispersed operations;

o- we may incur cost overruns;

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

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

In addition, we expect to incur new fixed operating expenses associated
with our expansion efforts that will increase our cost of sales, including
substantial increases in depreciation expense and rental expense, that will increase our cost of sales.expense. If our
revenues do not increase sufficiently to offset these expenses, our operating
results would be adversely affected.seriously harmed. Our expansion, both through acquisitionsinternal growth
and internal growth,acquisitions, has contributed to our incurring significant accountingunusual charges.
For example, in connection with our acquisitions of DII, Palo Alto Products
International, Chatham, Lightning and JIT, we recorded merger related charges
and related facility closure costs of approximately $258.7

10
experiencing volatility11
million, net of tax, and in connection with the issuance of an equity instrument
to Motorola relating to our strategic alliance, we recorded a one-time non-cash
charge of approximately $286.5 million.

WE DEPEND ON THE TELECOMMUNICATIONS, NETWORKING, ELECTRONICS AND COMPUTER
INDUSTRIES WHICH CONTINUALLY PRODUCE TECHNOLOGICALLY ADVANCED PRODUCTS WITH
SHORT LIFE CYCLES; OUR INABILITY TO CONTINUALLY MANUFACTURE SUCH PRODUCTS ON A
COST-EFFECTIVE BASIS WOULD HARM OUR BUSINESS.

We depend on sales to customers in the telecommunications, networking,
electronics and computer industries. Factors affecting these industries in
general could seriously harm our customers and, as a result, us. These factors
include:

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

- the inability of our customers to develop and market their
products, some of which are new and untested, the potential that
our customers' products may become obsolete or the failure of our
customers' products to gain widespread commercial acceptance; and

- recessionary periods in our operating results. Wecustomers' markets.

If any of these factors materialize, our business would suffer.
Currently, many sectors of the telecommunications, networking, electronics and
computer industries are experiencing a significant decrease in demand for their
products and services, which has led to reduced demand for the services provided
by EMS companies. These changes in demand and generally uncertain economic
conditions have resulted, and may continue to result, in some customers
deferring delivery schedules for some of the products that we manufacture for
them, which could affect our results of operations. Further, a protracted
downturn in these industries could have a significant negative impact on our
business, financial condition and results of operation.

OUR CUSTOMERS MAY CANCEL THEIR ORDERS, CHANGE PRODUCTION QUANTITIES OR DELAY
PRODUCTION.

EMS providers must provide increasingly rapid product turnaround for
their customers. We generally do not obtain firm, long-term purchase commitments
from our customers and we continue to experience volatilityreduced lead-times in customer
orders. Customers may cancel their orders, change production quantities or delay
production for a number of reasons. The generally uncertain economic condition
of several of the industries of our customers has resulted, and may continue to
result, in some of our customers delaying the delivery of some of the products
we manufacture for them. Cancellations, reductions or delays by a significant
customer or by a group of customers would seriously harm our results of
operations.

In addition, we make significant decisions, including determining the
levels of business that we will seek and accept, production schedules, component
procurement commitments, personnel needs and other resource requirements, based
on our estimates of customer requirements. The short-term nature of our
customers' commitments and the possibility of rapid changes in demand for their
products reduce our ability to estimate accurately future customer requirements.
This makes it difficult to schedule production and maximize utilization of our
manufacturing capacity. We often increase staffing, purchase materials and incur
other expenses to meet the anticipated demand of our customers. Anticipated
orders may not materialize, and delivery schedules may be deferred as a result
of changes in demand for our customers' products. On occasion, customers may
require rapid increases in production, which can stress our resources and reduce
margins. Although we have increased our manufacturing capacity, and plan further
increases, we may not have sufficient capacity at any given time to meet our
customers' demands. In addition, because many of our costs and operating
expenses are relatively fixed, a reduction in customer demand could harm our
gross profit and operating income.

OUR OPERATING RESULTS VARY SIGNIFICANTLY.

We experience significant fluctuations in our results of operations.
The factors that contribute to fluctuations include:

- the timing of customer orders;

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12
- the volume of these orders relative to our capacity;

- market acceptance of customers' new products;

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

- our ability to manage the timing and amount of our procurement of
components to avoid delays in production and excess inventory
levels;

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

- our effectiveness in managing manufacturing processes and costs;

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

- changes in our product mix;

- changes in economic conditions;

- local factors and events that may affect our production volume,
such as local holidays; and

- seasonality in customers' product requirements.

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

We are reconfiguring certain of our operations to further increase our
concentration in low-cost locations. This shift of operations resulted in a
restructuring charge of $275.6 million, net of tax, in the fourth quarter of
fiscal 2001, and may result in additional restructuring charges in fiscal 2002.
In addition, some of our customers are currently experiencing increased
volatility in demand, and in some cases reduced demand, for their products. This
increases the difficulty of anticipating the levels and timing of future
expansion efforts.

Risksrevenues from these customers, and could lead them to defer delivery schedules
for products, which could lead to a reduction or delay in such revenues. Any of
Acquisitions

Acquisitions have representedthese factors or a combination of these factors could seriously harm our
business and result in fluctuations in our results of operations.

WE MAY ENCOUNTER DIFFICULTIES WITH ACQUISITIONS, WHICH COULD HARM OUR BUSINESS.

In the past year, we completed a significant portionnumber of the Company's growth
strategy,acquisitions of
businesses and the Company intendsfacilities, including our acquisitions of DII, Palo Alto Products
International, Chatham, Lightning and JIT. We expect to continue to pursue attractive acquisitions
opportunities. Our acquisitions during the last two fiscal years represented a
significant expansion of our operations. Acquisitions involve a number of risksacquire
additional businesses and challenges, including:

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

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

o lack of experience operatingfacilities in the geographic marketfuture and are currently in
preliminary discussions to acquire additional businesses and facilities. Any
future acquisitions may require additional debt or equity financing, which could
increase our leverage or be dilutive to our existing shareholders. We cannot
assure the terms of, or that we will complete, any acquisitions in the acquired
business; and

o an increase in our expenses and working capital requirements.future.

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

In addition, acquisitions involve a number of other risks and
challenges, including, but not limited to:

- diversion of management's attention;

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

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

12
13
- an increase in our expenses and working capital requirements.

Any of these and other factors could adversely affectharm our ability to achieve
anticipated levels of profitability at acquired operations or realize other
anticipated benefits of an acquisition.

Furthermore, any future
acquisitions may require additional debt or equity financing, which could
increase our leverage or be dilutiveOUR STRATEGIC RELATIONSHIPS WITH ERICSSON AND OTHER MAJOR CUSTOMERS CREATE
RISKS.

In April 2001, we entered into a definitive agreement with Ericsson with
respect to our existing shareholders. No assurance
can be given that we will consummatemanagement of its mobile telephone operations. Our ability to
achieve any acquisitions inof the future.

Variabilityanticipated benefits of Customer Requirements and Operating Results

Electronics manufacturing service providers must provide increasingly rapid
product turnaround for their customers. We generally do not obtain firm,
long-term purchase commitments from our customers, and over the past few years
we have experienced reduced lead-times in customer orders. Customers may cancel
their orders, change production quantities or delay production forthis new relationship with Ericsson
is subject to a number of reasons. Cancellations, reductions or delaysrisks, including our ability to meet Ericsson's
volume, product quality, timeliness and price requirements, and to achieve
anticipated cost reductions. If demand for Ericsson's mobile phone products
declines, Ericsson may purchase a lower quantity of products from us than we
anticipate. If Ericsson's requirements exceed the volume anticipated by us, we
may not be able to meet these requirements on a significant customer or by a
group of customers would adversely affecttimely basis. Our inability to
meet Ericsson's volume, quality, timeliness and cost requirements, and to
quickly resolve any issues with Ericsson, could seriously harm our results of
operations. In additionAs a result of these and other risks, we may be unable to achieve
anticipated levels of profitability under this arrangement, and it may not
result in any material revenues or contribute positively to our net income per
share. Due to our relationship with Ericsson, other OEMs may not wish to obtain
logistics or operations management services from us.

We have entered into strategic relationships with other customers, have
recently announced our plans to enter into a strategic relationship with
Alcatel, and plan to continue to pursue such relationships. These relationships
generally involve many, or all, of the variable nature of our operating results due to the short-term nature of
our customers' commitments, other factors may contribute to significant
fluctuationsrisks involved in our results of operations. These factors include:

o the timing of customer orders;

o the volume of these orders relativenew relationship
with Ericsson. Similar to our capacity;

o market acceptance of customers' new products;

o changes in demand for customers' productsother customer relationships, there are no volume
purchase commitments under these relationships, and product obsolescence;

o the timing ofrevenues we actually
achieve may not meet our expenditures inexpectations. In anticipation of future orders;

o our effectiveness in managing manufacturing processes;

o changes in the costactivities
under these strategic relationships, we are incurring substantial expenses as we
add personnel and availability of labor and components;

o changes in our product mix;

o changes in economic conditions;

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

o seasonality in customers' product requirements.

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

We make significant decisions, including the levels of business that we
will seek and accept, production schedules, component procurement commitments,
personnel needs and other resource requirements, based on our estimates of
customer requirements. The short-term nature of our customers' commitments and
the possibility of rapid changes in demand for their products reduces our
ability to estimate accurately future customer requirements. On occasion,
customers may require rapid increases in production, which can stress our
resources and reduce margins. Although we have increased our manufacturing capacity and plan further increases, there canprocure materials. Our operating
results will be no assuranceseriously harmed if sales do not develop to the extent and
within the time frame we will have
sufficient capacity at any given time to meetanticipate.

WE DEPEND ON THE CONTINUING TREND OF OUTSOURCING BY OEMs.

A substantial factor in our customers' demands. In
addition, because manyrevenue growth is the transfer of manufacturing
and supply base management activities from our costsOEM customers. Future growth
partially depends on new outsourcing opportunities. To the extent that these
opportunities are not available, our future growth would be unfavorably
impacted. These outsourcing opportunities may include the transfer of assets
such as facilities, equipment and operating expenses are relatively fixed,
a reduction in customer demand can adversely affect our gross margins and
operating income.

Customer Concentration; Dependence on Electronics Industry

Our five largest customers accounted for approximately 62% of consolidated
net sales in fiscal 1999 and 57% in fiscal 1998. Our largest customers during
fiscal 1999 were Philips, Ericsson and Cisco accounting for approximately 18%,
16% and 13% of consolidated net sales, respectively.inventory.

THE MAJORITY OF OUR SALES COMES FROM A SMALL NUMBER OF CUSTOMERS; IF WE LOSE ANY
OF THESE CUSTOMERS, OUR SALES COULD DECLINE SIGNIFICANTLY.

Sales to our fiveten largest customers hadhave represented a majoritysignificant
percentage of our net sales in recent periods. Our ten largest customers in
fiscal 2001 and 2000 accounted for approximately 59% and 57% of net sales in
fiscal 2001 and fiscal 2000, respectively. No customer accounted for more than
10% of net sales in fiscal 2001. Our largest customer during fiscal 2000 was
Ericsson, who accounted for approximately 12% of net sales. No other customer
accounted for more than 10% of net sales in fiscal 2000. We anticipate that our
strategic relationship with Ericsson will substantially increase the percentage
of our sales attributable to Ericsson.

The identity of our principal customers hashave varied from year to year, and
our principal customers may not continue to purchase services from us at current
levels, if at all. Significant reductions in sales to any of these customers, or
the loss of major customers, would have a material and adverse effect on us. We
canseriously harm our business. If we are not
assure theable to timely replacement ofreplace expired, canceled or reduced contracts with new business. See "--Variability of Customer Requirements and Operating
Results."

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

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

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

recessionary periods in our customers' markets.

Risk of Increased Taxes

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

Significant Leverage

Our level of indebtedness presents risks to investors, including:

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

o making us more vulnerable to economic downturns;

o limiting our ability to pursue new business opportunities; and

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

Risks of Competitionharmed.

OUR INDUSTRY IS EXTREMELY COMPETITIVE.

The electronics manufacturing servicesEMS industry is extremely competitive and includes hundreds of
companies, several of which have achieved substantial market share. Current and
prospective customers also evaluate our capabilities against the merits of
internal production. CertainSome of our competitors including
Solectron and SCI Systems, have substantially greater market
shares than us,share and
substantially greater manufacturing, financial research and development and marketing resources.resources than us.

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In recent years, many participants in the industry, including us, have
substantially expanded their manufacturing capacity. If overall demand for
electronics manufacturing services 13
should decrease, this increased capacity
could result in substantial pricing pressures, which could adversely affectseriously harm our
operating results.

RisksWE MAY BE ADVERSELY AFFECTED BY SHORTAGES OF REQUIRED ELECTRONIC COMPONENTS.

At various times, there have been shortages of International Operationssome of the electronic
components that we use, and suppliers of some components have lacked sufficient
capacity to meet the demand for these components. In some cases, supply
shortages and delays in deliveries of particular components have resulted in
curtailed production, or delays in production, of assemblies using that
component, which has contributed to an increase in our inventory levels. If we
are unable to obtain sufficient components on a timely basis, we may experience
manufacturing and shipping delays, which could harm our relationships with
current or prospective customers and reduce our sales.

OUR CUSTOMERS MAY BE ADVERSELY AFFECTED BY RAPID TECHNOLOGICAL CHANGE.

Our customers compete in markets that are characterized by rapidly
changing technology, evolving industry standards and continuous improvement in
products and services. These conditions frequently result in short product life
cycles. Our success will depend largely on the success achieved by our customers
in developing and marketing their products. If technologies or standards
supported by our customers' products become obsolete or fail to gain widespread
commercial acceptance, our business could be adversely affected.

WE ARE SUBJECT TO THE RISK OF INCREASED INCOME TAXES.

We have structured our operations in a manner designed to maximize
income in countries where:

- tax incentives have been extended to encourage foreign investment;
or

- income tax rates are low.

We base our tax position upon the anticipated nature and conduct of our
business and upon our understanding of the tax laws of the various countries in
which we have assets or conduct activities. However, our tax position is subject
to review and possible challenge by taxing authorities and to possible changes
in law which may have retroactive effect. We cannot determine in advance the
extent to which some jurisdictions may require us to pay taxes or make payments
in lieu of taxes.

Several countries in which we are located allow for tax holidays or
provide other tax incentives to attract and retain business. We have obtained
holidays or other incentives where available. Our taxes could increase if
certain tax holidays or incentives are not renewed upon expiration, or tax rates
applicable to us in such jurisdictions are otherwise increased. In addition,
further acquisitions of businesses may cause our effective tax rate to increase.

WE CONDUCT OPERATIONS IN A NUMBER OF COUNTRIES AND ARE SUBJECT TO RISKS OF
INTERNATIONAL OPERATIONS.

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

o- fluctuations in the value of currencies;

o- changes in labor conditions;

o- longer payment cycles;

o- greater difficulty in collecting accounts receivable;

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

o14
15
- political and economic instability;

o- increases in duties and taxation;

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

o- limitations on imports or exports;

o- expropriation of private enterprises; and

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

The attractiveness of our services to our U.S. customers can be
affected by changes in U.S. trade policies, such as "most favored nation" status
and trade preferences for certainsome Asian nations. For example, trade preferences extended
by the United States to Malaysia in recent years were not renewed in 1997. In addition, some countries in
which we operate, such as Brazil, the Czech Republic, Hungary, Mexico, Malaysia
and Malaysia,Poland, have experienced periods of slow or negative growth, high inflation,
significant currency devaluations andor limited availability of foreign exchange.
Furthermore, in countries such as MexicoChina and China,Mexico, governmental authorities
exercise significant influence over many aspects of the economy, and their
actions could have a significant effect on Flextronics.us. Finally, we could be adversely affectedseriously
harmed by inadequate infrastructure, including lack of adequate power and water
supplies, transportation, raw materials and parts in countries in which we
operate.

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

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

Risks relating to Mexico. The Mexican government exercises significant
influence over many aspects of the Mexican economy and its action could have a
significant effect on private sector entities in general and the Company in
particular. In addition, during the 1980s, Mexico experienced periods of slow or
negative growth, high inflation, significant devaluation of the peso and limited
availability of foreign exchange.

Risks Relating to Hungary. Hungary has undergone significant political and
economic change in recent years. Political, economic, social and other
developments, and changes in laws could have a material and adverse effect on
our business. Annual inflation and interest rates in Hungary have historically
been much higher than those in Western Europe. Exchange rate policies have not
always allowed for the free conversion of currencies at the market rate. Laws
and regulations in Hungary have been, and continue to be, substantially revised
during its transition to a market economy. As a result, laws and regulations may
be applied inconsistently. Also in some circumstances, it may not be possible to
obtain the legal remedies provided for under those laws and regulations in a
reasonably timely manner, if at all.

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

Risks of Currency Fluctuations and Hedging Operations

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

Dependence of Key PersonnelWE DEPEND ON OUR KEY PERSONNEL.

Our success depends to a largerlarge extent upon the continued services of
our key executives, managers and skilled personnel. Generally our employees are
not bound by 15
employment or non-competition agreements, and there can be no assurancewe cannot assure that
we will retain our key officers and key employees. We could be materially and adversely
affectedseriously harmed by
the loss of suchkey personnel. Limited Availability of Components

A substantial majority ofIn addition, in order to manage our net sales are derived from turnkey
manufacturing in whichgrowth, we will
need to recruit and retain additional skilled management personnel and if we are
responsible for procuring materials, which
typically results innot able to do so, our bearing the risk of component price increases. At
various times, there have been shortages of certain electronic components.
Component shortagesbusiness and our ability to continue to grow could result in manufacturing and shipping delays or higher
prices, which could have a material adverse effect on us.

Environmental Compliance Risksbe
harmed.

WE ARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS.

We are subject to a variety ofvarious federal, state, local and foreign
environmental laws and regulations, relating toincluding those governing the use, storage,
discharge and disposal of hazardous chemicals. Althoughsubstances in the ordinary course of our
manufacturing process. In addition, we believe
thatare responsible for cleanup of
contamination at some of our current and former manufacturing facilities are currently in materialand at
some third party sites. If more stringent compliance with applicableor cleanup standards under
environmental laws there canor regulations are imposed, or the results of future testing
and analyses at our current or former operating facilities indicate that we are
responsible for the release of hazardous substances, we may be subject to
additional remediation liability. Further, additional environmental matters may
arise in the future at sites where no assurancesproblem is currently known or at sites
that violations will not occur.
Thewe may acquire in the future. Currently unexpected costs and penalties that couldwe may incur
with respect to environmental matters may result from a violationin additional loss
contingencies, the quantification of environmental laws
could materially and adversely affect us.

Volatility of Market Price of Ordinary Shareswhich cannot be determined at this time.

THE MARKET PRICE OF OUR ORDINARY SHARES IS VOLATILE.

The stock market in recent years havehas experienced significant price and
volume fluctuations that have affected the market prices of technology
companies. SuchThese fluctuations have often been unrelated to or disproportionately
impacted by the operating performance of suchthese companies. The market for the
Ordinary Sharesour
ordinary shares may be subject to similar fluctuations. Factors such as
fluctuations in our operating results, announcements of technological
innovations or events affecting other companies in the electronics industry,
currency fluctuations and general market conditions may have a significant
effect on the market price of the Ordinary Shares.

Itemour ordinary shares.

ITEM 2. FACILITIESPROPERTIES

Our facilities consist of a global network of industrial parks,
regional manufacturing and technology centers, and design/engineering and
product introduction centers, providing a totalover 16.0 million square feet of
overcapacity

15
16
as of March 31, 2001. We own facilities with approximately 1.1 million square
feet in the Americas, 2.5 million square feet in Asia and 4.8 million square
feet of capacity in Europe. We lease facilities with approximately 2.9 million
square feet in the Americas, 1.5 million square feet in Asia and 3.5 million
square feet of capacity.capacity in Europe.

Over the past several years, we have actively increased our overall
capacity through internal growth, acquisitions and purchases of manufacturing
facilities. We plan to further expand our facilities in low cost locations,
adding new equipment and further developing our industrial parks. We cannot
assure that we will not encounter unforeseen difficulties, costs or delays in
expanding our facilities or that our expanded facilities will not prove to be in
excess of our requirements.

In connection with the consummated mergers and restructuring activities
in fiscal 2001, we developed formal plans to exit certain activities.
Management's plan to exit an activity included the identification of duplicate
manufacturing and administrative facilities for closure and the identification
of manufacturing and administrative facilities for consolidation into other
facilities. As a result of these integration activities, we identified
approximately 3.2 million of owned and leased square feet of capacity for
closure in the Americas. Approximately 700,000 of owned and leased square feet
of capacity in Asia was identified for closure. In Europe, we identified
approximately 800,000 of owned and leased square feet of capacity for closure.
See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Unusual Charges."

Our industrial parks, each incorporating from approximately 300,000400,000 to
1.2 million square feet of facilities, are designed for fully integrated, high
volume manufacturing. These industrial parks offerself-contained facilities that
co-locate our manufacturing and distribution operations with our suppliers in
low-cost regions near our customers' end markets. Our industrial parks provide a
total supply chain management. This approach to production and suppliers that are located together at one sitedistribution
benefits our customers by reducing logistical barriers and costs, improving
communications, increasing flexibility, lowering transportation costs and
reducing turnaround times. We have strategically established large industrial
parks in low cost areas close to major electronics markets. ManufacturingChina, Hungary, Mexico, Brazil and Poland.

Our regional manufacturing and technology centers are facilities that
have both medium and high volume manufacturing and product introduction centers
and, as a result, are where we focus on launching customers' new products and
transitioning them to volume production. Each center features advanced
technological competency. RegionalThese regional manufacturing facilities range from
approximately 50,00070,000 to 165,000500,000 square feet and provide medium and
high volume production in locations
close to strategic markets. ProductWe have established regional manufacturing and
technology centers in Austria, Brazil, China, Denmark, England, Finland, France,
Germany, Hungary, India, Indonesia, Ireland, Israel, Italy, Malaysia, Mexico,
Norway, Scotland, Sweden, Switzerland and in various states throughout the
United States.

Our design/engineering and product introduction centers provide a broad
range of advanced engineering services and prototype and low volume production
capabilities. The locations of our product introduction centers include Austria,
China, Finland, Germany, Italy, Sweden, Switzerland and the United States.

Our facilities are generally well maintained and suitable for the
operations conducted and, in substantially all cases where owned, free and clear
of any encumbrances. The productive capacity of our plants is generally adequate
for current needs. All of our manufacturing facilities are registered to the
quality requirements of the International Organization for Standardization (ISO
9002) or are in the process of final certification.

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

YEAR TYPE OF APPROXIMATE OWNED/
LOCATION COMMENCED(1) FACILITY(2) SQUARE FEET LEASED(3) SERVICES
-------- ------------ ----------- ----------- --------- --------

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

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

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

(2) "I" designates Industrial parks.

"M" designates Manufacturing and technology centers.

"R" designates Regional manufacturing facilities.

"P" designates Product introduction centers.

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

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

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

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

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

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

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

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

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

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

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

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

The campus facilities in China, Hungary, and Mexico are designed to be
integrated facilities that can produce certain components used by the Company,
manufacture complete products for customers, warehouse the products and
distribute them directly to customer's distribution channels. The Company
believes that by offering all of those capabilities at the same site, it can
reduce material and transportation costs, simplify logistics and communications,
and improve inventory management. This enables Flextronics to provide customers
with a more complete, cost-effective manufacturing solution.

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

ItemITEM 3. LEGAL PROCEEDINGS

Not applicable.

ItemNone.

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

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

19
None.

PART II

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

PRICE RANGE OF ORDINARY SHARES

The Company's Ordinary Shares16
17

Our ordinary shares are tradedquoted on the Nasdaq National Market under the
symbol "FLEX". The following table showssets forth the high and low closing
saleper share sales
prices of the Company's Ordinary Sharesfor our ordinary shares since the beginning of fiscal 2000 as reported on
the Company's 1998 fiscal year (givingNasdaq National Market.

HIGH LOW
------ ------

FISCAL YEAR ENDED MARCH 31, 2000
First Quarter................................................. $14.59 $ 9.34
Second Quarter................................................ 17.03 10.63
Third Quarter................................................. 24.69 14.28
Fourth Quarter................................................ 39.88 19.16
FISCAL YEAR ENDED MARCH 31, 2001
First Quarter................................................. $38.06 $22.38
Second Quarter................................................ 44.91 32.38
Third Quarter................................................. 43.00 21.38
Fourth Quarter................................................ 40.13 14.25

All share prices have been adjusted to give effect to our December 1999the two-for-one
stock split).

HIGH LOW
------ -------
Fiscal 1998
First Quarter.................................... $13 1/2 $ 8 3/4
Second Quarter................................... $23 13/splits effected as bonus issues (the Singapore equivalent of a stock
dividend), distributed to our shareholders on January 11, 1999, December 22,
1999 and October 16, $13 3/16
Third Quarter.................................... $24 1/16 $16 1/4
Fourth Quarter................................... $23 15/16 $14 7/8
Fiscal 1999
First Quarter.................................... $25 9/16 $18 3/16
Second Quarter................................... $23 1/2 $11 5/16
Third Quarter.................................... $42 13/16 $14 9/16
Fourth Quarter................................... $51 $33 1/8

On2000.

As of June 15, 1999,2001, there was 48,122,058were 3,703 holders of record of our ordinary
shares and the closing sale price of the Ordinary Sharesordinary shares as reported on the
Nasdaq National Market was $56.875$21.76 per share.

DIVIDENDS

Since inception, the Company haswe have not declared or paid any cash dividends on its Ordinary Shares,our
ordinary shares (exclusive of dividends paid by pooled entities prior to
acquisition), and the Credit Facilityour bank credit facility prohibits the payment of cash
dividends without the lenders' prior consent. The terms of the Company'sour outstanding
senior subordinated notes also restrict the Company'sour ability to pay cash dividends. See
"ItemItem 7, - Management's"Management's Discussion and Analysis of Financial Condition and Results
of Operations -- LiquidityOperations--Liquidity and Capital Resources" and "Description of
the Credit Facility.Resources." The Company anticipatesWe anticipate that all earnings
in the foreseeable future will be retained to finance the continuing development
of our business.

TAXATION

This summary of Singapore and U.S. tax considerations is based on current
law and is provided for general information. The discussion does not purport to
deal with all aspects of taxation that may be relevant to particular
shareholders in light of their investment or tax circumstances, or to certain
types of shareholders (including insurance companies, tax-exempt organizations,
regulated investment companies, financial institutions or broker-dealers, and
shareholders that are not U.S. shareholders subject to special treatment under
the U.S. federal income tax laws. Such shareholders should consult their own tax
advisors regarding the particular tax consequences to such shareholders of any
investment in our ordinary shares.

INCOME TAXATION UNDER SINGAPORE LAW

Under current provisions of the Income Tax Act, Chapter 134 of Singapore,
corporate profits are taxed at a rate equal to 24.5%. Under Singapore's taxation
system, the tax paid by a company is deemed paid by its business.

20shareholders. Thus, the
shareholders receive dividends net of the tax paid by Flextronics. Dividends
received by either a resident or a nonresident of Singapore are not subject to
withholding tax. Shareholders are taxed on the gross amount of dividends
(meaning the cash amount of the dividend plus the amount of corporate tax paid
by Flextronics). The tax paid by Flextronics will be available to shareholders
as a tax credit to offset the Singapore income tax liability on their overall
income (including the gross amount of dividends). No tax treaty currently exists
between the Republic of Singapore and the U.S.

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

17
Item18
There is no stamp duty payable in respect of the holding and disposition of
shares. No duty is payable on the acquisition of new shares. Where existing
shares are acquired in Singapore, stamp duty is payable on the instrument of
transfer of the shares at the rate of S$2 for every S$1,000 of the market value
of the shares. The stamp duty is borne by the purchaser unless there is an
agreement to the contrary. Where the instrument of transfer is executed outside
of Singapore, stamp duty must be paid if the instrument of transfer is received
in Singapore. Under Article 22 (iii) of our Articles of Association, our
directors are authorized to refuse to register a transfer unless the instrument
of transfer has been duly stamped.

INCOME TAXATION UNDER UNITED STATES LAW

Individual shareholders that are U.S. citizens or resident aliens (as
defined in Section 7701(b) of the Internal Revenue Code of 1986), corporations
or partnerships or other entities created or organized under the laws of the
United States, or any political subdivision thereof, an estate the income of
which is subject to U.S. federal income taxation regardless of its source or a
trust which is subject to the supervision of a court within the United States
and the control of section 7701(b)(30) of the Internal Revenue Code will, upon
the sale or exchange of a share, recognize gain or loss for U.S. income tax
purposes in an amount equal to the difference between the amount realized and
the U.S. shareholder's tax basis in such a share. If paid in currency other than
U.S. dollars, certain currency translation rules will apply to determine the
U.S. dollar amount realized. Such gain or loss will be capital gain or loss if
the share was a capital asset in the hands of the U.S. shareholder and will be
short-term capital gain or loss if the share has been held for not more than one
year, mid-term capital gain or loss if the share has been held for more than one
year but not more than eighteen months and, long-term capital gain or loss if
the share has been held for more than eighteen months. If a U.S. shareholder
receives any currency other than U.S. dollars on the sale of a share, such U.S.
shareholder may recognize ordinary income or loss as a result of currency
fluctuations between the date of such sale and the date such sale proceeds are
converted into U.S. dollars.

U.S. shareholders will be required to report as income for U.S. income tax
purposes the amount of any dividend received from us to the extent paid out of
our current or accumulated earnings and profits, as determined under current
U.S. income tax principles. If over 50% of our stock (by vote or value) were
owned by U.S. shareholders who individually held 10% or more of our voting
stock, such U.S. shareholders potentially would be required to include in income
a portion or all of their pro rata share of our and our non-U.S. subsidiaries'
earnings and profits. Certain attribution rules apply in this regard. If 50% or
more of our assets during a taxable year produced or were held for the
production of passive income, as defined in section 1297(b) of the Code (e.g.,
certain forms of dividends, interest and royalties), or 75% or more of our gross
income for a taxable year was passive income, adverse U.S. tax consequences
could result to U.S. shareholders. As of March 31, 2001, we were not aware of
any U.S. shareholder who individually held 10% or more of our voting stock.

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

ESTATE TAXATION

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

18
19
ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data forhave been prepared to give
retroactive effect to the pooling of interests mergers completed by us in fiscal
years
ended March 31, 1995, 1996, 1997, 19982001. In fiscal 2001, we acquired DII in April 2000, Palo Alto Products
International in April 2000, Lightning in August 2000, Chatham in August 2000
and 1999.JIT in November 2000.

These historical results are not necessarily indicative of the results to
be expected in the future. The following table is qualified by reference to and
should be read in conjunction with the consolidated financial statements,
related notes thereto and other financial data included elsewhere herein.

FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS, except per share amounts)
--------------------------------------------------------------------------------
1995 1996----------------------------------------------------------------------
1997 1998 1999 2000 2001
---------- ---------- ----------- ----------- ----------- ----------- --------------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales ......................................................................... $1,498,332 $2,577,926 $ 292,1493,952,786 $6,959,122 $ 572,045 $ 640,007 $ 1,113,071 $ 1,807,62812,109,699
Cost of sales ............................... 265,426 517,732 575,142 1,004,170 1,652,891.................................. 1,289,567 2,246,135 3,512,229 6,335,242 11,127,896
Unusual charges(1) ............................. 16,443 8,869 77,286 7,519 510,495
---------- ---------- ----------- ----------- ----------- ----------- --------------------- ------------
Gross marginprofit ................................ 26,723 54,313 64,865 108,901 154,737192,322 322,922 363,271 616,361 471,308
Selling, general and administrative ......... 15,771 28,138 36,277 53,695 68,121............ 113,308 169,586 240,512 319,952 430,109
Goodwill and intangibleintangibles amortization ........ 762 1,296 2,648 3,659 3,622
Provision for excess facilities ............. -- 1,254(1) 5,868(2) 8,869(3) 3,361(4)
Acquired in-process research.......... 5,979 10,487 29,156 41,326 63,541
Unusual charges(1) ............................. 4,649 12,499 2,000 3,523 462,847
Interest and development 91 29,000(1) -- -- 2,000(4)
----------- ----------- ----------- ----------- -----------
Income (loss) from operations ............... 10,099 (5,375) 20,072 42,678 77,633
Merger-related expenses ..................... (816) -- -- (7,415)(3) --
Otherother expense, net .......................... (1,814) (4,924) (6,425) (13,092) (18,333)................ 8,398 21,480 52,234 69,912 67,115
---------- ---------- ----------- ----------- ----------- ----------- -----------
Income (loss)---------- ------------
Income(loss) before income taxes ........... 7,469 (10,299) 13,647 22,171 59,300............ 59,988 108,870 39,369 181,648 (552,304)
Provision for (benefit from) income taxes .................. 1,588 3,847 2,027 2,258 7,770...... 16,415 22,378 (11,634) 23,080 (106,285)
---------- ---------- ----------- ----------- ----------- ----------- --------------------- ------------
Net income (loss) ........................... $ 5,88143,573 $ (14,146)86,492 $ 11,62051,003 $ 19,913158,568 $ 51,530(446,019)
========== ========== =========== =========== =========== =========== ===================== ============
Diluted net incomeearnings (loss) per share(2) ........... $ 0.18 $ 0.30 $ 0.17 $ 0.42 $ (1.01)
========== ========== =========== ========== ============
Shares used in computing diluted per
share ......... $ 0.20 $ (0.46) $ 0.34 $ 0.52 $ 1.12
=========== =========== =========== =========== ===========
Weighted average Ordinary Shares and
equivalents outstanding -- diluted ........ 29,764 30,872 34,656 38,194 46,163amounts(2) ............................. 238,770 297,307 329,352 383,119 441,991

FISCAL YEAR ENDEDAS OF MARCH 31,
(IN THOUSANDS)
--------------------------------------------------------------------------------
1995 1996----------------------------------------------------------------
1997 1998 1999 ----------- ----------- ----------- ----------- -----------2000 2001
-------- ---------- ---------- ---------- ----------

Balance Sheet Data:
Total current assets ........................(IN THOUSANDS)
CONSOLIDATED BALANCE SHEETS DATA:
Working capital ................................ $ 128,68187,855 $ 182,296372,870 $ 254,396 $ 439,534 $ 654,032
Property and equipment, net ................. $ 47,258 $ 91,792 $ 149,015 $ 255,573 $ 367,507
Goodwill and other non-current assets ....... $ 9,247 $ 35,179 $ 42,881 $ 49,016 $ 72,840384,084 $1,161,535 $1,914,741
Total assets ................................ $ 185,186 $ 309,267 $ 446,292 $ 744,123 $ 1,094,379................................... 937,865 1,862,088 2,783,707 5,134,943 7,571,655
Total current liabilities ................... $ 91,945 $ 156,769 $ 284,641 $ 314,998 $ 412,887
Long-termlong-term debt, and capital leases, excluding current
portion ........................... $ 18,278 $ 31,894 $ 29,128 $ 189,678 $ 197,179
Other non-current liabilities ............... $ 6,530 $ 35,033 $ 33,178 $ 24,638 $ 18,062
Total liabilities ........................... $ 116,753 $ 223,696 $ 346,947 $ 529,314 $ 628,128
Total...................................... 139,383 580,441 789,471 645,267 917,313
Shareholders' equity .................. $ 68,433 $ 85,571 $ 99,345 $ 214,809 $ 466,251
Total liabilities and shareholders' equity .. $ 185,186 $ 309,267 $ 446,292 $ 744,123 $ 1,094,379
Working capital ............................. $ 36,737 $ 25,527 $ (30,245) $ 124,536 $ 241,145
Long-term debt and capital leases,
including current portion.................. $ 23,055 $ 75,566 $ 165,916 $ 242,474 $ 261,072

Cash Flows Data:
Depreciation and amortization ............... $ 7,183 $ 13,864 $ 18,140 $ 30,948 $ 50,407
Cash flow from operations ................... $ (5,243) $ 2,418 $ 54,369 $ 38,286 $ 65,379
Capital expenditures ........................ $ 21,848 $ 23,520 $ 37,503 $ 98,617 $ 147,865........................... 331,622 641,667 915,305 2,376,628 4,030,361

21
- ----------

(1) In fiscal 1996, the Company wrote off $29.01997, we incurred approximately $4.6 million of
in-process research
and developmentmerger-related expenses associated with thean acquisition of Astron and also recorded
charges totaling $1.3$16.4
million forin costs associated with the closing and sale of one
of the Company's Malaysian plants and its Shekou, China operations.

(2) In fiscal 1997, the Company incurred plant closing expenses aggregating to
$5.9 million in connection with closing itsseveral
manufacturing facility in
Texas, downsizing manufacturing operations in Singapore, the write-off of
excess equipment and severance obligations at the nCHIP semiconductor
fabrication operations.

(3)facilities.

In fiscal 1998, the Companywe incurred plant closingapproximately $12.5 million of
merger-related expenses aggregating toand approximately $8.9 million in connectioncosts
associated with closing itsthe closure of a manufacturing facility in
Wales, UK. The Company also incurred $7.4 million of merger-related costs
as a result of the acquisitions of Neutronics, DTM, Energipilot, Altatron
and Conexao in fiscal 1998.

(4)operation.

In fiscal 1999, we incurred approximately $77.3 million of expenses
primarily associated with the Company incurred plant closing expenses aggregating to
$3.4 million in connection with consolidating its manufacturing facilities
in Hong Kong after the acquisitionclosure of ACLa semiconductor wafer
fabrication facility and restructuring some of its
U.S. manufacturing facilities. The Company also wrote offwrote-off approximately $2.0 million of
in-process research and development associated with an acquisition.

In fiscal 2000, we incurred approximately $3.5 million of
merger-related expenses and $7.5 million in costs primarily associated
with the acquisitionclosure of ACL.

22several manufacturing facilities.

In fiscal 2001, we recognized unusual pre-tax charges of $973.3
million. Of this amount, $286.5 million related to the issuance of an
equity instrument to Motorola. The remaining $686.8 million includes
merger-related expenses of approximately $102.4 million and
approximately $584.4 million of costs associated with the closing of
several manufacturing facilities.

(2) We completed a stock split during each of fiscal 1999, 2000 and 2001.
Each of the stock splits was effected as bonus issues (the Singapore
equivalent of a stock dividend). The stock dividend has been reflected
in our financial statements for all periods presented unless otherwise
noted. All share and per share amounts have been retroactively restated
to reflect the stock splits.

19
Item20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEWThis report on Form 10-K contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. The words "expects,"
"anticipates," "believes," "intends," "plans" and similar expressions identify
forward-looking statements. In recent years,addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. We undertake no obligation to
publicly disclose any revisions to these forward-looking statements to reflect
events or circumstances occurring subsequent to filing this Form 10-K with the
Company has substantially expanded itsSecurities and Exchange Commission. These forward-looking statements are subject
to risks and uncertainties, including, without limitation, those discussed in
this section. Accordingly, our future results could differ materially from
historical results or from those discussed or implied by these forward-looking
statements.

ACQUISITIONS

We have actively pursued mergers and other business acquisitions to expand
our global reach, manufacturing capacity technological capabilities and service offerings through both
acquisitions and internal growth. See "Item 1 - Business - Risk Factors -- Risks
of Expansion of Operations," "Item 1 - Business - Risk Factors -- Risks of
Acquisitions"to diversify
and Note 11 of Notes to Consolidated Financial Statements.

In June 1999, Flextronics entered into an agreement to acquire Kyrel EMS
Oyj, a provider ofstrengthen customer relationships. The significant business combinations
completed in fiscal 2001, include the following:

DATE ACQUIRED COMPANY NATURE OF BUSINESS CONSIDERATION
- ---- ---------------- ------------------ -------------

November 2000 JIT Holdings Ltd. Provides electronics 17,323,531 ordinary shares
manufacturing
and design services
August 2000 Chatham Technologies, Inc. Provides industrial and 15,234,244 ordinary shares
electronics
manufacturing and design
services
August 2000 Lightning Metal Provides injection molding, 2,573,072 ordinary shares
Specialties metal
and related entities stamping and integration
services
April 2000 Palo Alto Products Provides industrial and 7,236,748 ordinary shares
International Pte. Ltd. electronics
manufacturing and design
services
April 2000 The DII Group, Inc. Provides electronics 125,536,310 ordinary shares
manufacturing
services
with two facilities in
Finland and one in Luneville, France. Kyrel employs approximately 900 people and
its 1998 revenues were $230 million. Flextronics expects to issue approximately
1.9 million shares in the acquisition. Government approval is required in
Finland and the transaction is expected to close in the second quarter

Each of fiscal
2000. The acquisition of Kyrel EMS Oyj will bethese acquisitions was accounted for as a pooling-of-interests.

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

In April 1999, Flextronics entered into an agreement to purchase the
manufacturing facilities and related assets of Ericsson's Visby, Sweden
operations. Ericsson's Visby facility manufactures mobile systems
infrastructure, primarily radio base stations. Under the termscombined
operations of the agreement,
Flextronics will acquire the facility, including equipment and materials. In
connection with the acquisitionmerged companies for all periods presented. Additionally, we
have completed other immaterial pooling of assets, the Company hasinterests transactions in fiscal
2001. Prior period statements have not been restated for these transactions. We
have also entered intomade a manufacturing service agreement with Ericsson. The asset transfer is expected to
close during the second quarternumber of fiscal 2000.

On March 1, 1999, the Company acquired the manufacturing facility and
related assetsbusiness acquisitions of Advanced Component Labs HK Ltd. ("ACL"), a Hong Kong based
advanced technology printed circuit board manufacturer for $15.0 million cash.
The transaction has beenother companies. These
transactions were accounted for under the purchase method. As a result,
the purchase price was allocated to the assets based on their estimated fair
market values at the date of acquisition. As of the date of acquisition, $7.8
million of the purchase price was allocated to goodwill and which is amortized
over 10 years and $2.0 million of the purchase price was allocated to in-process
research and development related to development projects which had not reached
technological feasibility and had no probable alternative future uses;
accordingly, the Company expensed the $2.0 million on the date of acquisition as
a charge to operations. ACL's in-process research and development projects were
initiated to address the rapid technological change associated with the
miniaturized printed circuit board market. The incomplete projects include
developing technology for a low cost Ball Grid Array package, developing thermal
vias, and developing new methods that enable the use of extremely thin 1.5 mil
technology. The Company believes the efforts to complete the acquired in-process
research and development projects will consist of internally staffed engineering
costs over the next fiscal year. These costs are estimated to be approximately
$1.1 million to complete the research and development. There can be no assurance
that the Company will succeed in making commercially viable products from the
ACL research and development projects.

On March 1, 1999, the Company increased its ownership of FICO to 90% by
acquiring an additional 50% of its equity interests for (i)$7.2 million cash,
(ii)127,850 Ordinary Shares issued at closing valued at $4.8 million (iii)$3.0
million in 2% promissory notes due $1.0 million each in year 2000 through year
2002. This transaction has been accounted for underusing the purchase method and, accordingly our
consolidated financial statements include the operating results of each business
from the date of acquisition. Pro forma results of operations have not been
presented because the effects of these acquisitions were not material on either
an individual or an aggregate basis.

OTHER STRATEGIC TRANSACTIONS

On May 30, 2000, we entered into a strategic alliance for FICO have been included in the
accompanying consolidated statementsproduct
manufacturing with Motorola. In connection with this strategic alliance,
Motorola paid $100.0 million for an equity instrument that provided it with
incentives to purchase products and services from us by entitling it to acquire
22,000,000 of operations since March 1, 1999.our ordinary shares at any time by meeting targeted purchase
levels of up to $32.0 billion through December 31, 2005 or by making additional
payments to us. The acquisitionissuance of this additional 50% interestequity instrument on May 30, 2000 resulted
in a one-time non-cash charge equal to the excess of the fair value of the
equity instrument issued over the $100.0 million proceeds received. As a result,
the one-time non-cash charge amounted to approximately $286.5 million offset by
a corresponding credit to additional goodwill and
intangible assets of $8.5 million and $420,000 which were being amortized over 8
and 3 years, respectively.

On March 31, 1998, the Company acquired Conexao, a Brazil-based electronics
manufacturing service provider, in exchange for a total of 843,186 Ordinary
Shares, of which 236,610 Ordinary Shares were to be issued upon resolution of
certain general and specific contingencies. The contingencies were resolved and
the 236,610 Ordinary Shares were issued on March 1999. On March 31, 1998, the
Company also acquired Altatron, an electronics manufacturer service provider
headquartered in Fremont, California, with facilities in Fremont, California;
Richardson, Texas; and Hamilton, Scotland in exchange for 1,577,300 Ordinary
Shares, of which 315,460 Ordinary Shares are to be issued upon resolution of
certain general and specific contingencies. The contingencies were resolved and
the 315,460 Ordinary Shares were issued subsequent to fiscal 1999. The
acquisitions of Conexao and Altatron have been accounted for as a
pooling-of-interests. The Company did not restate its prior period financial
statements with respect to these acquisitions because they did not have a
material impact on its consolidated results of operations. Accordingly, the
balance sheets of Conexao and Altatron as of March 31, 1998 were included in the
Company's consolidated balance sheet as of March 31, 1998 and the results of
operations for Conexao and Altatron are included in the Company's results of
operations beginningpaid-in capital in the first quarter of
fiscal 1999.

On December 1, 19972001. In June 2001, we entered into an agreement with Motorola under
which we repurchased this equity instrument for $112.0 million. No current or
planned manufacturing programs are affected by the Company acquired DTM Products, Inc.,repurchase, and we anticipate
that Motorola will continue to be a Colorado-based producer of injection molded plastics for North American OEMs, in
exchange for 504,938 Ordinary Shares, and acquired Energipilot AB, a Swedish
company principally engaged in providing cables and engineering services for
Northern European OEMs, in exchange for 459,980 Ordinary Shares. The
acquisitions of DTM and Energipilotcustomer following the repurchase, although
our future revenue from Motorola may be less than it would have been accounted for ashad this
instrument remained in effect.

20
21
In April 2001, we entered into a pooling-of-interests. The Company did not restate its prior period financial
statementsdefinitive agreement with Ericsson with
respect to these acquisitions because they did not have a
material impact on its consolidated results. Accordingly,our management of the resultsoperations of operations for DTM and Energipilot beginning in December 1, 1997 are includedEricsson's mobile telephone
operations. Operations under this arrangement commenced in the Company's consolidated statementfirst quarter of
operations.

On October 30, 1997, the Company acquired 92%fiscal 2002. Under this agreement, we are to provide a substantial portion of
the outstanding shares of
Neutronics, an Austrian electronics manufacturing service provider with
operationsEricsson's mobile phone requirements. We will assume responsibility for product
assembly, new product prototyping, supply chain management and logistics
management, in Austria and Hungary for 5,612,000 Ordinary Shares of the Company.
The acquisition was accounted for as a pooling-of-interests and accordingly, the
Company has restated its prior period financial statements to give effect to
this acquisition.

On March 27, 1997, the Company acquired the facilities in Karlskrona,
Swedenwhich we will process customer orders from Ericsson forand configure
and ship products to Ericsson's customers. We expect to provide PCBs and
plastics, primarily from our Asian operations. In connection with this
relationship, we purchased certain equipment, inventory and other assets, and
assumed certain accrued expenses, from Ericsson at their net book value of
approximately $82.4$450.0 million. The acquisition was
financed by borrowings from banks, which the Company repaid in October 1997See Item 1, "Business--Risk Factors--Our strategic
relationship with the net proceeds from the Company's debt and equity offerings. The transaction
has been accounted for under the purchase method. As a result, the purchase
price was allocated to the assets based on their estimated fair market values at
the date of acquisition.

The ability of the Company to obtain the benefits of these acquisitions is
subject to a number of risks and uncertainties, including the Company's ability
to successfully integrate the acquired operations and its ability to maintain,
and increase, sales to customers of the acquired companies. There can be no
assurance that any acquisitions will not materially affect the Company. See
"Item 1 - Business - Risk Factors - Risks of Acquisitions.Ericsson creates risks."

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

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

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

RESULTS OF OPERATIONS

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

FISCAL YEAR ENDED
MARCH 31,
--------------------------
1997 1998 1999
------ ------ ------
Net sales ........................................ 100.0 100.0 100.0
Cost of sales .................................... 89.9 90.2 91.4
------ ------ ------
Gross margin ..................................... 10.1 9.8 8.6
Selling, general and administrative .............. 5.7 4.8 3.8
Goodwill and intangible amortization ............. 0.4 0.3 0.2
Provision for excess facilities .................. 0.9 0.8 0.2
Acquired in-process research and development ..... -- -- 0.1
------ ------ ------
Income from operations ........................... 3.1 3.9 4.3
Merger-related expenses .......................... -- (0.7) --
Interest and other expense, net .................. (1.0) (1.2) (1.0)
------ ------ ------
Income before income taxes ....................... 2.1 2.0 3.3
Provision for income taxes ....................... 0.3 0.2 0.4
------ ------ ------
Net income ....................................... 1.8 1.8 2.9
FISCAL YEAR ENDED
MARCH 31,
---------------------------------
1999 2000 2001
------ ------ ------

Net sales ....................................... 100.0% 100.0% 100.0%
Cost of sales ................................... 88.9 91.0 91.9
Unusual charges ................................. 1.9 0.1 4.2
------ ------ ------
Gross margin ............................... 9.2 8.9 3.9
Selling, general and administrative ............. 6.1 4.6 3.6
Goodwill and intangibles amortization ........... 0.7 0.6 0.5
Unusual charges ................................. 0.1 0.1 3.8
Interest and other expense, net ................. 1.3 1.0 0.6
------ ------ ------
Income (loss) before income taxes .......... 1.0 2.6 (4.6)
Provision for (benefit from) income taxes ....... (0.3) 0.3 (0.9)
------ ------ ------
Net income (loss) .......................... 1.3% 2.3% (3.7)%
====== ====== ======
25

Net Sales

Substantially all of the Company'sWe derive our net sales have been derived from the
manufacturea wide range of service offerings, including
product design, semiconductor design, printed circuit board assembly and
fabrication, enclosures, material procurement, inventory and supply chain
management, final system assembly of products for OEM customers.and test, packaging, logistics and
distribution.

Net sales for fiscal 19992001 increased 62.4%74% to $1.8$12.1 billion from $1.1$7.0 billion
in fiscal 1998.2000. The increase in sales for fiscal 19992001 was primarily the result
of our ability to continue to expand sales to our existing customers as well as
expanding sales to new customers worldwide and, to a lesser extent, the
incremental revenue associated with the purchases of several manufacturing
facilities and related assets during fiscal 2001. During fiscal 2001, our ten
largest customers accounted for approximately 59% of net sales, with no customer
accounting for more than 10% of net sales. While we experienced significant
growth in net sales in fiscal 2001, this growth was hampered in late fiscal 2001
by a decline in demand due to the downturn experienced by the electronics
industry, which was driven by a combination of weakening end-market demand
(particularly in the telecommunications and networking sectors) and our
customers' inventory imbalances. Along with other providers of electronics
manufacturing services, our fourth quarter net sales were adversely affected by
reductions in purchase volumes and delays in purchases by certain customers, as
they continued to experience erosion in demand for their products. This trend
has continued through the first quarter of fiscal 2002 and may continue, or
worsen, in future periods, as the timing of any recovery in our customers'
markets is uncertain.

Net sales for fiscal 2000 increased 76% to $7.0 billion from $4.0 billion
in fiscal 1999. The increase in sales for fiscal 2000 was primarily due to
increase inexpanding sales to certain existing customers including Philips, Ericsson and, Cisco.

The Company'sto a lesser extent, sales to new
customers. In fiscal 2000, our ten largest customers during fiscal 1999 were Philips,accounted for approximately
57% of net sales, with Ericsson
and Cisco accounting for approximately 18%, 16% and 13%12% of consolidated net sales, respectively.sales.
No other customer accounted for more than 10% of consolidated net sales in fiscal 1999. See "Item 1 - Business - Risk Factors --
Customer Concentration; Dependence on Electronics Industry".

Net sales for fiscal 1998 increased 73.9% to $1.1 billion from $640.0
million in fiscal 1997. The increase in sales for fiscal 1998 was primarily due
to (i) sales to Ericsson following the March 27, 1997 acquisition of the
Karlskrona Facilities, (ii) an increase in sales to certain existing customers,
including Advanced Fibre Communications, Cisco, Microsoft and Braun/Thermoscan
and (iii) sales to certain new customers including Bay Networks and Auspex
Systems. This increase was partially offset by reduced sales to certain
customers, including Minebea, Visioneer, 3Com/US Robotics and Global Village.
See "Item 1 - Business - Risk Factors --Customer Concentration; Dependence on
Electronics Industry".sales.

Gross Profit

21
22
Gross profit varies from period to period and is affected by among other
things,a number of
factors, including product mix, component costs, product life cycles, unit
volumes, startup, expansion and consolidation of manufacturing facilities,
pricing, competition and new product introductions. See Item 1, "Business--Risk
Factors."

Gross profit margin decreased to 8.6%3.9% for fiscal 19992001 from 9.8%8.9% in fiscal 1998.2000.
The decrease in gross margin is primarily attributable to unusual pre-tax
charges amounting to $510.5 million, which were associated with the plant
closures, as described in "Unusual Charges," below. Excluding unusual pre-tax
charges of $510.5 million and $7.5 million in fiscal 2001 and fiscal 2000,
respectively, gross margin decreased to 8.1% for fiscal 2001 from 9.0% in fiscal
2000. Gross margin decreased to 8.9% for fiscal 2000 from 9.2% in fiscal 1999.
Excluding unusual pre-tax charges of $7.5 million and $77.3 million in fiscal
2000 and 1999, respectively, gross margin decreased from 11.1% in fiscal 1999 to
9.0% in fiscal 2000. Our gross profit in each fiscal year was primarily dueadversely affected
by several factors, including costs associated with expanding our facilities,
costs associated with the startup of new customers and projects, which typically
carry higher levels of under absorbed manufacturing overhead costs until the
projects reach higher volume production, and changes in our product mix to the increases in
higher volume projects, which typically have a lower gross profit and startup expenses associated with new projects.

Gross profit margin decreased to 9.8% for fiscal 1998 from 10.1% in fiscal
1997. The gross profit margin in fiscal 1998 was adversely affected by changes
in customer and productbecause of
higher material content.

Increased mix andof products that have relatively high material costs associated with the startup of new
facilities in Doumen, China and Guadalajara, Mexico. Prices paid to the Company
by its significant customers can vary significantly based on the customer's
order level, with per unit prices typically declining as volumes increase. These
changes in price and volume can materially affect the Company's gross profit
margin. See "Item 1 - Business - Risk Factors - Risks of Expansion of
Operations."

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for fiscal 1999
increased to $68.1 million from $53.7 million in fiscal 1998 but decreased as a
percentage of net sales to 3.8%total unit costs can adversely affect our gross margins. Further,
we may enter into supply arrangements in fiscal 1999 from 4.8%connection with strategic
relationships and OEM divestitures. These arrangements, which are relatively
larger in fiscal 1998. The
dollar increase in SG&A was mainly due to (i) investment in infrastructure such
as personnelscale, could adversely affect our gross margins. We believe that
these and other factors may adversely affect our gross margins, but we do not
expect that this will have a material effect on our income from operations.

Unusual Charges

FISCAL 2001

We recognized unusual pre-tax charges of approximately $973.3 million
during fiscal year 2001. Of this amount, $493.1 million was recorded in the
first quarter and was comprised of approximately $286.5 million related corporateto the
issuance of an equity instrument to Motorola combined with approximately $206.6
million of expenses resulting from the DII and administrative expensesPalo Alto Products International
mergers and information systemsrelated facility closures. In the second quarter, unusual pre-tax
charges amounted to supportapproximately $48.4 million associated with the expansionChatham and
Lightning mergers and related facility closures. In the third quarter, we
recognized unusual pre-tax charges of approximately $46.3 million, primarily
related to the JIT merger and related facility closures. During the fourth
quarter, we recognized unusual pre-tax charges, amounting to $385.6 million
related to the closures of several manufacturing facilities.

On May 30, 2000, we entered into a strategic alliance for product
manufacturing with Motorola. See Note 8, "Shareholders' Equity," and Note 14,
"Subsequent Events," of the Company's businessNotes to Consolidated Financial Statements in Item
8, "Financial Statements and (ii)Supplementary Data" for further information
concerning the additionstrategic alliance. In connection with this strategic alliance,
Motorola paid $100.0 million for an equity instrument that entitled it to
acquire 22,000,000 of new sales personnelour ordinary shares at any time through December 31, 2005,
upon meeting targeted purchase levels or making additional payments to us. The
issuance of this equity instrument resulted in the Asia, Europe and the United States.
The Company anticipates its SG&A expenses will continue to increase in dollars

in the future. However,a one-time non-cash charge equal
to the extent that net sales continue to grow faster
than SG&A expenses, those expenses would continue to decline as a percentage of
net sales.

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

Goodwill and Intangible Assets Amortization

Goodwill and intangible assets are amortized on a straight-line basisequity instrument issued over the estimated life of the benefits received, which ranges from three to
twenty-five years. Goodwill and intangible assets amortization in fiscal 1999
decreased slightly to $3.6$100.0
million from $3.7 million in fiscal 1998. In March
1999, the Company acquired an additional 50% equity interest in FICO increasing
its ownership of FICO to 90% and recorded $8.5 million in goodwill and $420,000
in intangible assets and is amortized over 8 and 3 years, respectively. The
Company also recorded another $7.8 million goodwill from the acquisition of ACL
which is amortized over 10 years.proceeds received. As a result, of these acquisitions, goodwill
and intangible asset amortization expense per quarter will increasethe one-time non-cash charge amounted to
approximately $286.5 million offset by approximately $501,000 startinga corresponding credit to additional
paid-in capital in the first quarter of fiscal 2000. See Note 22001.

In connection with the aforementioned mergers and facility closures, we
recorded aggregate unusual charges of Notes to Consolidated Financial Statements.

Goodwill$686.8 million, which included
approximately $584.4 million of facility closure costs and intangible assets amortization in fiscal 1998 increased to
$3.7approximately $102.4
million from $2.6of direct transaction costs. As discussed below, $510.5 million in fiscal 1997. In the second quarter of fiscal
1998, the Company reduced its estimate of the
useful livescharges relating to facility closures have been classified as a component of
Cost of Sales during the fiscal year ended March 31, 2001. The components of the
goodwillunusual charges recorded are as follows (in thousands):

22
23

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL NATURE OF
CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
--------- --------- ---------- ---------- --------- -------------

Facility closure costs:
Severance..................... $ 62,487 $ 5,677 $ 3,606 $ 60,703 $ 132,473 cash
Long-lived asset impairment... 46,646 14,373 16,469 155,046 232,534 non-cash
Exit costs.................... 24,201 5,650 19,703 169,818 219,372 cash/non-cash
--------- --------- ---------- ---------- ---------
Total facility closure costs 133,334 25,700 39,778 385,567 584,379
Direct transaction costs:
Professional fees............. 50,851 7,247 6,250 -- 64,348 cash
Other costs................... 22,382 15,448 248 -- 38,078 cash/non-cash
--------- --------- ---------- ---------- ---------
Total direct transaction costs 73,233 22,695 6,498 -- 102,426
--------- --------- ---------- ---------- ---------
Total Unusual Charges........... 206,567 48,395 46,276 385,567 686,805
--------- --------- ---------- ---------- ---------
Income tax benefit.............. (30,000) (6,000) (6,500) (110,000) (152,500)
--------- --------- ---------- ---------- ---------
Net Unusual Charges............. $ 176,567 $ 42,395 $ 39,776 $ 275,567 $ 534,305
========= ========= ========== ========== =========

In connection with the facility closures, we developed formal plans to exit
certain activities and intangible assets (consistinginvoluntarily terminate employees. Management's plan to
exit an activity included the identification of goodwill, customer lists and trademarks and
tradenames) arising from the Astron acquisition from approximately twenty years
to ten years. This reduction increased the Company's amortization expense per
quarter by approximately $279,000, beginning in the second quarter of fiscal
1998.

Provision for Excess Facilities

The provision for excess facilities of $3.4 million in fiscal 1999 is
comprised of $2.2 million relating to the costs for consolidating the Company's
fourduplicate manufacturing and
administrative facilities for closure and the identification of manufacturing
and administrative facilities for consolidation into other facilities.
Management currently anticipates that the facility closures and activities to
which all of these charges relate will be substantially completed within one
year of the commitment dates of the respective exit plans, except for certain
long-term contractual obligations. The following table summarizes the components
of the facility closure costs and related activities in Hong Kong and $1.2fiscal 2001:

LONG-LIVED
ASSET EXIT
SEVERANCE IMPAIRMENT COSTS TOTAL
--------- ---------- --------- ---------

Balance at March 31, 2000 ............. $ -- $ -- $ -- $ --
Activities during the year:
First quarter provision ............. 62,487 46,646 24,201 133,334
Cash charges ........................ (35,800) -- (1,627) (37,427)
Non-cash charges .................... -- (46,646) (7,441) (54,087)
-------- --------- --------- ---------
Balance at June 30, 2000 .............. 26,687 -- 15,133 41,820
Activities during the year:
Second quarter provision ............ 5,677 14,373 5,650 25,700
Cash charges ........................ (4,002) -- (4,231) (8,233)
Non-cash charges .................... -- (14,373) (8,074) (22,447)
-------- --------- --------- ---------
Balance at September 30, 2000 ......... 28,362 -- 8,478 36,840
Activities during the year:
Third quarter provision ............. 3,606 16,469 19,703 39,778
Cash charges ........................ (7,332) -- (2,572) (9,904)
Non-cash charges .................... -- (16,469) (14,070) (30,539)
-------- --------- --------- ---------
Balance at December 31, 2000 .......... 24,636 -- 11,539 36,175
Activities during the year:
Fourth quarter provision ............ 60,703 155,046 169,818 385,567
Cash charges ........................ (13,605) -- (14,686) (28,291)
Non-cash charges .................... -- (155,046) (71,328) (226,374)
-------- --------- --------- ---------
Balance at March 31, 2001 ............. $ 71,734 $ -- $ 95,343 $ 167,077
======== ========= ========= =========

Of the total pre-tax facility closure costs, $132.5 million relatingrelates to
employee termination costs, of which $67.8 million has been classified as a
component of Cost of Sales. As a result of the various exit plans, we identified
11,269 employees to be involuntarily terminated related to the consolidationvarious mergers
and facility closures. As of certain U.S. facilities.March 31, 2001, 4,457 employees have been
terminated, and another 6,812 employees have been notified that they are to be
terminated upon completion of the various facility closures and consolidations.
During fiscal 2001, we paid employee termination costs of approximately $60.7
million. The provision for
excess facilities are comprisedremaining $71.7 million of $1.5employee termination costs is classified
as accrued liabilities as of March 31, 2001 and is expected to be paid out
within one year of the commitment dates of the respective exit plans.

The unusual pre-tax charges include $232.5 million for the reductionwrite-down of
certain
personnel duelong-lived assets to consolidationfair value. This amount has been classified as a component
of certain operations, $1.5Cost of Sales. Included in the long-lived asset impairment are charges of
$229.1 million, forwhich relate to property, plant and equipment associated with
the various manufacturing and administrative facility closures which were
written down to their net realizable value based on their estimated sales price.
Certain facilities will remain in service until their anticipated disposal dates
pursuant to the exit plans. Since the assets will remain in service from the
date of the decision to dispose of these assets to the anticipated disposal
date, the assets are being depreciated over this expected period. The impaired
long-lived assets consisted primarily of machinery and equipment of $153.0
million and building and improvements of $76.1 million. The long-lived

23
24
asset impairment also includes the write-off of the remaining goodwill and other
intangibles related to certain closed facilities of $3.4 million.

The unusual pre-tax charges also include approximately $219.4 million for
other exit costs. Approximately $210.2 million of this amount has been
classified as a component of Cost of Sales. The other exit costs recorded,
primarily related to items such as building and equipment lease termination
costs, warranty costs, current asset impairments and assetspayments to suppliers and
vendors to terminate agreements and were incurred directly as a result of the
various exit plans. We paid approximately $23.1 million of other exit costs
during fiscal 2001. Additionally, approximately $101.0 million of other exit
costs were non-cash charges utilized during fiscal 2001. The remaining $95.3
million is classified in accrued liabilities as of March 31, 2001 and is
expected to be substantially paid out within one year from the commitment dates
of the respective exit plans, except for certain long-term contractual
obligations.

The direct transaction costs include approximately $64.3 million of costs
primarily related to investment banking and financial advisory fees as well as
legal and accounting costs associated with the merger transactions. Other direct
transaction costs which totaled approximately $38.1 million were mainly
comprised of accelerated debt prepayment expense, accelerated executive stock
compensation and benefit-related expenses. We paid approximately $70.9 million
of the direct transaction costs during fiscal 2001. Additionally, approximately
$28.2 million of the direct transaction costs were non-cash charges utilized
during fiscal 2001. The remaining $3.3 million is classified in accrued
liabilities as of March 31, 2001 and is expected to be substantially paid out in
the first quarter of fiscal 2002.

FISCAL 2000

In fiscal 2000, we recognized unusual pre-tax charges of $7.5 million
related to the operations the Company has
exited,of Chatham, which included severance and $400related
charges of approximately $4.4 million and other facility exit costs of
approximately $3.1 million.

Additionally, unusual pre-tax charges of $3.5 million were recorded in
fiscal 2000, related to the consolidationKyrel EMS Oyj merger. The unusual charges consisted
of facilities. In connection with
the provision for excess facilities, the Company terminateda transfer tax of $1.7 million, approximately 250
employees in the areas$0.4 million of finance, engineering, operations, productioninvestment
banking fees and purchasing. The Company anticipates the consolidationapproximately $1.4 million of facilities will belegal and accounting fees.

FISCAL 1999

During fiscal 1999, we recognized unusual pre-tax charges of approximately
$79.3 million, substantially complete by November 1999.

The provision for excess facilitiesall of $8.9 million in fiscal 1998 relateswhich related to the costs incurred in closingoperations of our
wholly owned subsidiary, Orbit Semiconductor, Inc. ("Orbit"). We decided to sell
Orbit's 6-inch, 0.6 micron wafer fabrication facility ("Fab") and adopt a
fabless manufacturing strategy to complement Orbit's design and engineering
services. The charges were primarily due to the Wales facility. This charge consists
primarilyimpaired recoverability of
the write-off of goodwill andinventories, intangible assets of $3.8 million,
severance payments, reimbursement of government grants, and fixed assets, and other costs associated with
the disposalexit of semiconductor manufacturing. The Fab was ultimately sold in January
1999.

The components of the factory. This closure isunusual charges recorded in fiscal 1999 are as
follows:

FIRST FOURTH
QUARTER QUARTER TOTAL NATURE OF
CHARGES CHARGES CHARGES CHARGES
-------- -------- -------- ----------

Severance............................... $ 498 $ 2,371 $ 2,869 cash
Long-lived asset impairment............. 38,257 16,538 54,795 non-cash
Losses on sales contracts............... 2,658 3,100 5,758 non-cash
Incremental uncollectible accounts
receivable........................... 900 -- 900 non-cash
Incremental sales returns and
allowances .......................... 1,500 500 2,000 non-cash
Inventory write-downs................... 5,500 250 5,750 non-cash
Acquired in-process research and
development.......................... -- 2,000 2,000 non-cash
Other exit costs........................ 1,845 3,369 5,214 cash/non-cash
-------- -------- --------
Total Unusual Pre-Tax Charges.... $ 51,158 $ 28,128 $ 79,286
======== ======== ========

Of the total unusual pre-tax charges, approximately $2.9 million relates to
employee termination costs. As a result of the Company's

27closure of the fabrication
facility, 460 employees were terminated. The terminations were completed and
related severance costs were fully paid out by the first quarter of fiscal 2000.

24
acquisition25
The unusual pre-tax charges include approximately $54.8 million for the
write-down of Altatron, which resulted in duplicative facilitieslong-lived assets to fair value. Included in the United
Kingdom. See Note 9long-lived asset
impairment are charges of Notes$50.7 million related to Consolidated Financial Statements.the Fab which was written
down to its net realizable value based on its sales price. The provision for excess facilitiesimpaired
long-lived assets consisted primarily of $5.9machinery and equipment of $43.4
million in fiscal 1997 consistsand building and improvements of $7.3 million. The long-lived asset
impairment also includes the write-off of the remaining goodwill of $0.6
million. The remaining $3.5 million of asset impairment relates to the
write-down to net realizable value of a facility we exited during fiscal 1999.

We entered into certain non-cancelable sales contracts to provide
semiconductors to customers at fixed prices. Because we were obligated to
fulfill the terms of the agreements at selling prices which were not sufficient
to cover the cost to produce or acquire such products, a liability for losses on
sales contracts was recorded for the estimated future amount of such losses. The
unusual pre-tax charges include approximately $8.7 million for losses on sales
contracts, incremental amounts of uncollectible accounts receivable, and
estimated incremental costs for sales returns and allowances, all of which were
fully utilized by the end of fiscal 2000.

The unusual pre-tax charges also include approximately $10.9 million for
losses on inventory write-downs and other exit costs. We have written off and
disposed of approximately $5.8 million of inventory. The remaining $5.1 million
relates primarily to incremental costs and contractual obligations for items
such as lease termination costs, litigation, environmental clean-up costs, and
other exit costs incurred in downsizingdirectly as a result of the Texas facility, downsizingexit plan, all of which
were paid out or non-cash charges utilized by the Singapore
manufacturing operations and writing off obsolete equipment and incurring
certain severance obligations at the nCHIP semiconductor fabrication facility.
The Texas facility was primarily dedicated to production for Global Village
Communications and Apple Computer, to whom the Company is no longer making
sales. The nCHIP semiconductor fabrication facility was primarily dedicated to
producing PCBs for nCHIP's MCMs, and the Company has transferred these
operations to a third party. The Singapore manufacturing facilities were
downsized in connection with the shiftend of manufacturing operations to lower cost
manufacturing locations.

Acquired In-Process Research and Developmentfiscal 2000.

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

MergerSelling, General and Administrative Expenses

InSelling, general and administrative expenses, or SG&A, for fiscal 1998, the Company incurred $7.42001
increased to $430.1 million of merger expenses
associated with the acquisitions of Neutronics, EnergiPilot, DTM, Altatron and
Conexao. The Neutronics merger expenses included $2.2from $320.0 million in cost associated
with the cancellationfiscal 2000 but decreased as
a percentage of Neutronics's public offering and $900,000net sales to 3.6% in other
legal and accounting fees. The remaining $4.3fiscal 2001 from 4.6% in fiscal 2000. SG&A
for fiscal 2000 increased to $320.0 million consists of a $3.1 million
brokerage and finders fees incurred in the Altatron acquisition and $1.2from $240.5 million in legalfiscal 1999
but decreased as a percentage of net sales to 4.6% in fiscal 2000 from 6.1% in
fiscal 1999. The dollar increase in SG&A for each fiscal year was primarily due
to our continued investment in infrastructure such as sales, marketing,
supply-chain management and accounting fees for allother related corporate and administrative expenses
as well as information systems necessary to support the expansion of our
business. The decline in SG&A as a percentage of each fiscal year's net sales
reflects our continued focus on controlling operating expenses relative to sales
growth and gross margin levels.

Goodwill and Intangible Assets Amortization

Goodwill and intangible assets amortization in fiscal 2001 increased to
$63.5 million from $41.3 million in fiscal 2000. This increase was directly the
result of the various acquisitions in fiscal 1998 acquisitions.2001 which were accounted for as
purchase transactions, which primarily include Irish Express Cargo Ltd, Fico,
Inc. (United States), Li Xin Industries, Ltd. and Ojala Yhtyma Oy.

Goodwill and intangible assets amortization in fiscal 2000 increased to
$41.3 million from $29.2 million in fiscal 1999 primarily related to the
acquisition of ACL which was completed in late March 1999, and various business
acquisitions completed during fiscal 2000.

Interest and Other Expense, Net

Interest and other expense, net Interest and other expense, net increaseddecreased to $18.3$67.1 million in fiscal 19992001
from $13.1$69.9 million in fiscal 1998.2000. The following table sets forth information
concerning the components of interest and other income and expense.

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

28
1999 2000 2001
-------- -------- ---------

Interest expense ................................... $ 61,430 $ 84,198 $ 135,243
Interest income .................................... (11,374) (22,681) (32,219)
Foreign exchange (gain) loss ....................... 3,543 2,128 (4,028)
Other (income) expense, net ........................ (1,365) 6,267 (31,881)
-------- -------- ---------
Total interest and other expense, net .... $ 52,234 $ 69,912 $ 67,115
======== ======== =========

25
26
Net interest expense increased to $16.7$103.0 million in fiscal 19992001 from $15.0$61.5
million in fiscal 1998.2000. The increase was primarily dueattributable to the interest
expense associated with the approximately $645.0 million of senior subordinated
notes, consisting of $500.0 million of 9.875% notes and euros 150.0 million of
9.75% notes we issued in June 2000.

Net interest expense increased to $61.5 million in fiscal 2000 from $50.1
million in fiscal 1999. The increase was attributable to the increased bank
borrowings to finance theour capital expenditures, and expansion of the Company'svarious facilities
and industrial parks and purchases of manufacturing assets offset by increased
interest income from our deployment of equity offering proceeds in Sweden, Hungary, Mexicomoney market
funds and China. The Company anticipates that
itscorporate debt securities. Fiscal 2000 net interest expense will increaseincluded
accelerated amortization of approximately $1.0 million in future periods asbank arrangement fees
associated with the termination of a result of borrowings
under its credit facility.

Net interest expense increasedIn fiscal 2001, there was $4.0 million of foreign exchange gain compared to
$15.0foreign exchange loss of $2.1 million in fiscal 1998 from $5.7
million2000. The foreign exchange gain
generated in fiscal 1997. The increase was primarily increased bank borrowings2001 mainly relates to finance the acquisition of the Karlskrona Facilities, capital expendituresnet non-functional currency monetary
liabilities in Singapore, Germany and the issuance of the $150.0 million 8.75% Senior Subordinated Notes in October
1997.Hungary. In fiscal 1999,2000, there was $3.1$2.1
million of foreign exchange loss compared to $1.6$3.5 million foreign exchange gainloss
in fiscal 1998.1999. The foreign exchange loss in fiscal 19992000 mainly relates to foreignnet
non-functional currency monetary liabilities in Austria, BrazilFinland and Hungary.

Foreign exchange gain decreased to $1.6Other (income) expense, net changed from $6.3 million from $1.7
million gainof net other expense
in fiscal 1997. The foreign exchange gain for fiscal 1998 was
mainly due2000 to the strengthening$31.9 million of the U.S. dollar against Asian currencies. See
Note 2 of Notes to Consolidated Financial Statements."

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

Equity in earnings of associated companies for fiscal 1998 increased to
$1.2 million from $133,000 in fiscal 1997. The equity in earnings of associated
companies results primarily from the Company's original 40% investment in FICO
and, to a lesser extent, certain minority investments of Neutronics. The Company
acquired a 40% interest in FICO in December 1996. According to the equity method
of accounting, the Company did not recognize revenue from sales by FICO, but
based on its ownership interest recognized 40% of the net income or loss of the
associated company. The Company has recorded its 40% share of FICO's
post-acquisition net income.

The Company recognized a permanent impairment in an investment in fiscal
1997, represented by a write-off of publicly traded common stock received from a
customer in fiscal 1997 as payment of $3.2 million in accounts receivable. As a
result of a significant decline in the market value of this common stock
following its receipt by the Company, this common stock subsequently was deemed
to be permanently impaired in fiscal 1997, resulting in a $3.2 million expense.
In fiscal 1997, bank commitment fees represented $750,000 of commitment fees
written off in March 1997 when the bank's commitment expired unused.

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

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

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

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

Other income (expense), net was an income of $1.8 million in fiscal 1999
compared to an expense of $546,000 in fiscal 1998. The other income in fiscal 19992001 primarily due
to realized gains on sales of marketable equity securities. The other expense in
fiscal 2000 was comprised mainly of gain froma loss on disposal of landfixed assets in
Mexico. Other income
(expense), net was an expenseHungary offset by compensation received in a settlement of $546,000 in fiscal 1998 compared to an income
of $814,000 in fiscal 1997. Other expense, net in fiscal 1998 primarily
consisted of the write-off of fixed assets. Other expense, net in fiscal 1997
includes $898,000 of income received under the Company's business interruption
insurance policy as a result of an April 1996 fire at its facilities in Doumen,
China.claim.

Provision for Income Taxes

The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Austria, Brazil, China,
Hungary, Malaysia, Mauritius, Mexico, The Netherlands, Singapore, Sweden, the
United Kingdom, and the United States. These subsidiaries are subject to
taxation in the country in which they have been formed. The Company's Asian and
Hungarian manufacturingCertain of our subsidiaries have, at various times, been granted certain tax relief
in each of thesetheir respective countries, resulting in lower income taxes than would
otherwise be the case under ordinary tax rates. See Note 7, "Income Taxes," of
the Notes to Consolidated Financial Statements.Statements included in Item 8, "Financial
Statements and Supplementary Data."

The Company's consolidated effective tax rate for any given period is
calculated by dividinga particular year will vary
depending on the aggregate taxes incurred by eachmix of earnings, operating loss carryforwards, income tax
credits, and changes in previously established valuation allowances for deferred
tax assets based upon management's current analysis of the operating
subsidiaries and the holding company by the Company's consolidated pre-tax
income. Losses incurred by any subsidiary or by the holding company are not
deductible by the entities incorporated in other countries in the calculationrealizability of
their respective local taxes. The ordinary corporatethese deferred tax rates for calendar 1999
were 34%, 28%, 26%, 18%, 16% and 15% in Austria, Sweden, Singapore, Hungary,
Hong Kong and China, respectively, and 30% on manufacturing operations in
Malaysia. In addition, the tax rate is de minimis in Labuan, Malaysia and
Mauritius where the Company's offshore marketing subsidiaries are located. The
Company's Hungarian subsidiaries have been on a tax holiday that expired on
December 31, 1998. Effective January 1, 1999, the Company's Hungarian
subsidiaries will be subject to corporate income taxes at a flat rate of 18%,
which will effectively be reduced to 7.2% in the years 1999 through 2003 because
a 60% exemption will apply. As a result of this change in tax status, the
Company expects to be subject to current income taxes in Hungary in future
years. The Company's U.S. and U.K. subsidiaries are subject to ordinary
corporate tax rates of 35% and 30% respectively. However, these tax rates did
not have any material impact on the Company's taxes in fiscal 1999 due to the
operating loss carry forwards benefited in this period.assets. The Company's consolidated effective tax rate was 13.1%a
19% benefit for fiscal year 19992001 compared to 10.2%a 13% provision for fiscal year
1998.2000, however, excluding the unusual charges in fiscal 2001 the effective tax
rate was 11%. The increaseslight decrease in the effective tax rate was due primarily to
the expansion of operations and increase in profitability in countries with
higherlower tax rates. See Item 1, "Business--Risk Factors--We are subject to the risk
of increased income taxes."

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1999, the Company2001 we had operating loss carryforwards of
approximately $15,208cash and cash equivalents balances totaling $631.6
million, total bank and other debts amounting to $1.2 billion and $500.0 million
available for U.S. federal income tax purposes which will expire
between 2003 and 2012 if not previously utilized. Utilization of these net
operating loss carryforwards may beborrowing under our credit facilities subject to an annual limitation duecompliance with
certain financial ratios. Our working capital increased to the
change in ownership rules provided by the Internal Revenue Code (the "Code").
This limitation and other restrictions provided by the Code may reduce the net

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

At$1.9 billion at March
31, 1999, the Company had2001 from $1.2 billion at March 31, 2000. Additionally, our debt to equity
ratio improved to 31% at March 31, 2001 from 49% at March 31, 2000.

Cash used in operating loss carryforwards of
approximately $9,867, $6,765activities was $469.7 million and $6,547 in U.K., Austria and Hong Kong,
respectively with various loss carryforward lives pursuant to local county tax
laws. The utilization of these net operating loss carryforwards is limited to
the future operations of the Company in the tax jurisdictions in which such
carryforwards arose.

The Company has structured its operations in Asia in a manner designed to
maximize income in countries where tax incentives have been extended to
encourage foreign investment or where income tax rates are low. The Company's
investments in its plants in Xixiang and Doumen, China fall under the "Foreign
Investment Scheme" which entitles the Company to apply for a five-year tax
incentive. The Company obtained the tax incentive for the Doumen plant in
December 1995 and the Xixiang plant in October 1996. With the approval, the
Company's tax rates on income from these facilities during the incentive period
will be 0% in years 1 and 2 and 7.5% in years 3 through 5, commencing in the
first profitable year and 15.0% thereafter. The Company has transferred its
offshore marketing and distribution functions to marketing subsidiaries located
in Labuan, Malaysia, where the tax rate is de minimis and Mauritius, where the
tax rate is 0%. The Company's facility in Shekou, China, which was closed$34.4 million in
fiscal 1996, was located2001 and 2000, respectively. In fiscal 1999, operating activities
provided cash amounting to $160.9 million. Operating activities used cash in
a "Special Economic Zone" and was an approved
"Product Export Enterprise" that qualified for a special corporate income tax
rate of 10%.

If tax incentives are not renewed upon expiration, if the tax rates
applicable to the Company are rescinded or changed, or if tax authorities were
to challenge successfully the manner in which profits are recognized among the
Company's subsidiaries, the Company's worldwide effective tax rate would
increase and its results of operations and cash flow would be adversely
affected. A significant portion of the products manufactured by the Company's
Asian subsidiaries are sold to customers based in other jurisdictions in North
America and Europe. While the Company believes that profits from its Asian
operations are not sufficiently connected to such other jurisdictions to give
rise to income taxation in such other jurisdictions, there can be no assurance
that tax authorities will not challenge the Company's position or, if such
challenge is made, that the Company will prevail in any such disagreement. If
the Company's Asian profits became subject to income taxes in such other
jurisdictions, the Company's taxes would increase and its results of operations
and cash flows would be adversely affected. The expansion by the Company of its
operations in the Americas and countries in Western Europe that have higher tax
rates is expected to increase its worldwide effective tax rate. See "Item 1 -
Business - Risk Factors -- Risk of Increased Taxes."

Quarterly Results

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

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

(UNAUDITED)
FISCAL YEAR ENDED MARCH 31, 1998 FISCAL YEAR ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------ ------------------------------------------------
First Second Third Fourth First Second Third Fourth
--------- --------- --------- --------- --------- --------- --------- ---------

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

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

The Company has experienced, and expects to continue to experience,
significant periodic and quarterly fluctuations in results of operations due to
a variety of factors. These factors include, among other things, timing of
orders, the short-term nature of most customers' purchase commitments, volume of
orders relative to the Company's capacity, customers' announcement, introduction
and market acceptance of new products or new generations of products, evolution
in the life cycles of customers' products, timing of expenditures in
anticipation of future orders, effectiveness in managing manufacturing
processes, changes in cost and availability of labor and components, mix of
orders filled, timing of acquisitions and related expenses and changes or
anticipated changes in economic conditions. In addition, the Company's net sales
may fluctuate throughout the year2001 primarily as a result of local factorssignificant increases in accounts
receivable and inventory, partially offset by an increase in accounts payable
combined with the $446.0 million net loss. Cash provided by operating activities
decreased in fiscal 2000 from fiscal 1999 because of increases in accounts
receivable, inventories and other events
that may affect production volumes.current assets, offset by increases in net
income and accounts payable.

Accounts receivable, net of allowance for doubtful accounts, increased to
$1.7 billion at March 31, 2001 from $1.1 billion at March 31, 2000. The market segments servedincrease
in accounts receivable was primarily due to an increase of approximately 74% in
net sales in fiscal 2001.

Inventories increased to $1.8 billion at March 31, 2001 from $1.1 billion
at March 31, 2000. The increase in inventories was primarily the result of
increased purchases of materials to support our growing sales, combined with

26
27
the inventory acquired in connection with the manufacturing facility purchased
during the fourth quarter of fiscal 2001. Additionally, many of our customers
have experienced a slowdown in demand for their products since late 2000 which
in some cases has resulted in the deferral of purchases, thereby adversely
affecting our inventory levels at the end of our fiscal year.

Cash used in investing activities was $1.1 billion, $879.4 million and
$572.2 million in fiscal 2001, 2000 and 1999, respectively. Cash used in
investing activities in fiscal 2001 were primarily related to:

- $711.2 million of net capital expenditures to purchase equipment and
the continued expansion of our manufacturing facilities worldwide, and
specifically for our continued expansion of our industrial park
strategy with new parks in Gdansk, Poland, Sao Paulo, Brazil and
Nyiregyhaza, Hungary;

- $239.0 million for purchases of manufacturing facilities and related
asset purchases, comprised primarily of Bosch Telecom GmbH's Denmark
facility, Ascom's Switzerland facility and Siemens Mobile's Italy and
United States facilities;

- $54.4 million primarily for minority investment in the stocks of
various technology companies in software and related industries; and

- $158.9 million for acquisitions of businesses.

Additionally, we received proceeds of $46.9 million from the sale of
marketable securities of various technology companies.

Cash used in investing activities in fiscal 2000 were primarily related to:

- $462.4 million of net capital expenditures to purchase equipment and
continued expansion of our manufacturing facilities in Brazil, China,
Hungary, Mexico, Sweden and United States;

- $249.8 million for acquisitions of manufacturing facilities and
assets, comprised primarily of Cabletton Systems Inc.'s New Hampshire
and Ireland facilities, Fujitsu Siemens Computer's Germany facility,
Ericsson Business Network's Sweden facility, ABB Automation Product's
Sweden facility and Ericsson AG's Austria facility;

- $42.4 million for minority investment in the stocks of various
technology companies in software and related industries;

- $75.0 million of funding for a loan to another company, and;

- $85.7 million for acquisitions of businesses.

Additionally, we received proceeds of $35.9 million from the sale of
certain subsidiaries.

Cash provided by financing activities was $1.5 billion, $1.4 billion and
$501.8 million in fiscal 2001, 2000, and 1999, respectively. Cash provided by
financing activities in fiscal 2001 were primarily related to our completion of
two public stock offerings. In June 2000, we sold a total of 11.0 million
ordinary shares at a price of $35.63 per share resulting in net proceeds to us
of approximately $375.9 million. In July 2000, we sold an additional 1.65
million ordinary shares at a price of $35.63 per share resulting in net proceeds
of $55.7 million, which represented the Companyoverallotment option on the public stock
offering completed in June 2000. Also, in February 2001, we completed a public
stock offering of 27.0 million ordinary shares at a price of $37.94 per share
resulting in net proceeds of $990.1 million. Additionally, cash provided by
financing activities in fiscal 2001 resulted from:

- $1.4 billion of bank borrowings and long-term debt, which primarily
resulted from the issuance of approximately $645.0 million of senior
subordinated notes, consisting of $500.0 million of 9.875% notes and
euros 150.0 million of 9.75% notes we issued in June 2000;

- $100.0 million of proceeds from an equity instrument issued to
Motorola;

- $78.5 million in proceeds from ordinary shares issued under our stock
plans.

27
28
Additionally, our financing activities used $1.5 billion for the repayment
of bank borrowings and long-term debt and $31.8 million for the repayment of
capital lease obligations. The repayments of our bank borrowings and long-term
debt primarily resulted from the use of the proceeds from our issuance of the
senior notes in June 2000. See Note 4, "Bank Borrowings and Long-Term Debt," of
the Notes to Consolidated Financial Statements in Item 8, "Financial Statements
and Supplementary Data" for a description of our bank credit facilities and
long-term debt.

Cash provided by financing activities in fiscal 2000 was primarily related
to the completion of three public stock offerings. In February 2000, we sold a
total of 17.2 million ordinary shares at a price of $29.50 per share resulting
in net proceeds to us of approximately $494.2 million. In October 1999, we sold
a total of 27.6 million ordinary shares at a price of $16.92 per share resulting
in net proceeds to us of approximately $448.9 million. In addition, in October
1999, DII sold a total of 13.8 million shares of its common stock in a public
offering at a price of $16.50 per share, resulting in net proceeds of
approximately $215.7 million. Cash provided by financing activities in fiscal
2000 also included:

- $181.5 million of net proceeds from bank borrowings, capital leases,
and long-term debts;

- $26.9 million in proceeds from ordinary shares issued under our stock
plans.

Additionally, we used cash of approximately $26.6 million for the payment
of dividends to former shareholders of acquired companies prior to their
acquisition by us.

In April 2001, we entered into a definitive agreement with Ericsson with
respect to our management of the operations of Ericsson's mobile telephone
operations. Operations under this arrangement commenced in the first quarter of
fiscal 2002. Under this agreement, we are alsoto provide a substantial portion of
Ericsson's mobile phone requirements. In connection with this relationship, we
purchased certain equipment, inventory and other assets, and assumed certain
accrued expenses, from Ericsson at their net book value of approximately $450.0
million. Additionally, in the first quarter of fiscal 2002, we announced our
intentions to purchase the manufacturing facility and related assets from
Alcatel located in Laval, France. The estimated purchase price is subject to
economic cyclesfinal negotiations, due diligence and haveworking capital levels at the time of
closing, but is not expected to be a material cash requirement.

We anticipate that our working capital requirements and capital
expenditures will continue to increase in order to support the anticipated
continued growth in our operations. In addition to our anticipated manufacturing
facilities and related asset purchases, we also anticipate incurring significant
capital expenditures and operating lease commitments in order to support our
anticipated expansions of our industrial parks in Brazil, China, Hungary, Mexico
and Poland as well as our regional manufacturing facilities in the past experienced,Czech
Republic and are
likely inIreland. We intend to continue our acquisition strategy and it is
possible that future acquisitions may be significant and may require the future to experience, recessionary periods. A recessionary period
affecting the industry segments served by the Company could have a material
adverse effectpayment
of cash. Future liquidity needs will also depend on the Company's results of operations. Results of operations in
any period should not be considered indicative of the results to be expected for
any future period, and fluctuations in levels of
inventory, the timing of expenditures by us on new equipment, the extent to
which we utilize operating results may also resultleases for the new facilities and equipment, levels
of shipments and changes in fluctuations in the pricevolumes of the Company's Ordinary Shares. In future periods,
the Company's revenues or results of operations may be below the expectations of
public market analysts and investors. In such event, the price of the Company's
Ordinary Shares would likely be materially adversely affected. See "Item 1 -

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

BACKLOG

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

LIQUIDITY AND CAPITAL RESOURCES

The Company hascustomer orders.

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

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

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

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

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

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

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

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

The Company anticipates that its working capital requirements will increase
in order to support anticipated increases in business capacity. In addition, the
Company anticipates incurring significant capital expenditures and operating
lease commitments in order to support its anticipated expansions of these
facilities in China, Hungary, Mexico and Brazil. Future liquidity needs will
depend on fluctuations in levels of inventory, the timing of expenditures by the
Company on new equipment, the extent to which the Company utilizes operating
leases for the new facilities and equipment, levels of shipments by the Company
and changes in volumes of customer orders. The Company believes that theour existing cash balances, together
with anticipated cash flowflows from operations and amountsborrowings available under theour
credit facility will be sufficient to fund itsour operations through fiscal 1999. However,at least the
next twelve months. We anticipate that we will continue to enter into debt and
equity financings, sales of accounts receivable and lease transactions to fund
our acquisitions and anticipated growth. Such financings and other transactions
may not be available on terms acceptable to us or at all. See Item 1,
"Business--Risk Factors--If we do not manage effectively the extent that the Company'sexpansion of our
operations, significantly expand, the Companyour business may be required to obtain
additional debt or equity financing. See "Item 1 - Business - Risk Factors --
Risks of Expansion of Operations.harmed."

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate RiskITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

A portion of the Company'sour exposure to market risk for changes in interest rates
relates to the Company'sour investment portfolio. The Company doesWe do not use derivative financial
instruments in itsour investment portfolio. The Company
investsWe invest in high-credit quality
issuers and, by policy, limitslimit the amount of credit exposure to any one issuer.
As stated in itsour policy, the Company ensures
the safety and preservation of itswe protect our invested principal funds by limiting
default 34
risk, market risk and reinvestment risk. The Company mitigatesWe mitigate default risk by
investing in safe and high-credit quality securities and by constantly
positioning itsthe portfolio to respond appropriately to a significant reduction in
a credit rating of any investment issuer, guarantor or depository. The portfolio
includes only

28
29
marketable securities with active secondary or resale markets to ensure
portfolio liquidity. Maturities of short-term investments are timed, whenever
possible, to correspond with debt payments and capital investments. As of March
31, 1999,2001, the outstanding amount in the investment portfolio was $130.5$349.8 million,
with an average maturitycomprised mainly of 71 days andmoney market funds with an average return of 5.05%5.26%.

The CompanyWe also hashave exposure to interest rate risk with certain variable rate
lines of credit. These credit lines are located throughout the world and are
based on a spread over that country's inter-bank offering rate. The CompanyWe primarily
entersenter into debt obligations to support general corporate purposes including
capital expenditures, acquisitions and working capital needs. As of March 31,
1999,2001, the outstanding short-term debt, including capitalized leases was $63.9$325.7
million. The following table presents principal cash flows and related interest
rates by fiscal year of maturity for debt obligations. The variable interest
rate for future years assumes the same rate as March 31, 1999.

Expected Fiscal Year of Maturity
(in thousands)2001.

There-
Debt 2000 2001EXPECTED FISCAL YEAR OF MATURITY
----------------------------------------------------------------------
DEBT 2002 2003 2004 after Total2005 2006 THEREAFTER TOTAL
- ------------------------------------------- ------- -------- -------- ------ ------ ---------- ---------- ---------- ---------- ---------- ---------- ---------------
(IN THOUSANDS)

Sr. Subordinated Notes ................................. -- -- -- -- -- 150,000 150,000779.59 779,596
Weighted Average interest rate ............. 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% 8.75%Interest Rate ....... 9.64% 9.6% 9.6% 9.64% 9.64% 9.7% 9.7%
Fixed Rate ............................ 11,711 9,344 6,388 4,143 2,788 11,341 45,715............................. 118,170 110,126 107,773 86,899 77,077 142,609 642,654
Weighted Average interest rate .............. 7.2% 7.2% 6.6% 7.4% 6.6% 7.7% 7.6%Interest Rate ....... 6.66% 6.48% 6.02% 6.24% 5.48% 6.20% 6.22%
Variable Rate ......................... 52,182 4,027 2,634 2,635 1,788 2,091 65,357
Average interest rate .............. 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% 5.1%.......................... 5.60% 5.80% 5.80% 5.20% 5.20% 5.20% 5.20%

Foreign Currency Exchange Risk

The Company transactsFOREIGN CURRENCY EXCHANGE RISK

We transact business in various foreign countries. The Company
manages itsWe manage our foreign
currency exposure by borrowing in various foreign currencies and by entering
into foreign exchange forward contracts only with respect to transaction
exposure. The Company's policy isWe try to maintain a fully hedged position for all certain, known
transactionstransaction exposures. These exposures are primarily, but not limited to,
revenues, vendor payments, accrued expenses and inter-company balances in
currencies other than the functional currency unit of the operating entity. The CompanyWe
will first evaluate and, to the extent possible, use non-financial techniques,
such as currency of invoice, leading and lagging payments, receivable management
or local borrowing to reduce transaction exposure before taking steps to
minimize remaining exposure with financial instruments. As of March 31, 1999,2001,
the total cumulative outstanding notional amounts of our forward contracts in
Euro, French Franc, German Deutsche Mark, Japanese Yen, Swedish Kronor and
United States dollarDollar was approximately $16.5$200.4 million.

YEAR 2000 COMPLIANCE

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

3529
(and thereafter until corrected), as they will be unable to distinguish the
correct date. Such an uncorrected condition could significantly interfere with
the conduct of the Company's business, could result in disruption of its
operations, and could subject it to potentially significant legal liabilities.

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

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

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

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

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

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

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

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

Item30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of Flextronics
International Ltd. and subsidiaries (a Singapore company)Company) and subsidiaries as of March 31, 19982000
and 19992001 and the related consolidated statements of operations, comprehensive
income(loss), shareholders' equity and cash flows for each of the three years in
the period ended March 31, 1999.2001. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
schedule based on our audits. We did not audit the financial statementsconsolidated balance sheet of
Neutronics Electronics Industries Holding A.G.The DII Group, Inc., a company acquired on October
30, 1997during fiscal 2001 in a transaction
accounted for as a pooling-of-interests,pooling of interests, as of January 2, 2000, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the two years in the period ended January 2, 2000, as discussed in Note
2.11. Such statements are included in the consolidated financial statements of
Flextronics International Ltd. and reflect total assets of 22% of the related
consolidated total as of March 31, 2000, and reflect total revenues of 23 percent23% and
19% of the related consolidated totals for the yearyears ended March 31, 1997.1999 and
2000, respectively. These statements were audited by other auditors whose report
has been furnished to us and our opinion, insofar as it relates to amounts
included for Neutronics Electronics Industries
Holding A.G.The DII Group, Inc., is based solely upon the report of the other
auditors.

We conducted our audits in accordance with auditing standards generally
accepted auditing
standards.in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
auditsaudit and the report of other auditors provide a reasonable basis for our
opinion.

In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Flextronics International Ltd. and
subsidiaries as of March 31, 19982000 and 1999,2001, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
19992001 in conformity with accounting principles generally accepted accounting principles.in the United
States.

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

ARTHUR ANDERSEN LLP

San Jose, California
April 21, 1999

3820, 2001

30
31

INDEPENDENT AUDITORS' REPORT

OF INDEPENDENT AUDITORSBoard of Directors
The Management and Supervisory Boards and Shareholders at
Neutronics Electronic Industries Holding A.G.DII Group, Inc.

We have audited the accompanying consolidated balance sheets (not presented
herein)sheet of Neutronics Electronic Industries Holdings A.G.The DII Group, Inc. and
its subsidiariesSubsidiaries (the `Group'"Company") as at December 31, 1996 ,1995 and 1994of January 2, 2000, and the related consolidated
statements of operations, shareholders'stockholders' equity and cash flows for each of the
periods thentwo years in the period ended (notJanuary 2, 2000 (none of which are presented
herein). These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States Generally Accepted
Auditing Standards.of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, thesuch consolidated financial statements (not presented
herein) present fairly, in all
material respects, the financial position of the GroupCompany as at December 31, 1996, 1995 and 1994of January 2, 2000
and the results of its operations and its cash flows for each of the periods thentwo years
in the period ended January 2, 2000, in conformity with accounting principles
generally accepted in the United States Generally Accepted Accounting Principles.

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

25 June 1999

39of America.

DELOITTE & TOUCHE LLP

Denver, Colorado
March 28, 2000

32
FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED BALANCE SHEETS
MARCH 31
---------------------------------
1998 1999
----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

MARCH 31,
---------------------------
2000 2001
----------- -----------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................................................................... $ 89,390747,049 $ 172,984631,588
Accounts receivable, less allowancesallowance for doubtful accounts of $9,528$24,957 and
$5,050 ........................................ 155,125 225,790$44,419 as of March 31, 2000 and 2001, respectively ...................... 1,057,949 1,651,252
Inventories, .......................................................................... 157,077 192,766net ............................................................ 1,142,594 1,787,055
Other current assets ................................................................. 37,942 62,492........................................................ 275,152 386,152
----------- -----------
Total current assets ......................................................... 439,534 654,032................................................ 3,222,744 4,456,047
----------- -----------
Property, plant and equipment, net ............................................................ 255,573 367,507............................................ 1,323,732 1,828,441
Goodwill and other intangibles, net .................................................... 26,561 38,666........................................... 390,351 983,384
Other assets ........................................................................... 22,455 34,174.................................................................. 198,116 303,783
----------- -----------
Total assets ......................................................................................................................... $ 744,1235,134,943 $ 1,094,3797,571,655
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Bank borrowings and current portion of long-term debt ....................................................... $ 43,209487,773 $ 54,086
Capital298,052
Current portion of capital lease obligations ............................................................ 9,587 9,807................................ 24,037 27,602
Accounts payable ..................................................................... 177,084 251,796
Accrued............................................................ 1,227,142 1,480,468
Other current liabilities .................................................................. 85,118 91,222................................................... 317,879 730,246
Deferred revenue ..................................................................... -- 5,976............................................................ 4,378 4,938
----------- -----------
Total current liabilities .................................................... 314,998 412,887........................................... 2,061,209 2,541,306
----------- -----------
Long-term debt, net of current portion ................................................. 166,497 173,753........................................ 593,830 879,525
Capital lease obligations, net of current portion ...................................... 23,181 23,426
Deferred income taxes .................................................................. 4,812 4,831............................. 51,437 37,788
Other long-term liabilities ............................................................ 18,832 9,213
Minority interest ...................................................................... 994 4,018
----------- -----------
Total long-term liabilities .................................................. 214,316 215,241
----------- -----------............................................................. 51,839 82,675

Commitments (Note 6)and contingencies

SHAREHOLDERS' EQUITY:
Ordinary Shares,shares, S$.01 par value; Authorizedauthorized -- 100,000,0001,500,000,000 shares;
issued and outstanding - 41,234,858-- 411,596,229 and 48,205,493481,531,339 as of March 31,
19982000 and 1999,2001, respectively ................................................... 260 299.............................................. 2,467 2,871
Additional paid-in capital ........................................................... 214,340 425,652.................................................. 1,997,016 4,266,908
Retained earnings .................................................................... 6,934 58,464
Cumulative translation adjustment .................................................... (6,725) (18,164)(deficit) ................................................. 373,735 (132,892)
Accumulated other comprehensive income (loss) ............................... 8,494 (106,526)
Deferred compensation ....................................................... (5,084) --
----------- -----------
Total shareholders' equity ................................................... 214,809 466,251.......................................... 2,376,628 4,030,361
----------- -----------
Total liabilities and shareholders' equity ............................................................. $ 744,1235,134,943 $ 1,094,3797,571,655
=========== ===========

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

4031
33
FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEARS ENDED MARCH 31,
-------------------------------------------------------
1997 1998------------------------------------------
1999 2000 2001
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)---------- ------------

Net Sales ........................................................sales ....................................... $ 640,0073,952,786 $6,959,122 $ 1,113,071 $ 1,807,62812,109,699
Cost of Sales .................................................... 575,142 1,004,170 1,652,891sales ................................... 3,512,229 6,335,242 11,127,896
Unusual charges ................................. 77,286 7,519 510,495
----------- ----------- --------------------- ------------
Gross margin ........................................... 64,865 108,901 154,737
----------- ----------- -----------
Operating Expenses:profit .......................... 363,271 616,361 471,308
Selling, general and administrative ............................ 36,277 53,695 68,121............. 240,512 319,952 430,109
Goodwill and intangibles amortization .......................... 2,648 3,659 3,622
Provision for excess facilities ................................ 5,868 8,869 3,361
Acquired in-process research and development ................... -- --........... 29,156 41,326 63,541
Unusual charges ................................. 2,000 ----------- ----------- -----------
Total operating expenses ............................... 44,793 66,223 77,104
----------- ----------- -----------
Income from operations ................................ 20,072 42,678 77,633
Other Expense:
Merger-related expenses ........................................ -- (7,415) --3,523 462,847
Interest and other expense, net ................................ (6,425) (13,092) (18,333)................. 52,234 69,912 67,115
----------- ----------- --------------------- ------------
Income (loss) before income taxes .............................. 13,647 22,171 59,300..... 39,369 181,648 (552,304)
Provision for Income Taxes(benefit from) income taxes ....... (11,634) 23,080 (106,285)
----------- ---------- ------------
Net income (loss) ..................... $ 51,003 $ 158,568 $ (446,019)
=========== ========== ============
Earnings (loss) per share:
Basic ......................................... $ 0.17 $ 0.44 $ (1.01)
=========== ========== ============
Diluted ....................................... 2,027 2,258 7,770$ 0.17 $ 0.42 $ (1.01)
=========== ========== ============
Shares used in computing per share amounts:
Basic ......................................... 299,984 356,338 441,991
=========== ========== ============
Diluted ....................................... 329,352 383,119 441,991
=========== ========== ============

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

32
34
FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)

YEARS ENDED MARCH 31,
------------------------------------
1999 2000 2001
-------- --------- ---------

Net income (loss) ................................................ $ 51,003 $ 158,568 $(446,019)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax ............ (12,793) (16,783) (49,844)
Unrealized gain (loss) on available-for-sale securities,
net of tax ................................................... -- 59,704 (55,851)
-------- --------- ---------
Comprehensive income (loss) ...................................... $ 38,210 $ 201,489 $(551,714)
======== ========= =========

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

33
35
FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999, 2000 AND 2001
(IN THOUSANDS)

ACCUMULATED
ORDINARY SHARES ADDITIONAL RETAINED OTHER TOTAL
------------------ PAID-IN EARNINGS COMPREHENSIVE DEFERRED SHAREHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) INCOME (LOSS) COMPENSATION EQUITY
-------- ------- ----------- --------- -------------- ------------ -------------

BALANCE AT MARCH 31, 1998................. 288,370 $ 1,753 $ 467,584 $ 202,843 $ (17,600) $(12,913) $ 641,667
Issuance of ordinary shares for
acquisitions.......................... 511 3 4,798 -- -- -- 4,801
Issuance of common stock................ 4,144 24 49,056 -- -- -- 49,080
Exercise of stock options............... 5,482 32 11,370 -- -- -- 11,402
Ordinary shares issued under Employee
Stock Purchase Plan................... 2,957 17 7,304 -- -- -- 7,321
Tax benefit on employee stock plans..... -- -- 1,635 -- -- -- 1,635
Sale of ordinary shares in public
offering, net of offering costs....... 21,600 126 193,874 -- -- -- 194,000
Ordinary share repurchase............... (4,684) (27) (24,308) -- -- -- (24,335)
Conversion of convertible notes......... 2 -- 15 -- -- -- 15
Dividends paid to former shareholders... -- -- -- (9,227) -- -- (9,227)
Deferred stock compensation............. -- -- (938) -- -- 1,172 234
Amortization of deferred stock
compensation.......................... -- -- -- -- -- 2,247 2,247
Net income.............................. -- -- -- 51,003 -- -- 51,003
Foreign currency translation............. -- -- -- -- (14,538) -- (14,538)
-------- ------- ----------- --------- --------- -------- -----------
BALANCE AT MARCH 31, 1999................. 318,382 1,928 710,390 244,619 (32,138) (9,494) 915,305
Adjustment to conform fiscal year of
pooled entity......................... -- -- -- (818) -- -- (818)
Impact of immaterial pooling of
interests acquisitions................ 1,847 6 1,607 (2,062) -- -- (449)
Issuance of common stock................ 2,448 14 9,975 -- -- -- 9,989
Exercise of stock options............... 4,991 29 18,068 -- -- -- 18,097
Ordinary shares issued under Employee
Stock Purchase Plan................... 2,118 13 8,822 -- -- -- 8,835
Tax benefit on employee stock plans .... -- -- 4,785 -- -- -- 4,785
Sale of ordinary shares in public
offering, net of offering costs....... 67,018 391 1,158,382 -- -- -- 1,158,773
Conversion of convertible notes......... 14,792 86 84,988 -- -- -- 85,074
Dividends paid to former shareholders... -- -- -- (26,572) -- -- (26,572)
Deferred stock compensation............. -- -- (1) -- -- 361 360
Amortization of deferred stock
compensation.......................... -- -- -- -- -- 4,049 4,049
Net income.............................. -- -- -- 158,568 -- -- 158,568
Change in unrealized gain (loss) on
available for sale securities........ -- -- -- -- 59,704 -- 59,704
Foreign currency translation............ -- -- -- -- (19,072) -- (19,072)
-------- ------- ----------- --------- --------- -------- -----------
BALANCE AT MARCH 31, 2000................. 411,596 2,467 1,997,016 373,735 8,494 (5,084) 2,376,628
Adjustment to conform fiscal year of
pooled entities....................... 6,882 40 4,056 (58,306) (3,787) -- (57,997)
Impact of immaterial pooling of
interests acquisitions................ 728 4 2,482 (2,112) -- -- 374
Issuance of ordinary shares for
acquisitions.......................... 10,825 63 365,422 -- -- -- 365,485
Exercise of stock options............... 11,405 66 69,504 -- -- -- 69,570
Ordinary shares issued under Employee
Stock Purchase Plan................... 445 3 8,911 -- -- -- 8,914
Tax benefit on employee stock plans..... -- -- 11,537 -- -- -- 11,537
Sale of ordinary shares in public
offering, net of offering costs....... 39,650 228 1,421,443 -- -- -- 1,421,671
Dividends paid to former shareholders.. -- -- -- (190) -- -- (190)
Amortization of deferred stock
compensation.......................... -- -- -- -- -- 5,084 5,084
Issuance of equity instrument (Note 9).. -- -- 386,537 -- -- -- 386,537
Net loss................................ -- -- -- (446,019) -- -- (446,019)
Change in unrealized gain (loss) on
available for sale securities........ -- -- -- -- (55,851) -- (55,851)
Foreign currency translation............ -- -- -- -- (55,382) -- (55,382)
-------- ------- ----------- --------- --------- -------- -----------
BALANCE AT MARCH 31, 2001................. 481,531 $ 2,871 $ 4,266,908 $(132,892) $(106,526) $ -- $ 4,030,361
======== ======= =========== ========= ========= ======== ===========

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

34
36
FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEARS ENDED MARCH 31,
-----------------------------------------
1999 2000 2001
--------- ----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................................... $ 51,003 $ 158,568 $ (446,019)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation, amortization and impairment charges ......................... 180,153 187,597 518,985
Loss (gain) on sales of equipment ......................................... (427) 2,818 (1,382)
Provision for doubtful accounts ........................................... 1,149 12,534 9,429
Provision for inventories ................................................. 7,624 32,345 33,634
Equity in earnings of associated companies ................................ (2,529) (1,591) (79)
In-process research and development ....................................... 2,000 -- --
Gain on sales of subsidiaries and long-term investments ................... (67) (365) --
Amortization of deferred stock compensation ............................... 2,247 4,049 5,084
Non-cash charge from issuance of equity instrument ........................ -- -- 286,537
Minority interest expense and other non-cash unusual charges .............. 11,553 (2,414) 139,067
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ..................................................... (180,873) (444,306) (581,225)
Inventories ............................................................. (112,381) (597,698) (559,842)
Other current assets .................................................... (30,848) (89,464) (159,902)
Other current liabilities, including accounts payable ................... 253,645 721,965 464,009
Deferred revenue ........................................................ 314 (2,292) 1,723
Deferred income taxes ................................................... (21,681) (16,107) (179,744)
--------- ----------- -----------
Net income ..............................................cash provided by (used in) operating activities ................ 160,882 (34,361) (469,725)
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net of proceeds
from sale of equipment ................................................. (322,185) (462,398) (711,227)
Purchases of OEM facilities and related assets .............................. (104,900) (249,755) (239,042)
Proceeds from sales of subsidiaries and investments ......................... -- 35,871 46,910
Other investments and notes receivable ...................................... (15,250) (117,391) (54,398)
Acquisitions of businesses, net of cash acquired ............................ (130,441) (85,743) (158,882)
Other ....................................................................... 572 -- --
--------- ----------- -----------
Net cash used in investing activities .............................. (572,204) (879,416) (1,116,639)
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings and proceeds from long-term debt ............................ 497,188 342,691 1,420,594
Repayments of bank borrowings and long-term debt ............................ (178,872) (120,231) (1,451,114)
Repayments of capital lease obligations ..................................... (19,337) (40,930) (31,788)
Dividends paid to former shareholders ....................................... (9,227) (26,572) (190)
Proceeds from exercise of stock options and Employee Stock
Purchase Plan ............................................................. 18,723 26,932 78,484
Net proceeds from issuance of common stock .................................. 23,621 9,804 --
Net proceeds from sale of ordinary shares in public offering ................ 194,000 1,158,773 1,421,671
Proceeds from issuance of equity instrument ................................. -- -- 100,000
Payments to acquire treasury stock .......................................... (24,335) -- --
Other ....................................................................... -- 1,162 --
--------- ----------- -----------
Net cash provided by financing activities .......................... 501,761 1,351,629 1,537,657
--------- ----------- -----------
Effect on cash from:
Exchange rate changes .................................................... (5,872) (8,150) (34,048)
Adjustment to conform fiscal year of pooled entities ..................... -- (818) (32,706)
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents ........................ 84,567 428,884 (115,461)
Cash and cash equivalents, beginning of year ................................ 233,598 318,165 747,049
--------- ----------- -----------
Cash and cash equivalents, end of year ...................................... $ 11,620318,165 $ 19,913747,049 $ 51,530
=========== =========== ===========

Earnings Per Share
Basic ....................................................... $ 0.35 $ 0.55 $ 1.18
=========== =========== ===========
Diluted ..................................................... $ 0.34 $ 0.52 $ 1.12
=========== =========== ===========
Shares used for earnings per share
Basic ....................................................... 33,408 36,526 43,569
=========== =========== ===========
Diluted ..................................................... 34,656 38,194 46,163
===========631,588
========= =========== ===========

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

4135
37
FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF COMPREHENSIVE INCOME

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

Net income .......................................................... $ 11,620 $ 19,913 $ 51,530
Other comprehensive loss, net of tax :
Foreign currency translation adjustment ........................... (685) (5,773) (9,940)
-------- -------- --------
Comprehensive income ................................................ $ 10,935 $ 14,140 $ 41,590
======== ======== ========

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

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

ORDINARY SHARES ADDITIONAL RETAINED CUMULATIVE TOTAL
----------------------- PAID-IN EARNINGS TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
--------- --------- --------- --------- ---------- ---------

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

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

FLEXTRONICS INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

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

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

44
2001

1. ORGANIZATION OF THE COMPANY

Flextronics International Ltd. ("Flextronics" or the "Company") iswas
incorporated in the Republic of Singapore.Singapore in May 1990. Flextronics provides advanced
electronics manufacturing services to sophisticated original equipment manufacturers, ("OEMs")or OEMs,
primarily in the telecommunications, networking, consumer electronics and
computer consumerindustries. The Company provides a network of design, engineering and
medical electronics industries.manufacturing operations in 27 countries across four continents. Flextronics
offersprovides customers with the opportunity to outsource on a full range of services
includingglobal basis, a
complete product where the Company takes responsibility for engineering, new
product introduction and implementation, manufacturing, supply chain management
and logistics management. The Company provides complete product design printed circuit board ("PCB") assembly and
fabrication, materialtechnology services; logistics services, such as materials procurement,
inventory management, plastic injection
molding, final system assembly and test,vendor management, packaging and distribution. Thedistribution; and
automation of key components subassemblies and finished products manufactured byof the Company
incorporatesupply chain through advanced interconnect, miniaturization and packaging technologies
such as surface mount ("SMT"), multichip modules ("MCM") and chip-on-board
("COB")information
technologies.

2. SUMMARY OF ACCOUNTING POLICIES

Principles of consolidation and basis of presentation

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

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

As is more fully described in Note 11,In the current fiscal year, Flextronics acquired 92%100% of the outstanding
shares of Neutronics Electronics Industries Holding A.G.The DII Group, Inc. ("Neutronics"DII"), Lightning Metal Specialties and related
entities ("Lightning"), Chatham Technologies, Inc. ("Chatham"), Palo Alto
Products International Pte. Ltd. ("Palo Alto Products International") on October 30, 1997. The acquisition wasand JIT
Holdings Ltd. ("JIT"). These acquisitions were accounted for as a
pooling-of-interestspooling of
interests and the consolidated financial statements have been restatedprepared to reflectgive
retroactive effect to the combined operations of Neutronicsmergers.

DII, Lightning and Flextronics for
all periods presented.

NeutronicsChatham operated under a calendar year end prior to merging with
Flextronics, and accordingly, Neutronics' statements of operations,
shareholders' equity and cash flows for the years ended December 31, 1996 has
been combined with the corresponding Flextronics consolidated statements for the
fiscal years ended March 31, 1997. During fiscal 1998, Neutronics'different fiscal year end wasthan
Flextronics prior to the respective mergers. However, starting in fiscal 2001,
DII, Lightning and Chatham changed from December 31 to March 31their respective year ends to conform to the
Company's fiscal
year-end.March 31 year end. Accordingly, Neutronics'DII's and Lightning's operations for
the three months ended March 31, 1997, which included net sales of $34.9 million2000, and net loss of $3.1 millionChatham's operations for the six
months ended March 31, 2000, have been excluded from the consolidated results of
operations for fiscal 2001 and have been reported as an adjustment to retained earnings inearnings.
Palo Alto Products International and JIT operated under the first quartersame fiscal year end
as Flextronics, and as such, no alignment of fiscal 1998.

All dollaryear ends was required. See
Note 11, "Business Combinations," for further details on the respective pooling
of interests transactions.

A reconciliation of results of operations previously reported by the
separate companies and the combined amounts includedpresented in the financial
statements are expressed in
U.S. dollars unless otherwise designated as Singapore dollars (S$)summarized below (in thousands).

36
38

YEARS ENDED MARCH 31,
---------------------------
1999 2000
----------- -----------

Net sales:
Flextronics .................................... $ 2,233,208 $ 4,307,193
DII ............................................ 925,543 1,339,943
Lightning ...................................... 124,795 269,258
Chatham ........................................ 206,736 376,997
Palo Alto Products International ............... 95,519 95,458
JIT ............................................ 368,229 573,132
Intercompany elimination ....................... (1,244) (2,859)
----------- -----------
As restated .................................... $ 3,952,786 $ 6,959,122
=========== ===========
Net income (loss):
Flextronics .................................... $ 60,883 $ 120,915
DII ............................................ (17,032) 58,382
Lightning ...................................... 5,051 3,461
Chatham ........................................ (15,321) (41,711)
Palo Alto Products International ............... 4,949 2,148
JIT ............................................ 12,473 15,373
----------- -----------
As restated .................................... $ 51,003 $ 158,568
=========== ===========

Reclassifications

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

Translation of Foreign Currencies

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

45
The financial position and results of operations of the Company's Swedish,Danish,
certain Italian, Norwegian, Polish, Swiss and UK Austrian, Brazilian and Hungarian subsidiaries are measured using
their respective local currencycurrencies as the functional currency. Accordingly, for
these subsidiaries all assets and liabilities are translated into U.S. dollars
at current exchange rates as of the respective balance sheet date. Revenue and
expense items are translated at the average exchange rates prevailing during the
period. Cumulative translation gains and losses from the translation of these
subsidiaries' financial statements are reported as a separate component of
shareholders' equity. On January 1, 1999, theThe Company's AustrianFinnish, French, German and Hungariancertain Italian
subsidiaries have adopted the Euro as itstheir functional currency.

Cash, Cash Equivalents and cash equivalents

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

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

For the purposes of the statement of cash flows, the Company considers allInvestments

All highly liquid instrumentsinvestments with an originala maturity of three months or less at
date of purchase are carried at fair market value and considered to be cash
equivalents. Cash and cash equivalents consist of investmentscash deposited in certificates of
deposit,checking and
money market funds, andaccounts, corporate debt securities with original
maturityand certificates of three months or less.deposit.

The Company classifies itsCompany's short-term investments incomprise of public corporate debtequity
securities as available-for-sale and are reportedincluded within Other Current Assets in the Company's
consolidated balance sheets and carried at fair market valuevalue. All investments
are generally held in accordancethe Company's name and custodied with SFAS No. 115 "Accounting for Certain Investmentsmajor financial
institutions. The specific identification method is used to determine the cost
of securities disposed of, with realized gains and losses reflected in Debtother
income and Equity Securities". As ofexpense. At March 31, 1999, the fair value2001, all of the Company's short-term
investments in corporate debt securities approximated amortized cost and,were classified as such, unrealizedavailable-for-sale. Unrealized holding gains and
losses were insignificant. The fair valueon these investments are included as a separate component of
shareholders' equity, net of any related tax effect.

37
39
Cash equivalents and short-term investments consist of the following (in
thousands):

MARCH 31, 2001
--------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------

Money market funds .................... $344,499 $ -- $ -- $344,499
Certificates of deposits .............. 272 -- -- 272
Corporate debt securities ............. 5,264 -- -- 5,264
Corporate equity securities ........... 1,622 3,853 -- 5,475
-------- ------ ---- --------
$351,657 $3,853 $ -- $355,510
======== ====== ==== ========
Included in cash and cash equivalents . $350,035 $ -- $ -- $350,035
Included in other current assets ...... 1,622 3,853 -- 5,475
-------- ------ ---- --------
$351,657 $3,853 $ -- $355,510
======== ====== ==== ========

MARCH 31, 2000
----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------

Money market funds .................... $236,342 $ -- $ -- $236,342
Certificates of deposits .............. 36,775 -- -- 36,775
Corporate debt securities ............. 282,781 -- -- 282,781
Corporate equity securities ........... 19,660 59,704 -- 79,364
-------- ------- ---- --------
$575,558 $59,704 $ -- $635,262
======== ======= ==== ========
Included in cash and cash equivalents . 555,898 -- -- 555,898
Included in other current assets ...... 19,660 59,704 -- 79,364
-------- ------- ---- --------
$575,558 $59,704 $ -- $635,262
======== ======= ==== ========

During fiscal year 2001, net gains realized on the sale of marketable
equity securities amounted to approximately $33.4 million. There were no sales
activities for the fiscal year ended March 31, 2000. The Company also has
certain investments in non-publicly traded companies. These investments are
included within Other Assets in the Company's consolidated balance sheet and are
carried at cost. The Company monitors these investments was determined based on quoted market prices at the
reporting date for those instruments.impairment and makes
appropriate reductions in carrying values when necessary.

Property, plant and equipment

Property, plant and equipment is stated at cost. Depreciation and
amortization are provided on a straight-line basis over the estimated useful
lives of the related assets (two(one to tenthirty years), with the exception of
building leasehold improvements, which are amortized over the life of the lease,
if shorter. Repairs and maintenance costs are expensed as incurred. Property,
plant and equipment was comprised of the following as of March 31:

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

46
31 (in
thousands):

2000 2001
----------- -----------

Machinery and equipment ........................ $ 927,294 $ 1,209,422
Buildings ...................................... 418,332 596,070
Leasehold improvements ......................... 55,834 168,764
Computer equipment and software ................ 74,412 167,115
Furniture, fixtures and vehicles ............... 79,397 216,818
Other, including land .......................... 119,677 88,901
----------- -----------
1,674,946 2,447,090
Accumulated depreciation and amortization ...... (351,214) (618,649)
----------- -----------
Property, plant and equipment, net ............. $ 1,323,732 $ 1,828,441
=========== ===========

Concentration of credit risk

Financial instruments, which potentially subject the Company to
concentrationconcentrations of credit risk, are primarily accounts receivable, cash
equivalents and cash
equivalents.investments. The Company performs ongoing credit evaluations of
its customers' financial condition and maintains an allowance for doubtful
accounts based on the outcome of its credit evaluations. The Company maintains
cash and cash equivalents with various financial institutions that management

38
40
believes to be of high credit quality. These financial institutions are located
in many different locations throughout the world.

Sales to customers whoNo customer accounted for more than 10% of net sales were as
followsin fiscal 1999 and
fiscal 2001. In fiscal 2000, Ericsson accounted for the years ended March 31:

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

Priorapproximately 12% of net
sales. We have increasingly focused on sales to the company's acquisition of Neutronics, Philips Electronics Group
("Philips") held a significant ownership interest in Neutronics (see Note 11).
Saleslarger companies and to
Philips, which are included in net salescustomers in the accompanying
consolidated statementstelecommunications, networking, consumer electronics and
computer industries. In fiscal 2001, our ten largest customers accounted for
approximately 59% of operations, totaled $120 million, $139 million, and
$325 million in fiscal 1997, 1998 and 1999, respectively. Neutronics also
purchased raw materials from Philips totaling $30 million, $53 million and $153
million in fiscal 1997, 1998 and 1999, respectively.

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

Goodwill and other intangibles

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

Intangible assets are comprised of technical agreements, patents,
trademarks, developed technologies and other acquired intangible assets
including assembled work forces, favorable leases and customer lists. Technical
agreements are being amortized on a straight-line basis over periods of up to
five years. Patents and trademarks are being amortized on a straight-line basis
over periods of up to ten5 years. Purchased developed technologies are being
amortized on a straight-line basis over periods of up to seven years. Intangible
assets related to assembled work forces, favorable leases and customer lists are
amortized on a straight-line basis over three to ten years.

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

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

Long-Lived Assets31 (in
thousands):

2000 2001
-------- -----------

Goodwill ....................................... $420,494 $ 1,060,712
Other intangibles .............................. 55,397 79,730
-------- -----------
475,891 1,140,442
Accumulated amortization ....................... (85,540) (157,058)
-------- -----------
Goodwill and other intangibles, net ............ $390,351 $ 983,384
======== ===========

Long-lived assets

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of property and equipment is measured by
comparison of its carrying amount, including the unamortized portion of goodwill
allocated to the property and equipment, to future net cash flows the property
and equipment are expected to generate. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property and equipment, including the allocated goodwill,
if any, exceeds its fair market value. The Company assesses the recoverability
of enterprise level goodwill and intangible assets as well as long-lived assets
by determining whether the unamortized balances can be recovered through
undiscounted future results of the operation or asset. The amount of enterprise
level long lived asset impairment, if any, is measured based on projected
discounted future results using a discount rate reflecting the Company's average
cost of funds. To date, the Company has made noThe Company's adjustments to the carrying value of its long-lived
assets.assets are discussed in Note 9, "Unusual Charges."

Use of estimates

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

Inventories

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

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

Accruedfollows (in thousands):

39
41

2000 2001
---------- ----------

Raw materials ................................ $ 820,070 $1,346,427
Work-in-process .............................. 207,474 301,875
Finished goods ............................... 115,050 138,753
---------- ----------
$1,142,594 $1,787,055
========== ==========

Other current liabilities

AccruedOther current liabilities waswere comprised of the following as of March 31:

199831
(in thousands):

2000 2001
-------- --------

Income taxes payable ................................... $ 26,108 $ 33,777
Accrued payroll ........................................ 112,035 182,217
Sales taxes and other taxes payable .................... 19,600 20,797
Accrued expenses for unusual charges (see Note 9) ...... 931 170,384
Other accrued liabilities .............................. 159,205 323,071
-------- --------
$317,879 $730,246
======== ========

Revenue recognition

In December 1999, ------- -------
Income taxes payable ................................... $ 4,183 $ 9,737
Accrued payroll ........................................ 19,928 31,593
Accrued loan interest .................................. 6,016 6,056
Provision for excess facilities (see note 9) ........... 5,445 2,523
Purchase price payablethe Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to former Astron's Shareholders . 10,000 --
Amount due underrevenue recognition issues in financial statements. The Company
adopted SAB 101 as required in the Service Agreement ................. 13,909 --
Customer deposits ...................................... 4,121 18,299
Sales tax payable ...................................... 4,347 5,779
Other accrued liabilities .............................. 17,169 17,235
------- -------
$85,118 $91,222
======= =======

Revenue recognitionfourth quarter of fiscal 2001 and the
adoption of SAB 101 did not have a material impact on the Company's consolidated
financial statements.

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

Interest and other expense, net

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

1997 1998 1999
-------- -------- --------
Interest expense ......................... $ (6,426) $(17,700) $(21,899)
Interest income .......................... 706 2,742 5,161
Foreign exchange gain (loss) ............. 1,665 1,581 (3,115)
Equity in31 (in thousands):

1999 2000 2001
-------- -------- ---------

Interest expense ...................................... $ 61,430 $ 84,198 $ 135,243
Interest income ....................................... (11,374) (22,681) (32,219)
Foreign exchange (gain) loss .......................... 3,543 2,128 (4,028)
Other (income) expense, net ........................... (1,365) 6,267 (31,881)
-------- -------- ---------
Total interest and other expense, net ....... $ 52,234 $ 69,912 $ 67,115
======== ======== =========

Earnings Per Share

Basic earnings of associated companies 133 1,194 1,036
Permanent impairment in investment ....... (3,200) -- --
Bank commitment fees ..................... (750) -- --
Gain on sale of subsidiary ............... 1,027 -- --
Minority interest ........................ (394) (363) (1,313)
Other income(expense), net ............... 814 (546) 1,797
-------- -------- --------
Total other expense, net ....... $ (6,425) $(13,092) $(18,333)
======== ======== ========

Net income per share

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

Diluted net incomeearnings per share is computed using the weighted average number of
Ordinary Sharesordinary shares and dilutive Ordinary Shareordinary share equivalents outstanding during the
applicable periods. Ordinary Shareshare equivalents include Ordinary Sharesordinary shares issuable
upon the exercise of stock options and other equity instruments, and are
computed using the treasury stock method.

The Company set a record date of December 22, 1998 for a two-for-one stock
split to be effected as a bonus issue (the Singapore equivalent of a stock
dividend). The distribution of Ordinary Shares occurred on January 11, 1999. All
share and40
42
Earnings per share amounts have been retroactively restated to reflect the
stock split.

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

1997 1998 1999
------- ------- -------
Ordinary Shares issued and outstanding(1) .... 32,438 35,606 43,569
Ordinary Shares due to Astron(2) ............. 970 920 --
------- ------- -------
Weighted average Ordinary Shares -- basic .... 33,408 36,526 43,569
Ordinary Share equivalents -- stock options(3) 1,248 1,668 2,594
------- ------- -------
Weighted average Ordinary Shares and
equivalents -- diluted ..................... 34,656 38,194 46,163
======= ======= =======
Net income ................................... $11,620 $19,913 $51,530
======= ======= =======
Basic earnings per share ..................... $ 0.35 $ 0.55 $ 1.18
======= ======= =======
Diluted earnings per share ................... $ 0.34 $ 0.52 $ 1.12
======= ======= =======
1999 2000 2001
-------- -------- ---------

BASIC EARNINGS (LOSS) PER SHARE:
Net income (loss) ................................................. $ 51,003 $158,568 $(446,019)
-------- -------- ---------
Shares used in computation:
Weighted-average ordinary shares outstanding ................... 299,984 356,338 441,991
======== ======== =========
Basic earnings (loss) per share ................................... $ 0.17 $ 0.44 $ (1.01)
======== ======== =========

DILUTED EARNINGS (LOSS) PER SHARE:
Net income (loss) ................................................. $ 51,003 $158,568 $(446,019)
Plus income impact of assumed conversions:
Interest expense (net of tax) on convertible
subordinated notes ........................................... 3,105 400 --
Amortization (net of tax) of debt issuance costs on
convertible subordinated notes ............................... 260 33 --
-------- -------- ---------
Net income (loss) available to shareholders .................... $ 54,368 $159,001 $(446,019)
Shares used in computation:
Weighted-average ordinary shares outstanding ................... 299,984 356,338 441,991
Shares applicable to exercise of dilutive options(1),(2) ....... 14,174 25,021 --
Shares applicable to deferred stock compensation ............... 432 302 --
Shares applicable to convertible subordinated notes ............ 14,762 1,458 --
-------- -------- ---------
Shares applicable to diluted earnings ........................ 329,352 383,119 441,991
======== ======== =========
Diluted earnings (loss) per share ................................. $ 0.17 $ 0.42 $ (1.01)
======== ======== =========

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

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

(3) Stock options of the Company calculated based on the treasury stock method
using average market price for the period, if dilutive. Options to purchase
495,610, 173,7921,591,596 and 56,329 weighted961,436 shares outstanding during the fiscal 1997,
1998,years ended
March 31, 1999 and 1999,March 31, 2000, respectively, were excluded from the
computation of diluted earnings per share because the optionsoptions' exercise
price was greater than the average market price of the Company's Ordinary Sharesordinary
shares during those fiscal years.

Comprehensive Income(2) The Company adopted SFAS No. 130, "Comprehensive Income" in the first
quarter of fiscal 1999. SFAS No. 130 requires companies to report an additional
measure of income on the income statement referred to as "comprehensive income"
or to create a separate financial statement that reflects comprehensive income.
The Company's comprehensive income includes net incomeordinary share equivalents from stock options and foreign currency
translation adjustments.

The following table sets forth the components of other comprehensive loss
net of income taxequity
instruments were antidilutive for the yearsfiscal year ended March 31:

1997 1998 1999
------------------------------- ------------------------------- ------------------------------
Tax Tax Tax
Pre-Tax (Expense) Net-of-Tax Pre-Tax (Expense) Net-of-Tax Pre-Tax (Expense) Net-of-Tax
Amount or Benefit Amount Amount or Benefit Amount Amount or Benefit Amount
------- -------- ------- ------- ------- -------- -------- ------- --------

Other comprehensive
loss :
Foreign currency
translation
adjustment ................. $ (804) $ 119 $ (685) $(6,427) $ 654 $ (5,773) $(11,439) $ 1,499 $(9,940)
31, 2001, and
therefore not assumed to be converted for diluted earnings per share
computation.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS No. 133") which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments imbeddedembedded in other contracts and for hedging activities. It requires
that companies recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. 50
The
Company expects to adoptadopted SFAS No. 133 the first quarter of fiscaleffective April 2001 and anticipates that SFAS No. 133the adoption will not have
a material impact on its consolidated financial statements.

3. SUPPLEMENTAL CASH FLOW DISCLOSURES

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

1997 1998 1999 2000 2001
------- ------- ---------------

Cash paid for:
Interest ............................................................................................................... $42,513 $78,293 $ 4,927 $11,076 $15,30468,363
Income taxes ........................................... 1,717 1,271 2,311............................................................ 16,846 12,927 15,312
Non-cash investing and financing activities:
Equipment acquired under capital lease obligations ..... 14,783 9,094 11,851
Earnout...................... 50,843 50,897 10,318
Conversion of $6.25 million payableconvertible notes to Astron's
shareholders less reduction in amount due under
the Services Agreement ............................ 5,250common stock ......................... -- 85,074 --

41
43

Issuances of ordinary shares for purchases of OEM assets ................ -- -- Issuance26,902
Issuances of 127,850 Ordinary Shares valued at $37.54ordinary shares for acquisitionacquisitions of FICO ...............................businesses ............. 4,801 -- -- 4,800338,583

4. BANK BORROWINGS AND LONG-TERM DEBT

In June 2000, the Company issued approximately $645.0 million of senior
subordinated notes, consisting of $500.0 million of 9.875% notes and euros 150.0
million of 9.75% notes. Interest is payable on July 1 and January 1 of each
year, commencing January 1, 2001. The notes mature on July 1, 2010. The Company
may redeem the notes on or after July 1, 2005. The fair value of the 9.875%
senior subordinated notes and the 9.75% euro senior subordinated notes based on
broker trading prices was 96.5% and 99.0% of the face value on March 31, 2001,
respectively.

Additionally, the Company has $150$150.0 million in unsecured Senior Subordinated Notessenior
subordinated notes due in 2007 outstanding with an annual interest rate of
8.75% due semi-annually.. Interest is payable on April 15 and October 15 of each year. The notes
mature on October 15, 2007. The fair value of the unsecured Senior Subordinated Notessenior subordinated
notes based on broker trading prices was 103%93.5% of the face value on March 31,
1999. In addition, during fiscal
1999,2001.

The indentures relating to the notes contain certain covenants that, among
other things, limit the ability of the Company increasedand certain of its credit facilitysubsidiaries
to $120.0 million(i) incur additional debt, (ii) issue or sell stock of certain subsidiaries,
(iii) engage in asset sales, and amended
certain(iv) make distributions or pay dividends. The
covenants are subject to a number of significant exceptions and financial ratios. As of March 31, 1999,limitations.

In April 2000, the Company has
borrowed $20.9replaced its existing credit facilities, with a
$500.0 million under the credit facility lineRevolving Credit Facility ("Credit Facility") with a syndicate of
credit.domestic and foreign banks. The Credit Facility is secured by substantially allconsisted of two separate credit
agreements, one providing for up to $150.0 million principal amount of revolving
credit loans to the Company and designated subsidiaries ("Tranche A") and one
providing for up to $350.0 million principal amount of revolving credit loans to
the Company's assetsprincipal United States subsidiaries ("Tranche B"). Both Tranche A
and expires in
January 2001.Tranche B are split equally between a 364 day and a three year facility.
Borrowings under the credit facilityCredit Facility bear interest, at the Company's option, at
either: (i) the base rate (as defined in the Credit Facility); or (ii) the LIBOR
rate (as defined in the Credit Facility) plus the applicable margin for LIBOR
loans ranging between 0.625% and 1.75%, based on certain financial ratios of the
United States prime rate orCompany. The Company is required to pay a quarterly commitment fee ranging from
0.15% to 0.375% per annum, based on certain financial ratios of the London interbank
offering rate (LIBOR) plus 0.5% (5.0%Company, of
the unutilized portion of the Credit Facility. The Credit Facility was amended
on April 3, 2001 to provide for an additional 364 day facility with similar
terms and conditions.

The Credit Facility is unsecured, and contains certain restrictions on the
Company's ability to (i) incur certain debt, (ii) make certain investments and
(iii) make certain acquisitions of other entities. The Credit Facility also
requires that the Company maintain certain financial covenants, including, among
other things, a maximum ratio of total indebtedness to EBITDA (earnings before
interest, taxes, depreciation, and amortization) and a minimum ratio of fixed
charge coverage, as defined, during the term of March 31, 1999).the Credit Facility. Borrowings
under the Credit Facility are guaranteed by the Company and certain of its
subsidiaries. As of March 31, 1999,2001, there were no borrowings outstanding under
the Credit Facility and the Company has $99.1 million available underwas in compliance with its Credit Facility line of
credit.covenants

Certain subsidiaries of the Company have various lines of credit available
with annual interest rates generally ranging from 4.0%3.1% to 6.4%7.8%. These lines of
credit expire on various dates through 2001.2002. The Company also has term loans
with annual interest rates generally ranging from 4% to 7%below 8.0% with terms of up to 2015 years.
These lines of credit and term loans are primarily secured by assignment of
account receivables and assets.

The Company has financed the purchase of certain facilities with mortgages.
The mortgages generally have terms of 5up to 2010 years and annual interest rates
ranging from 6.0%5.0% to 18.25%9.0% and are secured by the underlying properties with a
net book value of approximately $23 million.

In addition, the Company had notes payable for purchase price due to the
former shareholders of FICO for the additional 50% interest acquired in$63.4 million at March 1999. The notes were unsecured for a total of $3 million and bear interest at
2%.

51
31, 2001.

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

1998 1999
--------- ---------
Senior Subordinated Notes .............. $ 150,000 $ 150,000
Outstanding under lines of credit ...... 23,010 13,193
Credit Facility ........................ -- 20,914
Mortgages .............................. 12,848 15,630
Term loans and other debt .............. 23,848 28,102
--------- ---------
209,706 227,839
Current portion ...................... (43,209) (54,086)
--------- ---------
Non-current portion .................. $ 166,497 $ 173,753
========= =========31 (in thousands):

2000 2001
----------- -----------

Senior subordinated notes .................... $ 300,000 $ 779,596
Credit facilities ............................ 433,849 --
Outstanding under lines of credit ............ 116,624 219,579

42
44

Mortgages .................................... 23,550 43,340
Term loans and other debt .................... 207,580 135,062
----------- -----------
1,081,603 1,177,577
Current portion .................... (487,773) (298,052)
----------- -----------
Non-current portion ................ $ 593,830 $ 879,525
=========== ===========

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

2000.............................................. $ 54,086
2001.............................................. 5,539
2002.............................................. 4,119
2003.............................................. 3,026
2004.............................................. 2,049
Thereafter........................................ 159,020
---------
$ 227,839
=========31 (in thousands):

2002............................................ $ 298,052
2003............................................ 39,976
2004............................................ 14,141
2005............................................ 9,738
2006............................................ 11,872
Thereafter...................................... 803,798
-----------
$1,177,577
==========

5. FINANCIAL INSTRUMENTS

The value of the Company's cash and cash equivalents, investments, accounts
receivable and accounts payable carrying amount approximates fair value. The
fair value of the Company's long-term debt (see Note 4)4, "Bank Borrowings and
Long-Term Debt") is determined based on current broker trading prices. The
Company's cash equivalents are comprised of investment grade
certificates of deposits,cash deposited in money market
accounts, and corporate debt securities and certificates of deposit (see Note 2)2,
"Summary of Accounting Policies"). The Company's investment policy limits the
amount of credit exposure to 10%20% of the total investment portfolio in any single
issuer. All of
the Company's investments have an original maturity of 90 days or less.

The Company enters into forward exchange contracts to hedge underlying
transactional currency exposures and does not engage in foreign currency
speculation. The credit risk of these forward contracts is minimal since the
contracts are with large financial institutions. The Company hedges committed
exposures and these forward contracts generally do not subject the Company to
risk of accounting losses. The gains and losses on forward contracts generally
offset the gains and losses on the asset, liabilities and transactions hedged.
The Company's off-balance sheet financial instruments consist of $80.7$61.1 million
and $16.5$200.4 million of aggregate foreign currency forward contracts outstanding
at the end of fiscal year 19982000 and 1999,2001, respectively. These foreign exchange
contracts expire in less than three months and will settle in Euro, French
Franc, German Deutsche Mark, Japanese Yen, Swedish Kronor and United States
dollar.

6. COMMITMENTS AND CONTINGENCIES

As of March 31, 19982000 and 1999,2001, the Company has financed a total of $49,606$77.6
million and $52,295,$142.8 million, respectively in machinery and equipment purchases
with capital leases. Accumulated amortization for property and equipment under
capital leases totals $13,764totaled $26.8 million and $13,997$61.2 million at March 31, 19982000 and
1999,2001, respectively. These capital leases have interest rates ranging from 1.7%1.8%
to 16.6%14.6%. The Company also leases certain of its facilities under non-cancelable
operating leases. The 52
capital and operating leases expire in various years
through 20082007 and require the following minimum lease payments for the years
ended March 31:

CAPITAL OPERATING
------- ---------
2000.................................................. $11,921 $18,278
2001.................................................. 8,592 17,563
2002.................................................. 5,715 13,049
2003.................................................. 4,402 4,942
2004.................................................. 2,971 1,929
Thereafter............................................ 5,145 6,770
------- -------
Minimum lease payments................................ 38,746 $62,531
=======
Amount representing interest.......................... (5,513)
-------
Present value of minimum lease payments............... 33,233
Current portion....................................... (9,807)
-------
Capital lease obligations, net of current
portion............................................. $23,426
=======31 (in thousands):

CAPITAL OPERATING
-------- ---------

2002...................................................... $ 31,354 $117,171
2003...................................................... 20,859 101,714
2004...................................................... 14,069 70,801
2005...................................................... 3,177 35,463
2006...................................................... 1,359 16,456
Thereafter................................................ 400 16,848
-------- --------
Minimum lease payments.................................... 71,218 $358,453
========
Amount representing interest.............................. (5,828)
--------
Present value of minimum lease payments................... 65,390
Current portion........................................... (27,602)
--------
Capital lease obligations, net of current portion......... $ 37,788
========

43
45
Total rent expense was $3,144, $8,188$28.7 million, $50.7 million and $17,033$78.7 million for
the years ended March 31, 1997, 19981999, 2000 and 1999,2001, respectively.

We are party to various legal proceedings that arise in the normal course of
business. In the opinion of management, the ultimate disposition of these
proceedings will not have a material adverse effect on our consolidated
financial position, liquidity or results of operations.

7. INCOME TAXES

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

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

1999 2000 2001
------- -------- ---------

Singapore ................... $ 4,912 $ 32,377 $(269,771)
Foreign ..................... 34,457 149,271 (282,533)
------- -------- ---------
Total ....................... $39,369 $181,648 $(552,304)
======= ======== =========

The provision for (benefit from) income taxes consisted of the following for
the years ended March 31:

1997 1998 1999
------- ------- -------
Current 31 (in thousands):

Singapore ............. $ 1,608 $ 226 $ --
Foreign ............... 1,395 4,364 8,346
------- ------- -------
$ 3,003 $ 4,590 $ 8,346
======= ======= =======

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

1999 2000 2001
-------- --------- ---------

Current:
Singapore ............... $ 2,828 $ 839 $ 6,607
Foreign ................. 7,755 35,406 27,170
-------- --------- ---------
10,583 36,245 33,777
-------- --------- ---------
Deferred:
Singapore ............... 363 2,870 (2,206)
Foreign ................. (22,580) (16,035) (137,856)
-------- --------- ---------
(22,217) (13,165) (140,062)
-------- --------- ---------
$(11,634) $ 23,080 $(106,285)
======== ========= =========

The Singapore statutory income tax rate was 26%approximately 26.0% for each of
the years in the two year period ended March 31, 1997, 19982000, and 1999.24.5% for the one
year period ended March 31, 2001. The reconciliation of the income tax expense
(benefit) expected based on Singapore statutory income tax rates to the
provision for (benefit from) income taxes included in the consolidated
statements of operations for the years ended March 31 is as follows:follows (in
thousands):

1997 1998 1999 2000 2001
-------- -------- -----------------

Income taxes based on Singapore statutory rates ................................................. $ 3,54810,236 $ 5,764 $ 15,418
Losses from non-incentive Singapore operations 498 2,707 3,09847,133 $(135,315)
Effect of tax rate differential ........................... (19,220) (41,984) (138,105)
Tax exempt income ............................ -- --......................................... (549) Effect of foreign operations taxed at various
rates ...................................... (3,368) (3,443) (6,003)(866) (8,790)
Amortization of goodwill and other intangibles ..... 436 946 942
Merger costs ................................. -- 398 --
Benefit from realized deferred tax assets .... -- (2,829) (5,229)
Joint venture losses ......................... -- (310) (269)
Bank commitment fees ......................... 382............ 3,350 4,334 15,568
Motorola unusual charge ................................... -- -- 70,201
Merger expenses ........................................... -- -- 16,059
Facility closure costs .................................... -- -- 46,094
Change in valuation allowance ............................. (2,827) 15,993 26,848
Tax credits and carryforwards ............................. (1,166) (4,800) --
Other ........................................ 531 (975) 362..................................................... (1,458) 3,270 1,155
-------- -------- -----------------
Provision for (benefit from) income taxes ................ $(11,634) $ 2,027 $ 2,258 $ 7,77023,080 $(106,285)
======== ======== ========
Effective tax rate .......................... 14.9% 10.2% 13.1%=========

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

1998 1999
-------- --------
Deferred tax liabilities:
Depreciation ........................................... $ (855) $ (4,314)
Intangible assets ...................................... (2,405) (2,059)
Fixed assets ........................................... -- (515)
Exchange losses ........................................ -- (857)
Others ................................................. (1,552) (1,097)
-------- --------
Total deferred tax liability ................... $ (4,812) $ (8,842)
-------- --------31 (in
thousands):

2000 2001
--------- ---------

Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries ..................... $ (2,766) $ --
Intangible assets ............................................... (10,604) (6,665)
Fixed assets .................................................... (34,922) --
Others .......................................................... (5,398) (803)
--------- ---------
Total deferred tax liabilities .......................... $ (53,690) $ (7,468)
--------- ---------

Deferred tax assets:

Depreciation ........................................... $ 471 $ 598
Provision for inventory obsolescence ................... 3,117 2,869
Provision for doubtful accounts ........................ 1,100 1,600

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

The net deferred tax liability is classified as follows:
Long-term liability .............................. $ (4,812) $ (4,831)
Current and non-current assets ................... 2,586 3,181
-------- --------
$ (2,226) $ (1,650)
======== ========44
46

Fixed assets .................................................... $ -- $ 15,855
Deferred compensation ........................................... 6,057 43,147
Compensated absences ............................................ 1,164 3,210
Provision for inventory obsolescence ............................ 10,867 35,760
Provision for doubtful accounts ................................. 5,625 8,782
Net operating loss carryforwards ................................ 67,689 133,860
Federal and state credits ....................................... 11,857 11,414
Uniform capitalization of inventory ............................. 4,493 2,523
Unusual charges ................................................. -- --
Others .......................................................... 13,069 37,982
--------- ---------
Total deferred tax assets ............................... 120,821 292,533
Valuation allowances ............................................ (50,342) (102,792)
--------- ---------
Total deferred tax assets ............................... $ 70,479 $ 189,741
--------- ---------
Net deferred tax asset ......................................... $ 16,789 $ 182,273
========= =========
The net deferred tax asset is classified as follows:
Current asset (classified as Other Current Assets) .............. $ 18,338 $ 42,595
Long-term asset (classified as Other Assets/Liabilities) ........ (1,549) 139,678
--------- ---------
$ 16,789 $ 182,273
========= =========

A deferred tax asset arises substantially from available tax loss carryforwards. Thesecarryforwards and
non-deductible accruals. The Company has total tax losses can only be offset against future incomeloss carryforwards of
operations in respectapproximately $400.0 million, a portion of which begin expiring in tax year
2010. The utilization of these tax loss deductions is limited to the future
operations of the Company in the tax lossesjurisdictions in which such loss deductions
arose. As a result, management is uncertain as to when or whether these
operations will generate sufficient

54
profit to realize the deferred tax asset
benefit. The valuation allowance provides a reserve against deferred tax assets
that may expire or go unutilized by the Company. In accordance with the guidelines included in SFAS No. 109
"Accounting for Income Taxes,"However, management has
determined that it is more likely than not that the Company will not realize certain
of these benefits and, accordingly, has providedrecognized a valuation allowance for them.deferred tax asset from
these benefits. The amount of deferred tax assets considered realizable,
however, could be reduced or increased in the near-term if facts, change, including the
amount of taxable income or the mix of taxable income between subsidiaries,
differ from management's estimates.

At March 31, 1999, theThe Company had operating loss carryforwards of
approximately $15,208does not provide for U.S. federal income tax purposes which will expire
between 2003 and 2012 iftaxes on the undistributed
earnings of its foreign subsidiaries as such earnings are not previously utilized. Utilization of these net
operating loss carryforwards mayintended by
management to be subject to an annual limitation due torepatriated in the change in ownership rules provided by the Internal Revenue Code (the "Code").
This limitation and other restrictions provided by the Code may reduce the net
operating loss carryforwards such that they would not be available to offset
future taxable incomeforeseeable future. Determination of the
U.S. subsidiary.

At March 31, 1999, the Company had operating loss carryforwards of
approximately $9,867, $6,765 and $6,547 in U.K., Austria and Hong Kong,
respectively with various loss carryforward lives pursuant to local county tax
laws. The utilization of these net operating loss carryforwards is limited to
the future operationsamount of the Company in the tax jurisdictions in which such
carryforwards arose.

Distributions of earnings by the Austrian subsidiary are exempt from
Austrian income taxes under the international participation privilege. Nounrecognized deferred tax liability has been provided for withholding taxes on distributions
of dividends by the Austrian subsidiary, or any other foreign subsidiaries,
becausethese undistributed
earnings of foreign subsidiaries are to be reinvested indefinitely.

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

The Company has been granted the following tax incentives:

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

(ii) Product Export Enterprise incentive for the Shekou and Shenzhen, China
facilities. The Company's operation in Shekou and Shenzhen, China are
located in "Special Economic Zone" and are approved "Product Export
Enterprise' which qualifies for a special corporate income tax rate of 10%.
This special tax rate is subject to the Company exporting more than 70% of
its total value of products manufactured in China. The Company's status as
a Product Export Enterprise is reviewed annually by the Chinese government.

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

to apply for a five-year tax incentive. The Company obtained the incentive
for the Doumen plant in December 1995 and the Xixiang plant in October.
With the approval of the Chinese tax authorities, the Company's tax rates
on income from these facilities during the incentive period will be 0% in
years 1 and 2 and 7.5% in years 3 through 5, commencing in the first
profitable year. The Company has another plant in Doumen which commenced
operations in the fiscal year 1998. The plant which falls under the
"Foreign Investment Scheme" is confident that the five year incentive will
be granted upon formal application in its first profitable year. However,
there can be no assurance that the five year incentive will be granted.

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

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

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

8. SHAREHOLDERS' EQUITY

Issuance of non-employee stock options

In June 1996, the Company issued 40,000 stock options with an exercise
price of $15.62 to a customer as a result of that customer reaching a specified
sales target in accordance with an option agreement. These options were valued
as of the grant date using the Black-Scholes model. The resulting value of $380
was recorded as a sales discount in the accompanying consolidated statement of
operations for fiscal 1997.

Secondary offerings

In October 1997,During fiscal 1999, the Company completed an offering of its Ordinary Shares.ordinary
shares. A total of 4,370,00021,600,000 ordinary shares were sold, at a price of $23.50 per share resulting
in net proceeds to the Company of $96.2 million.

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

During fiscal 2000, the Company completed three secondary offerings of its
ordinary shares. A total of 67,018,000 ordinary shares were sold, resulting in
net proceeds to the Company of approximately $1.2 billion.

During fiscal 2001, the Company completed two equity offerings of its
ordinary shares. A total of 39,650,000 ordinary shares were sold, resulting in
net proceeds to the Company of approximately $1.4 billion.

Stock split

Thesplits

In fiscal 1999, the Company set a record date of December 22, 1998 foreffected a 2:1 stock split to
besplit. A distribution of
47,068,458 ordinary shares occurred on January 11, 1999. In fiscal 2000, the
Company effected a second 2:1 stock split. A distribution of 57,497,204 ordinary
shares occurred on December 22, 1999. In fiscal 2001, the Company effected
another 2:1 stock split. A distribution of 209,001,331 ordinary shares occurred
on October 16, 2000. Each of the stock splits was effected as a bonus issue (the
Singapore equivalent of a stock dividend). The distribution of 23,534,229 Ordinary Shares occurred on January 11, 1999. The
Company has accounted for this transactionthese
transactions as a stock split and all share and per share amounts have been
retroactively restated to reflect all stock splits.

Strategic Alliance

45
47
On May 30, 2000, the 2:1 stock
split.

56
Company entered into a strategic alliance for product
manufacturing with Motorola. This alliance provides incentives for Motorola to
purchase over $32.0 billion of products and services from us through December
31, 2005. The relationship is not exclusive and does not require that Motorola
purchase any specific volumes of products or services from the Company. The
Company's ability to achieve any of the anticipated benefits of this
relationship is subject to a number of risks, including its ability to provide
services on a competitive basis and to expand manufacturing resources, as well
as demand for Motorola's products. In connection with this strategic alliance,
Motorola paid $100.0 million for an equity instrument that entitles it to
acquire 22,000,000 Flextronics ordinary shares at any time through December 31,
2005 upon meeting targeted purchase levels or making additional payments to the
Company. The issuance of this equity instrument resulted in a one-time non-cash
charge equal to the excess of the fair value of the equity instrument issued
over the $100.0 million proceeds received. As a result, the one-time non-cash
charge amounted to approximately $286.5 million offset by a corresponding credit
to additional paid-in capital in the first quarter of fiscal 2001. During the
term of the strategic alliance, if Motorola meets targeted purchase levels, no
additional payments may be required by Motorola to acquire 22,000,000
Flextronics ordinary shares. However, there may be additional non-cash charges
of up to $300.0 million over the term of the strategic alliance. (See Note 14,
"Subsequent Events" for additional information on this equity instrument.)

Stock-based compensation

The Company's 1993 Share Option Plan (the "Plan") provides for the grant of
up to 7,200,00050,800,000 incentive stock options and non-statutory stock options to
employees and other qualified individuals to purchase Ordinary Sharesordinary shares of the
Company. As of March 31, 1999,2001, the Company had 113,967 Ordinary Shares5,741,227 ordinary shares
available for future option grants under the Plan at an exercise price of not
less than 85% of the fair value of the underlying stock on the date of grant.
Options issued under the Plan generally vest over 4 years andyears. Pursuant to an
amendment to the provisions relating to the term of options provided under the
Plan, options granted subsequent to October 1, 2000 expire 510 years from the
date of grant.grant, rather than the five-year term previously provided.

The Company's 1997, 1998 and 1999 Interim Option Plans provide for grants
of up to 500,000, 786,000,2,000,000, 3,144,000, and 1,300,0005,200,000 stock options, respectively. These
plans provide grants of non-statutory stock options to employees and other
qualified individuals to purchase Ordinary Sharesordinary shares of the Company. Options under
these plans can notcannot be granted to executive officers and directors. The Company'sAs of March
31, 2001, the 1997, 1998 and 1999 Interim Option Plans had 85,993, 27,633,490,594, 173,803 and
986,197 Ordinary Shares1,928,352 ordinary shares available for future option grants, respectively. All
Interim Option Plans have an exercise price of not less than 85% of fair market
value of the underlying stock on the date of grant. Options issued under these
plans generally vest over 4 years and expire 5 years from the date of grant.

The Company has assumed certain option plans and the underlying options of
companies which the Company has merged with or acquired (the "Assumed Plans").
Options under the Assumed Plans have been converted into the Company's options
and adjusted to effect the appropriate conversion ratio as specified by the
applicable acquisition or merger agreement, but are otherwise administered in
accordance with the terms of the Assumed Plans. Options under the Assumed Plans
generally vest over 4 years and expire 510 years from the date of grant.

The following table presents the activity for options outstanding under all
of the stock option plans as of March 31 ("Price" reflects the weighted average
exercise price):

1997 1998 1999 ----------------- ------------------ ------------------2000 2001
-------------------- -------------------- --------------------
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- ----- -------------------- ------ -------------------- ------ ----------- ------

Outstanding, beginning of year....... 2,631,940 $6.30 3,350,044 $9.31 4,894,078 $12.02
Granted.............................. 1,446,628 12.55 2,815,008 14.53 3,428,539 22.96
Exercised............................ (479,266) 2.93 (519,416) 3.75 (1,369,370) 8.37
Forfeited............................ (249,258) 8.91 (751,558) 15.06 (457,381) 13.98
--------- --------- ---------year ........... 28,281,584 $ 3.07 39,283,808 $ 4.25 44,853,772 $ 7.46
Granted .................................. 19,223,312 5.28 11,668,916 13.49 14,655,646 23.23
Exercised ................................ (5,481,928) 2.15 (4,990,596) 3.57 (11,404,613) 5.54
Forfeited ................................ (2,739,160) 4.11 (1,108,356) 6.30 (869,374) 23.98
---------- ---------- -----------
Outstanding, end of year............. 3,350,044 $9.31 4,894,078 $12.02 6,495,866 $18.37
========= ========= =========year ................. 39,283,808 $ 4.25 44,853,772 $ 7.46 47,235,431 $13.35
========== ========== ===========
Exercisable, end of year............. 1,199,531 1,631,152 1,625,520
========= ========= =========year ................. 11,314,768 13,583,702 21,065,008
========== ========== ===========
Weighted average fair value per option
granted................... $6.09 $6.96 $13.22
========= ========= =========granted ................................ $ 3.30 $ 7.44 $ 12.60
========== ========== ===========

The following table presents the composition of options outstanding and
exercisable as of March 31, 19992001 ("Price" and "Life" reflect the weighted
average exercise price and weighted average contractual life unless otherwise
noted):

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

Options reserved for future issuance under all stock options plans was
1,213,790 as of March 31, 1999.46
48

RANGE OF OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------- ---------------------------
EXERCISE PRICES AMOUNT PRICE LIFE AMOUNT PRICE
--------------- ---------- ------ ---- ---------- ------

$ 0.39--$ 4.05 9,686,954 $ 3.16 3.66 8,643,873 $ 3.08
4.12-- 6.00 10,670,262 5.42 2.58 6,651,767 5.38
6.23-- 16.00 10,379,352 11.92 4.86 4,837,944 10.73
16.13-- 25.00 12,824,248 23.22 7.53 644,517 21.49
25.03-- 44.12 3,674,615 32.82 4.42 286,907 29.25
---------- ----------
Total, March 31, 2001 47,235,431 $13.35 4.79 21,065,008 $ 6.48
========== ==========

The Company's employee stock purchase planEmployee Stock Purchase Plan (the "Purchase Plan") provides
for issuance of up to 150,000 Ordinary Shares.2,400,000 ordinary shares. The Purchase Plan was approved
by the stockholdersshareholders in October 1997. Under the Purchase Plan, employees may
purchase, on a periodic basis, a limited number of shares of common stock
through payroll deductions over a six monthsix-month period up to 10% of each
participant's compensation. The per share purchase price is 85% of the fair
market value of the stock at the beginning or end of the offering period,
whichever is lower. A total of 72,430 Ordinary Shares have been issued under the
Purchase Plan asAs of March 31, 1999.2001, there are 1,444,133 ordinary shares
available for sale under this plan. The ordinary shares sold under this plan in
fiscal 1999, 2000 and 2001, amounted to 282,088, 278,808 and 445,476,
respectively. The weighted-average fair value of ordinary shares sold under this
plan in fiscal 1999, 2000 and 2001 was $4.03, $8.69 and $20.00 per share,
respectively.

In connection with the acquisition of DII, the Company estimated the per-shareassumed DII's
Employee Stock Purchase Plan ("DII's Purchase Plan"). The ordinary shares sold
under this plan in fiscal 1999 and 2000 amounted to 1,790,111 and 1,838,932,
respectively. The weighted average fair value of stock issued to employees inordinary shares sold under the
DII Purchase Plan in fiscal 1999 and 2000 was $8.51
using$5.32 and $7.60 per share,
respectively. In addition, the Black-Scholes option pricing model with the same assumptions as those
listed for stock options granted duringCompany also assumed DII's Non-Employee
Directors' Stock Compensation Plan. The ordinary shares sold under this plan in
fiscal 1999.1999 and 2000 amounted to 28,526 and 17,871, respectively. The weighted
average fair value of ordinary shares sold under this plan in fiscal 1999 and
2000 was $6.07 and $10.41 per share, respectively. The Company discontinued
issuing ordinary shares under both plans in fiscal 2001.

The Company has elected to follow APB Opinion No. 25 "Accounting for Stock
Issued to Employees" and related interpretations in accounting for its employee
stock option plans and employee stock purchase plans and has adopted the
disclosure provisions of SFAS No. 123 "Accounting for Stock Based Compensation".Compensation."
Because the exercise price of the Company's stock options has equaled the fair
value of the underlying stock on the date of grant, no compensation expense has
been recognized under APB Opinion No. 25. Had the compensation cost for the
Company's stock-based compensation plans been determined based on the fair
values of these options, the Company's fiscal 1997, 1998,1999, 2000 and 19992001 net income
(loss) and earnings (loss) per share would have been adjusted to the pro-formaproforma
amounts indicated below:

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

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

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

5847
49

YEARS ENDED MARCH 31,
---------------------------------
1999 2000 2001
-------- -------- ---------

Net income (loss):
As reported ................................. $ 51,003 $158,568 $(446,019)
Proforma .................................... 35,943 133,319 (596,494)
Basic earnings (loss) per share:
As reported ................................. $ 0.17 $ 0.44 $ (1.01)
Proforma .................................... 0.12 0.37 (1.35)
Diluted earnings (loss) per share:
As reported ................................. $ 0.17 $ 0.42 $ (1.01)
Proforma .................................... 0.12 0.35 (1.35)

In accordance with the disclosure provisions of SFAS No. 123, the fair value
of employee stock options granted during fiscal 1997, 19981999, 2000 and 19992001 was
estimated at the date of grant using the Black-Scholes model and the following
weighted average assumptions:

Years Ended March 31,
1997 1998 1999
---- ---- ----
Volatility ................................ 67% 66% 64%
Risk-free interest rate range ............. 5.9% 5.9% 5.0%
Dividend yield ............................ 0% 0% 0%
Expected lives ............................ 4.1
YEARS ENDED MARCH 31,
--------------------------------
1999 2000 2001
---- ---- ----

Volatility .............................. 58% 58% 62%
Risk-free interest rate range ........... 5.2% 6.2% 6.3%
Dividend yield .......................... 0% 0% 0%
Expected lives .......................... 3.5 yrs 3.5 yrs 3.6 yrs
4.0 yrs 4.0 yrs

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

Option Repricing

In lightDeferred Stock Compensation

Under the DII 1994 Stock Incentive Plan, certain key executives of DII were
awarded 1,468,320 shares in fiscal 1999. Shares vest over a period of time,
which in no event exceeds eight years. The shares vested at an accelerated rate
upon the achievement of certain annual earnings per share targets established by
DII's Compensation Committee. Non-vested shares for individual participants who
are no longer employed by the Company on the plan termination date are
forfeited. Participants receive all unissued shares upon death or disability, or
in the event of a change of control of the substantial declineCompany. The shares are not reported
as outstanding until vested. The Company issued 884,972 vested shares in fiscal
1999.

Deferred stock compensation equivalent to the market value at the date the
shares were awarded is charged to shareholders' equity and is amortized to
expense based upon the estimated number of shares expected to be issued in any
particular year. Deferred compensation expense amounting to $2.2 million, $4.0
million and $5.1 million, was amortized to expense during fiscal 1999, 2000 and
2001, respectively. The weighted-average fair value of performance shares
awarded in fiscal 1999 and 2000, was $6.20 and $6.23 per share, respectively.

9. UNUSUAL CHARGES

FISCAL 2001

The Company recognized unusual pre-tax charges of approximately $973.3
million during fiscal year 2001. Of this amount, $493.1 million was recorded in
the market pricefirst quarter and was comprised of approximately $286.5 million related to
the issuance of an equity instrument to Motorola combined with approximately
$206.6 million of expenses resulting from the DII and Palo Alto Products
International mergers and related facility closures. In the second quarter,
unusual pre-tax charges amounted to approximately $48.4 million associated with
the Chatham and Lightning mergers and related facility closures. In the third
quarter, the Company recognized unusual pre-tax charges of approximately $46.3
million, primarily related to the JIT merger and related facility closures.
During the fourth quarter, the Company recognized unusual pre-tax charges,
amounting to $385.6 million related to closures of several manufacturing
facilities.

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50
On May 30, 2000, the Company entered into a strategic alliance for product
manufacturing with Motorola. See Note 8, "Shareholders' Equity," for further
information concerning the strategic alliance. In connection with this strategic
alliance, Motorola paid $100.0 million for an equity instrument that entitles it
to acquire 22.0 million Flextronics ordinary shares at any time through December
31, 2005, upon meeting targeted purchase levels or making additional payments to
the Company. The issuance of this equity instrument resulted in a one-time
non-cash charge equal to the excess of the Company's
Ordinary Sharesfair value of the equity instrument
issued over the $100.0 million proceeds received. As a result, the one-time
non-cash charge amounted to approximately $286.5 million offset by a
corresponding credit to additional paid-in capital in the first quarter of
fiscal 1998, in June 19972001.

In connection with the aforementioned mergers and facility closures, the
Company offered to all employees the opportunity to cancel existing options outstanding
with exercise price in excessrecorded aggregate unusual charges of $11.63 per share, the fair market value$686.8 million, which included
approximately $584.4 million of facility closure costs and approximately $102.4
million of direct transaction costs. As discussed below, $510.5 million of the
Company's Ordinary Shares at that time, andcharges relating to facility closures have such options replaced with
options that havebeen classified as a component of
Cost of Sales during the lower exercise price of $11.63 per share. Employees
electing to have options repriced were required to accept an extension of their
vesting schedule.fiscal year ended March 31, 2001. The other termscomponents of the
options remained unchanged. On June 5,
1997,unusual charges recorded are as follows (in thousands):

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL NATURE OF
CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
-------- ------- -------- --------- --------- -------------

Facility closure costs:
Severance............................ $ 62,487 $ 5,677 $ 3,606 $ 60,703 $ 132,473 cash
Long-lived asset impairment.......... 46,646 14,373 16,469 155,046 232,534 non-cash
Exit costs........................... 24,201 5,650 19,703 169,818 219,372 cash/non-cash
-------- ------- -------- --------- ---------
Total facility closure costs..... 133,334 25,700 39,778 385,567 584,379
Direct transaction costs:
Professional fees.................... 50,851 7,247 6,250 -- 64,348 cash
Other costs.......................... 22,382 15,448 248 -- 38,078 cash/non-cash
-------- ------- -------- --------- ---------
Total direct transaction costs... 73,233 22,695 6,498 -- 102,426
-------- ------- -------- --------- ---------
Total Unusual Charges.................. 206,567 48,395 46,276 385,567 686,805
-------- ------- -------- --------- ---------
Income tax benefit..................... (30,000) (6,000) (6,500) (110,000) (152,500)
-------- ------- -------- --------- ---------
Net Unusual Charges.................... $176,567 $42,395 $ 39,776 $ 275,567 $ 534,305
======== ======= ======== ========= =========

In connection with the facility closures, the Company repriced optionsdeveloped formal plans
to purchase 577,920 shares pursuantexit certain activities and involuntarily terminate employees. Management's
plan to this
offer.

9. PROVISION FOR EXCESS FACILITIES

The provision for excess facilitiesexit an activity included the identification of $3.4 million in fiscal 1999 is
comprised of $2.2 million relating to the costs for consolidating the Company's
fourduplicate manufacturing
and administrative facilities in Hong Kongfor closure and $1.2 million
relatingthe identification of
manufacturing and administrative facilities for consolidation into other
facilities. Management currently anticipates that the facility closures and
activities to the consolidationwhich all of certain U.S. facilities. The provision for
excess facilities consists of $1.5 million for the reduction of certain
personnel due to consolidation of certain operations, $1.5 million for the
write-off of equipment and assets related to the operations the Company has
exited, and $400 related to the consolidation of facilities. In connection with
the provision for excess facilities, the Company terminated approximately 250
employees in the areas of finance, engineering, operations, production and
purchasing. The Company anticipates the consolidation of facilitiesthese charges relate will be substantially complete by November 1999.

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

The provision for excess facilities of $5.9 million in fiscal 1997 relates
to the costs incurred in downsizing the Texas facility, the write-off of
equipment at the nChip semiconductor fabrication facility and downsizing the

Singapore manufacturing operations. The provision includes $2.0 million for
severance payments and $0.5 million for the write-off of fixed assets in the
Singapore manufacturing facilities. An additional amount of $2.9 million
associated with certain obsolete equipment at the Company's nChip and Texas
facilities has been written-off. The provision also includes severance payments
amounting to $0.5 million for the employeescommitment dates of the Texas and nChip facility
which were paid during fiscal 1997. The Company has not recorded the remaining
costs related to existing leases at the Texas facility as the Company is
continuing to use the facilityrespective exit plans, except for
certain administrative and warehousing
functions.long-term contractual obligations. The following table summarizes the
Company's components of the provision
for excess facilities during the years endedfacility closure costs and related activities in fiscal 1997, 1998 and 1999:2001:

Severance Fixed Factory
and benefits Assets Closure Goodwill Other Total
-----------------------------------------------------------------------------LONG-LIVED
ASSET EXIT
SEVERANCE IMPAIRMENT COSTS TOTAL
--------- ----------- --------- ---------

Balance at March 31, 1996 $ -- $ 1,2542000 ........... $ -- $ -- $ -- $ 1,254
1997--
Activities during the year:
First quarter provision ........ 2,560 3,308 -- -- -- 5,868........... 62,487 46,646 24,201 133,334
Cash charges .......... (560)...................... (35,800) -- -- -- -- (560)(1,627) (37,427)
Non-cash charges ........................ -- (1,254)(46,646) (7,441) (54,087)
-------- --------- --------- ---------
Balance at June 30, 2000 ............ 26,687 -- 15,133 41,820
Activities during the year:
Second quarter provision .......... 5,677 14,373 5,650 25,700
Cash charges ...................... (4,002) -- (4,231) (8,233)
Non-cash charges .................. -- (1,254)
-----------------------------------------------------------------------------(14,373) (8,074) (22,447)
-------- --------- --------- ---------
Balance at September 30, 2000 ....... 28,362 -- 8,478 36,840
Activities during the year:
Third quarter provision ........... 3,606 16,469 19,703 39,778
Cash charges ...................... (7,332) -- (2,572) (9,904)
Non-cash charges .................. -- (16,469) (14,070) (30,539)
-------- --------- --------- ---------
Balance at December 31, 2000 ........ 24,636 -- 11,539 36,175
Activities during the year:

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51

Fourth quarter provision .......... 60,703 155,046 169,818 385,567
Cash charges ...................... (13,605) -- (14,686) (28,291)
Non-cash charges .................. -- (155,046) (71,328) (226,374)
-------- --------- --------- ---------
Balance at March 31, 1997 2,000 3,308 -- -- -- 5,308
1998 provision ........ 1,636 807 1,565 3,769 1,092 8,869
Cash charges .......... (1,655) -- -- -- -- (1,655)
Non-cash charges ...... -- (3,308) -- (3,769) -- (7,077)
-----------------------------------------------------------------------------
Balance at March 31, 1998 1,981 807 1,565 -- 1,092 5,445
1999 provision ........ 1,471 1,455 385 -- 50 3,361
Cash charges .......... (923) -- -- -- (937) (1,860)
Non-cash charges ...... (673) (2,149) (1,446) -- (155) (4,423)
-----------------------------------------------------------------------------
Balance at March 31, 19992001 ........... $ 1,856 $ 113 $ 50471,734 $ -- $ 5095,343 $ 2,523
=============================================================================167,077
======== ========= ========= =========

Of the total pre-tax facility closure costs, $132.5 million relates to
employee termination costs, of which $67.8 million has been classified as a
component of Cost of Sales. As a result of the various exit plans, the Company
identified 11,269 employees to be involuntarily terminated related to the
various mergers and facility closures. As of March 31, 2001, 4,457 employees
have been terminated, and another 6,812 employees have been notified that they
are to be terminated upon completion of the various facility closures and
consolidations. During fiscal 2001, the Company paid employee termination costs
of approximately $60.7 million. The remaining $71.7 million of employee
termination costs is classified as accrued liabilities as of March 31, 2001 and
is expected to be paid out within one year of the commitment dates of the
respective exit plans.

The unusual pre-tax charges include $232.5 million for the write-down of
long-lived assets to fair value. This amount has been classified as a component
of Cost of Sales. Included in the long-lived asset impairment are charges of
$229.1 million, which relate to property, plant and equipment associated with
the various manufacturing and administrative facility closures which were
written down to their net realizable value based on their estimated sales price.
Certain facilities will remain in service until their anticipated disposal dates
pursuant to the exit plans. Since the assets will remain in service from the
date of the decision to dispose of these assets to the anticipated disposal
date, the assets are being depreciated over this expected period. The impaired
long-lived assets consisted primarily of machinery and equipment of $153.0
million and building and improvements of $76.1 million. The long-lived asset
impairment also includes the write-off of the remaining goodwill and other
intangibles related to certain closed facilities of $3.4 million.

The unusual pre-tax charges also include approximately $219.4 million for
other exit costs. Approximately $210.2 million of this amount has been
classified as a component of Cost of Sales. The other exit costs recorded,
primarily related to items such as building and equipment lease termination
costs, warranty costs, current asset impairments and payments to suppliers and
vendors to terminate agreements and were incurred directly as a result of the
various exit plans. The Company paid approximately $23.1 million of other exit
costs during fiscal 2001. Additionally, approximately $101.0 million of other
exit costs were non-cash charges utilized during fiscal 2001. The remaining
$95.3 million is classified in accrued liabilities as of March 31, 2001 and is
expected to be substantially paid out within one year from the commitment dates
of the respective exit plans, except for certain long-term contractual
obligations.

The direct transaction costs include approximately $64.3 million of costs
primarily related to investment banking and financial advisory fees as well as
legal and accounting costs associated with the merger transactions. Other direct
transaction costs which totaled approximately $38.1 million were mainly
comprised of accelerated debt prepayment expense, accelerated executive stock
compensation and benefit-related expenses. The Company paid approximately $70.9
million of the direct transaction costs during fiscal 2001. Additionally,
approximately $28.2 million of the direct transaction costs were non-cash
charges utilized during fiscal 2001. The remaining $3.3 million is classified in
accrued liabilities as of March 31, 2001 and is expected to be substantially
paid out in the first quarter of fiscal 2002.

FISCAL 2000

In fiscal 2000, the Company recognized unusual pre-tax charges of $7.5
million related to the operations of Chatham, which included severance and
related charges of approximately $4.4 million and other facility exit costs of
approximately $3.1 million.

Additionally, unusual pre-tax charges of $3.5 million were recorded in
fiscal 2000, related to the Kyrel EMS Oyj merger. The unusual charges consisted
of a transfer tax of $1.7 million, approximately $0.4 million of investment
banking fees and approximately $1.4 million of legal and accounting fees.

FISCAL 1999

During fiscal 1999, the Company recognized unusual pre-tax charges of $79.3
million, substantially all of which related to the operations of the Company's
wholly owned subsidiary, Orbit Semiconductor, Inc. ("Orbit").

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The Company decided to sell Orbit's 6-inch, 0.6 micron wafer fabrication
facility ("Fab") and adopt a fabless manufacturing strategy to complement
Orbit's design and engineering services. The charges were primarily due to the
impaired recoverability of inventories, intangible assets and fixed assets, and
other costs associated with the exit of semiconductor manufacturing. The Fab was
ultimately sold in January 2000.

The components of the unusual charges recorded in fiscal 1999 are as
follows:

FIRST FOURTH
QUARTER QUARTER TOTAL NATURE OF
CHARGES CHARGES CHARGES CHARGES
-------- -------- -------- ---------

Severance .................................. $ 498 $ 2,371 $ 2,869 cash
Long-lived asset impairment ................ 38,257 16,538 54,795 non-cash
Losses on sales contracts .................. 2,658 3,100 5,758 non-cash
Incremental uncollectible accounts
receivable ............................... 900 -- 900 non-cash
Incremental sales return and
allowances ............................... 1,500 500 2,000 non-cash
Inventory write-downs ...................... 5,500 250 5,750 non-cash
Acquired in-process research and
development .............................. -- 2,000 2,000 non-cash
Other exit costs ........................... 1,845 3,369 5,214 cash/non-cash
-------- -------- --------
Total Unusual Pre-Tax Charges .............. $ 51,158 $ 28,128 $ 79,286
======== ======== ========

Of the total unusual pre-tax charges, approximately $2.9 million relates to
employee termination costs. As a result of the closure of the fabrication
facility, 460 employees were terminated. The terminations were completed and
related severance costs were fully paid out by the first quarter of fiscal 2000.

The unusual pre-tax charges include approximately $54.8 million for the
write-down of long-lived assets to fair value. Included in the long-lived asset
impairment are charges of $50.7 million related to the Fab which was written
down to its net realizable value based on its sales price. The impaired
long-lived assets consisted primarily of machinery and equipment of $43.4
million and building and improvements of $7.3 million. The long-lived asset
impairment also includes the write-off of the remaining goodwill of $0.6
million. The remaining $3.5 million of asset impairment relates to the
write-down to net realizable value of a facility, the Company exited during
fiscal 1999.

The Company entered into certain non-cancelable sales contracts to provide
semiconductors to customers at fixed prices. Because the Company was obligated
to fulfill the terms of the agreements at selling prices which were not
sufficient to cover the cost to produce or acquire such products, a liability
for losses on sales contracts was recorded for the estimated future amount of
such losses. The unusual pre-tax charges include approximately $8.7 million for
losses on sales contracts, incremental amounts of uncollectible accounts
receivable, and estimated incremental costs for sales returns and allowances,
all of which were fully utilized by the end of fiscal 2000.

The unusual pre-tax charges also include approximately $10.9 million for
losses on inventory write-downs and other exit costs. The Company has written
off and disposed of approximately $5.8 million of inventory. The remaining $5.1
million relates primarily to incremental costs and contractual obligations for
items such as lease termination costs, litigation, environmental clean-up costs,
and other exit costs incurred directly as a result of the exit plan, all of
which were paid out or non-cash charges utilized by the end of fiscal 2000.

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

10. RELATED PARTY TRANSACTIONS

AND NOTES PAYABLES TO SHAREHOLDERS

Stephen Rees, a former Director and Senior Vice PresidentThe Company has loaned approximately $22.9 million to various executive
officers of the Company,
holds a beneficial interest in both Mayfield International Ltd. ("Mayfield") and
Croton Ltd. ("Croton"). During fiscal 1998, the Company paid $140 to Croton for
management services and $208 to Mayfield for the rental of certain office space.
Additionally, as of March 31, 1999, $2,520 was due from Mayfield under a note
receivable. The note is included in other current assets on the accompanying
balance sheet.

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

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

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

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

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

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

On February 4, 1999, the Company loaned $410 to Mr. Ronny Nilsson. Mr.
Nilsson executed a promissory note in favor of
the CompanyCompany. Certain notes are non-interest bearing and others have interest
rates ranging from 4.19% to 7.25%. The remaining outstanding balance of the
loans, including accrued interest, as of March 31, 2001 was approximately $10.4
million.

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11. BUSINESS COMBINATIONS

FISCAL 2001

Pooling of Interests Mergers

In fiscal 2001, Flextronics acquired 100% of the outstanding shares of DII,
Lightning, Chatham, Palo Alto Products International and JIT. These acquisitions
were accounted for as pooling of interests and the note maturesconsolidated financial
statements have been prepared to give retroactive effect to the mergers.

DII is a leading provider of electronics manufacturing and design services.
As a result of the merger, in April 2000, the Company issued approximately 125.5
million ordinary shares for all of the outstanding shares of DII common stock,
based upon the exchange ratio of 3.22 Flextronics ordinary shares for each share
of DII common stock.

Lightning is a provider of fully integrated electronic packaging systems.
As a result of the merger, in August 2000, the Company issued approximately 2.6
million ordinary shares for all of the outstanding shares of Lightning common
stock and interests.

Chatham is a leading provider of integrated electronic packaging systems to
the communications industry. As a result of the merger, in August 2000, the
Company issued approximately 15.2 million ordinary shares for all of the
outstanding Chatham capital stock and interests.

DII and Lightning operated under a calendar year end prior to merging with
Flextronics and, accordingly, their respective balance sheets, statements of
operations, shareholders' equity and cash flows as of December 31, 1999 and for
each of the two years ended December 31, 1999 have been combined with the
Company's consolidated financial statements as of March 31, 2000 and for each of
the two fiscal years ended March 31, 2000. Chatham operated under a fiscal year
which ended on the Saturday closest to September 30 prior to merging with
Flextronics and, accordingly, Chatham's balance sheets, statements of
operations, shareholders' equity and cash flows as of September 24, 1999 and for
each of the two years ended September 24, 1999 have been combined with the
Company's consolidated financial statements as of March 31, 2000 and for each of
the two fiscal years ended March 31, 2000.

Starting in fiscal 2001, DII, Lightning and Chatham changed their
respective year ends to conform to the Company's March 31 year end. Accordingly,
DII's and Lightning's operations for the three months ended March 31, 2000, and
Chatham's operations for the six months ended March 31, 2000, have been excluded
from the consolidated results of operations for fiscal 2001 and reported as an
adjustment to retained earnings. Total net sales related to the omitted periods
amounted to approximately $898.3 million.

Palo Alto Products International is an enclosure design and plastic molding
company. The Company merged with Palo Alto Products International in April 2000
by exchanging approximately 7.2 million ordinary shares of Flextronics for all
of the outstanding shares of Palo Alto Products International common stock.

JIT is a global provider of electronics manufacturing and design services.
The Company merged with JIT in November 2000, by exchanging approximately 17.3
million ordinary shares of Flextronics for all of the outstanding shares of JIT
common stock.

Palo Alto Products International and JIT operated under the same fiscal
year end as Flextronics, and accordingly, their respective balance sheets,
statements of operations, shareholders' equity and cash flows have been combined
with the Company's consolidated financial statements as of March 31, 1999 and
2000 and for each of the three fiscal years ended March 31, 2000.

The Company also purchases materials from FICO Investment Holdings
("FICO"), an associated company in whichcompleted several other immaterial pooling of interests
transactions. In connection with these mergers, the Company held a 40% interest through
March 1999.(see Note 11). At March 31, 1998,issued approximately
0.7 million ordinary shares. The historical operations of these entities were
not material to the amount due to FICOCompany's consolidated operations on either an individual or
an aggregate basis; therefore, prior period statements have not been restated
for these purchases was $382. On March 1, 1999,acquisitions.

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Business Acquisitions

In fiscal 2001, the Company acquired an additional 50% of
FICO and the results of FICOcompleted several immaterial business
acquisitions. These transactions have been consolidated in the accompanying
financial statements since this date (see Note 11 below).

11. MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS

Advanced Component Labs HK Ltd.

On March 1, 1999, the Company acquired the manufacturing facilities and
related assets of Advanced Component Labs HK Ltd. ("ACL"), a Hong Kong based
advanced technology printed circuit board manufacturer for $15 million cash. The
transaction has been accounted for under the purchase
method of accounting and accordingly, the results of ACL wasthe acquired businesses
were included in the Company's consolidated statements of operations from March 1, 1999.the
acquisition dates forward. Comparative pro-formaproforma information has not been
presented, as the results of the acquired operations for ACL arewere not material to the
Company's consolidated financial statements. In connection with these business
acquisitions, the Company paid total cash consideration of approximately $146.4
million, net of cash acquired, and issued approximately 9.8 million ordinary
shares, which equated to approximately $338.6 million of purchase price.

The goodwill associated with this acquisition is amortized
over ten years.

Theaggregate purchase price of $15 millionpaid for these business acquisitions was
allocated to the net assets acquired based on their estimated fair values at the
datedates of acquisitionthe acquisitions. The purchase price for certain acquisitions is
subject to adjustments for contingent consideration, based upon the businesses
achieving specified levels of earnings through December 2003. The contingent
consideration has not been recorded as follows:

ACL's net assets atpurchase price, pending the outcome of
the contingency. The fair value ....................... $ 5,250
In-process research and development .................. 2,000
Goodwill ............................................. 7,750
------
$15,000
======

As of the datenet liabilities acquired, amounted to
approximately $117.3 million, including estimated acquisition costs. The costs
of acquisition,acquisitions have been allocated on the $2basis of the estimated fair value of
assets acquired and liabilities assumed. Goodwill and intangibles resulting from
these acquisitions amounted to approximately $602.3 million. The respective
goodwill associated with these acquisitions is amortized over various years,
none of which exceed ten years. Also, the Company increased goodwill in the
amount of approximately $12.5 million offor contingent purchase price allocated
to in-process research and development related to development projects which had

not reached technological feasibility and had no probable alternative future
uses; accordingly,adjustments
for historical acquisitions during the Company expensed the entire amount on the datecurrent fiscal year.

FISCAL 2000

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

The Company believes the efforts to complete the in-process research and
development projects will consist of internally staffed engineers and will be
completed duringInterests Merger

In fiscal year 2000. The estimated cost to complete the research
and development is approximately $1,100. There is substantial risk associated
with the completion of each project and there is no assurance that any of the
projects will meet with technological or commercial success.

FICO Investment Holding Ltd.

On December 20, 1996,2000, the Company acquired an initial 40% of FICO, a
plastic injection molding company located in Shenzhen, China for $5.2 million of
which $3.0 million was paid in December 1996. The remaining $2.2 million
purchase price was paid in June 1997. Goodwill and other intangibles resulting
from this initial purchase totaled $3.2 million and are being amortized over ten
years. The Company accounted for its investment in FICO under the equity method
and accordingly has included its 40% share of FICO's operating results in its
accompanying consolidated statement of operations since December 20, 1996
through February 28, 1999. On March 1, 1999, the Company acquired an additional
50% of FICO for (i)$7.2 million cash, (ii)127,850 Ordinary Shares issued at
closing valued at $4.8 million (iii)$3.0 million in 2% promissory notes due $1.0
million each in year 2000 through year 2002. This transaction has been accounted
for under the purchase method and accordingly, the results of operations for
FICO have been included in the accompanying consolidated statements of
operations since March 1, 1999. The acquisition100% of the additional 50% interest
resulted in additional goodwilloutstanding shares of
Kyrel Ems Oyj ("Kyrel") and intangible assets of $8.5 million and
$420,000 which were being amortized over 8 and 3 years, respectively.

Conexao Informatical Ltd. and Altatron,PCB Assembly, Inc. On March 31, 1998 the Company acquired Conexao, a Brazil-based electronics
manufacturing service provider, in exchange for a total of 843,186 Ordinary
Shares, of which 236,610 Ordinary Shares to be issued upon resolution of certain
general and specific contingencies. The contingencies were resolved and the
236,610 Ordinary Shares were issued in March 1999. On March 31, 1998, the
Company also acquired Altatron, an electronics manufacturer service provider
headquartered in Fremont, California, with facilities in Fremont, California;
Richardson, Texas; and Hamilton, Scotland in exchange for 1,577,300 Ordinary
Shares, of which 315,460 Ordinary Shares are to be issued upon resolution of
certain general and specific contingencies. The contingencies were resolved and
the 315,460 Ordinary Shares were issued in March 1999.("PCB"). These acquisitions were
accounted for as a pooling-of-interests. The Company did not restate its prior
periodpooling of interests and the consolidated financial statements
with respecthave been prepared to these acquisitions because they did
not have a material impact ongive retroactive effect to the Company's consolidated results. Accordingly,
the results of the acquired companies are included in the Company's consolidated
statements of operations from the date of acquisition.

DTM Products, Inc. and Energipilot AB

On December 1, 1997, the Company merged with DTM Products, Inc.("DTM") and
EnergiPilot AB ("Energipilot"). DTMmergers.

Kyrel is based in Colorado and produces injection
molded plastics. Energipilot is based in Sweden and produces cable and cable
assemblies. All of the outstanding shares of DTM and Energipilot were acquired
in exchange for 504,938 and 459,980 Ordinary Shares, respectively. These
acquisitions were accounted for as a pooling-of-interests. The Company did not
restate its prior period financial statements with respect to these acquisitions
because they did not have a material impact on the Company's consolidated
results. Accordingly, the results of the acquired companies are included in the
Company's consolidated statements of operations from the date of acquisition
onward.

Neutronics Holdings A.G.

On October 30, 1997, the Company acquired Neutronics Holdings A.G.
("Neutronics"), an electronics manufacturing services provider with operations located in
AustriaFinland and Hungary. The acquisition was accounted for asFrance. As a pooling-of-interests andresult of the merger, the Company has issued 5,612,000 Ordinary Sharesapproximately
7.3 million ordinary shares in exchange for 92% ofall the outstanding shares of Neutronics. All financial
statements presented have been retroactively restated to include the results of
Neutronics. NeutronicsKyrel shares.
Kyrel operated under a calendar year end, prior to merging with Flextronics, and
accordingly, Neutronics'Kyrel's balance sheets, statements of operations, shareholders'
equity and cash flows as of December 31, 1997 and 1998 and for each of the three
years ended December 31, 1996 has1998 have been combined with the corresponding FlextronicsCompany's consolidated
financial statements as of March 31, 1998 and 1999 and for each of the three
fiscal years ended March 31, 1997. During1999. In fiscal 1998, Neutronics'2000, Kyrel's fiscal year end was
changed from December 31 to March 31 to conform to the Company's fiscal year-end.year end. Accordingly, Neutronics'Kyrel's
operations for the three months ended March 31, 1997, which included net sales of $34.9 million and net loss of $3.1 million1999, have been excluded from
the consolidated results of operations for fiscal 2000 and have been reported as
an adjustment to retained earnings in the first quarter of fiscal 1998.

Separate results2000.

PCB is an electronics manufacturing service provider based in the United
States. As a result of the merger, the Company issued approximately 2.2 million
ordinary shares in exchange for all the outstanding PCB shares, of which
approximately 0.2 million ordinary shares are to be issued upon resolution of
certain general and specific contingencies. PCB operated under the same fiscal
year end as the Company and, accordingly, their respective balance sheets,
statements of operations, shareholders' equity and cash flows have been combined
with Flextronics' consolidated financial statements as of March 31, 1999 and
2000 and for each of the periods presented are as follows for
thethree fiscal years ended March 31, 1997:

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

Ericsson2000.

The Company also completed several other immaterial pooling of interests
transactions in fiscal 2000. In connection with these mergers, the Company
issued 1.8 million ordinary shares. The historical operations of these entities
were not material to the Company's consolidated operations on either an
individual or an aggregate basis; therefore, prior period statements have not
been restated for these acquisitions.

53
55
Business Networks AB

On March 27, 1997,Acquisitions

In fiscal 2000, the Company acquired certain manufacturing facilitiesseveral immaterial businesses and made
a payment of an earn-out arrangement to the former owners of Great Sino
Electronics Technology (a company acquired by DII in Karlskrona, Sweden and related inventory, equipment and assets ("The Karlskrona
Facilities") from Ericsson Business Networks AB ("Ericsson") for $82,354 which
was financed by the Credit Facility described in Note 4. The transaction hasAugust 1998, as further
discussed below). These transactions have been accounted for as aunder the purchase
method of accounting and accordingly, the results of the acquired businesses
were included in the Company's consolidated statements of operations from the
acquisition dates forward. Comparative proforma information has not been
presented, as the results of the acquired operations were not material to the
Company's consolidated financial statements. In connection with these business
acquisitions, the Company paid total cash consideration of approximately $51.6
million, net of cash acquired.

The aggregate purchase price has beenpaid for these business acquisitions was
allocated to the net assets acquired based on their estimated fair market values at the
datedates of acquisition. There was no material purchase price in excess of
the acquisitions. The fair value of the net assets acquired.acquired amounted to
approximately $17.9 million, including estimated acquisition costs. The costs of
acquisitions have been allocated on the basis of estimated fair values of assets
acquired and liabilities assumed. Goodwill and intangibles resulting from these
acquisitions amounted to approximately $33.7 million. The respective goodwill
associated with these acquisitions is amortized over ten years. Also, the
Company increased goodwill in the amount of approximately $34.1 million for
contingent purchase price adjustments for historical acquisitions during fiscal
2000.

FISCAL 1999

Business Acquisitions

In fiscal 1999, the Company completed several immaterial business
acquisitions. These transactions have been accounted for under the purchase
method of accounting and accordingly, the results of operations of the Karlskrona Facilities have beenacquired businesses
were included in the Company's consolidated 63
statements of operations from the
acquisition dates forward. Comparative pro forma information has not been
presented, as the results of the Company since the date of acquisition and such results of these
facilitiesacquired operations were immaterial for March 27, 1997 to March 31, 1997.

Fine Line Printed Circuit Design Inc.

On November 25, 1996, the Company acquired Fine Line Printed Circuit
Design, Inc. ("Fine Line"), a circuit board layout and prototype operation
company located in San Jose, California. The Company issued 446,642 Ordinary
Shares in exchange for all of the outstanding capital stock of Fine Line. The
merger was accounted under the pooling-of-interests method of accounting;
however, prior period financial statements were not restated because the
financial results of Fine Line are not material to the
Company's consolidated financial statements. In connection with these business
acquisitions, the Company paid total cash consideration of approximately $130.4
million and issued approximately 0.5 million ordinary shares, which equated to
approximately $4.8 million of purchase price.

The aggregate purchase price paid for these business acquisitions was
allocated to the net assets acquired based on their estimated fair values at the
dates of acquisitions. The fair value of the net assets acquired, amounted to
approximately $50.4 million, including estimated acquisition costs. The costs of
acquisitions have been allocated on the basis of estimated fair values of assets
acquired and liabilities assumed. Goodwill and intangibles resulting from these
acquisitions amounted to approximately $84.8 million. The respective goodwill
associated with these acquisitions is amortized over fifteen years.

12. SEGMENT REPORTING

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

Information about segments for the years ended March 31:31 is as follows (in
thousands):

1997 1998 1999 2000 2001
----------- ----------- ----------------------- ------------

Net Sales:
Asia ............................................................................... $ 307,545898,304 $ 303,9931,588,665 $ 401,1262,467,629
Americas ................ 160,860 277,783 683,564....................................................... 1,875,677 2,936,441 5,466,547
Western Europe .......... 22,560 332,837 368,046................................................. 666,763 1,391,965 2,356,281
Central Europe .......... 149,042 210,233 406,107................................................. 572,289 1,132,242 2,147,788
Intercompany eliminations -- (11,775) (51,215)...................................... (60,247) (90,191) (328,546)
----------- ----------- ----------------------- ------------
$ 640,0073,952,786 $ 1,113,0716,959,122 $ 1,807,62812,109,699
=========== =========== ===========

Income(Loss)============ ============
Income (Loss) before Income Tax:Taxes:
Asia ............................................................................... $ 25,97461,845 $ 15,970102,541 $ 25,41613,611
Americas ................ (3,973) (4,413) 19,296....................................................... (52,774) (4,149) (319,420)
Western Europe .......... (2,487) 8,871 12,137................................................. 12,803 23,833 7,740
Central Europe .......... 4,598 7,723 12,833................................................. 31,839 44,107 33,333
Intercompany eliminations, corporate allocations and
non-recurring
charges (10,465) (5,980) (10,382)Motorola one-time non-cash charge (see Note 9) .............. (14,344) 15,316 (287,568)
----------- ----------- ----------------------- ------------
$ 13,64739,369 $ 22,171181,648 $ 59,300(552,304)
=========== =========== ===========

Long Lived============ ============
Long-Lived Assets:

54
56

Asia ............................................................................... $ 52,702286,797 $ 76,011449,824 $ 109,513503,094
Americas ................ 20,601 86,390 117,526....................................................... 511,036 712,215 636,399
Western Europe .......... 37,662 45,698 45,775................................................. 240,759 275,935 371,064
Central Europe .......... 38,050 47,474 94,693................................................. 114,734 171,165 317,884
----------- ------------ ------------
$ 1,153,326 $ 1,609,139 $ 1,828,441
=========== ============ ============
Depreciation and Amortization:*
Asia ........................................................... $ 25,492 $ 39,889 $ 54,038
Americas ....................................................... 69,079 86,967 126,012
Western Europe ................................................. 18,933 42,534 56,667
Central Europe ................................................. 11,854 18,207 49,734
----------- ------------ ------------
$ 125,358 $ 187,597 $ 286,451
=========== ============ ============
Capital Expenditures:
Asia ........................................................... $ 83,382 $ 155,243 $ 178,557
Americas ....................................................... 141,082 214,224 284,340
Western Europe ................................................. 127,471 52,396 125,072
Central Europe ................................................. 57,720 83,570 193,252
----------- ------------ ------------
$ 149,015409,655 $ 255,573505,433 $ 367,507781,221
=========== =========== ======================= ============

1997 1998* Excludes unusual charges related to property, plant and equipment and
goodwill impairment charges of $54,795 and $232,534 in fiscal 1999 -------- -------- --------
Depreciation and
Amortization:
Asia ....................... $ 8,004 $ 12,690 $ 15,321
Americas ................... 2,873 5,703 14,815
Western Europe ............. 929 7,298 10,110
Central Europe ............. 6,334 5,257 10,161
-------- -------- --------
$ 18,140 $ 30,948 $ 50,407
======== ======== ========

Capital Expenditure:
Asia ....................... $ 15,729 $ 34,549 $ 37,418
Americas ................... 11,562 38,799 46,427
Western Europe ............. 586 12,102 10,850
Central Europe ............. 9,626 13,167 53,170
-------- -------- --------
$ 37,503 $ 98,617 $147,865
======== ======== ========fiscal 2001, respectively. See Note 9, "Unusual Charges," for additional
information regarding unusual charges.

For purposes of the preceding tables, "Asia" includes China, Malaysia,
Singapore, Thailand and Singapore,Taiwan, "Americas" includes U.S,the U.S., Mexico, and
Brazil, "Western Europe" includes Denmark, Finland, France, Germany, Norway,
Poland, Sweden, ScotlandSwitzerland and the United Kingdom and "Central Europe" includes
Austria, the Czech Republic, Hungary, Ireland, Israel, Italy and Hungary.Scotland.

Geographic revenue transfers are based on selling prices to unaffiliated
companies, less discounts.

Income before tax isDuring fiscal 1999, Hungary accounted for approximately 11% of net sales.
No other foreign country accounted for more than 10% of net sales less operating
expenses, interest orin fiscal
1999. China and Hungary accounted for approximately 20% and 11% of long-lived
assets at March 31, 1999, respectively. No other expenses, but prior to income taxes.

1997 1998 1999
---- ---- ----
Net Sales:foreign country accounted for
more than 10% of long-lived assets at March 31, 1999.

During fiscal 2000, China, ..................... 22% 19%Sweden and Hungary accounted for approximately
11%, 12% and 12% of net sales, respectively. No other foreign country accounted
for more than 10% of net sales in fiscal 2000. China accounted for approximately
24% of long-lived assets at March 31, 2000. No other foreign country accounted
for more than 10% of long-lived assets at March 31, 2000.

During fiscal 2001, China accounted for over 10% of net sales. No other
foreign country accounted for more than 10% of net sales in fiscal 2001. China
and Hungary accounted for approximately 17% United States ............. 25% 24% 27%
Sweden .................... -- 27% 18%
Hungary ................... 13% 13% 17%
All others ................ 40% 17% 21%

Long Lived Assets:
China ..................... 25% 26% 27%
United States .............and 11% 23% 19%
Sweden .................... 22% 16% 11%
Hungary ................... 19% 14% 18%
All others ................ 23% 21% 25%of long-lived assets at
March 31, 2001, respectively. No other foreign country accounted for more than
10% of long-lived assets at March 31, 2001.

13. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table contains selected unaudited quarterly financial data
for fiscal years 2000 and 2001:

FISCAL YEAR ENDED FISCAL YEAR ENDED
MARCH 31, 2000 MARCH 31, 2001
---------------------------------------------- -------------------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Net sales ...................... $1,237,320 $1,525,366 $1,967,740 $2,228,696 $ 2,676,974 $3,078,998 $3,239,293 $ 3,114,434
Cost of sales .................. 1,112,493 1,383,783 1,797,643 2,041,323 2,470,408 2,829,406 2,964,034 2,864,048
Unusual charges ................ -- -- -- 7,519 83,721 24,268 38,550 363,956
---------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Gross profit (loss) ......... 124,827 141,583 170,097 179,854 122,845 225,324 236,709 (113,570)
Selling, general and
administrative ............... 67,996 73,733 86,534 91,689 94,918 107,931 113,736 113,524
Goodwill and intangibles
amortization ................. 9,754 8,787 10,735 12,050 9,370 12,505 15,141 26,525
Unusual charges ................ -- 3,523 -- -- 409,383 24,127 7,726 21,611
Interest and other expense
(income), net ................ 14,420 19,236 23,367 12,889 (4,199) 22,359 22,092 26,863
---------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Income (loss) before
income taxes .............. 32,657 36,304 49,461 63,226 (386,627) 58,402 78,014 (302,093)
Provision for (benefit from)
income taxes ................. 5,870 5,349 1,662 10,199 (16,065) 8,475 10,232 (108,927)
---------- ---------- ---------- ---------- ----------- ---------- ---------- -----------
Net income (loss) ........... $ 26,787 $ 30,955 $ 47,799 $ 53,027 $ (370,562) $ 49,927 $ 67,782 $ (193,166)
========== ========== ========== ========== =========== ========== ========== ===========

55
57

Diluted earnings (loss)
per share .................... $ 0.08 $ 0.09 $ 0.12 $ 0.12 $ (0.88) $ 0.10 $ 0.14 $ (0.41)
========== ========== ========== ========== =========== ========== ========== ===========
Shares used in computing
diluted per share amounts .... 359,213 360,465 384,017 427,521 418,857 480,801 478,657 468,069
========== ========== ========== ========== =========== ========== ========== ===========

14. SUBSEQUENT EVENTS (UNAUDITED)

In April 1999, Flextronics2001, the Company entered into ana definitive agreement with
Ericsson with respect to its management of the operations of Ericsson's mobile
telephone operations. Operations under this arrangement commenced in the first
quarter of fiscal 2002. Under this agreement the Company is to provide a
substantial portion of Ericsson's mobile phone requirements. The Company will
assume responsibility for product assembly, new product prototyping, supply
chain management and logistics management in which we will process customer
orders from Ericsson and configure and ship products to Ericsson's customers. In
connection with this relationship, the Company will employ the existing
workforce for certain operations, and will purchase from Ericsson certain
inventory, equipment and other assets, and may assume certain accounts payable
and accrued expenses at their net book value. The Company has not completed the
purchasing of the various assets, but estimate that the net asset purchase price
is expected to be approximately $450.0 million. We anticipate completing the
remaining purchases by the end of the first quarter of fiscal 2002.

In April 2001, the Company announced that it had signed a memorandum of
understanding with Alcatel to purchase theits manufacturing facility and related
assets located in Laval, France. Upon completion of Ericsson's Visby, Sweden
operations. Ericsson's Visby facility manufactures mobile systems
infrastructure, primarily radio base stations. Under the terms of the agreement,
Flextronics will acquire the facility, including equipment and materials. In
connection with the acquisition of assets,this transaction, the
Company has also enteredwill enter into a manufacturing servicelong-term supply agreement with Ericsson. The asset transfer is expectedAlcatel to close during the second quarter of fiscal 2000.

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

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

Itempurchase of assets. The estimated purchase price is subject
to final negotiations, due diligence and working capital levels at the time of
closing, but is not expected to be a material cash requirement.

In connection with the Company's strategic alliance with Motorola in May
2000, Motorola purchased an equity instrument. In June 2001, the Company entered
into an agreement with Motorola under which it repurchased this equity
instrument for $112.0 million. No current or planned manufacturing programs are
affected by this repurchase, and the Company anticipates that Motorola will
continue to be a customer following this repurchase, although the Company's
future revenue from Motorola may be less than it would have been had this
instrument remained in effect.

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

NoneDISCLOSURE

None.

PART III

ItemITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages and positions of the Company's Directorsour directors and officers as of March 31, 1999June 1,
2001 are as follows:

NAME AGE POSITION
- --------------------- --- --------------------------------------------------------

Michael E. Marks 4850 Chairman of the Board and Chief Executive Officer
Robert R. B. Dykes 4951 President, Systems Group and Chief Financial Officer
Ronny Nilsson 52 President, Western European Operations
Michael McNamara 44 President, Americas Operations
Ash Bhardwaj 3537 President, Asia Pacific Operations
Michael McNamara 42 President, Americas Operations
Ronny Nilsson 50 President, Western European Operations
Humphrey Porter 5153 President, Central/Eastern European Operations
Steven C. Schlepp 44 President, Multek
Ross Manire 49 President, Flextronics Enclosure Systems
Ronald R. Snyder 44 President, Flextronics Semiconductor
Thomas J. Smach 41 Vice President of Finance
Tsui Sung Lam 51 Director
Michael J. Moritz 46 Director
Richard L. Sharp 54 Director
Patrick Foley 69 Director

56
58
Chuen Fah Alain Ahkong 5152 Director
Patrick Foley 67 Director
Hui Shing Leong 40 Director
Michael J. Moritz 48 Director
Richard L. Sharp 51Goh Thiam Poh Tommie 50 Director

MichaelMICHAEL E. Marks --MARKS - Mr. Marks has been the Company'sour Chief Executive Officer since
January 1994 and is Chairman of the Board since July 1993.1994. He has been the Chairman of our Board of Directors since July 1993
and a Director of the Companymember since December 1991. From November 1990 to December 1993, Mr. Marks
was President and Chief Executive Officer of Metcal, Inc., a precision heating
instrument company ("Metcal"). Mr. Markscompany. He received a B.A. and an M.A. from Oberlin College and an
M.B.A. from the Harvard Business School.

RobertROBERT R. B. Dykes --DYKES - Mr. Dykes has served as a Director of the Company from
January 1994 until August 1997 andour Chief Financial Officer
since February 1997 and as our President of the Systems Group since April 1999.
From February 1997 to April 1999, he has served as itsour Senior Vice President of
Finance and Administration.Administration, and from January 1994 to August 1997 as a member of
our Board of Directors. From 1988 to February 1997, Mr. Dykes wasserved as
Executive Vice President, Worldwide Operations and Chief Financial Officer of
Symantec Corporation, an application and system software products company, from 1988 to
February 1997. Mr. Dykescompany. He
received a Bachelor of Commerce and Administration degree from Victoria University in
Wellington, New Zealand.

MICHAEL McNAMARA - Mr. Dykes is on the
board of directors of Symantec Corporation.

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

Michael McNamara -- Mr. McNamara has served as President of AmericasNorth American Operations since April 1994. From May 1993 to March 1994, he wasMr.
McNamara served as President and Chief Executive Officer of Relevant Industries,
Inc., which waswe acquired by the
Company in March 1994. From May 1992 to May 1993, he wasserved as
Vice President, Manufacturing Operations at Anthem Electronics, an electronics
distributor. From April 1987 to May 1992, he was a Principal of Pittiglo, Rabin,
Todd & McGrath, an operations consulting firm. Mr. McNamara received a B.S. from
the University of Cincinnati and an M.B.A. from Santa Clara University.

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

Humphrey Porter --ASH BHARDWAJ - Mr. Bhardwaj joined Flextronics in 1988 and was promoted to
President of Asia-Pacific Operations. Prior to his promotion, he served as our
Vice President of the China region. In addition, Mr. Bhardwaj was General
Manager for our Flextronics plant in Shekou, China. He received a degree in
Electrical Engineering from Thapar Institute of Engineering and Technology and
an M.B.A. from Southeastern Louisiana University.

HUMPHREY PORTER - Mr. Porter has served as our President of Central and
Eastern European Operations since October 1997. From July 1994 to October 1997,
he wasserved as President and Chief Executive Officer of Neutronics Electronics
Industries Holding AG, which waswe acquired by the Company in October 1997. Prior to joining
Neutronics, Mr. Porter worked for over 27 years for theserved in various positions at Philips, organization. Between 1989 and 1994, he wasincluding
Industrial Director for Philips Audio Austria and between 1984 andfrom 1989 he wasto 1994 and Managing
Director of the Philips Audio factory in Penang, Malaysia.Malaysia from 1984 to 1989. He
received his B.Sc. in Production Engineering from Trent University.

STEVEN C. SCHLEPP - Mr. Schlepp has served as our President of Multek since
April 2000 following our acquisition of DII. From June 1996 to April 2000, he
served as Senior Vice President of DII and President of Multilayer Technology,
Inc. From January 1991 until June 1996, Mr. Schlepp served as President of
Toppan West Incorporated, a wholly owned subsidiary of Toppan Printing Ltd.

ROSS MANIRE - Mr. Manire has served as our President of Flextronics
Enclosure Systems, a division of Flextronics, since our acquisition of Chatham
Technologies, Inc. in August 2000. At Chatham, Mr. Manire served as the
President and Chief Executive Officer. Prior to this,joining Chatham, he was the
Senior Vice President and General Manager of the Carrier Systems Business Unit
of 3Com Corporation, a position he held since 1995. He has also served in
various executive positions with U.S. Robotics, which was acquired by 3Com in
June 1997, including Senior Vice President of Operations and Chief Financial
Officer. Mr. PorterManire received a B.A. in Economics from Davidson College and an
M.B.N.A. in Business from the University of Chicago.

RONALD R. SNYDER - Mr. Snyder has served as our President of Flextronics
Semiconductor since April 2000 following our acquisition of DII. From May 1998
to April 2000, he served as Senior Vice President of DII and

57
59
President of DII Semiconductor. From March 1994 to May 1998, Mr. Snyder served
as Senior Vice President of Sales and Marketing of DII. Prior to DII, he served
as President of Dovatron Manufacturing Colorado, a division of Dovatron
International, Inc. from March 1993 to March 1994.

THOMAS J. SMACH - Mr. Smach has served as our Vice President of Finance
since April 2000 following our acquisition of DII. From August 1997 to April
2000, he held various
managementseveral positions that included Senior Vice President, Chief
Financial Officer and technical staff positionsTreasurer of DII. From March 1994 to August 1997, Mr.
Smach served as Corporate Controller and Vice President. From 1982 to March
1994, he served as a certified public accountant with KPMG LLP. Mr. Smach
received his B.Sc. in Hong Kong, Holland, the United
States and the U.K.Accounting from State University of New York at
Binghamton.

TSUI SUNG LAM - Mr. Porter has a B.Sc. degree in production engineering from
Trent University in Nottingham, England.

Chuen Fah Alain Ahkong -- Mr. AhkongTsui has served as a Directormember of the
Companyour Board of Directors
since October 1997. Mr. Ahkong is a founder of Pioneer Management
Services Pte. Ltd. ("Pioneer"), a Singapore-based consultancy firm, and has been
the Managing Director of Pioneer since 1990. Pioneer provides advice1991. From January 1994 to the
Company, and other multinational corporations, on matters related to
international taxation.

Patrick Foley -- Mr. Foley has been a Director of the Company since October
1997. Mr. Foley is Chairman,April 1997, he served as our President and
Chief Operating Officer, and from June 1990 to December 1993 he served as our
Managing Director and Chief Executive Officer of DHL
Corporation, Inc.Officer. Between 1982 and its major subsidiary, DHL Airways,June 1990, Mr.
Tsui served in various positions for Flextronics, Inc., a global
document, package and airfreight delivery company. He joined DHL in September
1988 with more than 30 years experience in hotel and airline industries. Mr.
Foley also serves as a director of Continental Airlines, Inc., Del Monte
Corporation, DHL International, Foundation Health Systems, Inc. and Glenborough
Realty Trust, Inc.

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

MichaelManagement Studies from Hong Kong Polytechnic, and a certificate
in Industrial Engineering from Hong Kong University.

MICHAEL J. Moritz --MORITZ - Mr. Moritz has served as a Directormember of the Companyour Board of
Directors since July 1993. Mr. MoritzSince 1988, he has been a General Partner of Sequoia
Capital, a venture capital firm, since 1988.firm. Mr. Moritz also serves as a director of Yahoo,
Inc., NeomagicSaba Software and several privately-held companies.

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

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

CHUEN FAH ALAIN AHKONG - Mr. Ahkong has served as a member of our Board of
Directors since October 1997. He is a founder of Pioneer Management Services
Pte. Ltd., a Singapore-based consultancy firm, and has been the Managing
Director of Pioneer since 1990. Pioneer provides advice to us and other
multinational corporations on matters related to international taxation.

GOH THIAM POH TOMMIE -- Mr. Goh has been a member of our Board of Directors
since December 2000. He founded JIT Electronics Pte Ltd in 1988 and grew the
company to one of the top 20 largest electronics manufacturing services
providers in the world before the merger with Flextronics in November 2000. Mr
Goh was named "Entrepreneur of the Year" in 1997 and "Businessman of the Year"
in 1999 in Singapore. He was conferred the Doctor of Philosophy in Business
Administration by Wisconsin International University in 2000.

ITEM 11. EXECUTIVE COMPENSATION

The following table presents information requiredconcerning the compensation
paid or accrued by this item is incorporatedus for services rendered during fiscal 2001, 2000 and 1998 by
referencethe Chief Executive Officer and each of our four most highly compensated
executive officers whose total salary and bonus for fiscal 2001 exceeded
$100,000.

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SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
AWARDS
--------------
ANNUAL COMPENSATION OTHER SECURITIES
FISCAL ---------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- ------ -------- ---------- ------------ ------------- ------------

Michael E. Marks.................... 2001 $600,000 $1,285,000 $ 5,082(1) 1,036,456 $ 8,627(9)
Chairman and 2000 450,000 363,750 230,385(2) 600,000 8,350(10)
Chief Executive Officer 1999 400,000 339,315 9,617(3) 3,200,000 7,701(11)
Michael McNamara ................... 2001 450,000 831,250 3,925(1) 600,000 4,702(12)
President, Americas Operations 2000 375,000 201,250 3,867(1) 600,000 4,750(12)
1999 325,000 177,416 22,611(3) 1,784,000 5,000(12)
Robert R.B. Dykes .................. 2001 425,000 798,125 4,668(1) 400,000 5,329(12)
President, Systems Group 2000 337,500 156,000 4,599(1) 240,000 3,500(12)
and Chief Financial Officer 1999 300,000 166,008 25,337(3) 440,000 5,000(12)
Humphrey Porter..................... 2001 400,000 375,000 27,500(4) 200,000 36,000(13)
President, Central/ Eastern 2000 300,000 195,000 20,000(5) 160,000 36,000(13)
European Operations 1999 250,000 149,000 21,000(6) 880,000 30,000(14)
Ronny Nilsson....................... 2001 362,545 405,350 10,154(1) 200,000 33,614(14)
President, Western European 2000 317,684 129,563 17,436(7) 160,000 34,884(14)
Operations 1999 315,000 148,859 18,096(8) 320,000 43,497(14)

(1) Represents a vehicle allowance.

(2) Represents a vehicle allowance of $3,868 and forgiveness of a promissory
note due to one of our subsidiaries of $200,000 and forgiveness of
interest payment of $26,517 on the promissory note.

(3) Represents payment for a company vehicle.

(4) Represents a vehicle allowance of $13,500 and a housing allowance of
$14,000.

(5) Represents a vehicle allowance of $12,000 and a housing allowance of
$8,000.

(6) Represents a vehicle allowance of $7,000 and an apartment allowance of
$14,000.

(7) Represents a vehicle allowance of $10,166 and a housing allowance of
$7,270.

(8) Includes a vehicle allowance of $10,404 and an apartment allowance of
$7,692.

(9) Represents our contributions to the 401(k) plan of $4,750 and life and
disability insurance premium payments of $3,877.

(10) Represents our contributions to the 401(k) plan of $4,750 and life and
disability insurance premium payments of $3,600.

(11) Represents our contributions to the 401(k) plan of $5,000, and life and
disability insurance premium payments of $2,701.

(12) Represents our contributions to the 401(k) plan.

(13) Represents our contributions to a pension retirement fund of $24,000 and
life insurance premium payments of $12,000.

(14) Represents our contributions to a pension retirement fund.

OPTION GRANTS IN FISCAL 2001

The following table presents information regarding option grants during
fiscal 2001 to our Chief Executive Officer and each of our four other most
highly compensated executive officers. All options were granted pursuant to our
1993 Share Option Plan.

The options shown in the table were granted at fair market value and
are incentive stock options (to the extent permitted under the caption "Executive Compensation"Internal Revenue
Code). Options granted on or before October 1, 2001 expire five years from the
date of grant, subject to earlier termination upon termination of the Registrants
definitive Proxy Statement and noticeoptionee's
employment. Options granted after October 1, 2001 expire ten years from the date
of grant, subject to earlier termination as described above. The options become
exercisable over a four-year period, with 25% of the Company's Annual Meetingshares vesting on the first
anniversary of shareholdersthe date of grant and 1/36th of the shares vesting for each full
calendar month that an optionee renders services to be held on August 12, 1999us thereafter. Each option
fully accelerates in the event that, in the 18-month period following certain
mergers or acquisitions of us, the optionee's employment with us is terminated
or his duties are substantially reduced or changed. Each option includes a
limited stock appreciation right pursuant to which the Companyoption will automatically
be canceled upon the occurrence of certain hostile tender offers, in return for
a cash distribution from us based on the tender offer price per share. The
exercise price of each option may be paid in cash or through a cashless exercise
procedure involving a same-day sale of the purchase shares. We granted options
to purchase an aggregate of 14,655,646 Ordinary Shares to our employees during
fiscal 2001.

In accordance with the rules of the Securities and Exchange Commission,
the table presents the potential realizable values that would exist for the
options at the end of their respective five-year terms. These values are based
on assumed rates of annual compound stock price appreciation of 5% and 10% from
the date the option was granted to the end of the option term. Potential
realizable values are computed by:

- multiplying the number of ordinary shares subject to a given
option by the trading price per share of our ordinary shares on
the date of grant;

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- assuming that the aggregate option exercise price derived from the
calculation compounds at the annual 5% or 10% rates should in the
table for the entire five or ten year term of the option, as the
case may be; and

- subtracting from that result the aggregate option exercise price.

The assumed 5% and 10% rates of share price appreciation are mandated
by rules of the Securities and Exchange Commission and do not represent our
estimate or projection of future ordinary share prices. The closing sale price
per share as reported on the Nasdaq National Market on March 30, 2001, the last
trading day of fiscal 2001, was $15.00.

INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATED
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED FISCAL 2001 SHARE DATE 5% 10%
- ---- ---------- ------------- --------- ---------- ------------ -----------

Michael E. Marks........... 36,456 0.25% $32.4375 04/07/2005 $ 326,714 $ 721,953
1,000,000 6.82 23.1875 12/20/2010 14,582,494 36,954,903
Michael McNamara........... 600,000 4.09 23.1875 12/20/2010 8,749,496 22,172,942
Robert R.B. Dykes.......... 400,000 2.73 23.1875 12/20/2010 5,832,998 14,781,961
Humphrey Porter............ 200,000 1.36 23.1875 12/20/2010 2,916,499 7,390,981
Ronny Nilsson.............. 200,000 1.36 23.1875 12/20/2010 2,916,499 7,390,981

AGGREGATED OPTION EXERCISES IN FISCAL 2001 AND OPTION VALUES AT MARCH 31, 2001

The following table presents information concerning the exercise of
options during fiscal 2001 by our Chief Executive Officer and each of our four
other most highly compensated executive officers, including the aggregate amount
of gains on the date of exercise. The amounts set forth in the column entitled
"Value Realized" represent the fair market value of the ordinary shares
underlying the option on the date of exercise less the aggregate exercise price
of the option.

In addition, the table includes the number of shares covered by both
exercisable and unexercisable stock options as of March 31, 2001. Also reported
are values of "in-the-money" options that represent the positive spread between
the respective exercise prices of outstanding stock options and $15.00 per
share, which was the closing price per ordinary share as reported on the Nasdaq
National Market on March 30, 2001, the last day of trading for fiscal 2001.
These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized.

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES MARCH 31, 2001 MARCH 31, 2001
ACQUIRED VALUE ----------------------- --------------------------
NAME ON EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED
- ---- ----------- ----------- --------- --------- ----------- -----------

Michael E. Marks .......... 935,274 $25,047,854 2,866,039 2,804,167 $42,990,585 $27,062,505
Michael McNamara .......... 109,298 2,925,023 1,767,448 1,666,982 26,511,720 16,004,730
Robert R.B. Dykes ......... 377,166 10,721,962 1,131,002 775,832 16,965,030 5,637,480
Humphrey Porter ........... 231,997 8,934,592 183,670 678,333 2,755,050 7,174,995
Ronny Nilsson ............. -- -- 900,000 -- 10,500,000 --

EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS

Mr. Nilsson. In connection with the acquisition of two manufacturing
facilities from Ericsson Business Networks AB located in Karlskrona, Sweden, we
entered into an Employment and Noncompetition Agreement and a Services Agreement
with Mr. Ronny Nilsson, each dated as of April 30, 1997.

Pursuant to the Employment Agreement, Mr. Nilsson:

- was appointed as our Senior Vice President, Europe for a four-year
period;

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- is entitled to receive an annual salary of $250,000; and

- is entitled to a bonus of up to 45% of his annual salary upon the
successful completion of certain performance criteria.

Pursuant to the Services Agreement, Mr. Nilsson is to perform management
consultation and guidance services to us in consideration for:

- an aggregate of $775,000 which was paid between March 31, 1997 and
April 15, 1998; and

- the issuance by us to Mr. Nilsson of an interest-free loan in the
amount of 51,875 kronor ($415,000 as of April 15, 1997, the date of
the issuance of the loan) which was repaid by Mr. Nilsson in two
installments of $210,000 on September 15, 1997 and $205,000 on April
15, 1998.

In connection with Mr. Nilsson's repayment of the interest-free loan, on
April 15,1998 we paid to Mr. Nilsson as compensation an amount equal to the two
installments paid by Mr. Nilsson.

Mr. Goh. In connection with our acquisition of JIT Holdings Limited, JIT
entered into a noncompetition agreement with Goh Thiam Poh Tommie, Chairman of
the Board of JIT and a principal shareholder of JIT. Pursuant to this agreement,
Mr. Goh agreed that within specific geographic areas he will not own or manage a
business that competes with JIT or solicit any employees or customers of JIT.
This agreement will terminate upon the earlier of one year after the termination
of Mr. Goh's employment with JIT or November 30, 2003.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the compensation committee of our Board of Directors during
fiscal 2001 were Messrs. Sharp and Moritz. None of our officers serve on our
compensation committee. No interlocking relationships exist between our Board of
Directors or compensation committee and the board of directors or compensation
committee of any other company.

DIRECTOR COMPENSATION

Each individual who first becomes a non-employee Board member is granted a
stock option to subscribe for 15,000 ordinary shares. After this initial grant,
on the date of each Annual General Meeting, each individual who is at that time
serving as a non-employee director receives a stock option to subscribe for
3,000 ordinary shares, all pursuant to the automatic option grant provisions of
our 1993 Share Option Plan. Pursuant to this program, Messrs. Ahkong, Moritz,
Sharp, Foley and Tsui each received option grants for 3,000 ordinary shares in
fiscal 2001.

In addition, all directors receive reimbursement of reasonable
out-of-pocket expenses incurred in connection with meetings of the Board of
Directors. No non-employee Director receives any cash compensation for services
rendered as a director. No director who is our employee receives compensation
for services rendered as a director.

COMPLIANCE UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16 of the Securities Exchange Act of 1934, as amended, requires
our directors and officers, and persons who own more than 10% of our common
stock to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission within 120 days afterand the endNasdaq National Market. Such
persons are required by Securities and Exchange Commission regulations to
furnish us with copies of all Section 16(a) forms that they file. Based solely
on our review of the fiscalcopies of such forms furnished to us and written
representations from our executive officers and directors, we believe that all
Section 16(a) filing requirements for the year covered by this report.

Itemended March 31, 2001 were met
with the exception of the following: Messrs. Manire, Schlepp, Snyder and Smach
failed to file timely Forms 3; Messrs. Bhardwaj, McNamara, Marks and Schlepp
failed to timely file Forms 4 for October 2000; and Messrs. Bhardwaj, McNamara,
Marks, Porter, Schlepp and Smach failed to file timely Forms 4 for February
2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information required by this item is incorporated by reference toas of May 1, 2001 regarding the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management"beneficial ownership of the Registrants definitive Proxy Statementour ordinary shares, by

- each shareholder known to us to be the beneficial owner of more than
5% of our ordinary shares;

63
- each director;

- each executive officer named in the Summary Compensation Table;
and

notice- all directors and executive officers as a group.

Information in this table as to our directors and executive officers is
based upon information supplied by these individuals. Information in this table
as to our 5% shareholders is based solely upon the Schedules 13G filed by these
shareholders with the Securities and Exchange Commission. Where information
regarding shareholders is based on Schedules 13G, the number of shares owned is
as of the Company's Annual Meetingdate for which information was provided in such schedules.

Beneficial ownership is determined in accordance with the rules of shareholdersthe
Securities and Exchange Commission that deem shares to be heldbeneficially owned by
any person who has voting or investment power with respect to such shares.
Ordinary shares subject to options that are currently exercisable or exercisable
within 60 days of May 1, 2001 are deemed to be outstanding and to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person. Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all the shares
beneficially owned, subject to community property laws where applicable.

In the table below, percentage ownership is based upon 480,058,647
ordinary shares outstanding as of May 1, 2001.

SHARES BENEFICIALLY OWNED
-------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT
- ------------------------------------ ---------------- -------

5% SHAREHOLDERS:
Entities associated with AXA Financial, Inc.(1)............... 45,279,073 9.4%
1290 Avenue of the Americas
New York, NY 10104
T. Rowe Price Associates, Inc.(2)............................. 26,521,115 5.5
100 E. Pratt Street
Baltimore, MD 21202
Entitles associated with FMR Corporation(3)................... 24,634,204 5.1
82 Devonshire Street
Boston, MA 02109
EXECUTIVE OFFICERS AND DIRECTORS:
Richard L. Sharp(4)........................................... 6,062,202 1.3
Goh Thiam Poh Tommie.......................................... 5,573,114 1.2
Michael E. Marks(5)........................................... 5,285,777 1.1
Michael McNamara(6)........................................... 2,641,700 *
Robert R.B. Dykes(7).......................................... 1,606,407 *
Michael J. Moritz(8).......................................... 455,682 *
Ronny Nilsson(9).............................................. 390,000 *
Tsui Sung Lam(10)............................................. 313,946 *
Humphrey Porter(11)........................................... 272,003 *
Patrick Foley(12)............................................. 208,250 *
Chuen Fah Alain Ahkong(13).................................... 28,250 *
---------- ----
All 16 directors and executive officers as a group(14)........ 25,986,948 5.3%
========== ====

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

* Less than 1%.

(1) Based on August 12, 1999 which the
Company will fileinformation supplied by AXA Financial, Inc. in an amended Schedule
13G filed with the Securities and Exchange Commission within 120 days
after the end of the fiscal year coveredon February 12, 2001.

(2) Based on information supplied by this report.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information with required by this item is incorporated by reference to
the information under the caption "Certain Relationships and Related
Transactions" of the Registrants definitive Proxy Statement and notice of the
Company's Annual Meeting of shareholders to be held on August 12, 1999 which the
Company will fileT. Rowe Price Associates, Inc. in a
Schedule 13G filed with the Securities and Exchange Commission on February
14, 2001.

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(3) Based on information supplied by FMR Corporation in an amended Schedule 13G
filed with the Securities and Exchange Commission on February 13, 2001.

(4) Includes 1,480,000 shares beneficially owned by Bethany Limited
Partnership. Mr. Sharp, the general partner of Bethany Limited Partnership,
has voting and investment power over such shares and may be deemed to
beneficially own such shares. Mr. Sharp disclaims beneficial ownership of
all such shares except to the extent of his proportionate interest therein.
Also includes 612,000 shares held by RLS Charitable Remainder Unitrust of
which Mr. Sharp is a co-trustee and 96,250 shares subject to options
exercisable within 12060 days after May 1, 2001 held by Mr. Sharp.

(5) Includes 24,000 shares held by the endJustin Caine Marks Trust and 24,000
shares held by the Amy G. Marks Trust. Also includes 3,166,039 shares
subject to options exercisable within 60 days after May 1, 2001 held by Mr.
Marks.

(6) Includes 1,950,930 shares subject to options exercisable within 60 days
after May 1, 2001 held by Mr. McNamara.

(7) Includes 232,166 shares held by the Dykes Family LP Trust. Also includes
1,228,501 shares subject to options exercisable within 60 days after May 1,
2001 held by Mr. Dykes.

(8) Includes 359,432 shares held by the Maximus Trust. Also includes 96,250
shares subject to options exercisable within 60 days after May 1, 2001 held
by Mr. Moritz.

(9) Represents 390,000 shares subject to options exercisable within 60 days
after May 1, 2001 held by Mr. Nilsson.

(10) Includes 271,594 shares subject to options exercisable within 60 days after
May 1, 2001 held by Mr. Tsui.

(11) Represents 272,003 shares subject to options exercisable within 60 days
after May 1, 2001 held by Mr. Porter.

(12) Includes 168,250 shares subject to options exercisable within 60 days after
May 1, 2001 held by Mr. Foley.

(13) Represents 28,250 shares subject to options exercisable within 60 days
after May 1, 2001 held by Mr. Ahkong.

(14) Includes 9,065,280 shares subject to options exercisable within 60 days
after May 1, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Other than compensation agreements and other arrangements, which are
described in "Executive" Compensation, and the transactions described below,
during fiscal 2001, there was not, nor is there currently proposed, any
transaction or series of similar transactions to which we were or will be a
party:

- in which the amount involved exceeded or will exceed $60,000; and

- in which any director, executive officer, holder of more than 5%
of our ordinary shares or any member of their immediate family had
or will have a direct or indirect material interest.

LOANS TO EXECUTIVE OFFICERS

Mr. Marks. On October 11, 2000, our principal U.S. subsidiary,
Flextronics International (USA), Inc., which we refer to in this section as
Flextronics USA, loaned $10,569,658 to Mr. Michael Marks, our Chairman of the
Board and Chief Executive Officer. Mr. Marks executed a promissory note in favor
of Flextronics USA that bore interest at a rate of 5.96% and was to mature on
November 11, 2003. In fiscal year covered by2001, Mr. Marks paid the principal in full,
together with accrued interest.

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Mr. McNamara. On October 22, 1996, Flextronics USA loaned $135,900 to
Mr. Michael McNamara. Mr. McNamara executed a promissory note in favor of
Flextronics USA that bears interest at a rate of 7.00% and matures on October
22, 2001. The remaining outstanding balance of the loan as of March 31, 2001 was
$179,464 (representing $135,900 in principal and $43,564 in accrued interest).

On November 25, 1998, Flextronics USA loaned $130,000 to Mr. McNamara.
Mr. McNamara executed a promissory note in favor of Flextronics USA that bears
interest at a rate of 7.25% and matures on November 25, 2003. The remaining
outstanding balance of the loan as of March 31, 2001 was $152,797 (representing
$130,000 in principal and $22,797 in accrued interest).

On April 14, 1999, Flextronics USA loaned $950,000 to Mr. McNamara. Mr.
McNamara executed a promissory note in favor of Flextronics USA that bears
interest at a rate of 4.19% and matures on May 3, 2003. The remaining
outstanding balance of the loan as of March 31, 2001 was $1,089,663
(representing $950,000 in principal and $139,663 in accrued interest).

On October 11, 2000, Flextronics USA loaned $152,236 to Mr. McNamara.
Mr. McNamara executed a promissory note in favor of Flextronics USA that bears
interest at a rate of 5.96% and matures on November 11, 2003. The remaining
outstanding balance of the loan as of March 31, 2001 was $156,546 (representing
$152,236 in principal and $4,310 in accrued interest).

Mr. Dykes. On January 15, 1999, Flextronics USA loaned $200,100 to Mr.
Robert Dykes. Mr. Dykes executed a promissory note in favor of Flextronics USA
that bears interest at a rate of 7.25% and matures on January 15, 2004. In
fiscal 2001, Mr. Dykes paid the principal in full, together with accrued
interest.

On October 11, 2000, Flextronics USA loaned $1,046,886 to Mr. Dykes.
Mr. Dykes executed a promissory note in favor of Flextronics USA that bore
interest at a rate of 5.96% and was to mature on November 11, 2003. In fiscal
2001, Mr. Dykes paid the principal in full, together with accrued interest.

Mr. Smach. On April 3, 2000, Flextronics USA loaned $1,000,000 to Mr.
Thomas J. Smach. Mr. Smach executed a Loan and Security Agreement and a
promissory note in favor of Flextronics USA that does not bear interest and
matures on April 3, 2005. The remaining outstanding balance of the loan as of
March 31, 2001 was $1,000,000 in principal.

Mr. Snyder. On April 20, 2000, Flextronics USA loaned $1,000,000 to Mr.
Ronald R. Snyder. Mr. Snyder executed a Loan and Security Agreement and a
promissory note in favor of Flextronics USA that did not bear interest and was
to mature on April 20, 2005. In fiscal 2001, Mr. Snyder paid the principal in
full.

OTHER LOANS TO EXECUTIVE OFFICERS

In connection with an investment partnership, Glouple Ventures LLC, one
of our subsidiaries, Flextronics International, NV, which we refer to in this
report.

69section as Flextronics NV, has entered into the following transactions with our
executive officers.

- in July 2000, Flextronics NV loaned $76,922 to each of Messrs.
Marks, McNamara, Dykes, Porter, Nilsson, Bhardwaj, Schlepp, Snyder
and Smach, and each executed a promissory note in favor of
Flextronics NV that bears interest at a rate of 6.40% and matures
on August 15, 2010;

- in August 2000, Flextronics NV loaned an aggregate of $51,157 to
each of Messrs. Marks, McNamara, Dykes, Porter, Nilsson, Bhardwaj,
Schlepp, Snyder and Smach, and each executed promissory notes in
favor of Flextronics NV that bear interest at a rate of 6.22% and
mature on August 15, 2010; and

- in November 2000, Flextronics NV loaned an aggregate of $428,286
to each of Messrs. Marks, McNamara, Dykes, Porter, Nilsson,
Bhardwaj, Manire, Schlepp, Snyder and Smach, and each executed
promissory notes in favor of Flextronics NV that bear interest at
a rate of 6.09% and mature on August 15, 2010.

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As of March 31, 2001, the entire principal amount of these loans,
together with $102,698 of accrued interest, was outstanding.

PART IV

ITEM 14. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES.

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

2.1 Asset Transfer Agreement between Ericsson Business Networks ABSCHEDULES AND REPORTS ON FORM 8-K

(a) DOCUMENTS TO BE FILED AS PART OF THIS ANNUAL REPORT ON FORM 10-K

1. Financial Statements. See Item 8, "Financial Statements and
Flextronics International Sweden AB datedSupplementary Data."

2. Financial Statement Schedules. The following financial statement
schedule is filed as February 12,
1997.part of this report and should be read together
with our financial statements:

Schedule II -- Valuation and qualifying accounts

3. Exhibits. The following exhibits are filed with this annual report on
Form 10-K:

INCORPORATED BY REFERENCE
---------------------------------------------------
EXHIBIT FILING EXHIBIT FILED
NO. EXHIBIT FORM FILE NO. DATE NO. HEREWITH
------- ------- ---- -------- ------ ------- --------

2.01 Exchange Agreement dated as of June 11, 1999 among 10-K 000-23354 06-29-99 2.3
the Registrant, Flextronics Holding Finland Oyj,
Kyrel EMS Oyj, and Seppo Parhankangas

2.02 Agreement and Plan of Merger dated November 22, 1999 8-K 000-23354 12-06-99 2.1
among the Registrant, Slalom Acquisition Corp. and
The DII Group, Inc.*

2.03 Agreement and Plan of Reorganization dated July 31, 8-K 000-23354 09-15-00 2.01
2000 among the Registrant, Chatham Acquisition
Corporation, and Chatham Technologies, Inc.*

2.04 Merger Agreement dated August 10, 2000 among the S-3 333-46770 09-27-00 2.4
Registrant, JIT Holdings Limited, Goh Thiam Poh
Tommie and Goh Mui Teck William, as amended.*

2.05 Agreement and Plan of Reorganization dated August 31, S-3 333-46200 09-20-00 2.4
2000 among the Registrant, Lightning Metal
Acquisition Corp., Coating Acquisition Corp.,
Lightning Tool Acquisition Corp., Lightning Metal
Specialties, Incorporated, Coating Technologies,
Inc., Lightning Tool and Design, Inc., Lightning
Metal Specialties E.M.F., Ltd., Lightning
Manufacturing Solutions-Europe, Ltd., Lightning
Manufacturing Solutions Texas, L.L.C., Lightning
Logistics, L.L.C., Papason, L.L.C., 200 Scott Street,
L.L.C., 80 Scott Street, L.L.C., 230 Scott Street,
L.L.C., 1350 Lively Blvd, L.L.C., D.A.D. Partnership,
S.O.N. Partnership, S.O.N. II Partnership, and
shareholders and members of such companies.*

2.06 Exchange Agreement dated January 14, 2000, among the X
Registrant, Palo Alto Products International Pte.
Ltd., and the shareholders of Palo Alto Products
International Pte. Ltd., Palo Alto Manufacturing
(Thailand) Ltd., and Palo Alto Plastic (Thailand)
Ltd.

3.01 Memorandum and New Articles of Association of the 10-Q 000-23354 02-09-01 3.1
Registrant.

4.01 Indenture dated as of October 15, 1997 between 8-K 000-23354 10-22-97 10.1
Registrant and State Street Bank and Trust Company of
California, N.A., as trustee.

65
67

4.02 U.S. Dollar Indenture dated June 29, 2000 between the 10-Q 000-23354 08-14-00 4.1
Registrant and Chase Manhattan Bank and Trust
Company, N.A., as trustee.

4.03 Euro Indenture dated as of June 29, 2000 between 10-Q 000-23354 08-14-00 4.2
Registrant and Chase Manhattan Bank and Trust
Company, N.A., as trustee.

4.04 Credit Agreement dated April 3, 2000 among the 10-K 000-23354 06-13-00 10.26
Registrant and its subsidiaries designated under the
Credit Agreement as borrowers from time to time, the
lenders named in Schedule I to the Credit Agreement,
ABN AMRO Bank N.V. as agent for the lenders, Fleet
National Bank as documentation agent, Bank of
America, National Association and Citicorp USA, Inc.
as managing agents, and The Bank of Nova Scotia as
co-agent (the "Flextronics International Credit
Agreement.*

4.05 Credit Agreement dated as of April 3, 2000 among 10-K 000-23354 06-13-00 10.27
Flextronics International USA, Inc., The DII Group,
Inc., the lenders named in Schedule I to the Credit
Agreement, ABN AMRO Bank N.V. as agent for the
lenders, Fleet National Bank, as documentation agent,
Bank of America, National Association and Citicorp
USA, Inc. as managing agents, and The Bank of Nova
Scotia as co-agent (the "Flextronics USA Credit
Agreement").*

4.06 Amendment, dated as of June 15, 2001, to the 10-Q 000-23354 11-14-01 10.01
Flextronics USA Credit Agreement.*

4.07 First Amendment, dated as of April 3, 2001, to the X
Flextronics International Credit Agreement.*

4.08 Second Amendment, dated as of April 3, 2001, to the X
Flextronics USA Credit Agreement.*

10.01 Form of Indemnification Agreement between the S-1 33-74622 10.01
Registrant and its Directors and certain officers.

10.02 Registrant's 1993 Share Option Plan.+ S-8 333-55850 02-16-01 4.2

10.03 Registrant's 1997 Employee Share Purchase Plan.+ S-8 333-95189 01-21-00 4.3

10.04 Flextronics U.S.A. 401(k) plan.+ S-1 33-74622 10.52

10.05 Employment and Noncompetition Agreement dated as of 10-K 000-23354 quarter ended
April 30, 1997 between Flextronics International Sweden 03-31-97 10.29
AB and Ronny Nilsson.+

10.06 Services Agreement dated as of April 30, 1997 between 10-K 000-23354 quarter ended
Flextronics International USA, Inc. and Ronny Nilsson.+ 03-31-97 10.30

10.07 Promissory Note dated April 15, 1997 executed by 10-K 000-23354 quarter ended
Ronny Nilsson in favor of Flextronics International 03-31-97 10.31
USA, Inc.

10.08 Form of Secured Full Recourse Promissory Note X
executed by certain executive officers of the
Registrant in favor of Flextronics International, NV,
in connection with Glouple Ventures 2000 - I.

10.09 Form of Secured Full Recourse Promissory Note X
executed by certain executive officers of the
Registrant in favor of Flextronics International, NV,
in connection with Glouple Ventures 2000 - II.

10.10 Deed of Noncompetition dated November 30, 2000
among JIT Holdings Limited and Goh Thiam Poh Tommie.+ X

21.01 Subsidiaries of Registrant X

23.01 Consent of Arthur Andersen LLP X

23.02 Consent of Deloitte & Touche LLP X

66
68

* Certain schedules have been omitted. The CompanyRegistrant agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon
request.

(Incorporated by reference to Exhibit
2.6 of the Registrant's registration statement+ Management contract, compensatory plan or arrangement.

(b) Reports on Form S-3, No.
333-21715.)

2.2 Exchange Agreement dated October 19, 1997 by and among
Registrant, Neutronics Electronic Industries Holding A.G. and the
named Shareholders of Neutronics Electronic Industries Holding
A.G. (Incorporated by reference to Exhibit 2 of the Registrant's
Current Report8-K:

On January 29, 2001 we filed a current report on Form 8-K for event reported on October 30,
1997.)

2.3 Exchange Agreement datedincluding our
consolidated financial statements as of June 11,March 31, 1999 among the
Registrant, Flextronics Holding Finland Oyj and Seppo
Parhankangas.

3.1 Memorandum of Association2000 and for
each of the Registrant. (Incorporated by
referencethree years in the period ended March 31, 2000, giving
retroactive effect to Exhibit 3.1 of the Registrant's registration
statement on Form S-1, No. 33-74622.)

3.2 Articles of Association of the Registrant. (Incorporated by
reference to Exhibit 3.2 of the Registrant's registration
statement on Form S-4, No. 33-85842.)

4.1 Indenture dated as of October 15, 1997 between Registrantour mergers with Chatham Technologies, Inc. and
State Street BankLightning Metal Specialties and Trust Company of California, N.A., as
trustee. (Incorporated by reference to Exhibit 10.1 of the
Registrant's Current Reportrelated entities.

On February 1, 2001 we filed a current report on Form 8-K for event reported on
October 15, 1997.)

10.1 Formrelating to (i)
our underwritten public offering of Indemnification Agreement between27,000,000 of our ordinary shares, all
of which were sold by us, at a public offering price of $37.9375 per share
and (ii) our announcement that we had entered into a non-binding memorandum
of understanding with Ericsson in which we were selected to manage the
Registrant and its
Directors and certain officers. (Incorporated by reference to
Exhibit 10.1operations of the Company's registration statement on Form S-1,
No. 33-74622.)

10.2 1993 Share Option Plan. (Incorporated by reference to Exhibit
10.2 of the Company's registration statement on Form S-1, No.
33-74622.)

10.3 nCHIP, Inc. Amended and Restated 1988 Stock Option Plan.
(Incorporated by reference to Exhibit 10.5 of the Company's
registration statement on Form S-4, No. 33-85842.)

10.4* Agreement to Grant Options dated as of June 9, 1995 between the
Company and Lifescan. (Incorporated by reference to Exhibit 10.7
of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995.)

10.5 Lease Agreement dated as of October 1, 1994 among Shenzhen Xinan
Industrial Shareholdings Limited, Flextronics Industrial
(Shenzhen) Limited and Flextronics Singapore Pte Ltd.
(Incorporated by reference to Exhibit 10.25 of the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1995.)

10.6 Lease Agreement dated as of January 2, 1995 between Shenzhen
Xinan Industrial Shareholdings Limited and Flextronics Industrial
(Shenzhen) Limited. (Incorporated by reference to Exhibit 10.25
of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995.)

10.7 Services Agreement between the Registrant and Stephen Rees dated
as of January 6, 1996. (Incorporated by reference to Exhibit 10.1
of the Company's Current Report onEricsson's mobile phone business. This Form 8-K for the event
reportedwas amended
on February 2, 1996.)

10.8 Supplemental Services Agreement between Astron and Stephen Rees
dated as of January 6, 1996. (Incorporated by reference8, 2001 to Exhibit 10.2 offile the Company's Current Report on Form 8-K for the
event reported on February 2, 1996.)

10.9 Promissory Note dated April 17, 1995 executed by Michael E. Marks
in favor of Flextronics Technologies, Inc. (Incorporated by
referenceunderwriting agreement relating to Exhibit 10.34 to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1995.)

70our
underwritten public offering.

67
10.10* Printed Circuit Board Assembly Services Agreement between
Lifescan Inc., a Johnson & Johnson Company, and the Registration
dated November 1, 1992. (Incorporated by reference to Exhibit
10.41 of the Company's registration statement on Form S-1, No.
33-74622.)

10.11 Tenancy of Flatted Factory Unit dated February 28, 1996 between
Jurong Town Corporation and the Registrant. (Incorporated by
reference to Exhibit 10.44 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1990.)

10.12 Tenancy of Flatted Factory Unit dated May 14, 1993 between Jurong
Town Corporation and the Registrant. (Incorporated by reference
to Exhibit 10.45 of the Company's registration statement on Form
S-1, No. 33-74622.)

10.13 Flextronics Asia U.S.A. 401(k) plan. (Incorporated by reference
to Exhibit 10.52 of the Company's registration statement on Form
S-1, No. 33-74622.)

10.14 Amended and Restated Revolving Credit Agreement dated as of
January 14, 1998 among Flextronics International USA, Inc.,
BankBoston, N.A. and the lending institutions listed on Schedule
1 attached thereto and BankBoston, N.A. as agent with BancBoston
Securities Inc. as arranger. The Company agrees to furnish a copy
of the omitted schedules to the Commission upon request.
(Incorporated by reference to Exhibit 10.1 of the Company's
Report on Form 10-Q for the quarterly period ended December 31,
1997.)

10.15 Amended and Restated Revolving Credit Agreement dated as of
January 14, 1998 among Flextronics International Ltd.,
BankBoston, N.A. and the lending institutions listed on Schedule
1 attached thereto and BankBoston, N.A. as agent with BancBoston
Securities Inc. as arranger. The Company agrees to furnish a copy
of the omitted schedules to the Commission upon request.
(Incorporated by reference to Exhibit 10.2 of the Company's
Report on Form 10-Q for the quarterly period ended December 31,
1997.)

10.16 Employment and Noncompetition Agreement dated as of April 30,
1997 between Flextronics International Sweden AB and Ronny
Nilsson. (Incorporated by reference to Exhibit 10.29 of the
Company's Annual Report on Form 10-K for fiscal year ended March
31, 1997.)

10.17 Services Agreement dated as of April 30, 1997 between Flextronics
International USA, Inc. and Ronny Nilsson. (Incorporated by
reference to Exhibit 10.30 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)

10.18 Promissory Note dated April 15, 1997 executed by Ronny Nilsson in
favor of Flextronics International USA, Inc. (Incorporated by
reference to Exhibit 10.31 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)

10.19 Letter Agreement dated March 27, 1997 among the Company, Astron
Technologies Limited, Croton Technology Ltd. and Stephen Rees
regarding the termination of the Services Agreement.
(Incorporated by reference to Exhibit 10.32 of the Company's
Annual Report on Form 10-K for fiscal year ended March 31, 1997.)

10.20 Letter Agreement dated March 27, 1997 between Astron Group
Limited and Stephen Rees regarding the termination of the
Supplemental Services Agreement. (Incorporated by reference to
Exhibit 10.33 of the Company's Annual Report on Form 10-K for
fiscal year ended March 31, 1997.)

10.21 Services Agreement between Astron Technologies Limited and Tsui
Sung Lam effective as of April 1, 1997. (Incorporated by
reference to Exhibit 10.36 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)

10.22 Services Agreement between Flextronics Singapore Pte Limited and
Tsui Sung Lam effective as of April 1, 1997. (Incorporated by
reference to Exhibit 10.37 of the Company's Annual Report on Form
10-K for fiscal year ended March 31, 1997.)

10.23 Loan Agreement between Flextronics International USA, Inc. as
lender, and Michael E. Marks, as borrower dated November 6, 1997.
(Incorporated by reference to Exhibit 10.35 of the Company's
Registration Statement on Form S-4, No. 333-41293.)

10.24 Secured Full Recourse Promissory Note, dated November 6, 1997,
executed by Michael E. Marks in favor of Flextronics
International USA, Inc. (Incorporated by reference to Exhibit
10.36 to the Company's Registration Statement on Form S-4, No.
333-41293.)

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

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

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

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

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

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

21.1 Subsidiaries of Registrant.

23.1 Consent of Arthur Andersen LLP.

23.2 Consent of Moore Stephens.

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

VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II

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

ADDITIONS
----------------------
BALANCE AT EFFECT CHARGED TO CHARGED BALANCE AT
BEGINNING OF OF COSTS AND TO OTHER DEDUCTIONS/ END OF
PERIOD ACQUISITIONS EXPENSES ACCOUNTS WRITE-OFFS PERIOD
------------ ------------ ---------- --------- ---------- ----------

Allowance for doubtful accounts
receivable:
Period
Year ended March 31, 1997 3,766 -- 3,091 -- (785) 6,072
Year ended March 31, 1998 6,072 4,188 1,218 -- (1,950) 9,528
Year ended March 31, 1999 9,528 223 (2,584) -- (2,117) 5,050

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

73
69
SIGNATURES

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

Date :Date: June 25, 199929, 2001 FLEXTRONICS INTERNATIONAL LTD.

By: /s/ MICHAEL E. MARKS
----------------------------------------------------------------
Michael E. Marks
Chairman of the Board
and Chief Executive Officer

POWER OF ATTORNEY

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

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

SIGNATURE TITLE DATE
--------- ----- ----
/s/ MICHAEL E. MARKS Chief Executive Officer June 29, 2001
- ----------------------------------------------------- and Chairman of the Board
Michael E. Marks (Principal Executive Officer)

/s/ ROBERT R.B. DYKES President, Systems Group June 29, 2001
- ----------------------------------------------------- and Chief Financial Officer
Robert R.B. Dykes (Principal Financial Officer)

/s/ THOMAS J. SMACH Vice President, Finance June 29, 2001
- ----------------------------------------------------- (Principal Accounting Officer)
Thomas J. Smach

/s/ TSUI SUNG LAM Director June 29, 2001
- -----------------------------------------------------
Tsui Sung Lam

/s/ MICHAEL J. MORITZ Director June 29, 2001
- -----------------------------------------------------
Michael J. Moritz

/s/ RICHARD L. SHARP Director June 29, 2001
- -----------------------------------------------------
Richard L. Sharp

/s/ PATRICK FOLEY Director June 29, 2001
- -----------------------------------------------------
Patrick Foley

/s/ CHUEN FAH ALAIN AHKONG Director June 29, 2001
- -----------------------------------------------------
Chuen Fah Alain Ahkong

/s/ GOH THIAM POH TOMMIE Director June 29, 2001
- -----------------------------------------------------
Goh Thiam Poh Tommie

68
70

Valuation and Qualifying Accounts
Schedule II

Years Ended March 31, 1999, 2000 and 2001
(in thousands)

ADDITIONS
-------------------------
BALANCE AT EFFECT CHARGED TO BALANCE AT
BEGINNING OF OF COSTS AND DEDUCTIONS/ END OF
YEAR ACQUISITIONS EXPENSES WRITE-OFFS YEAR
------------ ------------ ---------- ---------- ----------

Allowance for doubtful accounts:
Year ended March 31, 1999 $ 15,446 $ 223 $ 1,149 $ 121 $ 16,939
Year ended March 31, 2000 16,939 1,123 12,534 (5,639) 24,957
Year ended March 31, 2001 24,957 10,293 9,429 (260) 44,419
Accrual for unusual charges:
Year ended March 31, 1999 5,445 -- 79,286 (78,177) 6,554
Year ended March 31, 2000 6,554 -- -- (5,623) 931
Year ended March 31, 2001 931 -- 686,805 (517,352) 170,384
Reserve for inventory obsolescence:
Year ended March 31, 1999 19,834 3,095 7,624 (741) 29,812
Year ended March 31, 2000 29,812 3,046 32,345 (3,411) 61,792
Year ended March 31, 2001 61,792 34,341 33,634 (24,668) 105,099
71

EXHIBIT INDEX

2.01 Exchange Agreement dated as of June 11, 1999 among 10-K 000-23354 06-29-99 2.3
the Registrant, Flextronics Holding Finland Oyj,
Kyrel EMS Oyj, and Seppo Parhankangas

2.02 Agreement and Plan of Merger dated November 22, 1999 8-K 000-23354 12-06-99 2.1
among the Registrant, Slalom Acquisition Corp. and
The DII Group, Inc.*

2.03 Agreement and Plan of Reorganization dated July 31, 8-K 000-23354 09-15-00 2.01
2000 among the Registrant, Chatham Acquisition
Corporation, and Chatham Technologies, Inc.*

2.04 Merger Agreement dated August 10, 2000 among the S-3 333-46770 09-27-00 2.4
Registrant, JIT Holdings Limited, Goh Thiam Poh
Tommie and Goh Mui Teck William, as amended.*

3.01 Memorandum and New Articles of Association of the 10-Q 000-23354 02-09-01 3.1
Registrant.

4.01 Indenture dated as of October 15, 1997 between 8-K 000-23354 10-22-97 10.1
Registrant and State Street Bank and Trust Company of
California, N.A., as trustee.
72

4.02 U.S. Dollar Indenture dated June 29, 2000 between the 10-Q 000-23354 08-14-00 4.1
Registrant and Chase Manhattan Bank and Trust
Company, N.A., as trustee.

4.03 Euro Indenture dated as of June 29, 2000 between 10-Q 000-23354 08-14-00 4.2
Registrant and Chase Manhattan Bank and Trust
Company, N.A., as trustee.

4.06 Amendment, dated as of June 15, 2001, to the 10-Q 000-23354 11-14-01 10.01
Flextronics USA Credit Agreement.*

4.07 First Amendment, dated as of April 3, 2001, to the X
Flextronics International Credit Agreement.*

4.08 Second Amendment, dated as of April 3, 2001, to the X
Flextronics USA Credit Agreement.*

10.01 Form of Indemnification Agreement between the S-1 33-74622 10.01
Registrant and its Directors and certain officers.

10.02 Registrant's 1993 Share Option Plan.+ S-8 333-55850 02-16-01 4.2

10.03 Registrant's 1997 Employee Share Purchase Plan. + S-8 333-95189 01-21-00 4.3

10.04 Flextronics U.S.A. 401(k) plan.+ S-1 33-74622 10.52

10.05 Employment and Noncompetition Agreement dated as of 10-K 000-23354 quarter ended
April 30, 1997 between Flextronics International Sweden 03-31-97 10.29
AB and Ronny Nilsson.+

10.06 Services Agreement dated as of April 30, 1997 between 10-K 000-23354 quarter ended
Flextronics International USA, Inc. and Ronny Nilsson.+ 03-31-97 10.30

10.07 Promissory Note dated April 15, 1997 executed by 10-K 000-23354 quarter ended
Ronny Nilsson in favor of Flextronics International 03-31-97 10.31
USA, Inc.

10.08 Form of Secured Full Recourse Promissory Note X
executed by certain executive officers of the
Registrant in favor of Flextronics International, NV,
in connection with Glouple Ventures 2000 - I.

10.10 Deed of Noncompetition dated November 30, 2000 among
JIT Holdings Limited and Goh Thiam Poh Tommie.+ X

21.01 Subsidiaries of Registrant X

23.01 Consent of Arthur Andersen LLP X

23.02 Consent of Deloitte & Touche LLP X
73

* Certain schedules have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted schedule to the Board, and Chief June 25, 1999
- ----------------------- Executive Officer (principal
Michael E. Marks executive officer)

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

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

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

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

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

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

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

74Commission upon
request.

+ Management contract, compensatory plan or arrangement.