AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13,AUGUST 27, 1997

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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 IDENTIFICATION
INCORPORATION) NO.)

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514 CHAI CHEE LANE #04-13
BEDOK INDUSTRIAL ESTATE
SINGAPORE 469029
(65) 449-5255
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

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

COPIES TO:

GORDON K. DAVIDSON, ESQ. DANIEL J. WINNIKE, ESQ.
DAVID K. MICHAELS, ESQ. RICHARD G. COSTELLO, ESQ.
TRAM T. PHI,CARLTON X. OSBORNE, ESQ. HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN,
FENWICK & WEST LLP A PROFESSIONAL CORPORATION
TWO PALO ALTO SQUARE THREE EMBARCADERO CENTER, 7TH FLOOR
PALO ALTO, CALIFORNIA 94306 SAN FRANCISCO, CALIFORNIA 94111

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

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

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

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

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CALCULATION OF REGISTRATION FEE

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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE

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Ordinary Shares, par value S$0.01 per
share.............................. 2,012,500 $26.375 $53,079,688 $16,084.76
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(1) Includes 262,500 shares issuable upon exercise of an option granted by the
Company to the Underwriters to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(c) under the Securities Act of 1933,
based on the average of the high and low prices of the Ordinary Shares on
the Nasdaq National Market on February 11, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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2

EXPLANATORY NOTE

The Registration Statement contains two forms of prospectus, one to be used
in connection with a United States underwritten offering (the "U.S.
Prospectus"), and one to be used in connection with a concurrent international
underwritten offering (the "International Prospectus" and, together with the
U.S. Prospectus, the "Prospectuses"). The Prospectuses will be identical in all
respects except for the front cover page, the section entitled "Underwriting"
and the outside back cover page.

The form of the U.S. Prospectus is included herein and the form of the
front cover page, "Underwriting" section and outside back cover page of the
International Prospectus are included following the back cover page of the U.S.
Prospectus as pages X-1 through X-5.
3

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.

SUBJECT TO COMPLETION FEBRUARY 12,AUGUST , 1997

1,750,000 SHARES

LOGO

ORDINARY SHARES

[LOGO]

All of the 1,750,000 Ordinary Shares offered hereby are being sold by
Flextronics International Ltd. ("Flextronics" or the "Company"). Of the
1,750,000 Ordinary Shares offered hereby, 1,312,500 shares initially are being
offered in the United States and Canada by the U.S. Underwriters and 437,500
shares initially are being offered in a concurrent offering outside the United
States and Canada by the International Managers. The public offering price and
the underwriting discount per share are identical for both of the offerings. See
"Underwriting."

The Company's Ordinary Shares are quotedtraded on the
Nasdaq National Market under the symbol "FLEXF." On February 11,August 21, 1997, the last
reported sale price for the Ordinary Shares was $26$35 1/48 per share. See "Price
Range of Ordinary Shares."

SEE "RISK FACTORS" COMMENCING ON PAGE 76 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE ORDINARY
SHARES OFFERED HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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Price to Underwriting Proceeds to
Public Discount(1) Company(2)

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Per Share................................... $ $ $
Total(3).................................... $ $ $
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(1) See "Underwriting" for information concerning indemnification of the
U.S.
Underwriters and the International Managers and other matters.

(2) Before deducting expenses payable by the Company estimated at $360,000.$1,140,000.

(3) The Company has granted to the U.S. Underwriters and the International
Managersa 30-day optionsoption to purchase up
to 196,875 and 65,625262,500 additional Ordinary Shares respectively, in each case solely to cover over-allotments, if
any. If these options arethis option is exercised in full, the Price to Public will total
$ , the Underwriting Discount will total $ , and the
Proceeds to Company will total $ .

The Ordinary Shares are offered by the U.S. Underwriters and the
International Managers subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part. It is expected that delivery of the certificates representing such shares
will be made against payment therefor at the office of Montgomery Securities on
or about , 1997.

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MONTGOMERY SECURITIES
COWEN & COMPANY
SALOMON BROTHERS INC
UBS SECURITIES

The date of this Prospectus is , 1997.

AVAILABLE INFORMATION

Flextronics International Ltd. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Company's
Ordinary Shares are quoted for trading on the Nasdaq National Market and
reports, proxy statements and other information concerning the Company also may
be inspected at the offices of the National Association of Securities Dealers,
9513 Key West Avenue, Rockville, Maryland 20850. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement. Statements made in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and in each instance in which a copy of such
contract is filed as an exhibit to the Registration Statement, reference is made
to such copy, and each such statement shall be deemed qualified in all respects
by such reference. Copies of the Registration Statement may be inspected,
without charge, at the offices of the Commission, or obtained at prescribed
rates from the Public Reference Section of the Commission at the address set
forth above.3

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by the Company are hereby
incorporated by reference into this Prospectus except as superseded or modified
herein: (1) the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996;1997, as amended on Form 10-K/A; (2) the Company's definitive proxy statement dated June 25,
1996; (3) the Company's Quarterly ReportsReport on
Form 10-Q for the fiscal quartersquarter ended June 30, 1996 and September 30, 1996; (4)1997; (3) the Company's Current Report
on Form 8-K as amended on Form 8-K/A for the event reported on April 12, 1995; (5)
the Company's Current Report on Form 8-K as amended on Form 8-K/A for the event
reported on February 2, 1996; (6) the Company's Current Report on Form 8-K for
the event reported on December 13, 1996;August 11, 1997;
and (7)(4) the description of the Company's Ordinary Shares set forth in the
Company's Registration Statement on Form 8-A filed with the Commission on
January 28, 1994. All documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of the offering of the shares
offered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus. The Company will provide without charge to each
person, including any beneficial owner, to whom this Prospectus is delivered,
upon written or oral request of such person, a copy of any and all of the
documents that have been or may be incorporated by reference herein (other than
exhibits to such documents which are not specifically incorporated by reference
into such documents). Such requests should be directed to Flextronics
International Ltd., Investor Relations, 2241 Lundy Avenue,2090 Fortune Drive, San Jose, California
95131, telephone number (408) 428-1300.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE ORDINARY SHARES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE ORDINARY SHARES
ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

2
5

PROSPECTUS SUMMARY

In this Prospectus, references to "U.S. dollars"Dollars" and "$" are to United
States currency and references to "Singapore dollars" and "S$" are to Singapore
currency. Except as otherwise noted, (i) all monetary amounts in this Prospectus
are presented in U.S. dollars and (ii) all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE ORDINARY SHARES,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

2
4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the consolidated financial statements
and notes thereto, appearing elsewhere in this Prospectus or incorporated by
reference in this Prospectus. This Prospectus 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. In
this Prospectus, the words "expects," "anticipates," "believes," "intends" and
similar expressions identify forward-looking statements, which speak only as of
the date hereof, and are subject to certain risks and uncertainties. These
include the factors set forth in "Risk Factors" and elsewhere in this
Prospectus.

THE COMPANY

Flextronics International Ltd. ("Flextronics" or the "Company") is a
leading
provider of advanced contract manufacturing services to original equipment
manufacturers ("OEMs") in the communications, computer, consumer electronics and
medical device industries. Flextronics offers a full range of services including
product design, printed circuit board ("PCB") fabrication and assembly,
materials procurement, inventory management, final system assembly and test,testing,
packaging and distribution. The components, subassemblies and finished products
manufactured by Flextronics incorporate advanced interconnect, miniaturization
and packaging technologies, such as surface mount ("SMT"), multichip module ("MCM") and chip-on-board
("COB")., ball grid array ("BGA") and miniaturized gold-plated PCB technology.
The Company's strategy is to use its global manufacturing capabilities and
advanced technological expertise to provide its customers with a complete
manufacturing solution, highly responsive and flexible service, accelerated time
to market and reduced production costs. The Company targets leading OEMs, in
growing vertical markets, with which it believes it can establish long-term
relationships, and serves its customers on a global basis from its strategically
located facilities in North America, East Asia and Northern Europe. The
Company's customers include Advanced Fibre Communications, Ascend
Communications, Braun/ThermoScan, Cisco Systems, Diebold, Ericsson, Harris DTS,
Lifescan (a Johnson & Johnson company), Microsoft, Philips Electronics and U.S. Robotics.

In FebruaryOn March 27, 1997, the Company entered into a definitive agreement to
acquireacquired from Ericsson Business Networks AB
("Ericsson") 330,000 square feet oftwo manufacturing facilities (the "Karlskrona Facilities") located
in Karlskrona, Sweden and related inventory, equipment and other assets (the "Karlskrona Facilities"), for
approximately 792$82.4 million Swedish kronor (approximately $109.2 million based on exchange rates at January
31, 1997), substantially expanding the Company's Northern European operations.
See "Acquisition of Karlskrona Facilities." The Company intends to use the net
proceeds of this offering to pay a portion of the purchase price for the
Karlskrona Facilities.in cash. The Karlskrona Facilities include a 220,000
square foot facility and a 110,000 square foot facility, each of which is ISO
9002 certified. The Company is currently utilizing the Karlskrona Facilities to
assemble and test PCBs, network switches, cordless base stations and other
components for the business communications systems sold by Ericsson. As a part of this transaction, the
Company and Ericsson entered intopursuant to a
multi-year purchase agreement under which
the Company will manufacture certain of these products for Ericsson.(the "Purchase Agreement"). The Company believes that manyintends to
also use the Karlskrona Facilities to offer advanced contract manufacturing
services to other European OEMs in the telecommunications and other industries,
which the Company believes are beginning to outsource the manufacture of
significant product lines,lines. See "Business -- Karlskrona Acquisition" and
that the acquisition of the Karlskrona Facilities positions it to capitalize on
this trend. See "Acquisition of Karlskrona Facilities," "Risk
Factors -- Risks of Ericsson Transaction" and "Use of Proceeds.Karlskrona Acquisition."

Since 1994, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, both through
acquisitions and internal growth. In fiscal 1994, the Company added U.S.
manufacturing capabilities by acquiring Relevant Industries, Inc. ("Relevant"),
a final assembly contract manufacturer located in San Jose, California. In
fiscal 1995, the Company:Company acquired nCHIP, Inc. ("nCHIP"), a leader in the designdesigner and
manufacturemanufacturer of MCMs;multichip modules ("MCMs"); added Northern European
manufacturing capabilities through the acquisition of Assembly & Automation
(Electronics) Ltd. ("A&A"), a contract manufacturer located in the United
Kingdom; and opened new facilities in China and Texas. In fiscal 1996, the
Company obtained miniature gold-finished PCB fabrication capabilities and
expanded its presence in China by acquiring Astron Group Ltd. ("Astron"). In
fiscal 1997, the Company:Company expanded its advanced PCB design capabilities by
acquiring Fine Line Printed Circuit Design, Inc. ("Fine Line"); expanded its
presence in China by investing in FICO Investment Holding Limited ("FICO"), a
producer of plastic injection moldings; andmolded plastics for Asian electronics companies; opened an
additional manufacturing facility in San Jose, California.California; closed its plant in
Texas; and downsized manufacturing operations in Singapore. The Company is
continuing to consolidate and expandhas
recently substantially expanded its manufacturing operations by developingexpanding its
integrated campusescampus in Doumen, China, andconstructing a new manufacturing campus in

Guadalajara, Mexico and adding facilities in San Jose, California, while closing its plant in Texas and
discontinuing manufacturing in Singapore.California.

3
65

THE OFFERING

Ordinary Shares offered by the Company....... 1,750,000 shares
Ordinary Shares to be outstanding after the
offering................................... 15,374,39615,502,293 shares(1)
Use of proceeds.............................. PaymentRepayment of a portion of the purchase price for
the Karlskrona Facilities and working capital(2)indebtedness
Nasdaq National Market symbol................ FLEXF

SUMMARY FINANCIAL INFORMATION

(IN THOUSANDS, EXCEPT PER SHARE DATA)

NINETHREE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------------------------------------JUNE 30,
---------------------------------------------------- -------------------
1992
1993 1994 1995 1996(3) 1995 1996(4)
-------1996(2) 1997(2) 1997
-------- -------- -------- -------- -------- 1996 --------
(RESTATED)(3) --------
(RESTATED)(3)
(UNAUDITED)

Statement of Operations
Data:Data(2):
Net sales............... $80,729sales.............. $100,759 $131,345 $237,386 $448,346 $322,645 $362,264$490,585 $117,889 $196,883
Operating income (loss)............... (3,222)... 1,365 3,835 10,207 (11,775) 15,146 14,152(9,435) 10,919 5,476 8,380
Net income (loss)....... (6,518)...... (1,228) 2,151 6,156 (17,412) 11,626 10,536(15,132) 7,463 4,197 5,312
Net income (loss) per
share................ $ (0.89)share............... $ (0.17) $ 0.28 $ 0.51 $ (1.39)(1.19) $ 0.890.50 $ 0.730.28 $ 0.36
Weighted average
outstanding Ordinary
Shares and
equivalents.......... 7,284equivalents......... 7,382 7,730 12,103 12,536 13,130 14,37712,684 14,877 14,914 14,955

DECEMBER 31, 1996
--------------------------------------------JUNE 30, 1997 (UNAUDITED)
-------------------------------------------
AS ADJUSTED
ACTUAL AS ADJUSTED(5)ADJUSTED(4) PRO FORMA(5)(6)FORMA(4)(5)
-------- -------------- -------------------------------

Balance Sheet Data:
Working capital.....................................capital...................................... $ 26,2051,324 $ 69,486 $133,48653,579 $ 85,979
Net property and equipment.......................... 71,001 71,001 102,781equipment........................... 135,835 135,835 135,835
Total assets........................................ 217,934 261,215 358,415assets......................................... 402,131 402,131 417,786
Long-term debt and capital lease obligations, excludingless
current portion........................ 28,019 28,019 128,019portion................................... 82,886 82,886 110,868
Shareholders' equity................................ 83,602 126,818 126,818equity................................. 88,542 140,797 140,797

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(1) Based on the number of shares outstanding as of June 30, 1997. Does not
include options outstanding as of December 31, 1996June 30, 1997 to acquire 1,795,4351,907,558 shares
with a weighted average exercise price of $17.93$19.93 per share,share.

(2) Expansion through acquisitions and an additional 299,016 shares reserved for issuance pursuantinternal growth has contributed, and may
continue to contribute, to the Company's 1993 Share Option Plan.

(2) See "Risk Factors -- Risks of Ericsson Transaction."

(3)incurring significant accounting
charges and experiencing volatility in its operating results. In the fourth quarter of fiscal
1996, the Company wrote off $31.6$29.0 million of in-process research and
development associated with the acquisition of Astron and also recorded
charges totaling $2.5$1.3 million for costs associated with the closing of one
of the Company's Malaysian plants and its Shekou, China operations. Without taking these write-offs and charges into account,
the Company's net income and net income per share would have been $16.6
million and $1.25, respectively, in fiscal 1996.

(4) In the third quarter of
fiscal 1997, the Company incurred plant closing expenses of $2.3aggregating $5.9
million in connection with the closing of its Texas facility, downsizing its
Singapore manufacturing operation and the write-off ofwriting off obsolete equipment and
incurring severance obligations at the nCHIP semiconductor fabrication
facility. (5)See "Risk Factors -- Management of Expansion and Consolidation"
and
"-- Acquisitions."

(3) The consolidated financial statements of the Company for the fiscal year
ended March 31, 1996 and the three months ended June 30, 1996 have been
restated as a result of changes in the Company's accounting for the
acquisition of Astron. See Note 14 of Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Recent Changes in Accounting for Astron
Acquisition."

(4) Adjusted to reflect the sale of the 1,750,000 Ordinary Shares offered by the
Company hereby (at an assumed public offering price of $26.25$35 1/8 per share and
after deducting the estimated underwriting discount and offering expenses
payable by the Company) and the receiptapplication of the net proceeds therefrom.therefrom to
repay indebtedness. See "Use of Proceeds.Proceeds" and "Capitalization."

(6)(5) Gives pro forma effect to (i) the acquisition of the Karlskrona Facilities,
(ii) the incurrenceanticipated issuance of $100.0 million
principal amount of indebtedness by
the Company, all of which is assumed to be long-term debt (although the
Company is evaluating its financing strategySenior Subordinated Notes (the "Senior Subordinated
Notes") and may also utilize short-term
debt), and (iii) the application of the net proceeds of suchtherefrom to repay
indebtedness as
well as the sale of Ordinary Shares offered hereby by the Company to pay the
purchase price for the Karlskrona Facilities and for working capital, in
each case as if such transactions had been consummated on December 31, 1996.

4
7

ACQUISITION OF KARLSKRONA FACILITIES

In February 1997, the Company entered into an Asset Transfer Agreement (the
"Asset Transfer Agreement") to acquire from Ericsson Business Networks AB two
manufacturing facilities located in Karlskrona, Sweden and related inventory,
equipment and other assets for approximately $792 million Swedish kronor
(approximately $109.2 million based on exchange rates at January 31, 1997) in
cash, subject to adjustment based on the net book value of the acquired assets
as of the closing date. The Karlskrona Facilities include a 220,000 square foot
facility and a 110,000 square foot facility, each of which is ISO 9002
certified. These facilities currently assemble PCBs, network switches, cordless
base stations and other components for the business communications systems sold
by Ericsson. Approximately 930 Ericsson employees currently based at the
Karlskrona Facilities are expected to remain employed at the facilities. In
addition, Ronny Nilsson, currently Vice President and General Manager, Supply
and Distribution of Ericsson will be appointed President of Flextronics
International Sweden AB and Senior Vice President, Europe of the Company at the
closing of the transaction. See "Risk Factors -- Risks of Ericsson Transaction."

The Company, certain of its subsidiaries and Ericsson also entered into a
multi-year purchase agreement (the "Purchase Agreement"), under which the
Company will manufacture certain products used in Ericsson's business
communications systems. The Company believes that, as a result, sales to
Ericsson will account for a large portion of its net sales in fiscal 1998. The
Karlskrona Facilities' cost of sales and services (including certain overhead
allocations) for the year ended December 31, 1996 was 2.14 billion Swedish
kronor (approximately $314.7 million based on exchange rates at December 31,
1996). However, there can be no assurance as to the volume of Ericsson's
purchases, or the mix of products that it will purchase, from the Karlskrona
Facilities in any future period.

By acquiring the Karlskrona Facilities, the Company substantially increases
its worldwide capacity, obtains a strong base in Northern Europe and enhances
its position as a contract manufacturer for the telecommunications industry,
which is increasingly outsourcing manufacturing. The Company also intends to use
the manufacturing resources provided by the Karlskrona Facilities to offer
services to other European OEMs, which it believes are beginning to outsource
the manufacture of significant product lines.

The Company intends to use a combination of the proceeds of this offering
and debt financing to pay the purchase price for the Karlskrona Facilities. The
Company is currently engaged in discussions regarding long-term and short-term
credit arrangements, although no assurancecapital. No assurances can be given as to
whether, or on what terms, the availability
or terms of any such arrangements.Senior Subordinated Notes will be issued. See
"Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."Capitalization."

The Company anticipates closing the
acquisition of the Karlskrona Facilities by April 1, 1997. However, the
transition is subject to various closing conditions, including obtaining
regulatory approvals, and no assurance can be given as to when, or whether, it
will be completed. See "Risk Factors -- Risks of Ericsson Transaction."

The Company anticipates that it will record a charge to earnings of
approximately $3.0 million in the fourth quarter of fiscal 1997, relating to the
anticipated costs of separating the Karlskrona Facilities from Ericsson's
information systems and implementing a new management information system, as
well as transaction costs for the acquisition. The Company expects to reflect
the acquired assets on its balance sheet at amounts equal to those used in
calculating the purchase price. On a pro forma basis as of December 31, 1996
(and based on exchange rates as of such date), this would have increased the
Company's inventories from $45.3 million to $124.6 million, and would have
increased its net property and equipment from $71.0 million to $102.8 million.
Accounts receivable and cash would not have increased on a pro forma basis as of
December 31, 1996. In addition, the Company will not assume any liabilities of
Ericsson other than certain accrued compensation obligations, which were $3.3
million as of December 31, 1996 (based on exchange rates on such date). The
Company does not expect to account for any portion of the purchase price as an
intangible asset, such as goodwill. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

The foregoing discussion, and discussions elsewhere in this Prospectus
relating to the acquisition of the Karlskrona Facilities and the execution of
the Purchase Agreement (together, the "Ericsson Transaction") and the benefits
that the Company anticipates that it may derive from the Ericsson Transaction,
contain

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8

forward looking statements. The Company's ability to achieve the anticipated
benefits of the Ericsson Transaction is subject to a number of risks. The
Purchase Agreement contains certain cost reduction targets and price
limitations, and imposes on the Company certain manufacturing quality
requirements. The Company has no experience operating in Sweden, which has
relatively high manufacturing costs, and there can be no assurance that the
Company can achieve acceptable levels of profitability under the Purchase
Agreement or reduce costs and prices to Ericsson over time as contemplated by
the Purchase Agreement. Further, the Purchase Agreement contains certain
financial covenants that must be maintained by the Company, and prohibits the
Company from selling or relocating the equipment acquired in the transaction
without Ericsson's consent. A material breach by the Company of any of the terms
of the Purchase Agreement could allow Ericsson to repurchase the assets conveyed
to the Company at the Company's book value or to obtain other relief, including
the cancellation of outstanding purchase orders or termination of the Purchase
Agreement. Ericsson also has certain rights to be consulted on the management of
the Karlskrona Facilities and to approve the use of the Karlskrona Facilities
for Ericsson's competitors, or for other customers where such use might
adversely affect Ericsson's access to production capacity at the facilities. In
addition, without Ericsson's consent, the Company may not enter into certain
transactions that could adversely affect its ability to continue to supply
products and services to Ericsson under the Purchase Agreement or its ability to
reduce costs and prices to Ericsson. See "Risk Factors -- Risks of Ericsson
Transaction."6

THE COMPANY

Flextronics is incorporated in Singapore under the Companies Act, Chapter
50 of Singapore (the "Companies Act"). The Company's principal executive offices
are located at 514 Chai Chee Lane #04-13, Bedok Industrial Estate, Singapore
469029, and its telephone number is (65) 449-5255. The address of the Company's
principal U.S. office is 2241 Lundy Avenue,2090 Fortune Drive, San Jose, California 95131, and its
telephone number is (408) 428-1300. "Flextronics" is a trademark of Flextronics.
This Prospectus also contains trademarks of other companies. Flextronics
prepares its consolidated financial statements in U.S. dollars.

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97

RISK FACTORS

The following risk factors should be considered carefully in addition to
the other information in this Prospectus before purchasing the Ordinary Shares
offered hereby. The discussion in this Prospectus contains certain
forward-looking statements, such as statements ofand the Company's plans,
objectives, expectations and intentions. The cautionary statements made in this
Prospectusfollowing risk factors should be read as
being applicable to all related forward-looking statements wherever they appear
in this Prospectus. The Company's actual results could differ materially from
those discussed here.in this Prospectus. Factors that could cause or contribute to
such differences include those discussed below, as well as those discussed
elsewhere herein.

RISKS OF ERICSSON TRANSACTION

While the Company has entered into the Asset Transfer Agreement with
Ericsson to acquire the Karlskrona Facilities from Ericsson, it has not
consummated this transaction, and consummation is subject to certain conditions
precedent, including obtaining Swedish regulatory approvals, the receipt of
specified legal assurances, and the absence of certain adverse changes. Although
the Company anticipates closing this transaction by April 1, 1997, and the Asset
Transfer Agreement provides for a closing by no later than May 2, 1997, no
assurance can be given as to when, or whether, the Ericsson Transaction will be
completed.KARLSKRONA ACQUISITION

The Company intends to use the net proceeds from this offering to pay
a portion of the purchase price of the Karlskrona Facilities. If the Ericsson
Transaction is not consummated, the Company intends to use such proceeds for
working capital and general corporate purposes, including the planned expansion
of its operations in Doumen, China and San Jose, California. See "Use of
Proceeds." The Company also intends to incur a substantial amount of
indebtedness to pay a portion of the purchase priceacquisition of the Karlskrona Facilities which will increase its interest expense in future periods. There
can be no assurance as toand the availability or termsexecution of such indebtedness.

The Ericsson Transaction representsthe
Purchase Agreement (together the "Karlskrona Acquisition") represent a
significant expansion of the Company's operations, and entailsentail a number of risks.
In particular, the Karlskrona Facilities havehad operated as captive manufacturing
facilities for Ericsson prior to March 27, 1997 and willare now be used as anbeing integrated
part ofinto the Company's ongoing manufacturing operations. This will requirerequires optimizing
production lines,
separating the Karlskrona Facilities' management information systems from those
of Ericsson and implementing new management information systems, implementing
the Company's operating systems, and assimilating and managing existing
personnel. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview" and "Business -- Employees.Overview." The difficulties of this integration may be
further complicated by the geographical distance of the Karlskrona Facilities
from the Company's currentother operations in East Asia and the
United States.North America. In addition,
the Ericsson TransactionKarlskrona Acquisition has increased and will continue to increase the
Company's expenses and working capital requirements, and place burdens onhas burdened the
Company's management resources. In the event the Company is unsuccessful in
integrating these operations, the Company would be materially adversely
affected.

As a result of the Karlskrona Acquisition, sales to Ericsson Transaction,represent, and
the Company expects that saleswill continue to
Ericsson will represent, a large portion of its net
sales. See "Business -- Karlskrona Acquisition." Prior to the Karlskrona
Acquisition, Ericsson haswas not
previously been a substantial customer of the Company. ThereThe Company
has no experience operating in Sweden, and there can be no assurance that the
Company can achieve acceptable levels of profitability, or reduce costs and
prices to Ericsson over time as contemplated by the Purchase Agreement. In
addition, there can be no assurance that the Company will not encounter
difficulties in meeting Ericsson's expectations as to product quality timeliness and
cost reductions.timeliness. If Ericsson's requirements exceed the volume anticipated by the
Company, the Company may be unable to meet these requirements on a timely basis.
The Company's inability to meet Ericsson's volume, quality, timeliness and cost
requirements, and to quickly resolve any other issues with Ericsson, could have
a material adverse effect on the Company and its results of operations. There
can also be no assurance that Ericsson will purchase a sufficient quantity of
products from the Company to meet the Company's expectations or that the Company
will utilize a sufficient portion of the capacity of the Karlskrona Facilities
to achieve profitable operations.

The Company may seekintends to use the Karlskrona Facilities to manufacture
products for third parties.OEMs other than Ericsson. The Company has no commitments by any
third party to purchase manufacturing services to be provided at the Karlskrona
Facilities, and no assurance can be given that the Company will be successful in
marketing and providing manufacturing services to third parties from the
Karlskrona Facilities. Ericsson also has certain rights to be consulted on the
management of the Karlskrona Facilities and to approve the use of the Karlskrona
Facilities for Ericsson's competitors, or for other customers where such use
might adversely affect Ericsson's access to production capacity at the
facilities. The Company

7
10

has no experience operating in Sweden, which has relatively high manufacturing
costs, and there can be no assurance that the Company can achieve acceptable
levels of profitability, or reduce costs and prices to Ericsson over time as
contemplated by the Purchase Agreement. In addition,Further, no assurances can be given as to the Company's ability to
expand manufacturing capacity at the Karlskrona Facilities.

The Purchase Agreement contains certain financial covenants that must be
maintained by the Company, and prohibits the Company from selling or relocating
the equipment acquired in the transaction without Ericsson's consent. In
addition, without Ericsson's consent, the Company may not enter into any
transactions that could adversely affect its ability to continue to supply
products and services to Ericsson under the Purchase Agreement or its ability to
reduce costs and prices to Ericsson. A material breach by the Company of any of
the terms of the Purchase Agreement could allow Ericsson to repurchase the
assets conveyed to the Company at the Company's book value or to obtain other
relief, including the cancellation of outstanding purchase orders or termination
of the Purchase Agreement. As a result of these rights, Ericsson may, under

6
8

certain circumstances, have a significant degree of control over the Karlskrona
Facilities and their management. See "Acquisition"Business -- Karlskrona Acquisition."

INCREASED LEVERAGE

At June 30, 1997, the Company had consolidated indebtedness of
Karlskrona Facilities.approximately $163.6 million (including bank borrowings, long-term debt and
capitalized lease obligations, and excluding $9.0 million of liabilities
relating to the Astron acquisition that the Company intends to repay in the
Company's Ordinary Shares). The Company's indebtedness at June 30, 1997 included
$111.0 million borrowed on March 27, 1997, which substantially increased the
Company's leverage. The Company's ratio of indebtedness to shareholders' equity
increased from approximately 75.6% at June 30, 1996 to 184.8% at June 30, 1997.
See "Management's Discussion and Analysis of Financial Condition and Result of
Operations -- Liquidity and Capital Resources."

The degree to which the Company is leveraged could have important
consequences to the Company and its shareholders, including the following: (i)
the Company's ability to obtain additional financing in the future for working
capital, capital expenditures, product development, acquisitions or other
purposes may be limited or impaired; (ii) the Company's operating flexibility
with respect to certain matters will be limited by covenants that limit the
ability of the Company and certain of its subsidiaries to incur additional
indebtedness, grant liens, pay dividends, redeem capital stock or prepay certain
subordinated indebtedness and enter into sale and leaseback transactions; and
(iii) the Company's degree of leverage may make it more vulnerable to economic
downturns, may limit its ability to pursue other business opportunities and may
reduce its flexibility in responding to changing business and economic
conditions.

The Company's ability to generate cash for the repayment of debt will be
dependent upon the future performance of the Company's business, which will in
turn be subject to financial, business, economic and other factors affecting the
business and operations of the Company, including factors beyond its control,
such as prevailing economic conditions.

The Company may seek growth through selective acquisitions, including
significant acquisitions. The Company could incur substantial additional
indebtedness in connection with a significant acquisition, in which event the
Company's leverage would be further increased.

MANAGEMENT OF EXPANSION AND CONSOLIDATION

The Company is currently experiencing a period ofhas experienced rapid expansion in recent years through both
internal growth and acquisitions, with net sales increasing from $80.7$100.8 million
in fiscal 19921993 to $448.3$490.6 million in fiscal 1996. In addition to its
recent acquisitions,1997, and reaching $196.9 million in
the Company may from time to time pursue the acquisition of
other companies, assets or product lines that complement or expand its existing
business.three months ended June 30, 1997. There can be no assurance that the
Company's historical growth will continue or that the Company will successfully
manage the integration of the acquired operations. Expansion has caused, and is
expected to continue to cause, strain on the Company's infrastructure, including
its managerial, technical, financial and other resources. To manage further
growth, the Company must continue to enhance financial controls and hire
additional engineering and sales personnel. ContinuedThe Company's ability to manage any
future growth effectively will also require increased investmentsit to enhance
management information systems capabilitiesattract, train, motivate and manage
new employees successfully, to integrate new employees into its overall
operations and to add manufacturing capacity.continue to improve its operational systems. The Company may
experience certain inefficiencies as it integrates new operations and manages
geographically dispersed operations. There can be no assurance that the Company
will be able to manage its expansion effectively, and a failure to do so could
have a material adverse effect on the Company's results of operations. In
addition, the Company's results of operations would be adversely affected if its
new facilities do not achieve growth sufficient to offset increased expenditures
associated with expansion.

Expansion through acquisitionacquisitions and internal growth has contributed to the
Company's incurring significant accounting charges and experiencing volatility
in its operating results. In the fourth quarter of fiscal 1996, the Company
reported a substantial loss as a result of the write-off of in-process research
and development charges related to the Astron acquisition and closure of a
facility in Malaysia and a facility in China. In the third quarter of fiscal 1997, the Company
reported charges associated with the closure ofclosing its manufacturing facilitiesfacility in Texas,
downsizing manufacturing operations in Singapore, and the write-off ofwriting off obsolete
equipment and incurring severance obligations at the nCHIP semiconductor
fabrication facility. There can be no assurance that the

7
9

Company will not continue to experience volatility in its operating results or
incur write-offs in connection with its expansion and consolidation efforts.
Furthermore, the Company has recently completed the construction of significant
new facilities in Guadalajara, Mexico, Doumen, China, and San Jose, California,
resulting in new fixed and operating expenses, including substantial increases
in depreciation expense that will increase the Company's cost of sales. There
can be no assurances that the Company will utilize a sufficient portion of the
capacity of these facilities to offset the impact of these expenses on its gross
margins and operating income. If revenue levels do not increase sufficiently to
offset these new expenses, the Company's operating results could be materially
adversely affected.

The Company is beginning the process of replacing its management
information systems. The new systems will significantly affect many aspects of
the Company's business including its manufacturing, sales and marketing, and
accounting functions, and the Company's ability to integrate the Karlskrona
Facilities, which must be converted to the new system, and the successful
implementation of these systems will be important to facilitate future growth.
The Company intends to implement the new system incrementally on a regional
basis and currently anticipates that the implementation of the new management
information systems will take at least 18 months. Delays or difficulties could
be encountered in the implementation process, which could cause significant
disruption in operations, including problems with the delivery of its products
or an adverse impact on its ability to access timely and accurate financial and
operating information . If the Company is not successful in implementing its new
systems or if the Company experiences difficulties in such implementation, the
Company's operating results could be materially adversely affected.

ACQUISITIONS

Acquisitions involve a number of risks in addition to those described under
"Management"-- Management of Expansion and Consolidation" that could adversely affect the
Company, including the diversion of management's attention, the integration and
assimilation of the operations and personnel of the acquired companies, the
amortization of acquired intangible assets and the potential loss of key
employees of the acquired companies. The Company may not have had any experience
with technologies, processes and markets involved with the acquired business and
accordingly may lack the management and marketing experience that will be
necessary to successfully operate and integrate the business. The successful
operation of an acquired business will require communication and cooperation in
product development and marketing among senior executives and key technical
personnel. Given the inherent difficulties involved in completing a major
business combination, there can be no assurance that such cooperation will occur
or that integration of the respective businesses will be successful and will not
result in disruption in one or more sectors of the Company's business. In
addition, there can be no assurance that the Company will retain key technical,
management, sales and other personnel, that the market will favorably view the
Company's entry into a new industry or market or that the Company will realize
any of the other anticipated benefits of the acquisition. No assurance can be
given that any past or future acquisition by the Company will not materially
adversely affect the Company or that any such acquisition will enhance the
Company's business.

8
1110

CUSTOMER CONCENTRATION; DEPENDENCE ON ELECTRONICS INDUSTRY

A small number of customers are currently responsible for a significant
portion of the Company's net sales. In fiscal 1996,1997 and the first three months of
fiscal 1998, the Company's five largest customers accounted for approximately
52.0% of net sales,46% and in the nine months
ended December 31, 1996 its five largest customers accounted for approximately
49.4%61%, respectively, of net sales. Approximately 14.1%13% and 10% of Flextronics'the
Company's net sales for fiscal 1996, and 13.8% of its net sales for the nine months ended December 31, 1996,1997 were derived from sales to Lifescan (a Johnson & Johnson company).and U.S.
Robotics, respectively. Approximately 30% and 10% of the Company's net sales for
the first three months of fiscal 1998 were derived from sales to Ericsson and
Advanced Fibre Communications, respectively. See Business -- Karlskrona
Acquisition." Flextronics anticipates that a small number of its customers will
continue to account for a large portion of its net sales as it focuses on
strengthening and broadening relationships with leading OEMs. After consummation of the Ericsson Transaction,
the Company expects that sales to Ericsson will represent a significant portion
of its net sales. See "Risk Factors -- Risks of Ericsson Transaction."

The composition of the group comprising the Company's largest customers has
varied from year to year, and there can be no assurance that the Company's
principal customers will continue to purchase products and services from the
Company at current levels, if at all. For example, the Company expects that its
sales to Global Village Communications in fiscal 1998 will be significantly
lower than in recent periods. Significant reductions in sales to any of these
customers, or the loss of one or more major customers, would have a material
adverse effect on the Company's results of operations.Company. The Company generally does not obtain firm
long-term volume purchase commitments from its customers, and over the past few
years has experienced reduced lead-times in customer orders. In addition,
customer contracts can be canceled and volume levels can be changed or delayed.
The timely replacement of canceled, delayed, or reduced contracts with new
business cannot be assured. These risks are exacerbated because a majority of
the Company's sales are to customers in the electronics industry, which is
subject to rapid technological change and product obsolescence. The factors
affecting the electronics industry in general, or any of the Company's major
customers in particular, could have a material adverse effect on the Company's resultsCompany.
See "Management's Discussion and Analysis of operations.Financial Condition and Results of
Operations -- Results of Operations."

Credit terms are extended to customers after performing credit evaluations,
which continue throughout a customer's contract period. Credit losses have
occurred in the past, and no assurances can be given that credit losses, which
could be material, will not occur in the future. The Company's concentration of
customers increases the risk that any credit loss would have a material adverse
effect on the Company's resultsCompany. See "Management's Discussion and Analysis of operations.Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

VARIABILITY OF CUSTOMER REQUIREMENTS AND OPERATING RESULTS

Contract manufacturers must provide increasingly rapid product turnaround
and respond to ever-shorter lead times. The Company generally does not obtain
long-term purchase orders but instead works with its customers to anticipate the
volume of future orders. In certain cases, the Company will procure components
without a customer commitment to pay for them, and the Company must continually
make other significant decisions for which it is responsible, including the
levels of business that it will seek and accept, production schedules, personnel
needs and other resource requirements. A variety of conditions, both specific to
the individual customer and generally affecting the industry, may cause
customers to cancel, reduce or delay orders. Cancellations, reductions or delays
by a significant customer or by a group of customers would adversely affect the
Company's results of operations.Company. On occasion, customers may require rapid increases in production, which
can stress the Company's resources and reduce margins. Although the Company has
increased its manufacturing capacity, there can be no assurance that the Company
will have sufficient capacity at any given time to meet its customers' demands
if such demands exceed anticipated levels.

In addition to the variability resulting from the short-term nature of its
customers' commitments, other factors have contributed, and may contribute in
the future to significant periodic and quarterly fluctuations in the Company's
results of operations. These factors include, among other things: timing of
orders; volume of orders relative to the Company's capacity; customers'
announcements, introductions 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; product mix; and changes or anticipated changes in economic

9
11

conditions. In addition, the Company's revenuesnet sales are adversely affected by the
observance of local holidays 9
12

during the fourth fiscal quarter in Malaysia and
China, reduced production levels in Sweden in July, and the reduction in orders
by certain customers in the fourth fiscal quarter reflecting a seasonal slowdown
following the Christmas holiday.

Expansion through acquisition and internal growth has contributed to the
Company's incurring significant accounting charges and to volatility in its
operating results. In the fourth quarter of fiscal 1996, the Company reported a
substantial loss as a result of the write off of in-process research and
development charges related to the Astron acquisition and closurethe closing of
facilities in Malaysia and China. In the third quarter of fiscal 1997, the Company reported charges
associated with the closureclosing of its manufacturing facilitiesfacility in Texas, downsizing
manufacturing operations in Singapore and the write-offwriting-off of obsolete equipment and
incurring severance obligations at the nCHIP semiconductor fabrication facility.

The market segments served by the Company are also subject to economic
cycles and have in the past experienced, and are likely in the future to
experience, recessionary periods. A recessionary period affecting the industry
segments served by the Company could have a material adverse effect on the
Company's results of operations. Results of operations in any period should not
be considered indicative of the results to be expected for any future period,
and fluctuations in operating results may also result in fluctuations in the
price of the Company's Ordinary Shares. In future periods, the Company's revenuenet
sales 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 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

RAPID TECHNOLOGICAL CHANGE

The markets in which the Company's customers compete are characterized by
rapidly changing technology, evolving industry standards and continuous
improvements in products and services. These conditions frequently result in
short product life cycles. The Company's success will depend to a significant
extent on the success achieved by its customers in developing and marketing
their products, some of which are new and untested. If technologies or standards
supported by customers' products become obsolete or fail to gain widespread
commercial acceptance, the Company's business may be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations."

The Company has made substantial investments in developing advanced
interconnect technological capabilities. See "Business -- Services." These
capabilities, primarily MCMs, miniature gold-finished PCBs and epoxy molding
conductive compounds, currently account for a relatively small portion of the
overall market for electronic interconnect products. The ability of the Company
to achieve desired operating results will depend upon the extent to which
customers design, manufacture and adopt systems based on these advanced
technologies. There can be no assurance that the Company will be able to develop
and exploit these technologies successfully. In addition, there can be no
assurance that the Company will be able to exploit new technologies as they are
developed or to adapt its manufacturing processes, technologies and facilities
to address emerging customer requirements.

COMPETITION

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12

the Company's competitors, including Solectron Corporation and SCI Systems, have
substantially greater manufacturing, financial, research and development and
marketing resources than the Company. The Company believes that the principal
competitive factors in the segments of the contract manufacturing industry in
which it operates 10
13

are cost, technological capabilities, responsiveness and
flexibility, delivery cycles, location of facilities, product quality and range
of services available. Failure to satisfy any of the foregoing requirements
could materially adversely affect the Company's competitive position. See
"Business -- Competition."

RISK OF INCREASED TAXES

The Company has structured its 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. If these tax incentives are not
renewed upon expiration, if the tax rates applicable to the Company are
rescinded or changed, or if tax authorities successfully challenge the manner in
which profits are recognized among the Company's subsidiaries, the Company's
taxes would increase and its results of operations and cash flow would be
adversely affected. Substantially all of the products manufactured by the
Company's Asian subsidiaries are sold to U.S.-based customers. While the Company
believes that profits from its Asian operations are not sufficiently connected
to the U.S. to give rise to U.S. federal or state income taxation, there can be
no assurance that U.S. tax authorities will not challenge the Company's position
or, if such challenge is made, that the Company would prevail in any such
dispute. If the Company's Asian profits became subject to U.S. income taxes, the
Company's worldwide effective tax rate would increase and its results of
operations and cash flow would be adversely affected. The expansion by the
Company of its operations in North America and Northern Europe may increase its
worldwide effective tax rate. See "Management's Discussion and Analysis of
Financial Condition and ResultsResult of Operations -- Provision for Income Taxes."

RISKS OF INTERNATIONAL OPERATIONS

The Company's executive offices are located in Singapore and the United
States and the Company has substantial manufacturing operations located in Singapore,China,
Malaysia, China, the United StatesSweden and the United Kingdom.States. In addition, the Company is acquiring substantial manufacturing operations in
Sweden and is developinghas recently
constructed a manufacturing campus in Mexico, countries in whichwhere the Company has never
manufactured products. The Company's net sales derived from operations outside
of the United States was $329.0 million in fiscal 1997, $161.8 million of which
was derived from operations in China, and was $148.4 million in the three months
ended June 30, 1997, $50.0 million of which was derived from operations in
China. The geographical distances between Asia, the United StatesNorth America and Europe create
a number of logistical and communications challenges. Because of the location of
manufacturing facilities in a number of countries, the Company is affected by
economic and political conditions in those countries, including fluctuations in
the value of currency, duties, possible employee turnover, labor unrest, lesslack of
developed infrastructure, longer payment cycles, greater difficulty in
collecting accounts receivable, the burdens and costs of compliance with a
variety of foreign laws and, in certain parts of the world, political
instability. Changes in policies by the U.S. or foreign governments resulting
in, among other things, increased duties, higher taxation, currency conversion
limitations, restrictions on the transfer of funds, limitations on imports or
exports, or the expropriation of private enterprises could also have a material
adverse effect on the Company. The Company could also be adversely affected if
the current policies encouraging foreign investment or foreign trade by its host
countries were to be reversed. In addition, the attractiveness of the Company's
services to its U.S. customers is affected by U.S. trade policies, such as "most
favored nation" status and trade preferences for certain Asian nations. For
example, trade preferences extended by the United States to Malaysia in recent
years were not renewed in 1997.

In particular, the Company's operations and assets are subject to
significant political, economic, legal and other uncertainties in China and
Mexico, where the Company is substantially expanding its operations.

Risks Relating to China. The Company's operations and assets are subject to
significant political, economic, legal and other uncertainties in China,
where the Company is substantially expanding its operations. Under its
current leadership, the Chinese government has been pursuing economic
reform policies, including the encouragement of foreign trade and
investment and greater economic decentralization. No assurance can be
given, however, that the Chinese government will continue to pursue such
policies, that such policies will be successful if pursued, or that such
policies will not be significantly

11
13

altered from time to time. Despite progress in developing its legal system,
China does not have a comprehensive and highly developed system of laws,
particularly with respect to foreign investment activities and foreign
trade. Enforcement of existing and future

11
14 laws and contracts is uncertain,
and implementation and interpretation thereof may be inconsistent. As the
Chinese legal system develops, the promulgation of new laws, changes to
existing laws and the preemption of local regulations by national laws may
adversely affect foreign investors.

The Company could also be adversely affected by the imposition of austerity
measures intended to reduce inflation, the inadequate development or
maintenance of infrastructure or the unavailability of adequate power and
water supplies, transportation, raw materials and parts, or a deterioration
of the general political, economic or social environment in China.

In addition, China currently enjoys Most Favored Nation ("MFN") status
granted by the United States, pursuant to which the United States imposes
the lowest applicable tariffs on Chinese exports to the United States. The
United States annually reconsiders the renewal of MFN trading status for
China. No assurance can be given that China's MFN status will be renewed in
the future years. China's loss of MFN status could adversely affect the
Company by increasing the cost to the U.S. customers of products
manufactured by the Company in China.

The Company maintains certain administrative, procurement and manufacturing
operations in Hong Kong, which may be influenced by the changing political
situation in Hong Kong and by the general state of the Hong Kong economy.
On July 1, 1997, sovereignty over Hong Kong was transferred from the United
Kingdom to China, and Hong Kong became a Special Administrative Region
("SAR"). Based on current political conditions and the Company's
understanding of the Basic Law of the Hong Kong SAR of China, the Company
does not believe that the transfer of sovereignty over Hong Kong will have
a material adverse effect on the Company. There can be no assurance,
however, that changes in political, legal or other conditions will not
result in such an adverse effect.

Risks Relating to Mexico. The Mexican government exercises significant
influence over many aspects of the Mexican economy. Accordingly, the
actions of the Mexican government concerning the economy 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 devaluations of the
peso and limited availability of foreign exchange. As a result of the
Company's recent expansion in Mexico, economic conditions in Mexico will
affect the Company.

CURRENCY FLUCTUATIONS

While Flextronics transacts business predominantly in U.S. dollars and most
of its revenues are collected in U.S. dollars, a portion of Flextronics' costs
such as payroll, rent and indirect operation costs, are denominated in other
currencies such as Singapore dollars, Swedish kronor, Hong Kong dollars,
Malaysian ringgit, British pounds sterling and Chinese renminbis. After
consummationrenminbi. Historically,
fluctuations in foreign currency exchange rates have not resulted in significant
exchange losses to the Company. As a result of the Ericsson Transaction, the Company expects thatKarlskrona Acquisition, a
significant portion of itsthe Company's business also willhas been, and is expected to
continue to be, conducted in Swedish kroner.kronor. Changes in the relation of these
and other currencies to the U.S. dollar will affect the Company's cost of goods
sold and operating margins and could result in exchange losses. The impact of
future exchange rate fluctuations on the Company's results of operations cannot
be accurately predicted. The Company has historically not actively engaged in
substantial exchange rate hedging activities and unless suchhas only recently begun to
engage in hedging activities are successfully implemented,with respect to the Company will be subject to
significantly greater exchange rate fluctuation risk following the Ericsson
Transaction.Swedish kronor. There can be no
assurance that the Company will implement any additional hedging techniques or
that if it does so, that such techniquesany of its hedging activities will be successful.

Over the last five years, the Chinese renminbi has experienced significant
devaluation against most major currencies. The establishment of the current
exchange rate system as of January 1, 1994 produced a significant devaluation of
the renminbi from $1.00 to Rmb 5.7 to approximately $1.00 to Rmb 8.7. The rates
at which exchanges of renminbi into U.S. dollars may take place in the future
may vary, and any material increase in

12
14

the value of the renminbi relative to the U.S. dollar would increase the
Company's costs and expenses and therefore would have a material adverse effect
on the Company.

LIMITED AVAILABILITY OF COMPONENTS

A substantial majority of the Company's net sales are derived from turnkey
manufacturing in which the Company is responsible for procuring materials, sowhich
typically results in the Company typically bearsbearing the risk of component price increases.
At various times there have been shortages of certain electronics components,
including DRAMs, memory modules, logic devices, ASICs, laminates, specialized
capacitors and integrated circuits in bare-die form. Component shortages could
result in manufacturing and shipping delays or higher prices which could have a
material adverse effect on the Company.

DEPENDENCE ON KEY PERSONNEL AND SKILLED EMPLOYEES

The Company's success depends to a large extent upon the continued services
of key managers.executives and skilled personnel. Generally, the Company's employees are
not bound by employment or noncompetition agreements. The Company has entered
into service agreements with certain officers, including Ronny Nilsson, Teo Buck
Song, Michael McNamara and Tsui Sung Lam, some of which contain non-competition
provisions and provides its officers and key employees with stock options that
are structured to incentivize such employees to remain with the Company.
However, there can be no assurance as to the ability of the Company to retain
its officers and key employees. The loss of such personnel could have a material
adverse effect on the Company. The Company's business also depends upon its
ability to continue to recruit, train and retain skilled and semi-skilled
employees, particularly administrative, engineering and sales personnel. There
is intense competition for skilled and semi-skilled employees, particularly in
the San Jose, California market, and the Company's failure to recruit, train and
retain such employees could adversely affect the Company's results of
operations.

The Company's
ability to successfully integrate the Karlskrona Facilities also depends in part
on its ability to retain existing employees at these facilities.

ENVIRONMENTAL COMPLIANCE RISKS

The Company is subject to a variety of environmental regulations relating
to the use, storage, discharge and disposal of hazardous chemicals used during
its manufacturing process. The Company manufactures substratesSubstrates for its MCMs are manufactured on itsa
semiconductor fabrication line in California andowned by the Company. The Company
is also expanding its PCB fabrication operations in China. Proper handling,
storage and disposal of the metals and chemicals used in suchthese manufacturing
processes are important considerations in avoiding environmental contamination.
Although the Company believes that its facilities are currently in material
compliance with applicable environmental laws, and it monitors its operations to
avoid violations arising from human error or equipment failures, there can be no
assurances that violations will not occur. In the event of a violation of
environmental laws, the Company could be held liable for damages and for the
costs of remedial actions and could also be subject to revocation of its
effluent discharge permits. Any such revocations could require the Company to
cease or limit production at one or more of its facilities, thereby having a
material adverse effect on the Company's operations. Environmental laws could
also become more stringent over time, imposing greater compliance costs and
increasing risks and penalties associated with any violation, which could have a
material adverse effect on the Company's operations.

12
15Company.

PROTECTION OF INTELLECTUAL PROPERTY CLAIMS

The Company relies on a combination of patent, trade secret and trademark
laws, confidentiality procedures and contractual provisions to protect its
intellectual property. The Company seeks to protect certain of its technology
under trade secret laws, which afford only limited protection. There can be no
assurance that any of the Company's pending patent applications will be issued
or that intellectual property laws will protect the Company's intellectual
property rights. In addition, there can be no assurance that any patent issued
to the Company will not be challenged, invalidated or circumvented or that the
rights granted thereunder will provide competitive advantages to the Company.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to obtain and use information that the Company regards as
proprietary. Furthermore, there can be no assurance that others will not
independently develop similar

13
15

technology or design around any patents issued to the Company. Moreover,
effective protection of intellectual property rights may be unavailable or
limited in certain foreign countries in which the Company operates. In
particular, the Company may be afforded only limited protection of its
intellectual property rights in China.

The Company may in the future be notified that it is infringing certain
patent or other intellectual property rights of others, although there are no
such pending lawsuits against the Company or unresolved notices that it is
infringing intellectual property rights of others. No assurance can be given
that in the event of such infringement, licenses could be obtained on
commercially reasonable terms, if at all, or that litigation will not occur. The
failure to obtain necessary licenses or other rights or the occurrence of
litigation arising out of such claims could materially adversely affect the
Company's business.

INCREASED LEVERAGE

In connection with the acquisition of the Karlskrona Facilities, the
Company will incur approximately $100.0 million in additional indebtedness which
will result in an increase in the Company's ratio of long-term debt and capital
lease obligations to total capitalization at December 31, 1996 from
approximately 25.1% to approximately 50.2% on a pro forma basis. As a result of
this additional indebtedness, the Company's principal and interest obligations
will increase substantially. The degree to which the Company will be leveraged
could materially adversely affect the Company's ability to obtain additional
financing for working capital, acquisitions or other purposes and could make it
more vulnerable to industry downturns and competitive pressures. The Company's
ability to meet its debt service obligations will be dependent upon the
Company's future performance, which will be subject to financial, business and
other factors affecting the operations of the Company, many of which are beyond
the Company's control.Company.

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

Certain provisions of the Singapore Companies Act (Chapter 50) and the
Singapore Code on Takeovers and Mergers could make it more difficult for a third
party to acquire control of the Company. Such provisions could limit the price
that certain investors might be willing to pay in the future for Ordinary Shares
of the Company. Certain of such provisions impose various procedural and other
requirements which could make it more difficult for shareholders to effect
certain corporate actions. See "Description of Capital Shares -- Takeovers."

VOLATILITY OF MARKET PRICE OF ORDINARY SHARES

The stock market in recent years has experienced significant price and
volume fluctuations that have affected the market prices of technology companies
and that have often been unrelated to or disproportionately impacted by the
operating performance of such companies. There can be no assurance that the
market for the Ordinary Shares will not be subject to similar fluctuations.
Factors such as fluctuations in the operating results of the Company,
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 prices of the Company's securities,
including the Ordinary Shares.

13
16

ENFORCEMENT OF CIVIL LIABILITIES

The Company is incorporated in Singapore under the Companies Act. Certain
of its directors and executive officers (and certain experts named in this
Prospectus) reside in Singapore. All or a substantial portion of the assets of
such persons, and a substantial portion of the assets of the Company (other than
its U.S. subsidiaries), are located outside the United States. As a result, it
may not be possible for persons purchasing Ordinary Shares to effect service of
process within the United States upon such persons or the Company or to enforce
against them, in the United States courts, judgments obtained in such courts
predicated upon the civil liability provisions of the federal securities laws of
the United States. The Company has been advised by its Singapore legal advisors,
Allen & Gledhill, that there is doubt as to the enforceability in Singapore,
either in original actions or in actions for the enforcement of judgments of
United States courts, of civil liabilities predicated upon the federal
securities laws of the United States.

14
16

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Ordinary Shares
offered hereby are estimated to be approximately $43.3$57.3 million. SuchThe Company
expects to use such net proceeds, together with anticipated net proceeds from
the issuance and sale of the Senior Subordinated Notes, to repay in full
outstanding borrowings under the CompanyCompany's credit facility, which consists of
anticipated debt
financing, willtwo revolving credit and term loan agreements provided by BankBoston, N.A., as
agent (together the "Credit Facility"). The borrowings to be usedrepaid include
$70.0 million of term loans, which amortize over a five-year period, and $72.0
million of revolving credit borrowings (based on amount, outstanding as of July
31, 1997) that mature in March 2000. $111.0 million of these borrowings were
incurred on March 27, 1997 to pay the purchase price of the Karlskrona
Facilities.
ToFacilities and for working capital and the extent thatremainder was borrowed subsequently
for working capital and for capital expenditures. These borrowings bear interest
at a variable rate equal to, as of July 31, 1997, approximately 8.4% per annum.
If the Company does not consummate the issuance of the Senior Subordinated
Notes, the Company will use the net proceeds from the sale of the Ordinary
Shares offered hereby together withto repay $57.3 million principal amount of term loans
under the Credit Facility. Any net proceeds from such anticipated debt financing,
exceed the amountsale of the purchase priceOrdinary Shares
and the Senior Subordinated Notes in excess of outstanding borrowings under the
Karlskrona Facilities, the
Company intends to use such excess proceedsCredit Facility will be used for working capital and general
corporate purposes, including the planned expansion of its operations in Doumen,
China and San Jose, California. Pending such uses, the Company will invest the
net proceeds of this offering in investment-grade, short-term, interest-bearing
securities. While the Company has entered into an agreement with Ericsson to
acquire the Karlskrona Facilities, it has not consummated this transaction, and
the consummation of the Ericsson Transaction is subject to certain conditions
precedent. If the Ericsson Transaction is not consummated, the Company intends
to use such proceeds for working capital and general corporate purposes,
including the planned expansion of its operations in Doumen, China and San Jose,
California. See "Risk Factors -- Risks of Ericsson Transaction."capital.

DIVIDENDS

Since inception, the Company has not declared or paid any cash dividends on
its Ordinary Shares, and the Company's current loan agreements prohibitCredit Facility prohibits the payment of cash
dividends without the lenders' prior consent. The Company anticipates that all
earnings in the foreseeable future will be retained to finance the continuing
development of its business.

1415
17

PRICE RANGE OF ORDINARY SHARES

The Company's Ordinary Shares are traded on the Nasdaq National Market
under the symbol "FLEXF." The following table shows the high and low closing
salessale prices of the Company's Ordinary Shares since the beginning of the
Company's 19951996 fiscal year.

HIGH LOW
---- ----

Fiscal 1995
First Quarter...................................................... $ 14 $8 3/4
Second Quarter..................................................... 15 1/2 9
Third Quarter...................................................... 16 1/4 12 3/4
Fourth Quarter..................................................... 18 13
Fiscal 1996
First Quarter......................................................Quarter............................................. $21 7/8 $13 1/2
Second Quarter..................................................... 26Quarter............................................ $26 3/4 21$21 3/4
Third Quarter...................................................... 30 21Quarter............................................. $30 $21
Fourth Quarter..................................................... 35Quarter............................................ $35 3/4 25$25 3/4

Fiscal 1997
First Quarter...................................................... $ 39 $ 25Quarter............................................. $39 $25
Second Quarter..................................................... 28Quarter............................................ $28 1/4 $17
Third Quarter............................................. $37 1/4 $21
Fourth Quarter............................................ $29 3/4 $19 5/8

Fiscal 1998
First Quarter............................................. 27 17 Third Quarter......................................................1/2
Second Quarter (through August 21, 1997).................. 37 1/4 21
Fourth Quarter (through February 11, 1997)......................... 29 7/8 23 5/26 3/8

On February 11,August 21, 1997, the closing salessale price of the Ordinary Shares was
$26.25$35 1/8 per share.

1516
18

CAPITALIZATION

The following table sets forth the Company's capitalization as of December
31, 1996,June 30,
1997, as adjusted to give effect to the application of the estimated net
proceeds from the sale by the Company of the 1,750,000 Ordinary Shares offered
hereby at an assumed public offering price of $26.25$35 1/8 per share, and pro forma
to give further effect to the assumed incurrenceissuance of $100.0 million principal
amount of long-term indebtedness by the Company in connection with the acquisition of
Karlskrona Facilities.Senior Subordinated Notes.

DECEMBER 31, 1996JUNE 30, 1997 (UNAUDITED)
-----------------------------------------------
AS ADJUSTED
ACTUAL AS ADJUSTED(1) PRO FORMA(1)(2)
-------- -------------- ---------------
(IN THOUSANDS)

Bank borrowings............................ 69,000 16,745 --
Current portion of long-term debt and
capital leases........................... 11,754 11,754 11,172
Long-term debt, less current portion....... $ 18,985 $ 18,985 $ 118,985portion
Other long-term debt..................... 72,018 72,108 --
Senior Subordinated Notes(2)............. -- -- 100,000
Notes payable to shareholders............ 223 223 223
Capital lease obligations, less current
portion.................................. 9,034 9,034 9,034leases........................... 10,645 10,645 10,645
Total long-term debt............. 82,886 82,886 110,868
Total indebtedness and capital
leases......................... 163,640 111,385 122,040
======== ======== ========
Shareholders' equity:
Ordinary Shares, S$0.01 par value;
100,000,000 shares authorized,
13,581,79113,752,293 shares issued and
outstanding, 15,331,79115,502,293 shares issued
and outstanding as adjusted........... 87 99 9989 100 100
Additional paid-in capital............... 94,652 137,921 137,92195,207 147,451 147,451
Accumulated deficit...................... (11,137) (11,137) (11,137)(6,754) (6,754) (6,754)
-------- -------- --------
Total shareholders' equity....... $ 83,602 $126,883 $ 126,88388,542 140,797 140,797
======== ======== ========
Total capitalization............. $111,621 $154,902 $ 254,902252,182 252,182 262,837
======== ======== ========

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

(1) Adjusted to reflect the sale of the 1,750,000 Ordinary Shares offered hereby
(at an assumed public offering price of $26.25$35 1/8 per share and after
deducting the estimated underwriting discount and offering expenses payable
by the Company) and the receipt of the net proceeds therefrom. See "Use of
Proceeds."

(2) Gives pro forma effect to the incurrenceissuance and sale of $100.0 million principal amount
of indebtedness by the Company, all of which is assumed to be long-term debt
(althoughSenior Subordinated
Notes, the Company is evaluating its financing strategy and may also
utilize short-term debt), net proceeds of which are expected to be used, together with the
net proceeds from the sale of the Ordinary Shares offered hereby, to payrepay
outstanding borrowings under the purchase price for the Karlskrona Facilities, in each caseCredit Facility, as if such transactions
had been consummated on December 31, 1996.

16June 30, 1997. No assurance can be given as to
whether, or on what terms, the Senior Subordinated Notes will be issued.

17
19

SELECTED FINANCIAL DATA

The following table sets forth selected financial data of the Company as of
and for each of ninethe three months ended December 31, 1995June 30, 1996 and 19961997 and the fiscal
years ended March 31, 1992, 1993, 1994, 1995, 1996 and 1996.1997. The selected financial
data set forth below as of March 31, 19951996 and 19961997 and for the fiscal years
ended March 31, 1994, 1995, 1996 and 19961997, have been derived from consolidated
financial statements of the Company which have been audited by Ernst & Young,
independent auditors, whose report thereon is included elsewhere herein. The
selected financial data set forth below as of March 31, 1992, 1993 and 1994 and for
the fiscal years ended March 31, 19921993 and 19931994 have been derived from audited
financial statements not included in this Prospectus. The selected financial
data as of December 31, 1996June 30, 1997 and for the ninethree months ended December
31, 1995June 30, 1996 and 19961997
is derived from the unaudited financial statements of the Company for such
periods. In the opinion of management, all adjustments, consisting of normal
recurring accruals,adjustments, considered necessary for a fair presentation have been
made. 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.

NINETHREE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------------------------------------- -------------------
1992JUNE 30,
-------------------------------------------------------------- ---------------------------
1993 1994 1995(1) 1996(2) 1995 1996(3)1996(1) 1997(2) 1996 1997
-------- -------- -------- -------- -------- -------- --------------------- ------------- ------------- -----------
(RESTATED)(3) (RESTATED)(3)
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $ 80,729sales........................ $100,759 $131,345 $237,386 $448,346 $322,645 $362,264$ 448,346 $ 490,585 $ 117,889 $ 196,883
Cost of sales...................................... 73,361sales.................... 91,794 117,392 214,865 406,457 293,461 325,827
-------407,457 440,448 106,143 177,212
-------- -------- -------- -------- -------- -------- --------
Gross profit..................................... 7,368profit................... 8,965 13,953 22,521 41,889 29,184 36,43740,889 50,137 11,746 19,671
Selling, general and
administrative expenses....... 7,252expenses........ 7,131 8,667 11,468 18,587 13,255 19,101
Research18,787 28,884 5,611 10,549
Acquired research and
development........................... 2,737development.................... 81 202 91 31,56229,000 -- -- --
Goodwill and intangible amortization............... 399amortization............ 388 419 755 1,061 783 863510 739 989 243 388
Intangible assets amortization... -- -- 245 544 1,646 416 354
Bank commitment and consulting
fees........................... -- -- -- -- 1,831 -- --
Provision for plant closings....................... 202closings..... -- 830 -- 2,4541,254 5,868 -- 2,321
---------
-------- -------- -------- -------- -------- -------- --------
Operating income (loss).......................... (3,222)........ 1,365 3,835 10,207 (11,775) 15,146 14,152(9,435) 10,919 5,476 8,380
Interest expense and other, net.................... 2,898net
............................... 2,329 1,376 1,043 1,846 1,121 1,4501,906 1,485 516 2,632
Merger expenses.................................... --expenses.................. -- -- 816 -- -- -- --
Income (loss) from joint venture................... --associated
company........................ -- (70) (729) -- 241 -- --
-------300
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes................ (6,120)taxes........................ (964) 2,389 7,619 (13,621) 14,025 12,702(11,341) 9,675 4,960 6,048
Provision for income taxes......................... 398taxes....... 264 654 1,463 3,791 2,399 2,1662,212 763 736
Extraordinary gain................................. --gain............... -- 416 -- -- -- -- ------- -------- -------- -------- -------- -------- ----------
Net income (loss)................................ $ (6,518).............. $ (1,228) $ 2,151 $ 6,156 $(17,412) $ 11,626(15,132) $ 10,536
=======7,463 $ 4,197 $ 5,312
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share........................ $ (0.89)share...... $ (0.17) $ 0.28 $ 0.51 $ (1.39)(1.19) $ 0.890.50 $ 0.73
=======0.28 $ 0.36
======== ======== ======== ======== ======== ======== ========
Weighted average Ordinary Shares
and equivalents
used in per share calculations................... 7,284equivalents................ 7,382 7,730 12,103 12,536 13,130 14,37712,684 14,877 14,914 14,955

MARCH 31,
DECEMBER 31,
-------------------------------------------------- -------------
1992------------------------------------------------------------------- JUNE 30,
1993 1994 1995 1996 1996
------- ------- --------1997 1997
-------- -------- ------------- ------------- ------------- -----------
(RESTATED)(3) (UNAUDITED)
(IN THOUSANDS)

BALANCE SHEET DATA:
Working capital (deficit).................................... $ 856 $(1,201) $.......... (1,201) 30,669 $ 33,425 $ 27,676 $ 26,20530,801 (25,047) 1,324
Total assets................................................. 41,734assets....................... 52,430 103,129 116,117 214,588 217,934231,024 359,234 402,131
Long-term debt and capital lease
obligations, lessexcluding current
portion.................................................... 7,514portion.......................... 17,243 4,755 6,890 28,360 28,41917,674 12,302 82,886
Shareholders' equity (deficit)............................... (1,040)..... (2,256) 46,703 57,717 70,779 83,60273,059 83,592 88,542

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

(1) In January 1995, the Company acquired nCHIP in exchange for an aggregate of
2,450,000 Ordinary Shares in a transaction accounted for as a pooling of
interests. Accordingly, the financial data presented for each fiscal period
includes the historical results of nCHIP.

(2) In the fourth quarter of fiscal 1996, the Company wrote off $31.6$29.0 million of in-process research
and development associated with the acquisition of Astron and also recorded
charges totaling $2.5$1.3 million for costs associated with the closing of one
of the Company's Malaysian plants and its Shekou, China operations.

Without taking these write-offs and charges into account,
the Company's net income and earnings per share would have been $16.6
million and $1.25, respectively, in fiscal 1996.

(3)(2) In the third quarter of fiscal 1997, the Company incurred plant closing expense of $2.3expenses aggregating $5.9
million in connection with the closing of its manufacturing facility in Texas,
facilitydownsizing manufacturing operations in Singapore, and the write-off ofwriting off obsolete
equipment and incurring severance obligations at the nCHIP semiconductor
fabrication facility.

17operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TheExcept for historical information contained herein, the matters discussed
below and elsewhere herein containare forward-looking statements regardingwithin the future performancemeaning of
Section 21E of the CompanySecurities Exchange Act of 1934, as amended, and future events.Section 27A
of the Securities Act of 1933, as amended. The words "expects," "anticipates,"
"believes," "intends" and similar expressions identify forward-looking
statements, which speak only as of the date hereof. These matters involveforward-looking
statements are subject to certain risks and uncertainties, including, without
limitation, those discussed in "Risk Factors," that could cause actualfuture results
to differ materially from the statements contained herein. In addition to the
matters discussed below, see "Risk Factors" for information relating to such
risks and uncertainties.historical results or those anticipated.

OVERVIEW

The Company was organized in Singapore in 1990 to acquire the Asian
contract manufacturing operations and certain U.S. design, sales and support
operations of Flextronics, Inc. (the "Predecessor"), which had been in the
contract manufacturing business since 1982. The acquisition of the selected
operations of the Predecessor for approximately $39.0 million was completed in
June 1990 and was financed with approximately $20.0 million of secured long-term
bank debt, $4.0 million of subordinated debt and $15.0 million of equity. After
such acquisition, the equity investors held approximately 55% of the outstanding
share capital of the Company. The Company's results of operations for periods
following the 1990 acquisition and through March 1994 reflect the interest
expense associated with the indebtedness incurred in connection with this
transaction.

In July 1993, a group of new investors acquired a controlling interest in
the Company through the acquisition of substantially all of the interest in the
Company that had been retained by the Predecessor, a direct equity investment of
$3.2 million in the Company and the purchase of a portion of the shares acquired
by the investors in the 1990 acquisition. In December 1993, the Company raised
an additional $7.0 million of equity capital from investors ($3.7 million of
which represented the conversion of its outstanding subordinated debt into
equity). In March 1994, the Company raised $32.5 million in an initial public
offering of Ordinary Shares. In August 1995, the Company raised an additional
$22.3 million in a public offering of Ordinary Shares.

In recent years, the Company has substantially expanded its manufacturing
capacity, technological capabilities and service offerings, through both
acquisitions and internal growth. See "Risk Factors -- Management of Expansion
and Consolidation," "Risk Factors -- Acquisitions" and Note 1314 of Notes to
Consolidated Financial Statements.

In March 1994, the Company acquired Relevant, a San Jose-based contract
manufacturer, for approximately $4.0 million in cash. In January 1995, the
Company acquired nCHIP in exchange for an aggregate of approximately 2,450,000
Ordinary Shares in a transaction accounted for as a pooling of interests.
Currently, the Company is engaged in negotiations to sell nCHIP's semiconductor
wafer fabrication facilities to a third party. See "Results of
Operations -- Provision for Plant Closings." In April 1995, the Company acquired
A&A, a contract manufacturer located in the United Kingdom, for a total
consideration of $2.9 million in cash and 66,908 Ordinary Shares.

In February 1996, the Company acquired Astron Group Limited in exchange for total
consideration of $45.6 million consisting of
(i) $13,440,605 in cash, (ii) $15.0 million in 8% promissory notes, ($10.0
million of which are payablewas paid in February 1997 and $5.0 million of which areis payable
in February 1998), (iii) 238,864238,684 Ordinary Shares issued at closing and (iv)
Ordinary Shares with a value of $10.0 million to be issued on June 30, 1998. The
Company is also required to paypaid an earnout of up to an additional $12.5$6.25 million in cash and Ordinary Shares on or
about March 31,in April
1997, based on the pre-tax profit of Astron for the calendar year ended December
31, 1996. In addition, the Company has agreed to pay a consulting and
non-compete fee of $15.0 million consulting fee
in June 1998 to an entity affiliated with Stephen J. L. Rees, on June 30, 1998a former shareholder and
the Chairman of Astron, pursuant to a services agreement among the Company, one
of its subsidiaries and the affiliate of Mr. Rees (the "Services Agreement").
Payment of the fee was conditioned upon, his remaining employedamong other things, Mr. Rees'
continuing as Chairman of Astron through June 1998. Mr. Rees currently also
serves as a director and executive officer of the Company.

In March 1997, the Company and Mr. Rees' affiliate agreed to remove the
remaining conditions to payment of the fee and to reduce the amount of the fee,
which remains payable in June 1998, to $14.0 million. This reduction was
negotiated in view of (i) a settlement in March 1997 of the amount of the
earnout payable by the Company to the former shareholders of Astron in which the
Company agreed to certain matters, previously in dispute, affecting the amount
of the earn-out payment, and (ii) the elimination of the conditions to payment
and of Mr. Rees' ongoing obligations under the Services Agreement. Substantially
all of the former shareholders of Astron were affiliates of Mr. Rees or members
of his family. See "-- Results of

19
21

Operations -- Goodwill and Intangible Assets Amortization." Accordingly, the
only remaining obligation of either party is the Company's unconditional
obligation to pay the $14.0 million fee in June 1998. Of the $14.0 million, $5.0
million must be paid in cash. The remainder may be paid in either cash or
Ordinary Shares at the option of the Company, and the Company intends to pay
such amount in Ordinary Shares. See "-- Recent Changes in Accounting for Astron
Acquisition."

Since the Company's acquisition of Astron, the net sales generated by
Astron's then-existing products and services, and by its products and services
then under development, have grown at rates significantly lower than those
anticipated by the Company at the time of the acquisition and significantly
lower than those assumed in the independent valuation used by the Company in
allocating the purchase price of Astron to the assets acquired. The Company
believes that time.
This amountthis is attributable primarily to (i) delays in developing certain
new technologies as a result of several factors, including the unanticipated
complexity of many of the new technologies, difficulties in achieving expected
production yields, changes in the Company's development priorities and
unavailability of certain materials; (ii) interruptions in production and
diversions of resources, resulting from a fire in Astron's facilities in Doumen,
China in April 1996; (iii) reduced sales of certain products to end-users by
certain of Astron's customers; and (iv) changes in product mix that adversely
affected production efficiency. While the Company has completed the development
of certain of the technologies that were under development at the time of the
acquisition, the Company has not yet completed development of other technologies
that were material to its valuation of Astron and which it initially anticipated
completing in fiscal 1996 and 1997. The Company currently anticipates that
completion of these technologies will require the expenditure of approximately
$5.0 million through fiscal 1999, consisting primarily of the cost of internal
engineering staff and related overhead, material costs and other expenses. The
completion of such development is subject to a number of uncertainties,
including potential difficulties in optimizing manufacturing processes and the
potential development of alternative technologies by competitors that could
render Astron's technologies uncompetitive or obsolete. Accordingly, no
assurances can be given as to whether, or when, the Company will be expensed when paid.able to
complete the development of such technologies, as to the cost of such
development, or as to potential sales of products based on such technologies.
See "Risk Factors -- Acquisitions" and "-- Results of Operations -- Research and
Development."

In the fourth quarter of fiscal 1996, the Company wrote off $31.6recorded charges totaling
$1.3 million for costs associated with the closing of one of the Company's
Malaysia plants and its Shekou, China operations in addition to the write-off of
$29.0 million of in-process research and development related toassociated with the
acquisition of Astron. InWithout taking into account these write-offs and charges,
the Company's net income and earnings per share in fiscal 1996 would have been
$15.1 million and $1.13, respectively.

On November 25, 1996, the Company acquired Fine Line in exchange for an aggregate of
223,321 Ordinary Shares in a transaction accounted for as pooling of interests transaction. Ininterest.
The Company's prior financial statements were not restated because the financial
results of Fine Line did not have a material impact on the consolidated result.

On December 20, 1996, the Company acquired 40% of FICO for $5.2 million. Of
this, the Company paid $3.0 million in December 1996, accrued the $2.2 million
balance in the fourth quarter of fiscal 1997 and paid the remaining amount is due$2.2 million balance
in AprilJune 1997. The Company also obtainedhas an option to purchase the remaining 60%
interest of FICO in 1998 for a price that is dependent on the financial
performance of FICO for the periodyear ending December 31, 1997.

In FebruaryOn March 27, 1997, the Company entered into the Asset Transfer Agreement
with Ericsson, under which the Company agreed to purchaseacquired the Karlskrona Facilities for
approximately 792 million Swedish kronor (approximately $109.2
million based on exchange rates at January 31, 1997),$82.4 million. The acquisition was financed by borrowings under
the Credit Facility, which the Company intends to be financedrepay with the net proceeds
from this offering and the anticipated debt financing. See "Usesale of Proceeds" and "-- Liquidity and Capital Resources." In connection with thisthe Senior Subordinated Notes.
The transaction has been accounted for under the Company anticipates that it will recordpurchase method. As a charge to earnings of
approximately $3.0 million inresult,
the fourth fiscal quarter of fiscal 1997, relatingpurchase price was allocated to the anticipated costsassets acquired based on their estimated
fair market values at the date of separating the Karlskrona Facilities from Ericsson's
management information systems and implementing a new management information
system, as well as transaction costs for the acquisition. See "Acquisition of
Karlskrona Facilities" and "Risk Factors -- Risks of
Ericsson Transaction.Karlskrona Acquisition."

18During fiscal 1997, the Company incurred plant closing expenses totalling
$5.9 million relating to the closing of its Texas facility, the downsizing of
manufacturing at its Singapore facilities and the write-off of obsolete
equipment and incurrence of severance obligations at the nCHIP semiconductor
fabrication operation. The Company has transferred the nCHIP wafer fabrication
operations to a third party and is

20
22

currently engaged in negotiations with respect to the sale of certain related
assets (having an aggregate book value of approximately $500,000 as of June 30,
1997) to such party. See "--Provision for Plant Closings."

In the first quarter of fiscal 1998, the Company completed construction of
a new 101,000 square foot manufacturing campus in Guadalajara, Mexico. In
addition, in July 1997 the Company completed construction of a new 224,000
square foot facility on its campus located in Doumen, China and a new 73,000
square foot facility in San Jose, and leased a new 71,000 square foot facility
in San Jose. See "Business -- Facilities."

RECENT CHANGES IN ACCOUNTING FOR ASTRON ACQUISITION

The Company has restated its financial results for the fiscal year ended
March 31, 1996 and for the first three reported quarters of the fiscal year
ended March 31, 1997 to reflect corrections to its accounting for the
acquisition of Astron. The acquisition of Astron has been accounted for under
the purchase method, and accordingly the purchase price had been allocated to
the assets and liabilities assumed based upon their estimated fair values at the
date of acquisition. The revisions include an increase in the initially recorded
purchase price to include the payment to be made in June 1998 to an affiliate of
Stephen Rees pursuant to the Services Agreement. In addition, a second valuation
was obtained and used to allocate the purchase price to the assets acquired,
including current assets, net property, plant and equipment, developed
technologies, in-process research and development, assembled workforce,
tradenames and trademarks, customer list and other intangible assets. As a
consequence, in-process research and development written off in the fiscal year
ended March 31, 1997 (the "In-Process R&D") was reduced from $31.6 million to
$29.0 million and the fair value of other assets recorded at the date of the
close of the transaction was increased by $16.6 million, representing $4.7
million of goodwill and $11.9 million of identified intangible assets. See Note
14 of Notes to Consolidated Financial Statements. The effect of the restatement
on the Company's previously reported statement of operations data is as follows
(in thousands except per share data):

FISCAL YEAR ENDED MARCH 31, 1996 NINE MONTHS ENDED DECEMBER 31, 1996
-------------------------------- -----------------------------------
PREVIOUSLY REPORTED RESTATED PREVIOUSLY REPORTED RESTATED
------------------- -------- ------------------- -----------
(UNAUDITED) (UNAUDITED)

STATEMENT OF OPERATIONS DATA
Gross profit...................... $ 41,889 $ 40,889 $36,437 $36,057
Operating income (loss)........... (11,775) (9,435) 14,152 12,656
Net income (loss)................. (17,412) (15,132) 10,536 9,026
Net income (loss) per share....... (1.39) (1.19) 0.73 0.61
Weighted average Ordinary Shares
and equivalents................. 12,536 12,684 14,377 14,889

CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS

On August 1, 1997, the Audit Committee of the Board of Directors of the
Company approved the engagement of Arthur Andersen LLP, San Jose, California as
independent public accountants to audit and report on the financial statements
of the Company and its subsidiaries for the year ended March 31, 1998. On August
5, 1997, Ernst & Young advised the Company that it will not seek re-election at
the Company's next Annual General Meeting scheduled for September 26, 1997.
Accordingly, the engagement of Ernst & Young will terminate at the time of the
Annual General Meeting. The Company will nominate Arthur Andersen LLP as the
Company's independent public accountants for approval by the shareholders at the
Company's Annual General Meeting.

There were no disagreements with Ernst & Young on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure with respect to the Company's consolidated financial statements for
the fiscal years ended March 31, 1995, 1996 and 1997 or through the date of this
Prospectus which, if not resolved to the former auditors' satisfaction, would
have caused them to make reference to the subject matter of the disagreement in
connection with their report.

21 23

RESULTS OF OPERATIONS

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

NINETHREE MONTHS
FISCAL YEAR ENDED ENDED
MARCH 31, DECEMBER 31,JUNE 30,
------------------------- ---------------
1994 1995 1996 19951997 1996 1997
----- ----- ----- ----- -----

Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 89.4 90.5 90.7 91.090.9 89.8 90.0 90.0
----- ----- ----- ----- -----
Gross profit..................................... 10.6profit....................................... 9.5 9.3 9.09.1 10.2 10.0 10.0
Selling, general and administrative expenses....... 6.6 4.9 4.2 4.15.9 4.8 5.3
Research and development........................... 0.2 -- 7.0 -- --
Goodwill and Goodwill/intangible assets amortization........ 0.3amortization............ 0.3 0.2 0.2 0.20.5 0.6 0.4
Provision for plant closings....................... 0.6 -- 0.50.3 1.2 -- 0.6--
Bank arrangement fees and consultancy fees......... -- -- 0.4 -- --
Acquired research and development.................. -- 6.5 -- -- --
----- ----- ----- ----- -----
Operating income (loss).......................... 2.9.................. 4.3 (2.6) 4.7 3.9(2.1) 2.2 4.6 4.3
Interest expense and other, net.................... 1.0 0.5 0.4 0.3 0.4 0.41.3
Merger expenses.................................... 0.3 -- 0.3 -- -- --
Income (loss) from joint venture................... (0.1)associated company.............. (0.3) -- 0.1 -- --0.1
----- ----- ----- ----- -----
Income (loss) before income taxes................ 1.8taxes........ 3.2 (3.0) 4.3 3.5(2.5) 2.0 4.2 3.1
Provision for income taxes......................... 0.6 0.9 0.5 0.6 0.9 0.7 0.6
Extraordinary gain................................. 0.3 -- -- -- --0.4
----- ----- ----- ----- -----
Net income (loss)................................ 1.6%........................ 2.6% (3.9%(3.4%) 1.5% 3.6% 2.9%2.7%
===== ===== ===== ===== =====

Net SalesNET SALES

Net sales for the ninethree months ended December 31, 1996June 30, 1997 increased 12.3%66.9% to
$362.3$196.9 million from $322.6$117.9 million for the ninethree months ended December 31, 1995.June 30, 1996. The
increase in sales 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, and (iii) sales to new customers. This increase was
partially offset by reduced sales to certain existing customers, including
Minebea, Apple Computer, Visioneer and Global Village. See "Risk
Factors -- Customer Concentration; Dependence on Electronics Industry" and "Risk
Factors -- Risks of Karlskrona Acquisition."

Net sales in fiscal 1997 increased 9.6% to $490.6 million from $448.3
million in fiscal 1996. This increase was primarily due to newhigher sales to
existing customers, in the computer and
communications industries, such asincluding U.S. Robotics, Microsoft, US Robotics and Advanced Fibre
Communications and Braun/Thermoscan, sales to new customers such as Cisco and
Auspex, and the inclusion of Astron's sales of Astron after it was acquiredfollowing its acquisition in
February 1996. This increase was partially offset by reduced sales to certain
existing customers, including Visioneer, Apple Computer, Logitech and Houston Tracker
Systems.Systems, Logitech, Voice Powered Technology and Fast Multimedia. The Company
believes that the reduction in sales to these customers was primarily due in part to
reductions in these customers' sales to end-users. See "Risk Factors -- Rapid
Technological Change."

Net sales in fiscal 1996 increased 88.8%89.0% to $448.3 million from $237.4
million in fiscal 1995. This increase was primarily due to: increasedthe result of higher sales
to existing customers, including Lifescan (a Johnson & Johnson company)Company),
Visioneer, Microcom and Global Village Communications;Communications, sales to new customers in
the computer and medical industries such as Apple Computer and Braun/ThermoScan;Thermoscan and
the inclusion of theA&A's and Astron's sales of A&A and Astron after they were acquiredtheir acquisitions in April 1995
and February 1996, respectively. This was partially offset by a significant
decline in sales to IBM due to IBM's efforts to consolidate more of its
manufacturing business internally.

Net sales in fiscal 1995 increased 80.8% to $237.4 million from $131.3
million in fiscal 1994. This increase was primarily the result of higher sales
to existing customers, including Lifescan (a Johnson & Johnson company), IBM and
Interbold, and sales to new customers in the consumer electronics industries
such as Phonex, International Components Corporation and Global Village
Communications.

Gross Profit22
24

GROSS PROFIT

Gross profit varies from period to period and is affected by, among other
things, product mix, component costs, product life cycles, unit volumes,
startup, expansion and consolidation of manufacturing facilities, pricing,
competition and new product introductions. Gross profit margin remained constant
at 10.0% for both the three months ended June 30, 1997 and the three months
ended June 30, 1996. Gross profit margin in the three months ended June 30, 1997
was favorably affected by cash payments due from a customer under the Company's
agreement with that customer as a result of production volumes for that customer
that were lower than previously scheduled. The Company's new and expanded
facilities provide capacity for production volumes significantly greater than
current levels. As a result of this expansion, the Company anticipates increased
depreciation and other fixed expenses, and expects that its gross profit margin
will be adversely affected in the remainder of fiscal 1998 as it commences
volume production in the new facilities.

Gross margin increased to 10.0% for the nine months ended December 31, 1996 as10.2% in fiscal 1997 compared to 9.0% for the
nine months ended December 31, 1995.9.1% in fiscal
1996. The

19
22 increase was mainly dueattributable to higher sales in the first two quarters of the year
resulting in better labor and overhead absorption, and(i) the inclusion of Astron's
printed circuit board business, which has historically had a relatively higher
gross profit margin than the Company.Company, (ii) the concentration of more sales in
the Company's facility in China which has a lower manufacturing cost compared to
the Company's facilities in other locations, and (iii) increased sales,
resulting in increased labor and overhead absorption. This benefit was partially
offset by underutilization of the nCHIP semiconductor fabrication facility and
of the Company's Texas facility which is being closed,(which has been closed), and the related inventory
write-offs. See "-- Provision for Plant Closings." Gross margins may be
adversely effected in the short term as the Company commences production in new
facilities, including the Karlskrona Facilities,"Risk Factors -- Management of Expansion and may also be adversely
affected by the relatively high cost of manufacturing in Sweden.Consolidation."

Gross profit margin declined slightly to 9.3%9.1% in fiscal 1996 as compared to
9.5% in fiscal 1995 mainly due to the additional costs associated with new
manufacturing facilities in Texas and China that were opened in the fourth
quarter of fiscal 1995 and the expansion of the nCHIPnCHIP's semiconductor fabrication
facility. The decrease in gross profit margin was also attributable to a
reduction in certain selling prices in order to remain competitive.

Gross margin decreased to 9.5% in fiscal 1995 as compared to 10.6% in
fiscal 1994, principally as a result of sales to new customers, which typically
entail higher expenses and lower margin initially, as well as a decline in
nCHIP's results of operations.

Selling, General and Administrative ExpensesSELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the ninethree months ended
December 31, 1996June 30, 1997 increased to $19.1$10.5 million from $13.3$5.6 million infor the ninethree months
ended December 31, 1995June 30, 1996 and increased as a percentage of net sales from
4.1% to 5.3%. for the
three months ended June 30, 1997 from 4.8% for the three months ended June 30,
1996. Of the $4.9 million increase in selling, general and administrative
expenses, $800,000 resulted from increased selling expenses, $2.6 million
resulted from increased general and administrative expenses and $1.5 million
resulted from increased corporate expenses. The increase in absolute dollarsselling expenses is
primarily due to the addition of new sales personnel in the United States and
Europe and the inclusion of Fine Line's selling expenses; the increase in
general and administrative expenses is primarily due to the inclusion of the
operations of the Karlskrona Facilities; and the increase in corporate expenses
is primarily due to an increase in staffing levels, primarily personnel related
to implementation of new information systems as awell as increased corporate
staff, and to increased legal and other professional expenses.

Selling, general and administrative expenses in fiscal 1997 increased to
$28.9 million from $18.8 million in fiscal 1996 and increased as percentage of
net sales to 5.9% in fiscal 1997 from 4.2% in fiscal 1996. The increase was
principallymainly due to the inclusion of Astron's selling and general and administrative
expenses after its acquisitionfor all of fiscal 1997; a $3.2 million provision for doubtful debts
(and write-off of shares taken in February 1996; increased corporate salariespayment of accounts receivable) relating to
one customer, Voice Powered Technology, and bonuses; increased sales and marketing
expense; and travel and legal
expenses related to recent acquisitions.expenses.

Selling, general and administrative expenses in fiscal 1996 increased to
$18.6$18.8 million from $11.5 million in fiscal 1995, but decreased as a percentage of
net sales to 4.2% in fiscal 1996 from 4.9% in fiscal 1995. The increase in
absolute dollars was principally due to costs associated with the expanded
facilities in China and Texas, increased sales personnel and market research
activities in the United StatesU.S. and the inclusion of A&A's and Astron's selling and
general and administrative expenses after their acquisitions in April 1995 and
February 1996, respectively.

Selling, general and administrative expenses in fiscal 1995 increased to
$11.5 million from $8.7 million in fiscal 1994, but decreased as a percentage23
25

GOODWILL AND INTANGIBLE ASSETS AMORTIZATION

Goodwill (which represents the excess of the purchase price of an acquired
company over the fair market value of its net sales to 4.9% in fiscal 1995 from 6.6% in fiscal 1994. The increase in
absolute dollars was principally due to costs associated with increases in
corporate administrative expenses and provision for doubtful accounts, the
inclusion of Relevant's selling, general and administrative expenses, and
provision for severance payments to certain nCHIP personnel.

Goodwill and Intangible Assets Amortization

Goodwillassets) and intangible assets are
amortized on a straight line basis.basis over the estimated life of the benefits
received, which ranges from three to twenty-five years. Goodwill and intangible
assets amortization for the ninethree months ended December 31, 1996June 30, 1997 increased to
$863,000$742,000 from $783,000$659,000 for the ninethree months ended December 31, 1995,
andJune 30, 1996. Goodwill
amortization increased to $1.1$989,000 in fiscal 1997 from $739,000 in fiscal 1996
and intangible asset amortization increased to $1.6 million in fiscal 1997 from
$544,000 in fiscal 1996. These increases were due to the amortization of
additional goodwill and intangible assets which arose from the Astron
acquisition in 1996. In fiscal 1997, the Company recognized approximately $8.5
million of additional goodwill, as a result of the acquisition of the 40%
interest in FICO and the Astron earnout payment of $6.25 million (which was
accrued to goodwill in March 1997 when the conditions to payment were resolved),
partially offset by the effect of the $1.0 million reduction in the payment due
in June 1998 to an affiliate of Stephen Rees. See "-- Overview" and Note 14 of
Notes to Consolidated Financial Statements.

Goodwill amortization increased to $739,000 in fiscal 1996 from $755,000$510,000 in
fiscal 1995 primarily due to the goodwill from the Company's acquisitionsacquisition of A&A
and Astron. Goodwill and
intangibleIntangible assets amortization increased to $755,000$544,000 in fiscal 1996
from $245,000 in fiscal 1995 from $419,000 in
fiscal 1994primarily due to the acquisition of Relevant.

Provision for Plant Closings

As the Company has implemented its facilities consolidation strategy, it
has incurred expensesA&A and Astron.

PROVISION FOR PLANT CLOSINGS

The provision for plant closings of $5.9 million in fiscal 1996 and1997 consists of
the nine months
ended December 31, 1996. Incosts incurred in closing the nine months ended December 31, 1996, the Company
incurred plant closing expense of $2.3 million in connection with the closing of
its Texas facility, downsizing the Singapore
manufacturing operations and the write-off ofwriting off obsolete equipment and incurring
certain severance obligations at the nCHIP semiconductor fabrication facility.
The $5.9 million provision includes $2.8 million for the write-off of obsolete
equipment, and $560,000 for severance payments to former employees, at the nCHIP
and Texas facilities. The Texas facility had been primarily dedicated to
production for Global Village Communications and Apple Computer, to whom the
Company does not anticipate making substantial sales in future periods. In

20
23

addition, during this period, the Company began negotiations to sell theThe
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. InThe provision also includes $2.0 million for severance payments and
$500,000 for the fourth quarterwrite-off of fiscal 1997,fixed assets in the Company expects to incur expenses of approximately $2.0 millionSingapore manufacturing
facilities in connection with its plannedthe shift of manufacturing operations from Singapore to lower
cost manufacturing locations. In the fourth quarterSee Note 11 of Notes to Consolidated Financial
Statements.

The provision for plant closings of $1.3 million in fiscal 1996 the Company recorded charges
totalling $2.5 million for costswas
associated with the closingwrite-off of certain obsolete equipment at one of the
Company's Malaysian plantsfacilities in Malaysia and in Shekou, China. The provision for plant
closings were related to the Company ceasing its satellite receiver product line
in Malaysia and the closing of its manufacturing operations in Shekou, China operations.China.
Production from the Shekou facility washas been moved to the Company's plant in
Xixiang, China.

Without
takingBANK COMMITMENT FEES AND CONSULTANCY FEES

During the quarter ending March 31, 1997, the Company obtained consulting
services from BankBoston, N.A. (formerly, The First National Bank of Boston)
regarding various forms of financings and development of appropriate financial
models for fees totalling $719,000. In addition, during the quarter ended March
31, 1997, the Company had obtained a commitment for a new $100 million credit
facility, for which it paid commitment fees of $750,000. This commitment fee
allowed the Company to continue its negotiations with Ericsson and was expensed
in the quarter. Instead of borrowing under this provisioncommitment, the Company entered
into account,the $175 million Credit Facility in March 1997 to provide funding for the
acquisition of the Karlskrona Facilities, for capital expenditures and for
general working capital. The Company paid additional commitment fees for the
Credit Facility, which were capitalized and are amortized over the term of the
Company's net incomeborrowings under the Credit Facility. The Company also recorded
$362,000 of consultancy fees in March 1997 for services provided by a key
employee of Ericsson in Sweden with respect to the Karlskrona Acquisition.

24
26

RESEARCH AND DEVELOPMENT

Most of the research and earnings per
share in fiscal 1996 would have been $16.6 million and $1.25, respectively. The
$2.5 million provision included a $1.0 million provision for inventory exposure
and $1.3 million associated with the write-off of certain obsolete equipment.

Research and Development

In the fourth quarter of fiscal 1996,development conducted by the Company wrote off $31.6 millionis paid for
by customers and is therefore included in cost of sales. Other research and
development is conducted by the Company, but is not specifically identified, as
such expenses, excluding amounts of acquired in-process research and
development, ("are less than 1% of its total net sales.

In June 1997, the Company obtained an independent valuation of certain of
the assets of Astron and the In-Process R&D") related to&D as of the acquisitiondate of Astron. The Company engaged Duff & Phelps Capital Markets Co.
("DPCM") to determineAstron's
acquisition. This valuation determined that the fair market value of Astron'sthe In-Process R&D
was $29.0 million. Accordingly, the Company adjusted the amount of In-Process
R&D written off in fiscal 1996 to $29.0 million. See " -- Overview" and
DPCM
determined the valuation to be between $31.0 million and $37.0 million.

Interest Expense and Other, Net" -- Recent Changes in Accounting for Astron Acquisition."

INTEREST EXPENSE AND OTHER, NET

Interest expense and other, net increased to $1.5$2.6 million for the ninethree
months ended December 31, 1996June 30, 1997 from $1.1 million$516,000 for the ninethree months ended December 31, 1995,June 30,
1996, due to interest and amortization of commitment fees related to borrowings
under the Credit Facility, primarily incurred to finance the Karlskrona
Acquisition. See "-- Liquidity and Capital Resources" and "Risk
Factors -- Increased Leverage."

Interest expense and other, net decreased to $1.5 million in fiscal 1997
from $1.9 million in fiscal 1996 mainly due to indebtedness incurredan increase in orderthe foreign
exchange gain from $872,000 in fiscal 1996 to finance the
Astron acquisition, offset$1.2 million in part byfiscal 1997 and a
successful insurance claim.claim of $898,000 received in fiscal 1997. This was
partially offset by an increase in interest expenses incurred in connection with
additional indebtedness used to finance working capital requirements, to finance
acquisitions and to purchase machinery and equipment for capacity expansion. The
Company expects itsalso recorded approximately $363,000 of interest expense in fiscal 1997
related to increase substantially as a result of the indebtedness which it expects to incur to finance acash portion of the purchase
price forCompany's obligations to an affiliate of
Stephen Rees, a former shareholder and the Karlskrona Facilities.Chairman of Astron, pursuant to the
Services Agreement. See "-- Overview."

Interest expense and other, net increased to $1.8$1.9 million in fiscal 1996
from $1.0 million in fiscal 1995. The increase reflects interest incurred in
connection with additional indebtedness used to finance the cash portion of the
A&A and Astron acquisitions, to purchase machinery and equipment for capacity
expansion and to finance the Company's working capital requirements. The Company
recorded an unrealized foreign exchange gain of $872,000 in fiscal 1996 compared
to a foreign exchange loss of $303,000 in fiscal 1995 due to a weaker Malaysian
ringgit and Singapore dollar.

See "Risk Factors -- Currency Fluctuations."

Interest expense and other, net decreased to $1.0 million in fiscal 1995
from $1.4 million in fiscal 1994.MERGER EXPENSES

The decrease reflects lower interest expense
during this periodCompany recorded a one-time non-operating charge of approximately
$816,000 as a result of the repaymentnCHIP acquisition in January 1995, which was
accounted for as a pooling of long term bank debtinterest.

INCOME (LOSS) FROM ASSOCIATED COMPANY

The Company acquired a 40% interest in March
1994, repaymentFICO in December 1996. According to
the equity method of short-term advancesaccounting, 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, amounting to $241,000 in April 1994,fiscal 1997 and
higher income earned
on cash balances for$300,000 in the first sixthree months of fiscal 1995.

Income (Loss) from Joint Ventureended June 30, 1997.

Flextracker, the joint venture with Houston Tracker Systems ("HTS")HTS in which the Company previously
owned a 49% interest, commenced operations in June 1993. The Company initially contributed $2.5 million for a 49% interest in
Flextracker and HTS contributed $2.6 million for the remaining 51% interest. In
April 1994, the Company and HTS each loaned $1.0 million to Flextracker. In
December 1994, the Company acquired all of the net assets of Flextracker (except
the $1.0 million loan made by HTS to Flextracker) for approximately $3.3
million. According to the equity
method of accounting, the Company previously did not recognize revenue from
sales by Flextracker, but based on its ownership interest recognized 49% of the
net income or loss of the joint venture. Due to start-up costs and manufacturing
inefficiencies, the Company recognized a loss of $729,000 and $70,000 associated
with its interest in Flextracker in fiscal 1995 and fiscal 1994 respectively.
Merger ExpensesThe Company initially contributed $2.5 million for a 49% interest in Flextracker
and HTS contributed $2.6 million for the remaining 51% interest. In January 1995,April 1994
the Company and HTS each loaned

25
27

$1.0 million to Flextracker. In December 1994, the Company acquired nCHIP and recorded a one-time
non-operating chargeall of the
net assets of Flextracker (except the $1.0 million loan made by HTS to
Flextracker) for approximately $816,000.

21
24

Provision for Income Taxes$3.3 million.

PROVISION FOR INCOME TAXES

The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Singapore, Malaysia,China, Hong Kong, Malaysia,
Mauritius, China,The Netherlands, Singapore, Sweden, the United Kingdom, and the
United States and the
Netherlands.States. Each of these subsidiaries is subject to taxation in the country
in which it has been formed. The Company's Asian manufacturing subsidiaries have
at various times been granted certain tax relief in each of these countries,
resulting in lower taxes than would otherwise be the case under ordinary tax
rates. See Note 7 of Notes to Consolidated Financial Statements.

The Company's consolidated effective tax rate for any given period is
calculated by dividing the aggregate taxes incurred by each of the operating
subsidiaries and the holding company by the Company's consolidated pre-tax
income. Losses incurred by any subsidiary or by the holding company are not
deductible by the entities incorporated in other countries in the calculation of
their respective local taxes. For example, the charge for the closing of one
plant in Malaysiathe
Texas facility in fiscal 19961997 was incurred by a MalaysianU.S. subsidiary that did not
have income against which this charge could be offset. The ordinary corporate
tax rates for calendar 19961997 were 26%, 16.5% and 15% in Singapore, 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 and distribution subsidiaries are located. The
Company's U.S. and U.K. subsidiaries are subject to ordinary corporate tax rates
of 35% and 33% respectively. However, these tax rates did not have any material
impact on the Company's taxes in fiscal 1997 due to the operating losses of
these two subsidiaries in this period. The Company's Swedish subsidiary, which
began operation on March 27, 1997 with the acquisition of the Karlskrona
Facilities, will be subject to an ordinary corporate tax rate of 28%.

The Company's consolidated effective tax rate was 17.1%12.2% for the ninethree
months ended December 31, 1996June 30, 1997 and 19.2%22.9% in fiscal 1995.1997. In the three months ended
June 30, 1997, the Company reduced the effective tax rate on certain of its
subsidiaries that had certain profitable operations by applying net loss carry
forwards. In addition, the Company has reduced its effective tax rate by
shifting some of its manufacturing operations from Singapore, which has an
ordinary corporate tax rate of 26%, to locations having lower corporate tax
rates. The provision for plant closings of $2.5$1.3 million and the $31.6$29.0 million
write-off of In-Process R&D in fiscal 1996 resulted in aggregate net losses for
that year, but the Company incurred taxes on the profitable operations of
certain of its subsidiaries. If the provision for plant closings and In-Process
R&D write-offwritten off are excluded from such calculation, the Company's fiscal 1996 consolidated
effective tax rate would have been 18.6%20.0%.

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
Singapore subsidiary was granted an investment allowance incentive in respect of
approved fixed capital expenditures subject to certain conditions. These
allowances have been utilized to reduce its taxable income since fiscal 1991,
and were fully utilized at the end of fiscal 1996. If the Singapore subsidiary
sells, leases or disposes of assets in respect of which investment allowances
have been granted before July 31, 1997, the amount of income previously exempted
from Singapore tax will then become taxable at the standard corporate tax rate
of 26.0%. The Company's investments in
its plants in Xixiang and Doumen, China fall under the "Foreign Investment
Scheme" thatwhich 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. In
fiscal 1993, the Company transferred its offshore marketing and distribution
functions to a newly formed marketing subsidiary located in Labuan, Malaysia,
where the tax rate is de minimus.minimis. In February 1996, the Company transferred
Astron's sales and marketing business to a newly formed subsidiary in Mauritius,
where the tax rate is 0%. The Company's Malaysian manufacturing subsidiary has
obtained a five-yearfive year pioneer certificate from the relevant authority that
provides a tax exemption on manufacturing income from certain products in
Johore, Malaysia. To date, this incentive has had a limited impact on the
Company due to the relatively short history of its Malaysian operations and its
tax allowances and losses carry forward. The Company's facility in Shekou,
China, which was closed in fiscal 1996, was located in a "Special Economic Zone"
and was an approved "Product Export Enterprise" that qualified for a special
corporate income tax rate of 10.0%.

26
28

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. Substantially all of the products manufactured by the Company's Asian
subsidiaries are sold to U.S.-basedU.S. based customers. While the Company believes that
profits from its Asian operations are not sufficiently connected to the U.S. to
give rise to U.S. federal or state income taxation, there can be no assurance
that U.S. tax authorities will not challenge the Company's position or, if 22
25

such
challenge is made, that the Company wouldwill prevail in any such dispute.disagreement. If
the Company's Asian profits became subject to U.S. income taxes, the Company's
worldwide effective tax ratetaxes would increase and its results of operations and cash flow would be
adversely affected. In addition, the expansion by the Company of its operations
in North America and Northern Europe may increase its worldwide effective tax
rate. See "Risk Factors -- Risk of Increased Taxes."

Extraordinary GainAt March 31, 1997, the Company had net operating loss carryforwards of
approximately $30.7 million for U.S. federal income tax purposes which will
expire between 2003 and 2011 if not previously utilized. Utilization of the U.S.
net operating loss carryforwards may be subject to an annual limitation due to
the change in ownership rules provided by the Internal Revenue Code of 1986.
This limitation and other restrictions provided by the Internal Revenue Code of
1986 may reduce the net operating loss carryforward such that it would not be
available to offset future taxable income of the U.S. subsidiary. At March 31,
1997, the Company had net operating loss carryforwards of approximately $10.0
million and $632,000 in the U.K. and Malaysia, respectively. The extraordinary gainutilization of
$416,000these net operating loss carryforwards is limited to the future operations of
the Company in fiscal 1994 represents the forgivenesstax jurisdictions in which such carryforwards arose. These
losses carryforward indefinitely. See Note 8 of accrued interest on the Company's outstanding subordinated debt,
the principal amount of which was converted into equity in December 1993.

Variability of ResultsNotes to Consolidated Financial
Statements.

VARIABILITY OF RESULTS

The Company has experienced, and expects to continue to experience,
significant periodic and quarterly fluctuations in the Company's results of
operations due to a variety of factors. These factors include, among other
things:things, timing of orders;orders, the short-term nature of most customers' purchase
commitments, volume of orders relative to the Company's capacity;capacity, customers'
announcements, introductionsannouncement and introduction and market acceptance of new products or new
generations of products; evolutionproducts, evolutions in the life cycles of customers' products;products,
timing of expenditures in anticipation of future orders;orders, effectiveness in
managing manufacturing processes;processes, changes in cost and availability of labor and
components;components, product mix;mix, and changes or anticipated changes in economic
conditions. In addition, the Company's revenuesnet sales are adversely affected by the
observance of local holidays during the fourth fiscal quarter in Malaysia and
China, reduced production levels in Sweden in July, and the reduction in orders
by certain customers in the fourth fiscal quarter reflecting a seasonal slowdown
following the Christmas holiday. The market segments served by the Company are
also subject to economic cycles and have in the past experienced, and are likely
in the future to experience, recessionary periods. A recessionary period
affecting the industry segments served by the Company could have a material
adverse effect on the Company's results of operations. Results of operations in
any period should not be considered indicative of the results to be expected for
any future period, and fluctuations in operating results may also result in
fluctuations in the price of the Company's Ordinary Shares. In future periods,
the Company's revenuenet sales 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
"Risk Factors -- Variability of Customer Requirements and Operating Results."

BACKLOG

The Company's backlog was $181.9$194.8 million at December 31, 1996June 30, 1997 and $196.3$173.3
million at December 31, 1995.June 30, 1996. Backlog consists of contracts or purchase orders with
delivery dates scheduled within the next six months. Because of the timing of
orders, overall decreasing lead times and delivery intervals, customer and
product mix and the possibility of customer changes in delivery schedules, the
Company's backlog as of any particular date mayis not be indicative of actual sales
for any succeeding period.

27
29

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations from cash generated from operations,
bank debt, lease financing of capital equipment and the proceeds of public offerings
of equity securities.securities, cash generated from operations, bank debt and lease
financing of capital equipment. In March 1997, the Company terminated its $48.0
million line of credit from several banks and obtained a new $175.0 million
credit facility from BankBoston, N.A. At December 31, 1996,June 30, 1997 the Company had cash
balances totaling $13.6$33.1 million, outstanding bank borrowings of $5.7$139.0 million
and an aggregate of $42.3$3.7 million available for borrowing under its credit
facilities.the Credit
Facility. See "Risk Factors -- Increased Leverage."

Net cash provided by operating activities was $40.1$18.0 million for the ninethree
months ended December 31,June 30, 1997, consisting of $26.2 million of cash provided by net
income, depreciation, increases in accounts payable and other sources, partially
offset by $8.3 million of cash used for increases in inventory and accounts
receivable and other operating activities. Net cash provided by operating
activities was $3.5 million for the three months ended June 30, 1996, comprisedconsisting
of $18.7 million of cash provided by net income, depreciation and decreases in
accounts receivable, partially offset by $15.2 million of cash used for
operating activities, primarily decreases in accounts payable.

Net cash provided by operating activities in fiscal 1997 was $46.7 million,
consisting primarily of net income, depreciation, provision for plant closingsclosing
and decreases in accounts receivable.

Net cash used for operating activities was $10.9 million for the nine months ended December
31, 1995, primarily due to increases in inventory and decreases in accounts
payable.

Net cash used for operating activities was $710,000 and $3.4 million for
fiscal 1996 and 1995, respectively. Cash provided by operating activities for fiscal 1996 was comprised$710,000,
consisting primarily of a net income (adjusted to excludeloss of $15.1 million and increases in accounts
receivable and inventories, largely offset by the $29.0 million write-off of
In-Process R&D, write-off and provision for plant closings) of $16.6 million,as well as by depreciation, amortization and allowance for
doubtful accountsdebt and obsolescence.

Cash usedAccounts receivable, net of allowance for operating activitiesdoubtful accounts, increased to
$74.0 million at June 30, 1997 from $69.3 million at March 31, 1997. The
increase in fiscal

23
26

1996accounts receivable was primarily compriseddue to increased sales for the
first quarter of increasesfiscal 1998. Inventories increased to $108.9 million at June
30, 1997 from $106.6 million at March 31, 1997. The increase in inventories was
mainly a result of increased purchases of material to support growing sales. The
Company's allowance for doubtful accounts decreased to $5.3 million at June 30,
1997 from $5.7 million at March 31, 1997. The Company's allowance for inventory
obsolescence decreased to $6.0 million at June 30, 1997 from $6.2 million at
March 31, 1997. The decreases in the allowances were due to the write-offs of
accounts receivable and inventories reflecting higher sales. Cash provided by operating activities for fiscal 1995
was comprised primarily of net income, depreciation, amortization, allowance for
doubtful debts andduring the loss from the Flextracker joint venture. Cash used for
operating activities for fiscal 1995 was comprised mainly of an increase in
accounts receivable and inventories.three months ended June 30, 1997.

Accounts receivable, net of allowance for doubtful accounts, decreased to
$67.2$69.3 million at DecemberMarch 31, 19961997 from $78.1 million at March 31, 1996. The
decrease in accounts receivable was mainlyprimarily due to improved collection of
accounts receivable during the nine months ended Decemberfiscal 1997. Inventories increased to $106.6 million
at March 31, 1997 from $52.6 million at March 31, 1996. Inventories
decreasedThe increase in
inventories was mainly a result of the acquisition of the $55.0 million of
inventories at the Karlskrona Facilities. The Company's allowances for doubtful
accounts increased to $45.3$5.7 million at DecemberMarch 31, 19961997 from $52.6$3.6 million at March
31, 1996. The Company's allowance for doubtful accountsinventory obsolescence increased to $4.3 million at
December 31, 1996 from $3.6$6.2
million at March 31, 1995. The Company's allowance
for inventory obsolescence increased to $5.9 million at December 31, 19961997 from $4.6 million at March 31, 1996. The increases in
the allowances for both
doubtful accounts and inventory obsolescence were due to the increases in sales and inventories during fiscal
1997 and the $3.2 million provision for doubtful debts, and write-off shares
taken in payment of receivables, related to one specific customer and inventory
exposure relating to the closing of the Texas facility.

Accounts receivable, net of allowance for doubtful accounts, increased to
$78.1 million at March 31, 1996 from $44.3 million at March 31, 1995 and
inventories increased to $52.6 million at March 31, 1996 from $30.2 million at
March 31, 1995. The increase in accounts receivable and inventories was mainly
due to the 89.0% increase in sales during fiscal 1996. The Company's allowances
for doubtful accounts increased from $1.8 million at March 31, 1995 to $3.6
million at March 31, 1996. The Company's allowance for inventory obsolescence
increased from $1.9 million at March 31, 1995 to $4.6 million at March 31, 1996.
The increases in the nine month period. See "Risk Factors -- Customer Concentration;
Dependence on Electronics Industry."allowances were due to the increases in sales and
inventories during fiscal 1996 and the $1.0 million provision for inventory
exposure relating to the closing of the satellite receiver product line in one
of the Company's Malaysia plants.

28
30

Net cash used for investing activities during the ninethree months ended December 31, 1996June
30, 1997 was $20.1$34.3 million, which consistedconsisting primarily of expenditures for:for new and
expanded facilities, including the construction in progress at theof new campusfacilities in Doumen,
China;China, Guadalajara, Mexico and San Jose, California and the acquisition of
machinery and equipment in the San Jose, California and Xixiang,Karlskrona, Sweden
facilities. Net cash used for investing activities during the three months ended
June 30, 1996 was $5.7 million, consisting primarily of equipment acquisitions
and building construction.

Net cash used for investing activities in fiscal 1997 was $112.0 million,
consisting primarily of $82.4 million for the acquisition of the Karlskrona
Facilities, and $27.0 million of expenditures for machinery and equipment in the
Company's, China, facilities; the
purchases of land in Guadalajara, Mexico and San Jose, California;California manufacturing facilities and $3.0
million cash paid in November for the investment40% interest in FICO.

Net cash used for investing activities during the nine
months ended December 31, 1995 was $21.6 million which consisted primarily of
purchases of machinery and equipment in the Company's manufacturing facilities
located in Texas, California and Xixiang, China.

Net cash used for investing activities during fiscal 1996 was $29.0 million,
which consistedconsisting primarily of $15.8 million of expenditures for machinery and
equipment in the Company's Texas, China and California manufacturing facilities located in Texas, California
and Xixiang, China
as well as payment of $15.2 million for the cash portion of the purchase prices paid in
fiscal 1996 for the A&A and Astron acquisitions (net of cash acquired).acquisitions.

Net cash used for
investing activities for fiscal 1995 was $10.2 million which consisted mainly of
purchases of property and equipment in three Asian plants and payment for the
acquisition of the net assets of Flextracker.

Net cash used forprovided by financing activities was $12.9$25.8 million for the ninethree
months ended December 31,June 30, 1997 and $4.5 million for the three months ended June 30,
1996, and consistedin each case consisting primarily of repaymentbank borrowings. Bank borrowings
increased from $19.0 million at June 30, 1996 to $139.0 million at June 30, 1997
due primarily to borrowings under the Credit Facility to fund the purchase price
for the Karlskrona Facilities.

Net cash provided by financing activities in fiscal 1997 was $82.4 million,
consisting primarily of bank loansborrowings of $152.8 million and capital lease
financing. This was partially offset by $56.0 million in repayments of bank
borrowings, $10.5 million in repayments of notes to Astron's ex-shareholders and
$8.0 million in repayments of capital lease obligations.

Net cash provided by financing activities was $36.1 million for the nine months ended December 31, 1995 and consisted
primarily of net proceeds from the issuance of share capital and borrowings from
banks. Bank borrowings decreased from $14.4 million at March 31,in fiscal 1996 to $5.7
million at December 31, 1996 as the Company repaid bank loans using cash
provided by the operating activities.

Net cash provided by financing activities was $31.6 million, in fiscal 1996,
consisting primarily of $22.3 million from the sale of 1,000,000 newly issued
Ordinary Shares and net bank borrowings of $12.3 million.

Net cash used for financing activities
was $10.8On March 27, 1997 the Company entered into a new credit facility consisting
of two revolving credit and term loan agreements provided by the BankBoston,
N.A. as agent. Under the Credit Facility, subject to compliance with certain
financial ratios and the satisfaction of customary borrowing conditions, the
Company and its United States subsidiary may borrow up to an aggregate of $175.0
million. The Credit Facility includes $105.0 million for fiscal 1995, consisting primarily of repaymentrevolving credit
facilities and a $70.0 million term loan facility. The revolving credit
facilities are subject to a borrowing base equal to 70% of bank
borrowingsconsolidated accounts
receivable and notes payable, offset in part by20% of consolidated inventory. As of June 30, 1997, $69.0 million
of revolving credit loans and $70.0 million of term loans were outstanding, and
bore interest at a variable rate equal, as of June 30, 1997, to approximately
8.4% per annum. The Company intends to use the net proceeds from this offering,
and from the saleissuance of the Senior Subordinated Notes, to repay all of the
outstanding borrowings under the Credit Facility. If the Company does not
consummate the issuance of the Senior Subordinated Notes, it will use the net
proceeds from this offering to repay a portion of the outstanding term loans.
See "Use of Proceeds." The term loan amortizes over a 5-year period and is
subject to certain mandatory prepayment provisions. Loans under the revolving
credit facility will mature in March 2000. Loans to the Company are guaranteed
by certain of its subsidiaries and loans to the Company's United States
subsidiary are guaranteed by the Company and by certain of the Company's
subsidiaries. The Credit Facility is secured by a lien on substantially all
accounts receivable and inventory of the Company and its subsidiaries, as well
as a pledge of the Company's shares in certain of its subsidiaries. The Credit
Facility contains covenants and provisions that, among other things, prohibit
the Company and its subsidiaries from (i) incurring additional indebtedness,
except for subordinated debt evidenced by the Subordinated Notes (as defined
therein) in an aggregate principal amount of not more than $150.0 million,
certain purchase money debt and leases not to exceed $25.0 million and certain
subsidiary debt not to exceed $15.0 million; (ii) incurring liens on their
property (subject to certain exceptions); (iii) making capital investments
exceeding $65.0 million in fiscal 1998 and $25.0 million annually thereafter;
(iv) engaging in certain sales of assets; (v) making acquisitions that do not
meet certain criteria; and (vi) making certain other investments. In addition,
the Credit Facility prohibits the payment of dividends or other distributions by
the Company to its shareholders.

29
31

The Credit Facility also requires that the Company satisfy certain
financial covenants and tests on a consolidated basis which, among other things,
provide that the Company's: (i) Leverage ratio (the ratio of Total Debt to
EBITDA (each as defined therein)) must not exceed 4.25 : 1.00 (reducing to 2.75
: 1.00 by April 1, 1999), (ii) Interest Coverage Ratio (the ratio of EBITDA to
Consolidated Interest Expense (as defined therein)) must not be less than 3.00 :
1.00 (increasing to 4.00 : 1.00 by January 1, 1999), (iii) Fixed Charge Coverage
Ratio (the ratio of EBITDA to Fixed Charges (as defined therein)) must not
exceed 1.15 : 1.00 (increasing to 1.25 : 1.00 by April 1, 1999) and (iv)
Consolidated Tangible Net Worth (as defined therein) must not be less than (a)
95% of Consolidated Tangible Worth at March 31, 1997 plus (b) 75% of positive
Consolidated Net Income (as defined therein) plus (c) 100% of the proceeds of
any Equity Issuance (as defined therein).

The Company anticipates issuing $100.0 million aggregate principal amount
of Senior Subordinated Notes. The indenture governing the Senior Subordinated
Notes is expected to impose certain restrictions on the Company and its
subsidiaries, including restrictions on their ability to incur indebtedness, pay
dividends, make certain investments, and engage in certain other activities. In
particular, the Company expects that the indenture will restrict the Company's
and its subsidiaries' ability to incur additional indebtedness unless on a pro
forma basis, after giving effect to such indebtedness, the Company's ratio of
consolidated cash flow to consolidated interest expense for the preceding four
quarters is at least 2.00 to 1.00. The Company expects that the indenture will
contain certain exceptions to this restriction, permitting it and its
subsidiaries to, among other things, incur revolving credit indebtedness in an
amount not to exceed the sum of 80% of its consolidated accounts receivable and
35% of its consolidated inventory, and to incur obligations under capitalized
leases and purchase money indebtedness in an amount not to exceed $15.0 million.
Under these anticipated provisions, as of June 30, 1997, and giving pro forma
effect to the issuance of the Senior Subordinated Notes and the Ordinary Shares
offered hereby and increased capital lease financing.the application of the net proceeds therefrom, the indenture
would have permitted the Company and its subsidiaries to incur additional
indebtedness requiring the payment of up to an aggregate of $2.2 million per
quarter in interest under the consolidated cash flow to consolidated interest
expense ratio (based on the Company's annualized consolidated cash flow for the
three months ended June 30, 1997), and would have permitted the incurrence of up
to $100.7 million of revolving credit indebtedness regardless of such ratio. The
indenture is also expected to require that the Company presently anticipates that itsoffer to repurchase the
Senior Subordinated Notes upon certain transactions involving a change in
control of the Company, and in certain circumstances with the proceeds of asset
sales. No assurances can be given as to whether, or on what terms, the Senior
Subordinated Notes will be issued.

The Company's capital expenditures in the fourthfirst quarter of fiscal 1997 will be1998 were
approximately $5.0$28.2 million to $7.0 million
(excludingand the purchase price for the Karlskrona Facilities) and anticipateCompany anticipates that its capital
expenditures in fiscal 1998 will be approximately $20.0 million to
$35.0$65.0 million, primarily
relating to the development of new and expanded facilities in San Jose,
California, Guadalajara, Mexico and Doumen, China. In addition, the Company
will be required to expendexpended cash in the fourth quarter of fiscal 1997 and will be required to
expend cash in fiscal 1998 pursuant to the terms of the Astron acquisition. The
Company paid an earnout of $6.25 million in cash in April 1997, and will be
required to make a principal paymentspayment of $10.0 million and $5.0 million in February 1997 and February 1998, respectively, pursuant
to the terms of notesa note issued by it in connection with the Astron acquisition, and will
be required to pay an earnout of up to an additional $12.5 million in cash and
Ordinary Shares on or about March 31, 1997, based on the pre-tax profit of
Astron for the year ended December 31, 1996.acquisition.
The Company is also required to make a $15.0$14.0 million payment to an entity
affiliated with Stephen Rees in June 1998. Of this amount, $5.0 million is
payable in cash and $9.0 million is payable in cash or, at the option of the
Company, in Ordinary Shares, and the Company intends to Stephen J. L. Reespay the $9.0 million
portion in Ordinary Shares. The Company also anticipates that its working
capital requirements will increase in order to support anticipated volumes of
business. Future liquidity needs will depend on, June 30, 1998, conditioned upon his remaining employed as Chairmanamong other factors, the timing
of Astron
through that time.expenditures by the Company on new equipment, levels of shipments by the
Company and changes in volumes of customer orders. The Company believes that the
existing cash balances, together with anticipated cash flow from operations and
amounts 24
27

available under its existing and anticipated credit facilities,the Credit Facility, will be sufficient to fund its
operations (other than the Ericsson Transaction) through fiscal 1998.

To finance30
32

RECENT ACCOUNTING PRONOUNCEMENT

In February 1997, the Ericsson Transaction, the Company intends to use a
combinationFinancial Accounting Standards Board issued Statement
of the net proceedsFinancial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128")
which requires disclosure of this offeringbasic earnings per share and anticipated long-term and
short-term financing arrangements,diluted earnings per
share and is engagedeffective for periods ending subsequent to December 15, 1997. The
pro forma effect of adoption of SFAS No. 128 is included in discussions with lenders
regarding such financing arrangements. No assurance can be given as to the availability or terms of any such financing arrangements. See "Risk
Factors -- Risks of Ericsson Transaction" and " -- Increased Leverage."

25table below.

FISCAL YEAR ENDED THREE MONTHS ENDED
MARCH 31, JUNE 30,
---------------------------- -------------------
1995 1996 1997 1996 1997
------ ---------- ------ ---------- ------
(RESTATED) (RESTATED)
(UNAUDITED)
(SHARES IN THOUSANDS)

AS REPORTED:
Net income per share......................... $.51 $(1.19) $.50 $.28 $.36
Weighted average number of common and common
equivalent shares outstanding............. 12,103 12,684 14,877 14,914 14,955
PRO FORMA (UNAUDITED):
Basic net income per share................... $.54 $(1.19) $.54 $.30 $.38
Weighted average number of common shares
outstanding............................... 11,404 12,684 13,849 13,824 14,159
Diluted net income per share................. $.51 $(1.19) $.50 $.28 $.36
Weighted average number of common and common
equivalent shares outstanding............. 12,103 12,684 14,877 14,914 14,955

31
2833

BUSINESS

The Company is a leading provider of advanced contract manufacturing services to
OEMs in the communications, computer, consumer electronics and medical electronicsdevice
industries. Flextronics offers a full range of services including product
design, PCB fabrication and assembly, materials procurement, inventory
management, final system assembly and test, packaging and distribution. The
components, subassemblies and finished products manufactured by Flextronics
incorporate advanced interconnect, miniaturization and packaging technologies,
such as SMT, MCM, COB, BGA and COBminiaturized gold-plated PCB technologies. The
Company's strategy is to use its global manufacturing capabilities and advanced
technological expertise to provide its customers with a complete manufacturing
solution, highly responsive and flexible service, accelerated time to market and
reduced production costs. The Company targets leading OEMs in growing vertical
markets with which it believes it can establish long-term relationships, and
serves its customers on a global basis from its strategically located facilities
in North America, East Asia and Northern Europe. The Company's customers include
Advanced Fibre Communications, Ascend Communications, Braun/ThermoScan, Cisco
Systems, Diebold, Ericsson, Harris DTS, Lifescan (a Johnson & Johnson company),
Microsoft, Philips Electronics and U.S. Robotics.

INDUSTRY OVERVIEW

Many OEMs in the electronics industry are increasingly utilizing contract
manufacturing services in their business and manufacturing strategies, and are
seeking to outsource a broad range of manufacturing and related engineering
services. Outsourcing allows OEMs to take advantage of the manufacturing
expertise and capital investments of contract manufacturers, thereby enabling
OEMs to concentrate on their core competencies. According to an independent
industry study, these trends and overall growth in OEMs' markets have resulted
in a compound annual growth rate in the electronics contract manufacturing
industry of over 30% from 1992 through 1996, to approximately $60 billion, andbillion.
According to this study, the industry is expected to grow to approximately $110
billion by 1999. OEMs utilize contract manufacturers to:

Reduce Production Costs. The competitive environment for OEMs requires
that they achieve a low-cost manufacturing solution, and that they
quickly reduce production costs for new products. Due to their
established manufacturing expertise and infrastructure, contract
manufacturers can frequently provide OEMs with higher levels of
responsiveness, increased flexibility and reduced overall production
costs than in-house manufacturing operations. The production scale,
infrastructure, purchasing volume and expertise of leading contract
manufacturers can further enable OEMs to reduce costs earlier in the
product life cycle.

Accelerate Time to Market. Rapid technological advances and shorter
product life cycles require OEMs to reduce the time required to bring a
product to market in order to remain competitive. By providing
engineering services, established infrastructure and advanced
manufacturing expertise, contract manufacturers can help OEMs shorten
their product introduction cycles.

Access Advanced Manufacturing and Design Capabilities. As electronic
products have become smaller and more technologically advanced,
manufacturing processes have become more automated and complex, making
it increasingly difficult for OEMs to maintain the design and
manufacturing expertise necessary to remain competitive. Contract
manufacturers enable OEMs to gain access to advanced manufacturing
facilities, packaging technologies and design expertise.

Focus Resources. Because the electronics industry is experiencing
increased competition and technological change, many OEMs are focusing
their resources on activities and technologies where they add the
greatest value. Contract manufacturers that offer comprehensive services
allow OEMs to focus on their core competencies.

Reduce Investment. As electronic products have become more
technologically advanced, internal manufacturing has required
significantly increased investment for working capital, capital
equipment, labor, systems and infrastructure. Contract manufacturers
enable OEMs to gain access to

32
34

advanced, high volume manufacturing capabilities without making the
capital investments required for internal production.

26
29

Improve Inventory Management and Purchasing Power. OEMs are faced with
increasing challenges in planning, procuring and managing their
inventories efficiently due to frequent design changes, short product
life cycles, large investments in electronic components, component price
fluctuations and the need to achieve economies of scale in materials
procurement. Contract manufacturers' inventory management expertise and
volume procurement capabilities can reduce OEM production and inventory
costs, helping them respond to competitive pressures and increase their
return on assets.

Access Worldwide Manufacturing Capabilities. OEMs are increasing their
international activities in an effort to lower costs and access foreign
markets. Contract manufacturers with worldwide capabilities are able to
offer such OEMs a variety of options on manufacturing locations to
better address their objectives regarding costs, shipment location,
frequency of interaction with manufacturing specialists and local
content requirements of end-market countries. In addition, OEMs in
Europe and other international markets are increasingly recognizing the
benefits of outsourcing.

STRATEGY

The Company's objective is to enhance its position as a leading provider of
advanced contract manufacturing and design services to OEMs worldwide. The
Company's strategy to meet this objective includes the following key elements:

Leverage Global Presence. The Company has established a manufacturing
presence in the world's major electronics markets -- Asia, North America
and Europe -- in order to serve the increasing outsourcing needs of
regional OEMs and to provide the global, large scale capabilities required
by larger OEMs. The Company ishas recently substantially increasing overall capacityexpanded its
manufacturing operations by
developing manufacturing campuses in China and Mexico, expanding its operationsintegrated campus in Doumen,
China, constructing a new manufacturing campus in Guadalajara, Mexico and
adding facilities in San Jose, California and acquiring the Karlskrona
Facilities in Sweden.California. By increasing the scale and the
scope of the services offered in each site, the Company believes that it
can better address the needs of leading OEMs that are increasingly seeking
to outsource high volume production of advanced products.

Provide a Complete Manufacturing Solution. The Company believes that
OEMs are increasingly requiring a wider range of advanced services from
contract manufacturers. Building on its integrated engineering and
manufacturing capabilities, the Company provides its customers with
services ranging from initial product design and development and prototype
production to final product assembly and distribution to OEMs' customers.
The Company believes that this provides greater control over quality,
delivery and cost, and enables the Company to offer its customers a
complete cost-effective solution.

Provide Advanced Technological Capabilities. Through its continuing
investment in advanced packaging and interconnect technologies (such as
MCM, COB and miniature gold-finished PCB capabilities), as well as its
investment in advanced design and engineering capabilities (such as those
offered by Fine Line), the Company is able to offer its customers a variety
of advanced design and manufacturing solutions. In particular, the Company
believes that its ability to meet growing market demand for miniaturized
electronic products will be critical to its ongoing success, and has
developed and acquired a number of innovative technologies to address this
demand.

Accelerate Customers' Time to Market. The Company's engineering
services group provides integrated product design and prototyping services
to help customers accelerate their time to market for new products. By
participating in product design and prototype development, the Company
often reduces the costs of manufacturing the product. In addition, by
designing products to improve manufacturability and by participating in the
transition to volume production, the Company believes that its engineering
services group can greatlysignificantly accelerate the time to volume production.
By working closely with its suppliers and customers throughout the design
and manufacturing process, the Company can enhance responsiveness and
flexibility, increase manufacturing efficiency and reduce total cycle
times.

33
35

Increase Efficiency Through Logistics. The Company is streamlining and
simplifying production logistics at its large, strategically located
facilities to decrease the costs associated with the handling and managing
of materials. The Company plans to incorporate suppliers of custom
components in its facilities in China and Mexico to further reduce material
and transportation costs. The Company 27
30

also intends to establish warehousing
capabilities from which it can ship products into the customer'scustomers' distribution
channels.

Target Leading OEMs in Growing Vertical Markets. The Company has
focused its marketing efforts on fast growing industry sectors that are
increasingly outsourcing manufacturing operations, such as the
communications, computer, consumer electronics and medical industries. The
Company seeks to maintain a balance of customers among these industries,
establishing long-term relationships with leading OEMs to become an
integral part of their operations.

There can be no assurance that the Company's strategy, even if successfully
implemented, will reduce the risks associated with the Company's business. See
"Risk Factors."

CUSTOMERS

The Company's customers consist of a select group of OEMs in the
communications, computer, consumer electronics and medical device industries.
Within these industries, the Company's strategy is to seek long-term
relationships with leading companies that seek to outsource significant
production volumes of complex products. The Company has increasingly focused on
sales to larger companies and to customers in the communications industries. In
fiscal 1996,1997 and the first quarter of fiscal 1998, the Company's five largest
customers accounted for approximately 52.0%46% and 61%, respectively, of net sales.
The loss of one or more major customers couldwould have a material adverse effect on
the Company's results of operations.Company. See "Risk Factors -- Customer Concentration; Dependence on
Electronics Industry."

The following table lists in alphabetical order certain of the Company's
largest customers with which the Company expects to continue to conduct
significant business in fiscal 1998 and the products for which the Company
provides manufacturing services.

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

Advanced Fibre Communications.......................Communications.................... Local line loop carriers
Braun/ThermoScan....................................ThermoScan................................. Temperature monitoring systems
Diebold.............................................Compaq........................................... Modems
Diebold.......................................... Automatic teller machines
IBM................................................. Tape driveEricsson......................................... Business telecommunications systems
Lifescan (a Johnson & Johnson company)......................... Portable glucose monitoring system
Microcom............................................ Modems
Microsoft...........................................Microsoft........................................ Computer peripheral devices
Polycom............................................. Teleconferencing systems
U.S. Robotics.......................................Robotics.................................... Pilot electronic organizers

In addition, in fiscal 1997 and the first quarter of fiscal 1998, the
Company has entered into relationships with a number of new significant
customers, including Ascend Communications (telecommunications products), Auspex
(drive carriers), Cisco Systems (data communications products), Harris DTS
(network switches) and, Philips Electronics (video cameras)cameras for personal computers),
Philips Consumer Products (telephones), Bay Networks (data communications
products) and Nokia (consumer electronics products).

TheIn connection with the Karlskrona Acquisition, the Company and Ericsson
entered into a multi-year purchase agreementagreement. Sales to Ericsson accounted for
approximately 30% of the Company's net sales in February 1997,the first quarter of fiscal
1998, and the Company believes that as a result, sales byto Ericsson will account for a
significant portion of its net sales in fiscal 1998. See "Acquisition of"-- Karlskrona
Facilities"Acquisition" and "Risk Factors -- Risks of Ericsson
Transaction.Karlskrona Acquisition."

SALES AND MARKETING

The Company achieves worldwide sales coverage through a 24-person37-person direct
sales force, which focuses on generating new accounts, and through 4320 program
managers, who are responsible for managing relationships

34
36

with existing customers and making follow-on sales. In North America, the
Company maintains sales offices in California and Massachusetts, as well as a
recently established sales officesoffice in Florida and Guadalajara, Mexico.Florida. The Company's Asian sales offices
are located in Singapore and Hong Kong and Malaysia.Kong. In Europe, the Company maintains sales
offices in England, Germany and the Netherlands,Netherlands. The Company is expanding its
European sales force, and intends to establish additional European sales offices
in France Germany and Sweden. In addition to its sales force, the Company's executive
staff plays an integral role in the Company's marketing efforts.

28
31

FACILITIES

The Company has manufacturing facilities located in Singapore, Malaysia,
China, the United Kingdom and the United States. In addition, the Company
provides engineering services at its facilities in Singapore, California and
Massachusetts. All of the Company's 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 is set forth below:

YEAR APPROXIMATE OWNED/
LOCATION COMMENCED SQUARE FEET LEASED(1) SERVICES
- ------------------------- --------- ------------- --------- ----------------------------------

Existing Manufacturing Facilities
Singapore(2)........... 1982 47,000 Leased Complex, high value-added PCB
assembly.
Johore, Malaysia....... 1991 80,000 Owned Full systems manufacturing; PCB
assembly.
Xixiang, China......... 1995 90,000 Leased High volume PCB assembly.
Doumen, China.......... 1995(3) 175,000(4) Owned Fabrication and assembly of high
density, miniaturized PCBs.
San Jose, CA........... 1994 65,000 Leased Full systems manufacturing; PCB
assembly.
San Jose, CA........... 1996 32,500 Leased Complex, high value-added PCB
assembly.
San Jose, CA........... 1989(5) 30,000 Leased Advanced packaging and MCM design
and fabrication.
Tonypandy, Wales....... 1983(6) 50,000 Owned Full systems manufacturing; medium
complexity PCB assembly.
Existing Engineering Facilities
Westford, MA........... 1987 9,112 Leased Design and prototype services.
Singapore.............. 1982 (7) -- Design and prototype services.
San Jose, CA........... 1989 (7) -- Design and prototype services.
Los Gatos, CA.......... 1986(8) 15,000 Leased Design and prototype services.
Facilities Under Development
San Jose, CA........... 1997(9) 73,000 Owned Complex, high value-added PCB
assembly.
San Jose, CA........... 1996(9) 71,000 Leased Engineering services and corporate
functions.
Doumen, China.......... 1996(9) 185,000 Owned Fabrication and assembly of high
density, miniaturized PCBs;
plastic injection molding.
Guadalajara, Mexico.... 1997(9) 101,000 Owned High volume PCB assembly.

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

(1) The leases for the Company's leased facilities expire between December 1997
and July 2005. In addition, the Company has a 47,000 square foot
manufacturing facility in Richardson, Texas that is being closed. The
Company leases this facility under a lease that expires in April 2000, and
the Company is seeking to sublet this facility.

(2) The Company intends to discontinue manufacturing operations at this
facility.

(3) Acquired by the Company in February 1996 in connection with the Astron
acquisition.

(4) Includes 75,000 square feet used for dormitories and other functions.

(5) Acquired by the Company in January 1995 in connection with the nCHIP
acquisition.

(6) Acquired by the Company in April 1995 in connection with the A&A
acquisition.

(7) Located within the 47,000 square foot manufacturing facility in Singapore
and the 30,000 square foot manufacturing facility in San Jose, California,
respectively.

(8) Acquired by the Company in March 1996 in connection with the Fine Line
acquisition.

(9) Refers to date of commencement of construction or of lease term.

29
32

The Company has recently begun to consolidate and expand its manufacturing
facilities, with the goal of concentrating its activities in a smaller number of
larger, strategically located sites. The Company is closing its Richardson,
Texas facility and reducing production levels at its Singapore facility, while
substantially increasing overall capacity by expanding operations in North
America, Asia and Europe. In North America, the Company has recently leased a
new 71,000 square foot facility, and is constructing a planned 73,000 square
foot facility, each adjacent to the Company's existing San Jose operations, and
it also is developing a planned 101,000 square foot manufacturing facility on a
32-acre campus site in Guadalajara, Mexico. In Asia, the Company is expanding
its Doumen facilities into a planned 360,000 square foot campus by developing an
additional 185,000 square feet. In Europe, the Company has entered into an
agreement to acquire the 330,000 square foot Karlskrona Facilities.

The campus facilities planned for Doumen, China and Guadalajara, Mexico are
designed to be integrated facilities that can produce many of the custom
components used by the Company, to manufacture products for customers, to
warehouse the products and to 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,
providing customers with a more complete, cost-effective manufacturing solution.

SERVICES

The Company provides a broad range of advanced engineering, manufacturing
and distribution services to OEM customers on a turnkey basis and, to a lesser
extent, on a consignment basis. These services include product design, PCB
fabrication and assembly, materials procurement, inventory management, final
system assembly and test, packaging and distribution. The components,
subassemblies and finished products manufactured by Flextronicsthe Company incorporate
advanced interconnect, miniaturization and packaging technologies, such as SMT,
MCM, COB and COBBGA technologies. While an increasing portion of the Company's revenue isnet
sales (a majority of its net sales in fiscal 1997 and the first quarter of
fiscal 1998) were derived from the manufacture and assembly of final products
for OEM customers, the Company also designs and manufactures printed
circuit board assemblies, MCM products and
miniature gold-finished PCBs that the
customercustomers then incorporatesincorporate into itstheir
products.

Engineering Services

The engineering services group coordinates and integrates the Company's
worldwide design, prototype and other engineering capabilities. Its focused,
integrated approach provides Flextronics'the Company's customers with advanced service and
support and leverages the Company's technological capabilities. As a result, the
engineering services group enables the Company to strengthen its relationship
with manufacturing customers as well as to attract new customers who require
advanced design services.

The engineering services group actively assists customers with initial
product design in order to reduce the time from design to prototype, improve
product manufacturability and reduce product costs. The Company provides a full
range of electrical, thermal and mechanical design services, including CAE and
CAD-based design services, manufacturing engineering services, circuit board
layout and test development. The engineering services group also coordinates
industrial design and tooling for product manufacturing. After product design,
the Company provides prototype assemblies for fast turnaround. During the
prototype process, Company engineers work with customer engineers to enhance
production efficiency and improve product design. The engineering services group
then assists with the transition to volume production. By participating in
product design and prototype development, the Company can reduce manufacturing
costs and accelerate the time to volume production.

The Company's recent acquisitions have provided it with substantial
advanced engineering capabilities. The Company's 1996 acquisition of Fine Line,
a leading San Jose-based provider of quick-turn circuit board layout and
prototype services, provides the Company with substantial expertise in a broad
range of advanced circuit board designs, and the Company's January 1995 acquisition of
nCHIP providedprovides advanced MCM design capabilities. FlextronicsThe Company has integrated the
nCHIP capabilities, and is integrating the Fine Line and nCHIP capabilities, with the
Company's existing design and prototype capabilities in its engineering services
group. The Company anticipates

30
33

establishing additionalplans to expand its design and prototype capabilities in
Westford, Massachusetts and San Jose, California, and also intends to establish
design and prototype capabilities in the Karlskrona Facilities. The Company also plans to expand its capabilities in Boston,
Massachusetts and San Jose, California.

Materials Procurement and Management

Materials procurement and management consists of the planning, purchasing,
expediting and warehousing of the components and materials used in the
manufacturing process. The Company's inventory management expertise and volume
procurement capabilities contribute to cost reductions and reduce total cycle
time. The Company generally orders components after it has a firm purchase order
or letter of authorization from a customer. However, in the case of long
lead-time items, the Company will occasionally order components in advance of
orders, based on customer forecasts, to ensure adequate and timely supply.
Although the Company works with customers and third-party suppliers to reduce
the impact of component

35
37

shortages, such shortages may occur from time to time and may have a material
adverse effect on the Company. See "Risk Factors -- Limited Availability of
Components." The campuses under development in China and Mexico are designed to provide many of
the custom components used by the Company on-site, in order to reduce material
and transportation costs, simplify logistics and facilitate inventory
management.

Assembly and Manufacturing

The Company's assembly and manufacturing operations include PCB assembly
and, increasingly, the manufacture of subsystems and complete products. Its PCB
assembly activities primarily consist of the placement and attachment of
electronic and mechanical components on printed circuit boards using both SMT
and traditional pin-through-hole ("PTH") technology. The Company also assembles
subsystems and systems incorporating PCBs and complex electromechanical
components, and, increasingly, manufactures and packages final products for
shipment directly to the customer or its distribution channels. The Company
employs just-in-time, ship-to-stock and ship-to-line programs, continuous flow
manufacturing, demand flow processes and statistical process control. The
Company has expanded the number of production lines for finished product
assembly, burn-in and test to meet growing demand and increased customer
requirements. In addition, the Company has invested in FICO, a producer of
injection molded plastic for Asia electronics companies with facilities in
Shenzhen, China.

As OEMs seek to provide greater functionality in smaller products, they
increasingly require advanced manufacturing technologies and processes. Most of
the Company's PCB assembly involves the use of SMT, which is the leading
electronics assembly technique for more sophisticated products. SMT is a
computer-automated process which permits attachment of components directly on
both sides of a PCB. As a result, it allows higher integration of electronic
components, offering smaller size, lower cost and higher reliability than
traditional manufacturing processes. By allowing increasingly complex circuits
to be packaged with the components placed in closer proximity to each other, surface mount technologySMT
greatly enhances circuit processing speed, and therefore board and system
performance. The Company also provides traditional PTH electronics assembly
using PCBs and leaded components for lower cost products.

In addition, the Company has invested in emerging technologies that extend
its miniaturization capabilities. The Company's January 1995 acquisition of nCHIP
provided it with advanced capabilities to manufacturedesign and assemble MCMs (collections
of integrated circuit chips interconnected within a single package), and the
Company now offers a range of MCM technologies from low-cost laminate MCMs to
high-performance, deposited thin-film MCMs. The Company believes that its MCMs
can offer cost, size and performance advantages compared to conventional and
interconnect technologies. The Company assembles completed MCMs
in its San Jose, California facilities and also utilizes an outside assembly
company. Substratescompany for the Company's MCMs are manufactured on the Company's semiconductor wafer
fabrication line in San Jose and by outside foundries. The Company is engaged in
negotiations to sell the semiconductor wafer fabrication line to a third party.
See "Management's Discussion and Analysisassembly of Financial Condition and Results of
Operations -- Overview."completed MCMs.

The Company's February 1996 acquisition of Astron provided it with significant
capabilities to fabricate miniature gold-finishedgoldfinished PCBs for specialized
applications such as cellular phones, optoelectronics, LCDs, pagers and
opticalautomotive electronics. These advanced laminate substrates can significantly
improve a product's performance, while reducing its size and cost. The Company's
miniature, gold-finished PCBs are fabricated in the Company's 31
34

facility in Doumen, China.
The Company is currently expanding this facility to provide the capacity to
fabricate other complex PCBs.

COB technology represents a configuration in which a bare, unpackaged
semiconductor is attached directly onto a PCB and then encapsulated with a
polymeric material. COB technology facilitates miniaturized, low-profile
assemblies, and can result in lower costs and reduced time to market.

FICO, in which the Company has a 40% investment, produces injection molded
plastics for electronics companies throughout Asia from its 120,000 square foot
facilities in Shenzhen, China. Flextronics intends to locate FICO operations
within the campus under development in Doumen, China.

Test

After assembly, the Company offers computer-aided testing of PCBs,
subsystems and systems, which contributes significantly to the Company's ability
to deliver high-quality products on a consistent basis. Working with its
customers, the Company develops product-specific test strategies. The Company's
test capabilities include management defect analysis, in-circuit tests and
functional tests. In-circuit tests verify that all components have been properly
inserted and that the electrical circuits are complete. Functional tests
determine if the board or system assembly is performing to customer
specifications. FlextronicsThe Company either designs and procures test fixtures and
develops its own test software or utilizes its customers' existing test fixtures
and test software. In addition, the Company also provides environmental stress
tests of the board or system assembly.

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38

Distribution

The Company offers its customers flexible, just-in-time delivery programs
allowing product shipments to be closely coordinated with customers' inventory
requirements. Increasingly, the Company is warehousing products for customers
and shipping those products directly into their distribution channels. The
Company believes that this service can provide customers with a more
comprehensive solution and enable them to be more responsive to market demands.

COMPETITION

The electronics contract manufacturing industry is extremely competitive
and includes hundreds of companies, several of whom have achieved substantial
market share. The Company competes against numerous domestic and foreign
contract manufacturers, and current and prospective customers also evaluate the
Company's capabilities against the merits of internal production. In addition,
in recent years the electronics contract manufacturing industry has attracted a
significant number of new entrants, including large OEMs with excess
manufacturing capacity, and many existing participants, including the Company,
have significantly expandedincreased their manufacturing capacity by expanding their
facilities and adding new facilities. In the event of a decrease in overall
demand for contract manufacturing services, this increased capacity could result
in substantial pricing pressures which could adversely affect the Company's
operating results. The Company believes there are more than 30 contract manufacturers with annual
revenues above $100 million. Certain of the Company's competitors, including Solectron
Corporation and SCI Systems, have substantially greater manufacturing,
financial, research and development and marketing resources than the Company.
Others, such as Jabil Circuits and Celestica, are rapidly increasing their sales
and capacity. As competitors increase the scale of their operations, they may
increase their ability to realize economies of scale, to reduce their prices and
to more effectively meet the needs of large OEMs. The Company believes that the
principal competitive factors in the segments of the contract manufacturing
industry in which it operates are cost, technological capabilities,
responsiveness and flexibility, delivery cycles, location of facilities, product
quality and range of services available. Failure to satisfy any of the foregoing
requirements could materially adversely affect the Company's competitive
position.

Many contract manufacturers, including the Company, are substantially
expanding their manufacturing capacity by expanding their facilities and adding
new facilities. In the event of a decrease in overall demand for contract
manufacturing services, this increased capacity can result in substantially
increased competition in the Company's markets.

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35

EMPLOYEES

As of DecemberJuly 31, 1996,1997, the Company employed 4,477 persons. In addition,
the Company expects to add approximately 9305,500 persons,
including approximately 870 employees in Sweden who were added with the
acquisition of the Karlskrona Facilities. None of the Company's employees are
represented by a labor union except for (i) theAcquisition. The Company's non-management employees located in
Singapore, Sweden and (ii)China, and the Company's hourly employees in the United
Kingdom. In addition, substantially all of the employees to be added with
the Karlskrona FacilitiesKingdom, are represented by tradelabor unions. The Company has never experienced a
work stoppage or strike. The Company believes that its employee relations are
good.

The Company's success depends to a large extent upon the continued services
of key managerial and technical employees. The loss of such personnel could have
a material adverse effect on the Company's results of operations. To date, the
Company has not experienced significant difficulties in attracting or retaining
such personnel. Although the Company is not aware that any of its key personnel
currently intend to terminate their employment, their future services cannot be
assured. See "Risk Factors -- Dependence on Key Personnel and Skilled
Employees."

33KARLSKRONA ACQUISITION

On March 27, 1997, the Company acquired from Ericsson the Karlskrona
Facilities located in Karlskrona, Sweden and related inventory, equipment and
other assets for approximately $82.4 million in cash. The Karlskrona Facilities
include a 220,000 square foot facility and a 110,000 square foot facility, each
of which is ISO 9002 certified. These facilities currently assemble PCBs,
network switches, cordless base stations and other components for business
communications systems sold by Ericsson. Approximately 870 Ericsson employees
based at the Karlskrona Facilities became employees of the Company at the
facilities. In addition, Ronny Nilsson, previously the Vice President and
General Manager, Supply and Distribution of Ericsson, was appointed President of
Flextronics International Sweden AB and Senior Vice President, Europe of the
Company.

37
3639

The Company, certain of its subsidiaries and Ericsson also entered into the
Purchase Agreement, under which the Company will manufacture and Ericsson will
purchase, for a three-year period, certain products used in Ericsson's business
communications systems. The Company believes that, as a result, sales to
Ericsson will account for a large portion of its net sales in fiscal 1998. The
Karlskrona Facilities' cost of sales and services (including certain overhead
allocations) for the year ended December 31, 1996 was approximately 2.1 billion
Swedish kronor (approximately $310.0 million based on exchange rates at December
31, 1996). However, there can be no assurance as to the volume of Ericsson's
purchases, or the mix of products that it will purchase, from the Karlskrona
Facilities in any future period.

By acquiring the Karlskrona Facilities, the Company substantially increased
its worldwide capacity, obtained a strong base in Northern Europe and enhanced
its position as a contract manufacturer for the telecommunications industry,
which is increasingly outsourcing manufacturing. The Company also intends to use
the manufacturing resources provided by the Karlskrona Facilities to offer
services to other European OEMs, which it believes are also beginning to
outsource the manufacture of significant product lines.

Assuming Ericsson's sales of those products that the Company will
manufacture remain at current levels, the Company anticipates realizing
approximately $300.0 million of sales (based on current exchange rates) to
Ericsson in fiscal 1998; however, there can be no assurance that the Company's
sales to Ericsson will not be materially less than those anticipated. Although
the Company expects that its gross margin percentage on sales to Ericsson will
be less than that realized by the Company in fiscal 1996 and 1997, it also
expects that the impact of lower gross margins may be partially offset by the
effect of anticipated lower overhead and sales expenses, as a percentage of net
sales, associated with supplying products to Ericsson relative to supplying
products to other OEMs. To the extent that the Company is successful in
increasing the capacity of the Karlskrona Facilities and in using these
facilities to provide services to other OEMs, the Company anticipates increased
operating efficiencies. There can be no assurance that the Company will realize
lower overhead or sales expenses or increased operating efficiencies as
anticipated.

The foregoing, and discussions elsewhere in this Prospectus, contain a
number of forward-looking statements relative to the benefits and effects of the
Karlskrona Acquisition, and the Company's relationship with Ericsson including
the Company's anticipated sales to Ericsson, the Company's net sales, gross
margins and results of operations, and no assurances can be given as to the
Company's ability to achieve such benefits and results. The Karlskrona
Acquisition and the Company's business are subject to a number of risks that
could adversely affect the Company's ability to achieve these operating results
and the anticipated benefits of the Karlskrona Acquisition, including the
Company's ability to reduce costs at the Karlskrona Facilities, the Company's
lack of experience operating in Sweden, the Company's ability to transition the
Karlskrona Facilities from captive manufacturing for Ericsson to manufacturing
for third parties and to expand capacity at these facilities and to integrate
these facilities into its global operations. In addition, there can be no
assurance that the Company will utilize a sufficient portion of the capacity of
the Karlskrona Facilities to achieve profitable operations. Further, changes in
exchange rates between Swedish kronor and U.S. dollars will affect the Company's
operating results at the Karlskrona Facilities. See "Risk Factors -- Risks of
Karlskrona Acquisition."

The Purchase Agreement contains cost reduction targets and price
limitations and imposes on the Company certain manufacturing quality
requirements, and there can be no assurance that the Company can achieve
acceptable levels of profitability under the Purchase Agreement or reduce costs
and prices to Ericsson over time as contemplated by the Purchase Agreement. In
addition, the Purchase Agreement requires that the Company maintain a ratio of
equity to total liabilities, debt and equity of at least 25%, and a current
ratio of at least 120%. Further, the Purchase Agreement prohibits the Company
from selling or relocating the equipment acquired in the transaction without
Ericsson's consent. A material breach by the Company of any of the terms of the
Purchase Agreement could allow Ericsson to repurchase the assets conveyed to the
Company at the Company's book value or to obtain other relief, including the
cancellation of outstanding purchase orders or termination of the Purchase
Agreement. Ericsson also has certain rights to be consulted on the management of
the Karlskrona Facilities and to approve the use of the Karlskrona Facilities
for Ericsson's competitors or for other customers where such use might adversely
affect Ericsson's access to production capacity at the facilities. In addition,
without Ericsson's consent, the Company may not enter into any transactions that
could

38
40

adversely affect its ability to continue to supply products and services to
Ericsson under the Purchase Agreement or its ability to reduce costs and prices
to Ericsson. As a result of these rights, Ericsson may, under certain
circumstances, retain a significant degree of control over the Karlskrona
Facilities and their management. However, the Company understands that it is
Ericsson's intention that the Company utilize the Karlskrona Facilities to
provide services not just to Ericsson, but also to other OEMs, and Ericsson will
receive price reductions if the Company is able to reduce costs at the
Karlskrona Facilities through any resulting volume efficiencies.

FACILITIES

The Company has manufacturing facilities located in China, Malaysia,
Mexico, Singapore, Sweden, the United Kingdom and the United States. In
addition, the Company provides engineering services at its facilities in
Singapore, California and Massachusetts. All of the Company's 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 June 30, 1997 is set forth below:

YEAR APPROXIMATE OWNED/
LOCATION COMMENCED(1) SQUARE FEET LEASED(2) SERVICES
- --------------------------- ------------ ----------- --------- ----------------------------

Manufacturing Facilities
Xixiang, China........... 1995 90,000 Leased High volume PCB assembly.
Hong Kong, China(3)...... 1996 45,000 Leased Fabrication of high density
PCBs
Doumen, China(3)......... 1996 330,000(4) Owned(4) Fabrication of high density,
miniaturized PCBs. High
volume PCB assembly.
Johore, Malaysia......... 1991 80,000 Owned Full system manufacturing;
PCB assembly.
Guadalajara, Mexico...... 1997 101,000 Owned High volume PCB assembly.
Singapore(5)............. 1982 47,000 Leased Complex, high value-added
PCB assembly.
Karlskrona, Sweden....... 1997 330,000 Owned Assembly and test of complex
PCBs and systems.
Tonypandy, Wales(6)...... 1995 50,000 Owned Full system manufacturing;
medium complexity PCB
assembly.
San Jose, CA............. 1994 65,000 Leased Full system manufacturing;
PCB assembly.
San Jose, CA............. 1996 32,500 Leased Complex, high value-added
PCB assembly.
San Jose, CA............. 1997 73,000 Owned Complex, high value-added
PCB assembly.
Engineering Facilities
Westford, MA............. 1987 9,112 Leased Design and prototype
services.
Singapore................ 1982 --(7) -- Design and prototype
services.
San Jose, CA............. 1996 71,000 Leased Engineering services and
corporate functions.
Karlskrona, Sweden....... 1997 --(8) -- Design and prototype
services.

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

(1) Refers to year acquired, leased or constructed by the Company or the
Predecessor.

(2) The leases for the Company's leased facilities expire between December 1997
and July 2005. In addition, the Company has a 47,000 square foot
manufacturing facility in Richardson, Texas that has been closed. The
Company leases this facility under a lease that expires in April 2000, and
the Company is seeking to sublet this facility.

39
41

(3) Acquired by the Company in fiscal 1998 in connection with the Astron
acquisition.

(4) Excludes approximately 370,000 square feet used for dormitories,
infrastructure and other functions. The Company has land use rights for this
facility through 2020.

(5) The Company downsized manufacturing operations at this facility in fiscal
1997.

(6) Acquired by the Company in fiscal 1996 in connection with the A&A
acquisition.

(7) Located within the 47,000 square foot manufacturing facility in Singapore.

(8) Located within the 330,000 square foot manufacturing facilities in
Karlskrona.

The Company has recently consolidated and expanded its manufacturing
facilities, with the goal of concentrating its activities in a smaller number of
larger, strategically located sites. The Company has closed its Richardson,
Texas facility and downsized manufacturing operations at its Singapore facility,
while substantially increasing overall capacity by expanding operations in North
America, East Asia and Northern Europe. In North America, the Company has
recently leased a new 71,000 square foot facility, from which the Company offers
a wide range of engineering services, including product design and prototype
development, and in July 1997 the Company completed construction of a new 73,000
square foot facility, dedicated to high volume PCB assembly. These new
facilities are located adjacent to the Company's other San Jose operations. Also
in July 1997, the Company completed construction of a 101,000 square foot
manufacturing facility on a 32-acre campus site in Guadalajara. This new
facility currently has over 200 employees and has begun PCB assembly operations.

In Asia, the Company has expanded its Doumen facilities by developing an
additional 240,000 square feet of facilities for fabrication of miniaturized
gold-finished PCB fabrication and for PCB and full system assembly. The Company
completed this expansion in June 1997. The Doumen campus, located on a 15-acre
site, now includes approximately 330,000 square feet of manufacturing facilities
as well as approximately 370,000 square feet of facilities used for dormitories,
infrastructure and other functions, with over 1,000 employees. The Company is
currently installing equipment and infrastructure at its new facilities in
Doumen, Guadalajara, and San Jose.

The campus facilities in Doumen and Guadalajara are designed to be
integrated facilities that can produce many of the custom 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, providing customers with a more complete,
cost-effective manufacturing solution.

FICO, in which the Company has a 40.0% investment, produces injection
molded plastics for Asian companies from its 120,000 square foot facilities in
Shenzhen, China. The Company intends to locate FICO operations within the Doumen
campus.

40
42

MANAGEMENT

DIRECTORS AND OFFICERS

The names, ages and positions of the Company's directors and officers as of
July 31, 1997 are as follows:

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

Michael E. Marks............Marks 46 Chairman of the Board and Chief Executive Officer and Director
Tsui Sung Lam...............Lam 47 President, Chief Operating OfficerAsia Pacific Operations and
Director
Dennis P. Stradford......... 50Robert R. B. Dykes 48 Senior Vice President of Finance and
Administration and Director
Ronny Nilsson 49 Senior Vice President, Europe
Michael McNamara 40 Vice President, President North American
Operations
Stephen J. L. Rees 36 Senior Vice President, Worldwide Sales and
Marketing Goh Chan Peng............... 42 Chief Financial Officer
Teo Buck Song............... 39 Vice President, Purchasing
Michael McNamara............ 39 Vice President, President of United States
Operations
Hans D. Nilsson............. 40 Vice President, General Manager of European
Operations
Robert R. B. Dykes(1)(2).... 47and Director
Stephen J. L. Rees.......... 35 Director, Chairman of Astron Group
Michael J. Moritz(1)........(2) 42 Director
Richard L. Sharp(2)......... 49 50 Director
Bernard J. Lacroute.........Lacroute(1) 53 Director

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

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

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

Tsui Sung Lam. Mr. Tsui has been the Company's President, and Chief
Operating OfficerAsia-Pacific
since January 1994,April 1997, and a Director since 1991. From January 1994 to April 1997, he
served as the Company's President and Chief Operating Officer. From June 1990 to
December 1993, he was the Company's Managing Director and Chief Executive
Officer. From 1982 to June 1990, Mr. Tsui served in various positions for
Flex
Holdings Pte. Limited,Flextronics, Inc., the Company's predecessor, ("Flex Holdings"), including Vice President of Asian
Operations. Mr. Tsui received Diplomas in Production Engineering and Management
Studies from Hong Kong Polytechnic, and a Certificate in Industrial Engineering
from Hong Kong University.

Dennis P. Stradford.Robert R. B. Dykes. Mr. StradfordDykes has served asbeen the Company's Senior Vice President
Salesof Finance and MarketingAdministration since December 1990. From October 1985February 1997 and served as a Director of
the Company from January 1994 to August 1997. Mr. Dykes was Executive Vice
President, Worldwide Operations and Chief Financial Officer of Symantec
Corporation, an application and system software products company, from 1988 to
February 1990, he
served as Senior Vice President, Sales and Marketing at Flex Holdings.1997. Mr. StradfordDykes received a B.A.Bachelor of Commerce and Administration
degree from San Jose StateVictoria University and an M.A. and M.Div.
from St. Patrick's College.

Goh Chan Peng.in Wellington, New Zealand. Mr. GohDykes is on the
board of directors of Symantec Corporation.

Ronny Nilsson. Mr. Nilsson has served as the Company's Chief Financial OfficerSenior Vice
President, Europe since July 1992.April 1997. From June 1990May 1995 to July 1992,April 1997, he was the Company's Director of
Finance. From 1982 to June 1990, he served in various financial capacities at
Flex Holdings, including Director of Finance and Finance Manager -- Asia Pacific
Region. Mr. Goh received a Bachelor of Commerce from Singapore Nanyang
University and a Diploma in Personnel Management from Singapore Institute of
Management.

Teo Buck Song. Mr. Teo has served as Vice
President Purchasing since April
1994.and General Manager, Supply & Distribution and Vice President,
Procurement, of Ericsson Business Networks where he was responsible for
facilities in Sweden, Austria, China, the Netherlands, Mexico and Australia.
From 1988January 1991 to April 1994,May 1995, he was Director of PurchasingProduction at Flex Holdings.
From 1982 to 1988,the EVOX+RIFA
Group, a manufacturer of components, and Vice President of RIFA AB where he servedwas
responsible for factories in various operational capacities at Flex Holdings,
including Purchasing ManagerSweden, Finland, Singapore and Production Material Control Manager.Indonesia. Mr.
TeoNilsson received a Productioncertificate in Mechanical Engineering Diploma from Singapore Polytechnic.the Lars Kagg
School in Kalmar, Sweden and certificates from the Swedish Management Institute
and the Ericsson Management Program.

Michael McNamara. Mr. McNamara has served as Vice President, and President
of United StatesNorth American Operations since April 1994. From May 1993 to March 1994, he was
President and Chief Executive Officer of

41
43

Relevant Industries, Inc., which was acquired by the Company in March 1994. From
May 1992 to May 1993, he was Vice President, Manufacturing Operations at Anthem
Electronics, an electronics distributor. From April 1987 to May 1992, he was a
Principal of Pittiglo, Rabin, Todd & McGrath, an operations consulting firm. 34
37

Mr.
McNamara received a B.S. from the University of Cincinnati and an M.B.A. from
Santa Clara University.

Hans Nilsson. Mr. Nilsson has served as the Company's Vice President and
General Manager of European Operations since April 1994. From April 1991 to
April 1994, he was Senior Vice President at Metcal, Inc., a precision heating
instrument company. Mr. Nilsson received an M.S. in electrical engineering from
Chalmers University of Technology, Sweden and an M.B.A. from Stanford
University.

Robert R. B. Dykes. Mr. Dykes has served as a Director of the Company since
January 1994 and has been appointed to serve as its Senior Vice President of
Finance and Administration effective February 17, 1997. Mr. Dykes has been
Executive Vice President, Worldwide Operations and Chief Financial Officer of
Symantec Corporation, an application and system software products company, since
1988.

Stephen J. L. Rees. Mr. Rees has served as a Director of the Company since
April 1996, as Senior Vice President, Worldwide Sales and Marketing since May
1997, and as Chairman and Chief Executive Officer of Astron since the
acquisition of Astron by the Company in February 1996. Mr. Rees has been
Chairman and Chief Executive Officer of Astron since November 1991. Mr. Rees
holds a B.A. in Finance from the City of London Business School and graduated in
Production Technology and Mechanical Engineering from the HTL St. Polten
Technical Institute in Austria.

Michael J. Moritz. Mr. Moritz has served as a Director of the Company since
July 1993. Mr. Moritz has been a General Partner of Sequoia Capital, a venture
capital firm, since 1988. Mr. Moritz also serves as director of Visigenic
Software,Yahoo, Inc.,
Yahoo! Inc.Neomagic and several privately-held companies.

Richard L. Sharp. Mr. Sharp has served as a Director of the Company since
July 1993. He has been the Chairman, President, Chief Executive Officer and a
director of Circuit City Stores, Inc., a consumer electronics and appliances
retailer, since June 1986. Mr. Sharp also serves as a director of S&K Famous
Brands, Inc. and the Fort James River Corporation.

Bernard J. Lacroute. Mr. Lacroute has served as a Director of the Company
since July 1993. Mr. Lacroute has been a partner of Kleiner Perkins Caufield &
Byers, a Northern California venture capital firm, since 1989. Mr. Lacroute also
serves as a director of Radius Inc. and several privately-held companies.

3542
3844

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Ordinary Shares as of February
1,July 31,
1997, and as adjusted to reflect the sale of shares offered by the Company
pursuant to this Prospectus, by (i) each of the Company's directors, the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers in fiscal 1996, (ii) all directors and
executive officers as a group, and (iii) each person who is known by the Company
to own beneficially more than 5% of the Company's Ordinary Shares. 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.

PERCENT OWNED PERCENT OWNED
NUMBER OF SHARES OWNED PRIOR PERCENT
BENEFICIALLY TO OWNED AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING(2) OFFERING(3)
- --------------------------------------------------- ---------------------------------------------------------------------- --------------------- ------------- -------------

JF Asia Select Limited(4).......................... 891,511 6.5% 5.8%Ronald Baron(4)................................... 1,931,600 14.04% 12.46%
c/o Standard Chartered Bank
8thBaron Capital Management, Inc.
767 Fifth Avenue, 24th Floor
Edinburgh Tower
The Landmark Central, Hong KongNew York, New York 10153
Sequoia Capital(5)................................. 791,062 5.8 5.1................................ 953,568 6.92% 6.14%
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, California 94025
The Capital Group Companies(6)......................................... 781,500 5.7 5.15.68% 5.04%
333 South Hope Street
Los Angeles, California 90071
Richard L. Sharp(7)................................ 746,644 5.5 4.8............................... 948,144 6.89% 6.10%
c/o Circuit City Stores, Inc.
9950 Mayland Drive
Richmond, Virginia 23233
Michael E. Marks(8)................................ 330,071 2.4 2.1............................... 389,759 2.80% 2.49%
Tsui Sung Lam(9)................................... 66,961 * *
Dennis P. Stradford(10)............................ 45,064 * *
Goh Chan Peng(11).................................. 35,683 *57,305 *
Michael McNamara(12)............................... 78,454 *McNamara(10).............................. 36,315 *
Robert R. B. Dykes(13)R.B. Dykes(11)............................. 36,450 *38,024 *
Bernard J. Lacroute(14)............................ 46,977 *Lacroute(12)........................... 62,855 *
Michael Moritz(5).................................. 791,062 5.8 5.1Moritz(13)................................ 953,568 6.92% 6.14%
Stephen J. L. Rees(15)J.L. Rees(14)............................. 45,547 *62,505 *
All directors and executive officers as a group (10(8
persons)(16)..................................... 2,223,038 15.8% 14.1%(15).................................... 2,548,475 18.00% 16.02%

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

* Less than 1%1.0%.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has voting or investment power with respect to such
shares. Ordinary Shares subject to options that are currently exercisable
or exercisable within 60 days of February 1,after July 31, 1997 are deemed to be
outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person.

(2) Percentage ownership is based upon 13,624,39613,754,469 outstanding Ordinary Shares
as of February 1,July 31, 1997.

(3) Assumes that the Underwriters' over-allotment option to purchase up to
262,500
shares from the Company is not exercised.

(4) Jardine FlemingBased on information supplied by Mr. Baron in a Schedule 13D filed with the
Securities and Exchange Commission on January 26, 1997. Includes 205,000
shares held by Baron Capital Partners, L.P. and Baron Investment Partners,
L.P., of which Mr. Baron is a general partner. Mr. Baron may be deemed to
have sole power to vote and direct the disposition of such shares. Also
includes 1,465,000 shares held by Baron Asset Fund and Baron Growth &
Income Fund, which are advised by BAMCO, Inc., and 261,600 shares held by
investment advisory clients of Baron Capital Management, Limited ("JFIM"), a corporation with
a boardInc. BAMCO, Inc.
and Baron Capital Management, Inc. are controlled by Mr. Baron, and Mr.
Baron may be deemed to share power to vote and dispose of directors comprised of 26 individuals, manages JF Asia Select
Limited. As of February 12, 1997, JF Asia Select had sold 425,000 of the
shares shown as beneficially owned by it. JFIM has advised the Company that

36such shares.

43
39

JF Asia Select Limited expects to sell the remaining shares beneficially
owned by it in open market transactions.45

(5) Includes 709,520788,985 shares held by Sequoia Capital Growth Fund, a limited
partnership, and 45,29150,291 shares held by Sequoia Technology Partners III, a
limited partnership.partnership, 80,167 shares held by Sequoia Capital VII, a limited
partnership, 3,900 shares held by Sequoia Technology Partners VII, a
limited partnership and 2,600 shares held by Sequoia 1995, a limited
corporation. Sequoia Partners (CF) is the general partner of Sequoia
Capital Growth Fund and has sole voting and investment power over such
shares. The general partners of Sequoia Partners (CF) are Donald T.
Valentine, Pierre R. Lamond, Thomas F. Stephenson, Michael J. Moritz and
Gordon Russell. The general partners of Sequoia Technology Partners III are
Donald T. Valentine, Pierre R. Lamond, Thomas F. Stephenson and Gordon
Russell. The general partner of Sequoia Capital VII and Sequoia Technology
Partners VII is Sequoia Capital VII-A Management, LLC. The general partners
of Sequoia Capital VII-A Management, LLC are Mr. Moritz, Douglas Leone,
Mark Stevens, Thomas Stephenson and J. Thomas McMurray. Also includes
26,25027,625 shares subject to options exercisable within 60 days of February 1,after July 31,
1997 held by Mr. Moritz.

(6) Includes 781,500 shares beneficially owned by Capital Research and
Management Company.

(7) Includes 225,000 shares beneficially owned by Bethany Limited Partnership.
Mr. Sharp, the general partner of Bethany Limited Partnership, may be
deemed to share voting and investment power with respect to such shares.
Mr. Sharp disclaims beneficial ownership of all such shares except to the
extent of his proportionate interest therein. Also includes 36,25037,625 shares
subject to options exercisable within 60 days of February 1,after July 31, 1997 held by
Mr. Sharp.

(8) Includes 133,584163,252 shares subject to options exercisable within 60 days of
February 1,after
July 31, 1997 held by Mr. Marks.

(9) Includes 62,66738,230 shares subject to options exercisable within 60 days of
February 1,after
July 31, 1997 held by Mr. Tsui.

(10) Includes 1,773 shares held in an IRA rollover account. Also includes 6,29136,315 shares subject to options exercisable within 60 days of February 1,after
July 31, 1997 held by Mr. Stradford.McNamara.

(11) Includes 35,54237,625 shares subject to options exercisable within 60 days of
February 1, 1997 held by Mr. Goh.

(12) Includes 31,042 shares subject to options exercisable within 60 days of
February 1, 1997 held by Mr. McNamara.

(13) Includes 36,250 shares subject to options exercisable within 60 days of
February 1,after
July 31, 1997 held by Mr. Dykes.

(14) Represents 36,250(12) Includes 14,503 shares held by KPCB Zaibatsu Fund I. KPCB IV Associates,
L.P., of which Mr. Lacroute is a limited partner, is the general partner of
KPCB Zaibatsu Fund I. Mr. Lacroute disclaims beneficial ownership of such
shares. Also includes 10,727 shares held by the Bernard and Ronni Lacroute
Trust and 36,25037,625 shares subject to options exercisable within 60 days of February 1,after
July 31, 1997 held by Mr. Lacroute.

(15)(13) Includes 788,985 shares held by Sequoia Capital Growth Fund, a limited
partnership, 50,291 shares held by Sequoia Technology Partners III, a
limited partnership, 80,167 shares held by Sequoia Capital VII, a limited
partnership, 3,900 shares held by Sequoia Technology Partners VII, a
limited partnership and 2,600 shares held by Sequoia 1995, a limited
corporation. Sequoia Partners (CF) is the general partner of Sequoia
Capital Growth Fund and has sole voting and investment power over such
shares. The general partners of Sequoia Partners (CF) are Donald T.
Valentine, Pierre R. Lamond, Thomas F. Stephenson, Michael J. Moritz and
Gordon Russell. The general partners of Sequoia Technology Partners III are
Donald T. Valentine, Pierre R. Lamond, Thomas F. Stephenson and Gordon
Russell. The general partner of Sequoia Capital VII and Sequoia Technology
Partners VII is Sequoia Capital VII-A Management, LLC. The general partners
of Sequoia Capital VII-A Management, LLC are Mr. Moritz, Douglas Leone,
Mark Stevens, Thomas Stephenson and J. Thomas McMurray. Also includes
27,625 shares subject to options exercisable within 60 days after July 31,
1997 held by Mr. Moritz.

(14) Also includes 3,754 shares held by Mrs. Janine Margaret Rees. Also includes
12,500Includes
21,458 shares subject to options exercisable within 60 days of February 1,
1997.

(16)after July 31,
1997 held by Mr. Rees.

(15) Includes 417,606399,755 shares subject to options exercisable within 60 days of
February 1,after
July 31, 1997.

3744
4046

DESCRIPTION OF CAPITAL SHARES

The following statements are brief summaries of the capital structure of
the Company and of the more important rights and privileges of shareholders
conferred by the laws of Singapore and the Company's Articles of Association
(the "Articles"). These statements summarize the material provisions of the
Articles but are qualified by reference to the Articles, which have been
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus forms a part. The Articles are available at the Company's San
Jose, California office and at the registered office of the Company in
Singapore.

ORDINARY SHARES

The authorized capital of the Company consists of 100,000,000 Ordinary
Shares, par value S$0.01. There is a provision in the Articles to enable the
Company in certain circumstances to issue shares with preferential, deferred or
other special rights or restrictions as the directors may determine. The
directors may issue shares at a premium and a sum equal to the aggregate amount
or value of the premium will, subject to certain exceptions, be transferred to a
share premium account.

All shares presently issued are fully paid and existing shareholders are
not subject to any calls on such shares. All shares are in registered form. The
shares offered hereby, when issued, will be fully paid and future shareholders
will not be subject to any calls on such shares. All shares offered hereby also
will be in registered form. The Company can neither purchase its own shares nor,
except in the circumstances permitted by the Companies Act, grant any financial
assistance for the acquisition or proposed acquisition of its own shares.

NEW SHARES

New shares may only be issued with the prior approval of the Company in a
general meeting. General approval may be sought from the Company in a general
meeting for the issue of shares. Such approval, if granted, will lapse at the
next Annual General Meeting or the expiration of the period within which the
next Annual General Meeting is required to be held, whichever is the earlier.
The shareholders have provided general authority to issue any remaining unissued
shares, up to 100,000,000 Ordinary Shares, prior to the next Annual General
Meeting. Unless otherwise determined by the Company in a general meeting, any
new shares shall, before they are issued, be offered to existing shareholders in
proportion, as nearly as may be, to the number of shares then held by them
respectively. Subject to this and the provisions of the Companies Act, all new
shares are under the control of the directors who may allot and issue the same
with such rights and restrictions as they may think fit.

SHAREHOLDERS

Only persons who are registered in the books of the Company are recognized
as shareholders and absolute owners of the shares. On February 1,June 30, 1997, there were
approximately 526480 holders of Ordinary Shares. The Company may, on giving not
less than 14 days' notice, close the register of members for any time or times
but the register may not be closed for more than 30 days in any calendar year.
Such closure is normally made for the purpose of determining shareholders'
entitlement to receive dividends and other distributions and would, in the usual
case, not exceed 10 days.

TRANSFER OF SHARES

Subject to applicable securities laws, shares are freely transferable but
the directors may decline to register any transfer of shares on which the
Company has a lien, and in the case of shares not fully paid up the directors
may refuse, at their discretion, to register or transfer shares to a transferee
of whom they do not approve. Shares may be transferred by a duly signed
instrument of transfer in a form approved by the directors. The directors may
decline to register any transfer unless, among other things, it has been duly
stamped and is presented for registration together with the share certificate
and such other evidence of title as they may require. The Company will replace
lost or destroyed certificates for shares upon notice to the Company and upon,
among other things, the applicant furnishing such evidence and indemnity as the
directors may require.

3845
4147

SHAREHOLDERS' MEETINGS

The Company is required to hold an Annual General Meeting in each year. The
directors may convene an Extraordinary General Meeting whenever they think fit
and they must do so upon the request in writing of shareholders representing not
less than one-tenth of the total voting rights of all shareholders. In addition,
two or more shareholders holding not less than one-tenth of the issued share
capital of the Company may call a meeting of the Company. Unless otherwise
required by law or by the Articles, voting at general meetings is by ordinary
resolution (requiring an affirmative vote of a simple majority of the votes cast
at a meeting of which at least 14 days' written notice is given). An ordinary
resolution suffices, for example, in respect of appointments of directors. A
special resolution (requiring an affirmative vote of at least 75% of the votes
cast at the meeting of which at least 21 days' written notice is given) is
necessary for certain matters under Singapore law, such as an alteration of the
Articles.

VOTING RIGHTS

Voting at any meeting of shareholders is by a show of hands unless a poll
is duly demanded. If voting is by a show of hands, every shareholder who is
present in person or by proxy at the meeting has one vote. On a poll every
shareholder who is present in person or by proxy has one vote for every share
held by him. A poll may be demanded by the chairman of the meeting or by not
less than three members present in person or by proxy and entitled to vote or by
shareholders present in person or by proxy and representing in the aggregate not
less than one-tenth of the total voting rights of all shareholders having the
right to attend and vote at the meeting.

DIVIDENDS

Since inception, the Company has not declared or paid any cash dividends on
its Ordinary Shares, and the Company's current loan agreements prohibit the
payment of cash dividends without the lenders' prior consent. The Company
anticipates that all earnings in the foreseeable future will be retained to
finance the continuing development of its business.

BONUS AND RIGHTS ISSUE

The Company in a general meeting may, upon the recommendation of the
directors, capitalize any reserves or profits (including profits or monies
carried and standing to any reserve or to the share premium account) and
distribute the same as bonus shares credited as paid-up to the shareholders in
proportion to their shareholdings. The directors may also issue to shareholders
rights to take up additional shares, in proportion to their shareholdings. Such
rights are subject to any conditions attached to such issue and the regulations
of the stock exchange on which the shares are listed.

TAKEOVERS

The acquisition of shares of public companies is regulated by, inter alia,
the Singapore Companies Act (Chapter 50) and the Singapore Code on Takeovers and
Mergers regulates the acquisition of
shares of public companies.(the "Takeovers Code"). Any person acquiring an interest (either on his own
or together with parties acting in concert with him) in 25% or more
of the voting sharesrights in the Company is obliged to extend a takeover offer for
the remaining shares which carry voting rights in accordance with the provisions
of such code.the Takeovers Code. "Parties acting in concert" include related and
associated companies, directors (including their relatives), pension funds,
discretionary funds and financial advisers (in respect of shares held by them
and funds managed by them on a discretionary basis). An offer for consideration
other than cash must be accompanied by a cash alternative at not less than the
highest price (excluding stamp duty and commission) paid by the offeror or
parties acting in concert with him for shares of that class within the preceding
12 months. A mandatory takeover offer is also required to be made if a person
holding between 25% and 50% of the voting sharesrights (either on his own or together
with parties acting in concert with him) acquires additional shares representing
more than 3% of the voting sharesrights in any 12 month12-month period.

46
48

LIQUIDATION OR OTHER RETURN OF CAPITAL

On a winding-up or other return of capital, subject to any special rights
attaching to any other class of shares, holders of Ordinary Shares will be
entitled to participate in any surplus assets in proportion to their
shareholdings.

39
42

INDEMNITY

As permitted by the laws of Singapore, the Articles provide that, subject
to the Companies Act, the Company's directors and officers will be indemnified
by the Company against any liability incurred by them in defending any
proceedings, whether civil or criminal, which relate to anything done or omitted
to have been done as an officer, director or employee of the Company and in
which judgment is given in their favor or in which they are acquitted or in
connection with any application under any statute for relief from liability in
respect thereof in which relief is granted by the court. Directors and officers
may not be indemnified by the Company against any liability which by law would
otherwise attach to them in respect of any negligence, default, breach of duty
or breach of trust of which they may be guilty in relation to the Company.

LIMITATIONS ON RIGHTS TO HOLD OR VOTE ORDINARY SHARES

Except as discussed in "Takeovers," there are no limitations imposed by the
laws of Singapore or by the Articles on the right of nonresident shareholders to
hold or vote Ordinary Shares.

TRANSFER AGENT

The Transfer AgentCompany's transfer agent is The First National Bank of Boston 150 Royall Street,
M/S 45-01-07, Canton,EquiServe, P.O. Box 8040, Boston,
Massachusetts 02021.

4002266-8040.

47
4349

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 (as defined below)) subject to
special treatment under the U.S. federal income tax laws. Such shareholders
should consult their own tax advisors regarding the tax consequences of any
investment in the 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 26.0%. Under Singapore's taxation
system, the tax paid by a company is deemed paid by its shareholders. Thus, the
shareholders receive dividends net of the tax paid by the Company. 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 (i.e.,
the cash amount of the dividend plus the amount of corporate tax paid by the
Company). The tax paid by the Company 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). If the shareholder's marginal tax
rate is equal to the corporate tax rate, there is no further Singapore tax to
pay on the dividends. In the case of a resident shareholder, if the
shareholder's marginal tax rate is lower than the corporate tax paid, the
shareholder is entitled to claim a tax refund for the difference from the
Singapore Inland Revenue Department; conversely, if the resident shareholder's
marginal tax rate is higher than the corporate tax rate, the shareholder must
pay the difference to the Singapore Inland Revenue Department. In the case of a
nonresident shareholder, the shareholder is taxed on dividends at the corporate
tax rate. Thus, the nonresident shareholder pays no further Singapore income tax
on the net dividends received. Further, the nonresident shareholder will not
receive any tax refund from the Singapore Inland Revenue Department. 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).

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 the Articles of Association of the
Company, its directors are authorized to refuse to register a transfer unless
the instrument of transfer has been duly stamped.

INCOME TAXATION UNDER UNITED STATES LAW

ShareholdersIndividual shareholders that are (i) corporations or partnerships organized under the
laws of the United States, or any political subdivision thereof, (ii) estates or
trusts, the income of which, from sources without the U.S., is includable in
gross income for federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States, (iii) U.S. citizens or (iv) U.S. resident aliens (as
defined in Section 7701(b) of the Internal Revenue Code of 1986 as amended)(the "Code")),
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 is subject to U.S. federal income taxation regardless
of its source or a trust if a U.S. court exercises primary jurisdiction over its
administration and one or more U.S. fiduciaries have the authority to control
all of its substantial decisions ("U.S. Shareholders") will be required to
report as income for U.S. income tax purposes the amount of any dividend
received from the Company to the extent paid out of the current or accumulated
earnings and profits of the Company, as determined under current U.S. income tax
principles. Such dividend income will generally be subject to the separate
limitation for "passive income" for purposes of the foreign tax credit
limitation. Shareholders that are corporations will not be entitled to the
dividends-received deduction with respect to dividends from the Company. If a
U.S. Shareholder receives a dividend payment in any currency other than U.S.
dollars, the amount of the dividend payment for federal income tax purposes will
be the U.S. dollar value of the dividend payment (determined at the spot rate on
the date such dividend is included in income) regardless of whether the payment
is in fact converted into U.S. dollars. In such a case, U.S. Shareholders may
recognize ordinary income or loss as a result of currency fluctuations during
the period between the date of a dividend payment and the date such

41
44

dividend payment is converted into U.S. dollars. Non-corporate U.S. Shareholders
and corporate U.S. shareholders holding less than 10% of the voting stock of the
Company will not be entitled to an indirect foreign tax credit for the amount of
Singapore corporate income tax paid by the Company; a domestic corporation which
owns 10% or more of the voting stock of the Company may be entitled to an
indirect foreign tax credit for such taxes. Such dividend income, however, will
generally be subject to the separate limitation for "non-controlled Section 902
income" for purposes of the foreign tax credit limitation. Any domestic
corporation which owns 10% or more of the voting stock of the Company should
consult its tax advisor with respect to the U.S. taxation of its interest in the
Company. U.S. Shareholders 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, the U.S. dollar amount realized (as determined on the trade date) is
determined by translating the foreign currency into U.S. dollars at the spot
rate in effect on the settlement date of the sale in the case of a U.S.
Shareholder that is a cash basis taxpayer. An accrual basis taxpayer may elect
to use the spot rate in effect on the settlement date of the sale by filing a
statement with the U.S. Shareholder's first return in which the election is
effective clearly indicating that the election has been made. Such an election
must be applied consistently from year to year and cannot be changed without the
consent of the Internal Revenue Service. 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 not be long-termshort-term capital gain or loss if the share has been held for
more than one year. If a U.S. Shareholder receives any currency other than U.S.
dollars on the sale of a share, such U.S. Shareholder

48
50

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 the Company to the extent paid
out of the current or accumulated earnings and profits of the Company, as
determined under current U.S. income tax principles. If over 50%50.0% of the
Company's stock (by vote or value) were owned by U.S. Shareholders who
individually held 10%10.0% or more of the Company's voting stock, such U.S.
Shareholders potentially would be required to include in income a portion or all
of their pro rata share of the Company's and its non-U.S. subsidiaries' earnings
and profits. If 50%50.0% or more of the Company's assets during a taxable year
produced or were held for the production of passive income, as defined in
section 1296(b) of the Code (e.g., certain forms of dividends, interest and
royalties), or 75%75.0% or more of the Company's gross income for a taxable year
was passive income, adverse U.S. tax consequences could result to U.S.
shareholders of the Company. As of June 30, 1997, the Company was aware of only
one U.S. Shareholder who individually held 10% or more of its voting stock. See
"Principal Shareholders."

Shareholders that are not U.S. Shareholders ("non-U.S. shareholders") will
not be required to report for U.S. federal income tax purposes the amount of any
dividend received from the Company. Non-U.S. shareholders, upon the sale or
exchange of a share, willwould 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. The shares of the Company 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%5.0% on the first S$12,000,000 of the individual's Singapore chargeable
assets and thereafter at a rate equal to 10%10.0%. 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.

4249
4551

UNDERWRITING

The Underwriters named below (the "U.S. Underwriters""Underwriters") have severally agreed,
subject to the terms and conditions in the underwriting agreement (the
"U.S. Underwriting"Underwriting Agreement") by and among the Company and the U.S. Underwriters, to
purchase from the Company the number of Ordinary Shares indicated below opposite
their respective names, at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The U.S. Underwriting
Agreement provides that the obligations of the U.S. Underwriters are subject to
certain conditions precedent and that the U.S. Underwriters are committed to purchase
all of the Ordinary Shares offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if they purchase any.

NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------

Montgomery Securities.....................................................
Cowen & Company...........................................................
Salomon Brothers Inc......................................................
UBS Securities............................................................
---------
Total........................................................... 1,312,5001,750,000
=========

The Company also has entered into an underwriting agreement (the
"International Underwriting Agreement") with certain underwriters outside the
United States and Canada (the "International Managers" and, together with the
U.S. Underwriters, the "Underwriters"). Subject to the terms and conditions set
forth in the International Underwriting Agreement, and concurrently with the
sale of 1,312,500 Ordinary Shares to the U.S. Underwriters, the Company has
agreed to sell to the International Managers, and the International Managers
severally have agreed to purchase, an aggregate of 437,500 Ordinary Shares. The
offering price per share and the total underwriting discount per share are
identical under the U.S. Underwriting Agreement and the International
Underwriting Agreement.

In the U.S. Underwriting Agreement and the International Underwriting Agreement, the U.S. Underwriters and the International Managers, respectively, have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Ordinary Shares
being sold pursuant to each such Agreement if any of the Ordinary Shares being sold
pursuant to each such Agreement are purchased. Under certain circumstances, the
commitments of non-defaulting U.S. Underwriters
or International Managers may be increased.

The purchases of Ordinary Shares by
the U.S. Underwriters and the International Managers are conditioned upon one
another.

The U.S. Underwriters have advised the Company that they propose initially to
offer the Ordinary Shares to the public on the terms set forth on the cover page
of this Prospectus. The U.S. Underwriters may allow selected dealers a concession of
not more than $ per share; and the U.S. Underwriters may allow, and such
dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the U.S. Underwriters. The Ordinary Shares are
offered subject to receipt and acceptance by the U.S. Underwriters, and to certain
other conditions, including the right to reject orders in whole or in part.

The Company has granted to the U.S. Underwriters an over-allotment option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 196,875262,500 additional Ordinary Shares at the same price per share as
the initial shares to be purchased by the U.S. Underwriters. The U.S. Underwriters may
exercise such option only to cover over-allotments made in the sale of the
Ordinary Shares that the U.S Underwriters have agreed to purchase. To the extent the
U.S. Underwriters exercise such option, each U.S. Underwriter will be committed, subject
to certain conditions, to purchase such additional shares in approximately the
same proportion as set forth in the above table.

The Company has also granted an option to the International Managers, exercisable
during the 30-day period after the date of this Prospectus, to purchase up to an
aggregate of 65,625 additional Ordinary Shares to cover over-allotments, if any,
on terms similar to those granted to the U.S. Underwriters.

The U.S. Underwriters and the International Managers have entered into an
Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the

43
46

Intersyndicate Agreement, sales may be made between the U.S. Underwriters and
the International Managers of such number of Ordinary Shares as may be mutually
agreed. The prices of any Ordinary Shares so sold shall be the public offering
price, less an amount not greater than the selling concession.

Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and
any dealer to whom they sell Ordinary Shares will not offer to sell or sell
Ordinary Shares to persons who are non-United States or Canadian persons or to
persons they believe intend to resell to persons who are non-United States or
Canadian persons, and the International Managers and any dealer to whom they
sell Ordinary Shares will not offer to sell or sell Ordinary Shares to United
States or Canadian persons or to persons they believe intend to resell to United
States or Canadian persons, except, in each case, for transactions pursuant to
the Intersyndicate Agreement.

The U.S. Underwriting Agreement provides that the Company will indemnify the U.S.
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the U.S. Underwriters may be required
to make in respect thereof.

The Company has agreed, following completion of this offering, not to
issue, offer, sell, contract to sell or otherwise dispose of any Ordinary Shares
or securities convertible into or exchangeable or exercisable for Ordinary
Shares without the prior written consent of Montgomery Securities for a period
of 90 days after the date of this Prospectus, except that the Company may,
without such consent, (i) grant options pursuant to its existing employee
benefit plans or issue Ordinary Shares upon exercise of outstanding stock
options, and (ii) issue Ordinary Shares in connection with acquisitions. The
officers and directors and certain employees of the Company have agreed that they will not sell in
excess of an aggregate of 85,00030,000 Ordinary Shares without the prior written
consent of Montgomery Securities for a period of 90 days after the date of this
Prospectus.

In connection with thisthe offering certain U.S. Underwriters and selling
group members may engage in passive market making transactions inof the Ordinary Shares oncontemplated by this
Prospectus (the "Offering") and in compliance with applicable law, the
Nasdaq National Market immediately prior to the commencement of
sales in this offering, in accordance with Rule 10b-6A under the Exchange Act.
Passive market making consists of displaying bids on the Nasdaq National Market
that are limited by the bid prices of independent market makers and completing
purchases in response to order flow at prices limited by such bids. Net
purchases by a passive market maker on each day are limited to a specified
percentage of the passive market maker's average daily trading volume in theUnderwriters may over-allot (i.e., sell more Ordinary Shares during a specified periodthan they have
agreed to purchase from the Company) and must be discontinued for any day
inmay effect transactions which
such limit is reached. Passive market making may stabilize, maintain or otherwise affect the market price of the Ordinary Shares,
at a level abovewhich may be higher than the price that which might

50
52

otherwise prevail in the open market. Such transactions may include placing bids
for or effecting purchases of Ordinary Shares for the purpose of pegging, fixing
or maintaining the market price of the Ordinary Shares or for the purpose of
reducing a syndicate short position created in connection with the Offering. A
syndicate short position also may be covered by exercise of the over-allotment
option described above rather than, or in combination with, open market
purchases. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the securities sold in the Offering may be reclaimed by the syndicate if such
securities are repurchased by the syndicate in stabilizing or covering
transactions. The Underwriters are not required to engage in any of these
activities, and any such activities, if commenced, may be discontinued at any
time.

CERTAIN LEGAL MATTERS

The validity of the Ordinary Shares offered hereby will be passed upon on
behalf of the Company by Allen & Gledhill, Singapore, legal advisors to the
Company, and on behalf of the Underwriters by Arfat Selvam & Gunasingham,
Singapore legal advisors to the Underwriters. Certain United States legal
matters in connection with this offering will be passed upon for the Company by
Fenwick & West LLP and for the Underwriters by Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, a Professional Corporation.

EXPERTS

The consolidated financial statements and schedules of Flextronics at March
31, 1994, 19951996 and 19961997 and for each of the three years in the period ended March 31,
19961997 included in this Prospectus and Registration Statement have been audited by
Ernst & Young, independent auditors, as set forth in their reportreports thereon
included herein and in the Registration Statement, and are included in reliance
upon such reportreports given upon the authority of such Firm as experts in accounting
and auditing.

The financialAVAILABLE INFORMATION

Flextronics International Ltd. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and schedulesother information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of Astronsuch material can be obtained at
December 31, 1995 and
for eachprescribed rates from the Public Reference Section of the two years inCommission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Company's
Ordinary Shares are quoted for trading on the period ended December 31, 1995 incorporated by
reference into this ProspectusNasdaq National Market and
reports, proxy statements and other information concerning the Company also may
be inspected at the offices of the National Association of Securities Dealers,
9513 Key West Avenue, Rockville, Maryland 20850. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov.

The Company has filed with the Commission a Registration Statement have been auditedon Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered by Deloitte Touche Tomatsu International, independent auditors, asthis
Prospectus. This Prospectus does not contain all of the information set forth in
their report thereon incorporated by reference herein and in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

44
47

The financial statements and schedules of A&A as of June 30, 1993 and 1994
and for eachregulations of the two years inCommission. For further
information with respect to the period ended June 30, 1993Company and for the eighteen month period ended December 31, 1994 incorporated bysecurities offered hereby,
reference is made to the Registration Statement. Statements made in this
Prospectus have been auditedas to the contents of any contract or other document referred to
herein are not necessarily complete and in each instance in which a copy of such
contract is filed as an exhibit to the Registration Statement, reference is made
to such copy, and each such statement shall be deemed qualified in all respects
by Coopers & Lybrand, independent auditors, assuch reference. Copies of the Registration Statement may be inspected,
without charge, at the offices of the Commission, or obtained at prescribed
rates from the Public Reference Section of the Commission at the address set
forth in their report thereon, and are incorporated by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

45above.

51
4853

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Accountants.....................................................Auditors........................................................ F-2
Flextronics International Ltd. Consolidated Balance Sheets for the fiscal years endedas of March 31, 19951996 and
1996.............................................................1997................................................................................ F-3
Flextronics International Ltd. Consolidated Statements of Operations for the fiscal
years ended March 31, 1994, 1995, 1996 and 1996........................................... F-41997........................................... F-5
Flextronics International Ltd. Consolidated Statements of Shareholders' Equity........ F-5Equity for the
fiscal years ended March 31, 1995, 1996 and 1997.................................... F-6
Flextronics International Ltd. Consolidated Statements of Cash Flows for the fiscal
years ended March 31, 1994, 1995, 1996 and 1996........................................... F-61997........................................... F-7
Notes to Consolidated Financial Statements............................................ F-8
Flextronics International Ltd. Condensed Consolidated Balance Sheets for the nine
months ended December 31, 1996 and for the fiscal year ended March 31, 1996......... F-22
Flextronics International Ltd. Condensed Consolidated Statements of Income for the
three months ended December 31, 1995 and 1996....................................... F-23
Flextronics International Ltd. Condensed Consolidated Statements of Income for the
nine months ended December 31, 1995 and 1996........................................ F-24
Flextronics International Ltd. Condensed Consolidated Statements of Cash Flows for the
nine months ended December 31, 1995 and 1996........................................ F-25
Notes to Condensed Consolidated Financial Statements.................................. F-26F-9

F-1
4954

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders

Flextronics International Ltd.

We have audited the accompanying consolidated balance sheets of Flextronics
International Ltd.,Ltd as of March 31, 19951996 and 1996,1997, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended March 31, 1996.1997. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Flextronics International Ltd.Ltd at March 31, 19951996 and 1996,1997, and the consolidated
results of its operations and its cash flowflows for each of the three years in the
period ended March 31, 1996,1997, in conformity with U.S.United States Generally Accepted
Accounting Principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

As discussed in Note 14 of the notes to consolidated financial statements,
the 1996 financial statements have been restated to correct the Company's
accounting for the acquisition of the Astron Group Limited to conform to United
States Generally Accepted Accounting Principles.

/s/ ErnstERNST & YoungYOUNG

ERNST & YOUNG

Singapore

May 13, 1996July 31, 1997

F-2
50

FLEXTRONICS INTERNATIONAL LTD.55

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

ASSETS

MARCH 31,
---------------------
1995 19961996* 1997
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)

ASSETS

CURRENT ASSETS:
Cash...........................................................................Cash................................................................. $ 4,7516,546 $ 6,54623,645
Accounts receivable, net of allowance for doubtful accounts of $1,760$3,576
and $3,576$5,658 at March 31, 19951996 and 1996 respectively............................... 44,2501997 respectively................ 78,114 Inventories.................................................................... 30,19369,331
Inventories.......................................................... 52,637 106,583
Other current assets........................................................... 4,527assets................................................. 3,827 10,361
Deferred income taxes.......................................................... 220taxes................................................ 260 408
-------- ---------------
Total current assets.................................................... 83,941assets................................................... 141,384 210,328
-------- ---------------
PROPERTY AND EQUIPMENT:
Machinery and equipment........................................................ 43,358equipment.............................................. 77,771 Building....................................................................... 283 5,736100,795
Building............................................................. 5,975 37,758
Leasehold improvements......................................................... 3,891improvements............................................... 15,491 14,584
-------- -------
47,532 98,998--------
99,237 153,137
Accumulated depreciation and amortization...................................... (21,774)amortization............................ (37,896) (42,172)
-------- ---------------
Net property and equipment....................................................... 25,758 61,102equipment............................................. 61,341 110,965
-------- ---------------
OTHER NON-CURRENT ASSETS:
Goodwill, net of accumulated amortization of $1,976$2,715 and $2,701,$3,704, at
March 31, 19951996 and 1996 respectively................................................... 4,964 8,6621997 respectively.............................. 13,407 20,865
Intangible assets, net of accumulated amortization of $306$850 and
$642,$2,496, at March 31, 19951996 and 1996 respectively............................................... 624 7751997 respectively................... 12,227 10,469
Deposits and other............................................................. 226other................................................... 580 1,812
Receivables from related party.................................................party....................................... 2,085 2,554
Investment in associated company..................................... -- 2,085
Other investments.............................................................. 520 --
Deferred income taxes.......................................................... 84 --2,241
-------- ---------------
Total other non-current assets.......................................... 6,418 12,102assets....................................... 28,299 37,941
-------- ---------------
TOTAL ASSETS............................................................ $116,117 $214,588ASSETS................................................. $231,024 $359,234
======== ===============

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

* Restated -- See Note 14

See accompanying notes.

F-3
56

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

LIABILITIES AND SHAREHOLDERS' EQUITY

MARCH 31,
---------------------
1996* 1997
-------- --------
CURRENT LIABILITIES:
Bank borrowings................................................................ $ 2,000borrowings...................................................... $ 14,379 Notes payable.................................................................. -- 10,000$111,075
Current portion of long-term debt.............................................. 9 4,198debt.................................... 11,073 5,758
Current portion of capital lease............................................... 3,911lease.................................. 6,736 6,475
Accounts payable............................................................... 38,489payable.................................................. 64,625 73,631
Accrued payroll................................................................ 2,549payroll................................................... 5,606 10,680
Other accrued liabilities...................................................... 2,029liabilities......................................... 5,389 23,039
Income taxes payable........................................................... 1,529payable.............................................. 2,775 4,171
Payables to associated company....................................... -- 546
-------- ---------------
Total current liabilities............................................... 50,516 113,708liabilities.............................................. 110,583 235,375
-------- ---------------
NON CURRENT LIABILITIES:
Notes payable to shareholders.................................................. 684shareholders........................................ 686 223
Long-term debt, less current portion........................................... -- 2,554portion................................. 7,554 2,165
Other payable.................................................................. -- 15,000payable........................................................ 24,184 23,547
Capital lease, less current portion............................................ 6,206portion.................................. 10,120 10,137
Deferred income taxes.......................................................... 994 1,256
Commitments (Notes 4 and 5).................................................... -- --taxes................................................ 4,353 3,710
-------- ---------------
Total non-current liabilities........................................... 7,884 29,616liabilities.......................................... 46,897 39,782
-------- --------
Minority interests............................................................... --interests..................................................... 485 485
-------- ---------------
SHAREHOLDERS' EQUITY:
Ordinary Shares, S$.01 par value:
Authorized -- 100,000,000 shares at March 31, 19951996 and 19961997
Issued and outstanding -- 11,603,49613,213,289 shares at March 31,1996 and
13,676,243 shares at March 31, 1995 and 13,213,289
shares at March 31, 1996.................................................... 731997.............................. 85 88
Additional paid-in capital..................................................... 62,882capital........................................ 93,634 95,570
Accumulated deficit............................................................ (5,238) (22,940)deficit............................................... (20,660) (12,066)
-------- ---------------
Total shareholders' equity.............................................. 57,717 70,779equity............................................. 73,059 83,592
-------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. $116,117 $214,588EQUITY............................. $231,024 $359,234
======== ===============

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

* Restated -- See Note 14

See accompanying notes.

F-3F-4
51

FLEXTRONICS INTERNATIONAL LTD.57

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

YEAR ENDED
MARCH 31,
--------------------------------------
1994----------------------------------
1995 19961996* 1997
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)

Net sales........................................................ $131,345sales.................................................. $237,386 $448,346 $490,585
Cost of sales.................................................... 117,392sales.............................................. 214,865 406,457407,457 440,448
-------- -------- --------
Gross profit..................................................... 13,953profit............................................... 22,521 41,88940,889 50,137
Selling, general and administrative expenses..................... 8,667expenses............... 11,468 18,58718,787 28,884
Goodwill amortization............................................ 398amortization...................................... 510 725739 989
Intangible assets amortization................................... 21amortization............................. 245 336544 1,646
Provision for plant closings..................................... 830closings............................... -- 2,454
Research1,254 5,868
Bank commitment and development......................................... 202consultancy fees....................... -- -- 1,831
Acquired in-process research and development............... 91 31,56229,000 --
-------- -------- --------
Operating income/(loss).......................................... 3,835.................................... 10,207 (11,775)
Interest expense................................................. (1,778) (740) (2,718)(9,435) 10,919
Net interest expense....................................... (774) (2,380) (3,885)
Merger expenses..................................................expenses............................................ (816) -- (816) --
Foreign exchange gain gain/(loss)..................................... 402............................... (303) 872 Income 1,168
Income/(loss) from joint venture................................. (70)associated company...................... (729) -- 241
Other income/(expense)..................................... 34 (398) 1,232
-------- -------- --------
Income Income/(loss) before income taxes and cumulative effect
of change in accounting for income taxes....................... 2,389taxes.......................... 7,619 (13,621)(11,341) 9,675
Provision for income taxes....................................... 97taxes................................. 1,463 3,791 -------- -------- --------
Income (loss) after income taxes, before cumulative effect of
change in accounting for income taxes and extraordinary gain... 2,292 6,156 (17,412)
Cumulative effect as of March 31, 1994 of change
in accounting for income taxes................................. 557 -- --
-------- -------- --------
Income (loss) before extraordinary gain.......................... 1,735 6,156 (17,412)
Extraordinary gain............................................... 416 -- --2,212
-------- -------- --------
Net income income/(loss)................................................ $ 2,151.......................................... $ 6,156 $(17,412)$(15,132) $ 7,463
======== ======== ========
Earnings per share:
Net income (loss) before cumulative effect of change in
accounting for income taxes and extraordinary gain............. $ 0.30 $ 0.51 $ (1.39)
Cumulative effect of accounting change........................... (0.07) -- --
-------- -------- --------
Net income (loss) before extraordinary gain...................... $ 0.23 $ 0.51 $ (1.39)
Extraordinary gain............................................... 0.05 -- --
-------- -------- --------
Net income income/(loss) per share...................................... $ 0.28 $ 0.51 $ (1.39)share................................ $0.51 $(1.19) $0.50
======== ======== ========
Weighted average outstanding Ordinary Shares and
equivalents..... 7,730equivalents.............................................. 12,103 12,53612,684 14,877
======== ======== ========

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

* Restated -- See Note 14

See accompanying notes.

F-4F-5
52

FLEXTRONICS INTERNATIONAL LTD.58

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS)

CLASS "A" CLASS "B"
CONVERTIBLE ------------------------ TOTAL
------------------- CONVERTIBLE REDEEMABLE ADDITIONAL SHARE-
PREFERENCE SHARES PREFERENCE SHARES ORDINARY SHARES ADDITIONAL TOTAL
--------------- PAID-IN RETAINED HOLDERS'
SHARES AMOUNT SHARES AMOUNTSHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ------ ----------- ---------- -------- ------ ---------- -------- ------------
(IN THOUSANDS)-------------

BALANCE AT MARCH 31, 1993................ 2,700 $ 15 51 $ -- 2,404 $ 16 $ 10,662 $(12,949) $ (2,256)
Issuance of "A"
Convertible
Preference Shares
for cash............ 27 2 -- -- -- -- 65 -- 67
Issuance of Ordinary
Shares for cash and
from capitalization
of Subordinated Note
Payable............. -- -- -- -- 2,968 19 10,449 -- 10,468
Compensation expense
related to
stock options....... -- -- -- -- -- -- 159 -- 159
Issuance of Ordinary
Shares for
acquisition of
subsidiary.......... -- -- -- -- 600 4 3,998 -- 4,002
Issuance of Ordinary
Shares in the
initial public
offering (net)...... -- -- -- -- 2,500 15 32,088 -- 32,103
Exercise of stock
options............. -- -- -- -- 54 -- -- -- --
Conversion of
Preference Shares to
Ordinary Shares..... (2,727) (17) (51) -- 2,778 17 -- -- --
Net income for the
year................ -- -- -- -- -- -- -- 2,151 2,151
Transaction by pooled
companies:
Issuance of common
stock............. -- -- -- -- -- -- 9 -- 9
---------- ------ --- --- -------- ------ ---------- -------- ------------
BALANCE AT MARCH 31,
1994................ -- $ -- -- $ --1994...................... 11,304 $ 71 $ 57,430 $(10,798) $ 46,703$46,703
nCHIP fiscal year conversion.......... -- -- -- --conversion................... -- -- -- (596) (596)
Issuance of Ordinary Shares.............. -- -- -- --Shares.................... 300 2 925 -- 927
Expenses related to issuance of Ordinary
Shares.............. -- -- -- --Shares....................................... -- -- (968) -- (968)
Net income for the year................ -- -- -- --year........................ -- -- -- 6,156 6,156
Transactions by pooled companies:
Issuance of common stock............. -- -- -- --stock....................... -- -- 37 -- 37
Issuance of preference stock............. -- -- -- --stock................... -- -- 5,458 -- 5,458
---------- ------ --- ---------- -------- ------ ---------- -------- -------------------
BALANCE AT MARCH 31, 1995................ -- $ -- -- $ --1995...................... 11,604 $ 73 $ 62,882 $(5,238) $ 57,717(5,238) $57,717
Issuance of Ordinary Shares for acquisition of
subsidiaries........ -- -- -- --subsidiaries................................. 305 2 7,443 -- 7,445
Issuance of Ordinary Shares.............. -- -- -- --Shares.................... 304 2 1,007 -- 1,009
Secondary listing..... -- -- -- --Sale of shares for cash in public offering..... 1,000 8 23,492 -- 23,500
Expenses related to secondary listing... -- -- -- --sale of shares for cash in
public offering.............................. -- -- (1,190) -- (1,190)
Currency translation adjustments......... -- -- -- --adjustments............... -- -- -- (290) (290)
Net loss for year.....the year.......................... -- -- -- -- -- -- -- (17,412) (17,412)
----------(15,132) (15,132)
------ --- ---------- -------- ------ ---------- -------- -------------------
BALANCE AT MARCH 31, 1996................ -- $ -- -- $ --1996*..................... 13,213 $ 85 $ 93,634 $(22,940)$(20,660) $73,059
Issuance of Ordinary Shares and Options........ 240 2 1,740 -- 1,742
Currency translation adjustments............... -- -- -- 112 112
Net income for the year........................ -- -- -- 7,463 7,463
Issuance of common stock for Fine Line Printed
Circuit Design Inc........................... 223 1 196 1,019 1,216
------ --- ------- -------- -------
BALANCE AT MARCH 31, 1997...................... 13,676 $ 70,779
=========88 $ 95,570 $(12,066) $83,592
====== === ======= ========== ========== ======== ======= ========= ======== ===============

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

* Restated -- See Note 14

See accompanying notes.

F-5F-6
53

FLEXTRONICS INTERNATIONAL LTD.59

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

YEARSYEAR ENDED
MARCH 31,
----------------------------------
1994-------------------------------
1995 19961996* 1997
-------- -------- --------
(IN THOUSANDS)---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income income/(loss).................................................. $ 2,151........................................... $ 6,156 $(17,412)$(15,132) $ 7,463
Adjustments to reconcile net income to cash provided by
operating activities:
nCHIP fiscal year conversion.....................................conversion............................. (596) -- (596) --
Depreciation and amortization of equipment and leasehold
improvements................................................... 4,202improvements........................................... 5,370 9,344 10,940
Amortization of goodwill......................................... 398goodwill................................. 510 725739 989
Amortization of intangible assets................................ 21assets........................ 245 336544 1,646
Loss/(gain)on disposal of property and equipment................ 368equipment........ 56 (121) (85)
Loss on disposal of investment...................................investment........................... -- -- 266
Write-off of property and equipment.............................. 20 -- --
Extraordinary gain............................................... (416) -- --
Allowance for doubtful debts..................................... (32)debts............................. 1,211 1,4571,675 2,866
Allowance for stock obsolescence................................. (120)obsolescence......................... 43 631
Compensation expense relating to stock option plan............... 1591,631 4,228
Loss/(income) from associated company.................... 729 -- --
Loss from joint venture.......................................... 70 729 --(241)
In process research and development written off..................off.......... -- 29,000 -- 31,562
Provision for plant closure......................................closure.............................. -- 1,254 5,308
Deferred income taxes.................................... 237 84 (791)
Amortization of discount................................. -- 60 363
Issuance of non-employee stock options................... -- -- 2,454
Deferred income taxes............................................ 339 237 84380
-------- -------- --------
$ 7,160 $---------
13,961 $ 29,344 33,066
Changes in operating assets and liabilities:
Trade accounts receivable........................................ $ (8,306) $(15,057) $(28,965)receivable................................ (15,057) (28,965) 7,007
Notes receivable.................................................receivable......................................... -- (500) (586)
Inventories.............................................. (3,156) (19,209) (2,533)
Other accounts receivable................................ (2,430) 2,889 (5,678)
Deposits and other....................................... 311 (140) (1,208)
Accounts payable......................................... 2,995 14,143 7,991
Other accrued liabilities................................ (984) 607 6,666
Income taxes payable..................................... 933 1,121 1,396
Amount due from associated company....................... -- -- (500)
Inventories...................................................... (5,863) (3,156) (19,209)
Other accounts receivable........................................ (572) (2,430) 2,889
Due from joint venture........................................... (1,588) -- --
Deposits and other............................................... (121) 311 (140)
Accounts payable................................................. 14,812 2,995 14,143
Other accounts payable........................................... 1,283 (841) 727
Deferred rent.................................................... (1,302) (143) (120)
Income taxes payable............................................. 111 933 1,121546
-------- -------- -----------------
Cash provided by (used for) operating activities............ $ 5,614activities....... $ (3,427) $ (710) $ 46,667
-------- -------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
PurchasePurchases of property and equipment................................. $ (5,246)equipment......................... $ (7,536) $(15,812) $ (26,984)
Proceeds from sale of property and equipment....................... 2,301equipment................ 38 228 816
Intangibles arising from acquisition of subsidiaries............... --subsidiaries........ (62) -- Other investments.................................................. (120)--
Investment in associated company............................ -- 886 Investment to join venture......................................... (2,529) -- --
Restricted cash.................................................... 379 -- --(3,000)
Loan to joint venture..............................................venture....................................... (1,000) -- (1,000) --
Redemption of preference shares in joint venture...................venture............ 1,730 -- 1,730 --
Payment for business acquired, net of cash acquired................ --acquired......... (3,343) (15,152) --
Repayment of loan from related party...............................party........................ -- 815 --
Loan to related party....................................... -- -- 815(469)
Purchase of assets from Ericsson............................ -- -- (82,354)
-------- -------- -----------------
Cash used for investing activities.......................... $ (5,215) $(10,173) $(29,035)activities............................ (10,173) (29,035) (111,991)
-------- -------- ---------

F-6F-7
54

FLEXTRONICS INTERNATIONAL LTD.60

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

(IN THOUSANDS)

YEARSYEAR ENDED
MARCH 31,
1994 1995 19961996* 1997
-------- -------- --------
(IN THOUSANDS)---------

CASH FLOWS FROM FINANCING ACTIVITIES:
BorrowingBorrowings from (repayments to) banks............................... $ 1,177 $ (9,417) $ 12,280banks....................................... 7,000 43,980 152,761
Repayments to banks......................................... (16,417) (31,700) (56,041)
Proceeds from (repayment of) long-term debt........................ (13,008)debt................................ -- 2,873 776
Repayment of long-term debt................................. (8) 1,803(1,070) (1,536)
Refinancing of lease assets................................. -- -- 3,509
Repayment of capital lease obligations............................. (1,998)obligations...................... (4,310) (5,767) (7,991)
Proceeds from issuance of share capital............................ 38,598capital..................... 5,454 1,009 Proceeds from notes payable........................................ 1,449 -- --1,362
Payments on notes payable.......................................... (224)payable................................... (2,535) (17) (10,463)
Proceeds from secondary listing.................................... --listing............................. -- 22,310 --
-------- -------- -----------------
Cash provided by (usedby/(used for) financing activities............ 25,994activities......... (10,816) 31,618 82,377
-------- -------- -----------------
Increase (decrease) in cash and cash equivalents................... $ 26,393 $(24,415) $equivalents............ (24,416) 1,873 17,053
Effect of exchange rate changes on cash and cash
equivalents.......equivalents.............................................. -- -- (78) 46
Cash and cash equivalents at beginning of period................... 2,774period............ 29,167 4,751 6,546
-------- -------- -----------------
Cash and cash equivalents at end of period.................. $ 29,167period............... $ 4,751 $ 6,546 $ 23,645
======== ======== =================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (refunded) for:
Interest......................................................... $ 1,579Interest................................................. $ 779 $ 2,482 $ 3,025
Income taxes..................................................... (200)taxes............................................. 297 2,656 1,717
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Equipment acquired under capital lease obligations................. 494obligations.......... 8,338 11,556 Additional ordinary shares issued upon conversion of subordinated
note debt........................................................ 3,658 -- --6,387
Purchase of subsidiaries financed by issuance of 600,000 ordinary shares valued at $6.67.......................... 4,002 -- --
66,908
ordinary shares valued at $14.019.........................$14.019........................ -- 938 -- 938
238,684 ordinary shares valued at $27.262........................$27.262................... -- 6,507 --
223,321 ordinary shares valued at $25.524................... -- -- 6,5075,700
Promissory notes valued at $10 million payable in February
1997..................................................... -- 10,000 --
Promissory notes valued at $5 million payable in February
1998..................................................... -- 5,000 --
Ordinary Shares with a value of $10 million to be issued on
June 30, 1998............................................ -- 10,000 --
Cash and Ordinary Shares valued at $14.124 million to
Stephen Rees at the option of the Company due on June 30,
1998..................................................... -- 14,124 (1,000)
Contingent earnout of $6.25 million payable to Astron
shareholders in April 1997............................... -- -- 6,250

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

* Restated -- See Note 14

See accompanying notes.

F-7F-8
55

FLEXTRONICS INTERNATIONAL LTD.61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

1. ORGANIZATION OF THE COMPANY

Flextronics International Ltd. was incorporated in the Republic of
Singapore on May 31, 1990 as Flex Holdings Pte Limited. The subsidiary companies
are located in Singapore, Malaysia, Hong Kong, the People's Republic of China,
United Kingdom, Mauritius, Sweden and the United States. The Company was
incorporated to acquire the Asian and certain U.S. operations of Flextronics
Inc. (the "Predecessor"). The Predecessor had been involved in contract
manufacturing operations in Singapore since 1982, Hong Kong since 1983 and the
People's Republic of China since 1987.

The Company offersprovides advanced contract manufacturing services to
sophisticated original equipment manufacturers (OEMs) in the communications,
computer, consumer and medical electronics industries. Flextronics offers a full
range of services including microelectronics packages andproduct design, printed circuit board (PCB) assembly design
and fabrication, material procurement, inventory management, PCBfinal system
assembly final systems box buildand test, packaging and distribution.

The components, subassemblies and finished products manufactured by the
Company incorporate advanced interconnect, miniaturization and packaging
technologies such as SMT, MCM and COB technologies.

The Company's fiscal year-end is March 31. The Company follows accounting
policies which are in accordance with principles generally accepted in the
United States.

2. SUMMARY OF ACCOUNTING POLICIES

BasicsBasis of presentation

The accompanying consolidated financial statements include the accounts of
Flextronics International Ltd. and its subsidiaries (together the "Company""the Company"),
after elimination of all significant inter-companyintercompany balances and transactions.
Investments in affiliates owned 20% or more and corporate joint ventures in
which the Company does not have control, but has the ability to exercise
significant management influence over operating and financial policies, are
accounted for by the equity method. Other securities and investments are
generally carried at cost.

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

Foreign exchange

The Company, with the exception of certain subsidiaries, considers the U.S.
dollar as its functional currency. This is because the majority of the Company's
sales are billed and collected in U.S. dollars, and the majority of the
Company's purchases, such as raw materials, are invoiced and paid in U.S.
dollars.

Accordingly, transactions in currencies other than the functional currency
are measured and recorded in U.S. dollars using the exchange rate in effect at
the date of the transaction. At each balance sheet date, recorded monetary
balances that are denominated in currencies other than the functional currency
are adjusted to reflect the rate at the balance sheet date. All gains and losses
resulting from the translationremeasurement of accounts designateddenominated in other than the
functional currency are reflected in the determination of net income in the year
in which they occur.

For inclusion in the consolidated financial statements, all assets and
liabilities of foreign subsidiaries having a functional currency other than the
U.S. dollar are translated into U.S. dollars at the exchange rate ruling at the
balance sheet date and the results of these foreign subsidiaries are translated
into U.S. dollars at the weighted average exchange rates.rates for the period.
Exchange differences due to such currency translations are recorded in
shareholders' equity.

F-8F-9
56

FLEXTRONICS INTERNATIONAL LTD.62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

Cash and cash equivalents

For purposes of statement of cash flows, the Company considers highly
liquid investments with a maturity of three months or less when purchased to be
cash equivalents.

Property and equipment

Property and equipment is stated at cost. Depreciation and amortization are
provided on a straight-line basis over the estimated useful lives of the related
assets (two to twenty-twofifty years).

Concentration of credit risk

The Company is a turnkey manufacturer of sophisticated electronics for original
equipment manufacturers engaged in the communications, computer, medical, consumer electronics and
medicalcommunications industries. Financial instruments which potentially subject the
Company to concentration of credit risk are primarily accounts receivable and
cash equivalents. The Company performs ongoing credit evaluations of its
customers' financial conditions and, generally, requires no collateral from its
customers. The Company maintains cash and cash equivalents with various
financial institutions. These financial institutions are located in many
different geographic locations throughout the world.

The allowance for doubtful accounts the Company maintains is based upon the
expected collectibility of all accounts receivable.

Goodwill

Goodwill represents the excess of the purchase price of acquired companies
over the fair value of the net assets acquired. Goodwill is amortized on a
straight line basis over the estimated life of the benefits received which
ranges from ten to twenty-five years. On an annual basis, the Company evaluates
recorded goodwill for potential impairment against the current and estimated
undiscounted future operating income before goodwill amortization of the businesses to which
the goodwill relates.
MARCH 31,
-------------------
1996 1997
------- -------

Cost
Balance at beginning of the year....................... $ 6,939 $16,122
Additions.............................................. 9,183 8,447
------ -------
Balance at end of the year............................. 16,122 24,569
------ -------

MARCH 31,
-------------------
1996 1997
------- -------

Amortization
Balance at beginning of the year....................... $ 1,976 $ 2,715
Charge for the year.................................... 739 989
------- -------
Balance at end of the year............................. 2,715 3,704
------- -------
Net book value at end of the year........................ $13,407 $20,865
======= =======

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-10
63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

Intangible assets

Intangible assets comprise technical agreements, patents, trademarks,
developed technologies and identifiable intangible assets in a subsidiary's
assembled work force, its favorablefavourable lease and its customer list.

Technical agreements are being amortized on a straight line basis over
periods not exceeding five years. Patents and trademarks are being amortized on
a straight line basis over periods not exceeding seventeentwenty-five years. Purchased
developed technologies are being amortised on a straight line basis over periods
not exceeding seven years. The identifiable intangible assets in the
subsidiary's assembled work force, its favourable lease and its customer list
are amortized on a straight line basis over the estimated life of the benefits
received of three to twenty years.

F-9
57

FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31,
-------------------
1996 1997
------- -------

Cost
Balance at beginning of the year..................... $ 933 $13,077
Additions............................................ 12,144 --
Written off during the year.......................... -- (112)
------- -------
Balance at end of the year........................... 13,077 12,965
------- -------
Amortization
Balance at beginning of the year..................... $ 306 $ 850
Charge for the year.................................. 544 1,646
------- -------
Balance at end of the year........................... 850 2,496
------- -------
Net book value at end of the year...................... $12,227 $10,469
======= =======

Inventories

Inventories are stated at the lower of cost or market value. Cost is
comprised of direct materials on a first-in-first-out basis and in the case of
finished products and work-in-progress includes direct labor and attributable
production overheads based on normal levels of activity. The components of
inventories are as follows (in thousands):

MARCH 31,
-------------------
1995--------------------
1996 1997
------- ---------------

Raw materials.................................................... $21,691materials......................................... $42,202 Work-in-process.................................................. 10,249$ 70,384
Work-in-process....................................... 14,049 16,561
Finished goods................................................... 128goods........................................ 962 25,809
------- --------
57,213 112,754
Less: allowance for obsolescence...................... (4,576) (6,171)
------- 32,068 57,213
Less: allowances -- for obsolescence............................. (1,875) (4,576)
------- -------
$30,193--------
$52,637 $106,583
======= ===============

Revenue recognition

Revenue from product sales and services are recognized on delivery and
acceptance of the goods.

Associated companies

An associated company is a company, not being a subsidiary, in which the
Group has a long-term interest of not less than 20% of the equity and in whose
financial and operating policy decisions the Group exercises significant
influence.

F-11
64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

The Group's share of the results of associated companies is included in the
consolidated statement of operations. Where the audited accounts are not
co-terminous with those of the Group, the share of profits is arrived at from
the last audited accounts.

Shares in associated companies are stated in the Company's balance sheet at
cost and equity in post-acquisition earnings/(losses). Provision is made for
other than temporary declines in values.

Income taxes

Effective April 1, 1993, the Company changed its method of accounting for
incomeIncome taxes from the deferred method tohave been provided using the liability method required byin accordance
with SFAS Statement No. 109, "Accounting for Income Taxes".

Stock based compensation

The Company has elected to follow APB opinion 25 "Accounting for Stock
Issued to Employees" and related interpretations in accounting for its employee
options because, as discussed below (see note 10), the alternative fair value
accounting provided for under SFAS 123, "Accounting for Stock-Based
Compensation", requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognised.

Research and Development Expenditure

Direct expenditure and related costs incurred in connection with product
research and development are paid by the Company's customers and are therefore
included in cost of sales. Other research and development expenditure incurred
are not specifically identified because such expenses are immaterial.

Net Incomeincome per share

Net income per share is computed using the weighted average number of
Ordinary Shares and Ordinary Share equivalents outstanding during the respective
periods. Ordinary Share equivalents include Ordinary Shares issuable upon the
exercise of stock options (using the treasury stock method).

PursuantIn February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 83,
Ordinary Shares and Ordinary Share equivalents issued bybe adopted on December 31,
1997. At that time, the Company duringwill be required to change the twelve-month periodmethod currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact is expected to result in an
increase in primary earnings per share for the initial public offeringyears ended March 31, 1995 and
1997 to $0.54 and $0.52 per share, respectively. Statement 128 should have been included inno
effect on primary loss per share for the year ended March 31, 1996. The impact
of Statement 128 on the calculation of Ordinary Shares and Ordinary Share equivalents using the
treasury stock method and the initial public offering price of $14fully diluted earnings per share as
if they were outstanding for
all periods presented.

1994 1995 1996
------ ------- -------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)

Supplemental net income/(loss) per share............... $ 0.32 $ 0.51 $ (1.39)
Weighted average ordinary shares....................... 6,740 12,103 12,536

Supplemental net income/(loss) per sharethese years is calculated in accordance with
Accounting Principles Board Opinion No. 15 (APB 15). The supplemental net
income/(loss) per share amounts are presented for comparison purposes because
under APB 15 the effect of options is excluded from the net income/(loss) per
share calculation if anti-dilutive, whereas, under SAB No. 83, such options are
considered outstanding even if the effect of including them is anti-dilutive.

Retroactive restatements

The consolidated financial statements give retroactive effectnot expected to the
acquisition of nCHIP, Inc. ("nCHIP") in January 1995 which was accounted for as
a pooling of interest.

F-10
58

FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)be material.

Financial statement prepared in accordance with accounting principles accepted
in Singapore

A separate financial statement for the same period has been prepared in
accordance with accounting principles accepted in Singapore.

3. BANK BORROWINGS

Line of Credit

ThreeIn March 1997 the Company terminated its $48 million US Dollar line of
credit with the group of banks and obtained a new credit facility totalling $175
million representing $105 million revolving credit and

F-12
65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

$70 million through term loans amortized over a 5 year period and subject to
mandatory prepayment provisions. As at March 31, 1997, the Company has utilized
$111 million of the new credit facility.

The lines of credits are collateralized by:

(a) A floating charge over all the assets and the entire undertaking of the
holding company;

(b) Corporate guarantees from the Company and several of its subsidiaries;

(d) A lien on all accounts receivable and inventory of the Company and
certain of its subsidiaries.

The new credit facilities require that the Company maintains certain
financial ratios and other covenants. In addition, the Company and its
subsidiaries are not allowed to declare dividends for distribution out of
retained earnings. As at March 31, 1997, the Company was in compliance with its
covenants.

In addition, five of the Company's subsidiaries have obtained from several
banks working capital lines of credit, totalling approximately $48US$10.3 million,
representing overdraft facilities, bridging loan, short term cash advances,
letters of credit and letters of guarantee and trust receipts. Interest on
borrowings is charged within the range 5.75% to 7.125%7% per annum.

The lines of credits are collateralized by:

(a) negative pledge on assets of all the group entities;

(b) corporate guarantees from the Company and its subsidiaries;

These lines of credits require that the Company maintains certain financial
ratios and other covenants.

As of March 31, 1996,1997, the Company was in compliance
with its covenants.

As of March 31, 1996, the CompanyGroup had utilized the following credit
facilities under the above lines of credit (in thousands):

Short term cash advances................................................... $14,379advances.......................................... $111,075
Letters of credits and guarantees..........................................guarantees................................. $ 1,003
=======985
========

The remaining unused portion of lines of credit total $32.5$64 million.

The weighted average interest rates on borrowing are as follows:

MARCH 31,
--------------
1995---------------
1996 1997
----- ---------

InterestThe weighted average interest rate per annum on borrowings................................................ 6.438%all short
term borrowings outstanding as at year end are as
follows:.................................................. 6.41% 8.50%
===== =====

4. LONG TERM DEBT

Long-term debt consisted of the following at March 31, 1996.1996 and 1997.

1995MARCH 31,
--------------------
1996 ----1997
-------- -------

Term loan at 4.5%.................................................. $ -- $....................................... 333 83
Mortgage loans at 10.5%............................................ --11.4%................................. 2,244 1,886
Other loans at 8%.................................................. 9 -- 9%................................. 1,050 Purchase obligation earnout........................................ -- 3,125
---- ------
9 6,752954
Notes payable to Astron's former shareholders at 8%..... 15,000 5,000
-------- -------
18,627 7,923
Less: current portion.............................................. (9) (4,198)
---- ------portion................................... (11,073) (5,758)
-------- -------
$ --7,554 $ 2,554
==== ======2,165
======== =======

Maturities of long-term debt for the five years succeeding March 31, 19961997
are $4,198,000 by March 31, 1997, $740,000$5,758 by March 31, 1998, $645,000$469 by March 31, 1999, $358,000$469 by March 31, 2000,
and $358,000$469 by March 31, 2001.2001, $469 by March 31, 2002 and the balance thereafter.

The notes payable is payable to the former shareholders of Astron as part
of the purchase obligation earnout is contingent upon Astron Group Limited
meeting certain pre-tax profit for the calendar year 1996.

F-11consideration.

F-13
59

FLEXTRONICS INTERNATIONAL LTD.66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

5. OTHER PAYABLES

In accordance to the agreement signed to acquire Astron in February 1996,
the Company will issue Ordinary Shares with a value of $10 million to the former
Astron shareholders on June 30, 1998.

In addition the Company agreed to pay $15 million in June 1998 to an entity
affiliated with Stephen Rees as a consulting fee subject to certain conditions.
In March 1997, the agreement with Mr. Rees' affiliate was revised, the
conditions eliminated and the fee was reduced to $14 million. The cash portion
of $5 million has been discounted at 8% over the period of the agreement and the
remaining $9 million has not been discounted on the basis of the Company's
intention to pay that portion in stock. The payment to former Astron
shareholders and Mr. Rees' affiliate is interest-free and secured.

The components of Other Payables are as follows:

MARCH 31,
-------------------
1996 1997
------- -------

Balance at beginning of the year......................... -- $24,184
Additions during the year.............................. $24,124 --
Amortization of discount............................... 60 363
Amendment of agreement................................. -- (1,000)
------- -------
Balance at end of the year............................... $24,184 $23,547
======= =======

6. LEASE COMMITMENTS

Capital Lease

Following is a schedule by fiscal year, of future minimum lease payments
under capital lease obligations for certain machinery and equipment, together
with the present value of the net minimum lease payments (in thousands):

Fiscal Years Ending March 31,

1997..................................................................

1998............................................................... $ 7,960
1998.................................................................. 5,987
1999.................................................................. 3,411
2000.................................................................. 1,472
2001.................................................................. 503
Thereafter............................................................7,749
1999............................................................... 5,514
2000............................................................... 3,282
2001............................................................... 2,164
2002............................................................... 562
Thereafter......................................................... --
-------
Total installment payments................................................. 19,333payments......................................... 19,271
Amount representing interest............................................... (2,477)interest....................................... (2,659)
-------
Present value of net installation payments................................. 16,856installment payments.......................... 16,612
Less: current portion...................................................... 6,736portion.............................................. 6,475
-------
Long-term portion of capital lease......................................... $10,120lease................................. $10,137
=======

Items costing $28,387,304 (1995: $15,993,603)$29,912 (1996: $28,387) with accumulated amortization $8,780,878 (1995: $4,168,453)$11,389
(1996: $8,781) purchased under capital leases have been included in machinery
and equipment as of March 31, 1996.1997. Lease amortization is included in
depreciation expense.

F-14
67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

Operating Leases

The Company leases some of its facilities under operating leases. Future
minimum lease payments under operating leases with a term of more than one year
are as follows (in thousands):

Fiscal Years Ending March 31,

1997................................................................... $2,177
1998................................................................... 1,782
1999................................................................... 1,530
2000................................................................... 1,147
2001................................................................... 793
Thereafter.................................................................. 1,890
------
$9,319
======

1998............................................... 3,302
1999............................................... 3,078
2000............................................... 2,404
2001............................................... 1,697
2002............................................... 1,406
Thereafter......................................... 5,518
-------
$17,405
=======

The facilities lease of one of the subsidiaries provides for escalating
rental payments over the lease period. Rent expense for the lease is being
recognized on a straight-line basis over the term of the lease period. Total
operating lease expense for the Company was $1,263,019, $1,956,733expenses were $1,957, $2,211 and $2,211,077$2,593 for the years ended
March 31, 1994, 1995, 1996 and 19961997 respectively.

6.7. CAPITAL COMMITMENTS

OneTwo of the subsidiaries, Flextronics (Malaysia) Sdn. Bhd. hasand Astron Group
Limited have contracted to purchase $457,714$111 and $10,007 respectively, of fixed
assets as of March 31, 1996.1997. These fixed assets have not been delivered and are
therefore not provided for in the accounts as of March 31, 1996.

F-12
60

FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7.1997.

Astron Group Limited has authorised but not contracted to purchase $28,927
of fixed assets as at March 31, 1997. A commitment of $9,710 has also been made
to contribute to a subsidiary of Astron Group Limited in PRC China for
construction in progress in relation to the factory in Doumen.

8. INCOME TAXES

The domestic and foreign components of income income/(loss) before taxes are as
follows:

MARCH 31,
--------------------------------
1994 1995 1996 -------1997
------- -------- (IN THOUSANDS)-------

Singapore............................................Singapore.................................... $(1,529) $(21,977) $ (412) $(1,529) $(21,917)
Foreign.............................................. 2,801(392)
Foreign...................................... 9,148 8,296
-------10,636 10,067
------- -------- $ 2,389-------
$ 7,619 $(13,621)$(11,341) $ 9,675
======= ======== ======= ========

F-15
68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

Income tax expense consists of the following:

MARCH 31,
--------------------------
1994----------------------------
1995 1996 ----1997
------ ------ (IN THOUSANDS)------

Current:
Singapore................................................ $226Singapore...................................... $ 336366 $1,441 Foreign.................................................. 89$1,608
Foreign........................................ 860 2,266 ----- ------- -------
-- -
3151,395
------ ------ ------
1,226 3,707 ----- ------- -------
-- -3,003
------ ------ ------
Deferred:
Singapore................................................ 339Singapore...................................... 237 74 Foreign.................................................. --(559)
Foreign........................................ -- 10 ----- ------- -------
-- -
339(232)
------ ------ ------
237 84 ----- ------- -------
-- -
$654(791)
------ ------ ------
$1,463 $3,791 ======= ======= ========$2,212
====== ====== ======

Total income tax expense differs from the amount computed by applying the
Singapore statutory income tax rate of 26% (1995(1996 and 1994:1995: 26% and 27%) to
income before taxes as follows:

MARCH 31,
-----------------------------
1994-------------------------------
1995 1996 -----1997
------- ------- (IN THOUSANDS)-------

Computed expected income taxes.......................... $ 654taxes................ $ 2,057 $(3,541)$(2,950) $ 2,516
Effect of Singapore income tax incentives............... (278)incentives..... -- (82) --
Effect of losses from non-incentive Singapore
operations............................................ 255operations.................................. 367 8,4727,822 498
Effect of foreign operations............................ (667)operations.................. (1,609) (1,785) (2,336)
Non-deductible items:
Amortization andof goodwill and intangibles............. 113intangibles.... 205 270329 436
Loss on sale of investments...........................investments................. -- 69 --
Joint venture losses........................ 216 -- --
69
Joint venture losses..................................Bank commitment fee......................... -- 216 -- Others.................................................. 29382
Others........................................ 227 388 716
------- --------
------
-
1,463 3,791
97
Cumulative effect of March 31, 1993 of change from
deferral method to liability method................... -- --
557
------- --------
------
--------
$ 1,463 $ 3,791 $ 6542,212
======= =============== =======

F-13F-16
61

FLEXTRONICS INTERNATIONAL LTD.69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

The components of deferred income taxes are as follows (in thousands):follows:

MARCH 31,
---------------------
1995 1996 1997
-------- --------

Deferred tax liabilities:
Fixed assets.................................................assets......................................... $ 1,4661,343 $ 1,365
Others....................................................... 486 193801
Intangible assets.................................... 3,097 2,751
Others............................................... 169 237
-------- --------
1,952 1,5584,609 3,789
-------- --------
Deferred tax assets
Fixed assets......................................... (207) (311)
Provision for stock obsolescence............................. (249) (677)obsolescence..................... (683) (1,364)
Provision for doubtful debts................................. (180) (343)debts......................... (361) (1,636)
Net operating lossesloss carry forwards.......................... (11,032) (11,020)forwards.................... (13,805) (16,665)
Unabsorbed capital allowances carried forwards............... (731) (438)
Investment allowance......................................... (84) --
Others....................................................... (118) (699)carry forwards......... (539) (606)
Others............................................... (611) (645)
-------- --------
(12,394) (13,177)(16,206) (21,227)
-------- --------
Valuation allowance............................................ 11,132 12,615allowance.................................... 15,690 20,740
-------- --------
Net deferred tax liability.....................................liability............................. $ 6904,093 $ 9963,302
======== ========
The net deferred tax liability is classified as
follows:
Non-current liability........................................liability................................ $ 9944,353 $ 1,2563,710
Current asset................................................ (220)asset........................................ (260) Non-current asset............................................ (84) --(408)
-------- --------
$ 6904,093 $ 9963,302
======== ========

The Company's net deferred tax assets consist of the following:

MARCH 31,
---------------------
1996 1997
-------- --------

Net operating loss carried forward
UK................................................. 2,596 3,291
USA................................................ 11,020 13,185
Malaysia........................................... 189 189
Others............................................... 2,145 4,483
-------- --------
Total deferred tax assets............................ 15,950 21,148
Valuation allowance.................................. (15,690) (20,740)
-------- --------
Net deferred tax assets.............................. $ 260 $ 408
======== ========

At March 31, 1997, the Company had net operating loss carryforwards of
approximately $30,663 for U.S. federal income tax purposes which will expire
between 2003 and 2011 if not previously utilized. Utilization of the U.S. net
operating loss carryforwards may be subject to an annual limitation due to the
change in ownership rules provided by the Internal Revenue Code of 1986. This
limitation and other restrictions provided by the Internal Revenue Code of 1986
may reduce the net operating loss carryforward such that it would not be
available to offset future taxable income of the U.S. subsidiary.

At March 31, 1997, the Company had net operating loss carryforwards of
approximately $9,973 and $632 in U.K. and Malaysia respectively. 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. These
losses carryforward indefinitely.

F-17
70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

The Company has been granted the following tax incentives:

(i) Investment allowance on approved fixed capital expenditure
incurred within 5 years after August 1, 1990 subject to a maximum of $2,700,000$2,700
for its Singapore operations was granted by the Economic Development Board
of Singapore. This investment allowance has been utilized by the Company to
reduce taxable income of its Singapore subsidiary since 1991. This
allowance is however fully utilized at the end of the year.fiscal 1996.

(ii) Pioneer status granted to one of its Malaysian subsidiary for a
period of 5 years under the Promotion of Investment Act, 1986. This pioneer
incentive provides a tax exemption on manufacturing income of this
subsidiary.

(iii) Product Export Enterprise incentive for a lower rate for its
China operations.facility at Shekou. The Company's operations in ChinaShekou is located in a
"Special Economic Zone" anand is an 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
authorities.

The Company's investments in its plants in Xixiang and Doumen, China fall
under the "Foreign Investment Scheme" that entitles the Company to apply for a
five-year tax incentive. The Company obtained the incentive for the Doumen plant
in December 1995 and the Xixiang plant in October 1996. With the approval, 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.

A portion of the Company's sales are carried out by its subsidiary in
Labuan, Malaysia where the Company has opted to pay the Labuan tax authorities a
fixed amount of $8,000US$8 tax each year in accordance with the Labuan tax
legislation.

Also aA portion of the Company's sales are carried out by its subsidiary, an
offshore ordinary company, in Mauritius where the tax rate is at 0% for such
companies.

F-14
62

FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.The potential deferred tax asset arises substantially from tax losses
available for carry-forward. These tax losses can only be set off against future
income of the operations in respect of which the tax losses arose.

As a result, management is uncertain as to when or whether these operations
will generate sufficient profit to realise the deferred tax asset benefit.

9. SHAREHOLDERS' EQUITY

Exercise of Options

During the financial year ended March 31, 1997, certain employees exercised
their options to purchase 304,201239,633 Ordinary Shares at an exercise price of
$0.77US$0.77 -- US$24.00 per share.

Declaration of Dividends

The Company in a general meeting may by ordinary resolution declare
dividends but no dividend will be payable in excess of the amount recommended by
the directors. As the Company is incorporated in Singapore, all dividends
declared will be denominated in Singapore currency. The Company has not declared
any dividends to $14.50 per share.date.

F-18
71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

Acquisition of Flextronics International (UK) Limited ("FILUK")FILUK) (formerly known
as Assembly & Automation (Electronics) Limited)

On April 12, 1995, the Company acquired all the outstanding stock of FILUK
in exchange for $2,878,860$2,879 in cash and 66,908 Ordinary Shares of the Company, valued
at $14.019 per share.

Acquisition of Astron Group Limited ("Astron")

On February 2, 1996, the Company acquired all the outstanding stock of
Astron in exchange for $13,440,605$13,440 in cash; 238,684 Ordinary Shares of the Company,
valued at $27.262 per share; issuance of a $10 million promissory note due one
year after acquisition date; issuance of a $5 million promissory note due two
years after acquisition date and the issuance of $10 million of Ordinary Shares
of the capital of the Company on June 30, 1998. The promissory notes shall bear
interest at the rate of 8% per annum.

In addition, the Company will issue $9 million of Ordinary Shares of the
Company on June 30, 1998, in accordance to the revised agreement with Mr.
Stephen Rees' affiliate in March 1997.

Acquisition of Fine Line Printed Circuit Design Inc. ("Fine Line")

On November 25, 1996, the Company acquired all the outstanding stock of
Fine Line in exchange for 223,321 Ordinary Shares of the Company, valued at
$25.52 per share.

Foreign Currency Payments in the Company's subsidiaries operating in the
People's Republic of China

The Company's subsidiaries operating in the People's Republic of China are
required to obtain approval from the relevant authorities when making foreign
currency payments.

9.Issuance of non-employee stock options

On June 3, 1996, the Company issued 20,000 stock options to a customer.

10. SHARE OPTION PLANS

In July 1993, the Company adopted an Executives' Share Option Scheme
("SOS") and an Executives' Incentive Share Scheme ("ISS") for selected
management employees of the Company. The Company granted stock options for
344,520 Ordinary Shares exercisable at $2.92 per share (fair market value at
date of the grant) under the SOS and stock options for 54,618 Ordinary Shares at
S$0.01 per share (fair market value at date of grant was $2.92 per share) under
the ISS.

In February 1994, 53,748 Ordinary Shares were issued due to the
exercise of the options under ISS. During fiscal 1994, the Company amortized the
full compensation expense of $159,303. In March 1994, 53,748 Ordinary Shares
were issued due to the exercise of the options granted under ISS.

On December 1, 1993, the Company adopted theThe Company's 1993 Share Option Plan (the "Plan") that provides for the
grant of incentive stock options, automatic option grants and non-statutory
stock options to employees and other qualified individuals to purchase Ordinary
Shares of the Company. At March 31, 1995, the
Company had reserved 900,000 Ordinary Shares for issuance under the plan. In August 1995,1996 the Company's 1993 Share Option Plan was
amended to reserve an additional 600,000500,000 Ordinary Shares for issuance. At March
31, 1997, the Company had reserved 2,000,000 Ordinary Shares for issuance and, in August 1996, was again
amended to reserve an additional 500,000 Ordinary Shares for issuance.under
the Plan.

In January 1995, the Company acquired nCHIP and thereby assumed the
existing nCHIP stock option plan and the employee stock options outstanding
thereunder. The outstanding nCHIP employee stock options were converted into
options to purchase approximately 345,389 of the Company's Ordinary Shares.

As atProforma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company has accounted for its employee stock options granted subsequent
to March 31, 1996,1995 under the fair value method of this Statement. The fair value
of these options to purchase 1,327,000 Ordinary Shareswas estimated at athe date of grant using the Black-Scholes
multiple option pricing model with the following weighted average exercise price of $12.63 per share were outstanding under the
share option plans.

F-15assumptions:
risk-free interest rates ranging from 5.31% to 5.66% and from 5.40%

F-19
63

FLEXTRONICS INTERNATIONAL LTD.72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

to 5.77% for 1996 and 1997, respectively; a dividend yield of 0.0%, a volatility
factor of the expected market price of the Company's common stock of 0.67, and a
weighted-average expected life of the option of 0.13 years beyond each
respective vesting period.

MARCH 31,
-------------
1996 1997
---- ----

Options granted 4 year vesting................................. 628 705
Options granted 2 year vesting................................. 15 15
---- ----
Total granted.................................................. 643 720
==== ====
Weighted average vesting period (years)........................ 3.96 3.96

The weighted average vesting period is rounded to 4 years.

The amount of compensation expense recognized under all Flextronics Share
Option Plans is $1,453 in 1996 and $3,290 in 1997.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those traded options, and because the changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

Had the compensation cost for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the SFAS 123, the Company's net income and earnings
per share would have been reduced to the proforma amounts indicated below:

MARCH 31,
-------------------
1996 1997
-------- ------

Net income/(loss):
As reported............................................ $(15,132) $7,463
Proforma............................................... (16,052) 5,380
Net income/(loss) per share
Primary
As reported......................................... $ (1.19) $ 0.50
Proforma............................................ (1.27) 0.36

Because SFAS 123 is applicable only to awards granted subsequent to
December 30, 1994, the proforma effect will not be fully reflected until 1998.

F-20
73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

The following table presents the activity for options:options.

1995 1996 1997
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS OUTSTANDING
-------------------------------------------------PRICE OPTIONS AVAILABLE
FOR GRANT SHARES PRICE PER SHAREOPTIONS PRICE
--------- ---------- ---------------------------- --------- -------- --------- --------
BALANCE AT MARCH 31, 1994............ 649,872 729,180 S$0.01
Outstanding -- US$6.67
nCHIPbeginning of year.... 1,004,902 $ 3.47 1,026,052 $ 4.76 1,315,970 $12.52
Granted............................. 231,249 8.97 641,783 20.63 721,203 25.10
Exercised........................... (143,699) 2.96 (304,201) 3.30 (239,633) 5.86
Forfeited........................... (66,400) 3.88 (47,664) 11.03 (124,629) 17.81
Outstanding -- end of year.......... 1,026,052 4.76 1,315,970 12.60 1,672,911 18.57
Exercisable at end of year.......... 394,535 414,855 576,896
Weighted average fair value of
options converted to Flex
options............................ 345,389 -- US$0.77 -- US$4.74
Options granted...................... (508,501) 508,501 US$0.77 -- US$16.75
Options exercised.................... -- (143,699) US$2.92 -- US$4.33
Options cancelled.......... 33,418 (33,418) US$2.92 -- US$10.50
-------- --------- -------------------
BALANCE AT MARCH 31, 1995............ 520,178 1,060,564 US$2.92 -- US$16.75
Increase in options available for
grant.............................. 600,000 -- S$0.01 -- US$35.75
Options granted...................... (641,783) 641,783 US$14.75 -- US$35.75
Options exercised.................... -- (304,201) US$0.77 -- US$14.50
Options cancelled.................... 71,146 (71,146) US$0.77 -- US$24.00
-------- --------- -------------------
BALANCE AT MARCH 31, 1996............ 549,541 1,327,000
======== =========granted during the year... 9.67 9.22 11.25

10.11. PROVISION FOR PLANT CLOSURE

The provision for plant closure of $2,454,000$5,868 in fiscal 1997 relates to the
downsizingcosts incurred in the closure of the MalaysiaTexas facility, the write-off of obsolete
equipment at the nChip semiconductor fabrication facility and Shekou, Chinadownsizing the
Singapore manufacturing operations. The provision includes $1$2 million provision
for inventory exposureseverance payment and $200,000$500 provision for doubtful
debts related to one specific projectthe write-off of fixed assets in
Malaysia.the Singapore manufacturing facilities. An amount of $1,254,000$2,808 associated with
certain obsolete equipment at the Company's facilities nChip and Texas have been
written off. The provision also includes severance payments amounting to $560
for the employees of the Texas and nChip facility.

The provision for plant closure of $1,254 in fiscal 1996 was associated
with the write off of certain obsolete equipment at the Company's facilities in
Malaysia and Shekou, China has been written off.

11. EXTRAORDINARY ITEMChina.

The components of plant closure costs are as follows:

MARCH 31,
-----------------
1996 1997
------ ------

Assets write-off........................................... $1,254 $3,308
Severance payment to employees............................. -- 2,560
------ ------
1,254 5,868
------ ------
Severance payment made during the year..................... -- $ 560
====== ======

12. BANK COMMITMENT FEES AND CONSULTANCY FEES

In July 1993,March 1997, the Company recognized $416,000recorded bank commitment fees expenses of extraordinary gain$1,469
which were incurred in connectionobtaining new credit facilities from its bankers to
finance the acquisition of the Karlskrona Facilities from Ericsson Business
Network AB and for working capital. In addition, the Company also recorded $362
of consultancy fees in March 1997 for a key employee of Ericsson with respect to
the forgivenessCompany's acquisition of accrued interest on a subordinated note.

12.the Karlskrona Facilities.

13. RELATED PARTY TRANSACTIONS

For the year ended March 31, 1997, the Company had net sales of $1,548 to
Metcal, Inc., a precision heating instrument company. The Company's Chairman and
Chief Executive Officer, Michael E. Marks has a beneficial interest in Metcal,
Inc.

For the year ended March 31, 1996, the Company had net sales of $2,132,972$2,133 to
Metcal, Inc., a precision heating instrument company.

F-21
74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

Prior to becoming the Company's Chief Executive Officer in January 1994, Michael E.
Marks was the President and Chief Executive Officer of Metcal, Inc. Michael E.
Marks remained as a director of Metcal, Inc. during the year ended marchMarch 31,
1996.1997.

In March 1997, the Company revised the agreement to pay in June 1998 a $15
million consulting fee to an entity affiliated with Stephen JL Rees Senior Vice
President, Worldwide Sales and Marketing. The Company and Mr. Rees agreed to
remove the remaining conditions to payment of the fee and to reduce this amount
of the fee which remains payable in June 1998 to $14 million.

For the year ended March 31, 1995,1997, the Company had net sales of $989,220 to
Metcal, Inc.

Following the acquisition of Astron, its Managing Director, Stephen JL
Rees, was made a director of the Company on April 15, 1996. At the date of the
Astron acquisition a loan of $2,908,000 totransacted with Croton Ltd
and Mayfield International Limited ("Mayfield"('Mayfield'), a company inboth companies of which Stephen
JL Rees has beneficial interests. During the current fiscal year, $118 was paid
for services rendered by Croton Ltd under a beneficial interest, was
outstanding. At March 31, 1996 the loan balance amounted to $2,085,082. The loan
is secured by a corporate guarantee from Mayfield's holding company and it bears
interest at 7.15% per annum, earning $26,911 in the period.management service contract. Astron
has also rented an office from Mayfield, and rentals charged to Astron during
the period amounted to $34,669.

In May 1993, Flextronics (Malaysia) Sdn. Bhd. sold plant and machinery to
FlexTracker Sdn. Bhd. valued at $2,033,315. In December 1993, Flextronics
(Malaysia) Sdn. Bhd. repurchased$208. At March 31, 1997 a portion of such plant and machinery from
FlexTracker Sdn. Bhd. worth $251,654. The sale and purchase of plant and
machinery represent the net book value recordedloan balance in the parties' booksamount of
$2,554 was due from Mayfield. The loan is unsecured, interest bearing at 7.15%
per annum and is wholly repayable by February 4, 1999.

14. MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS

Restatement

The Company has reconsidered its accounting treatment for the acquisition
of the Astron Group Limited ("Astron") and a new independent valuation was
performed as of the date of transfer. During the year

F-16acquisition to address certain matters not
addressed in the original valuation. The cost of acquiring Astron has also been
changed from amounts previously reported to correct certain errors. The
allocation of the revised purchase price to the assets acquired is based on the
new valuation report.

The originally reported consideration paid to acquire Astron at February 2,
1996 and the revised cost are as follows:

AS ORIGINALLY
REPORTED AS RESTATED
------------- -----------

Cash................................................ $13,440 $13,440
Ordinary shares..................................... 6,507 6,507
Ordinary shares to be issued June 30, 1998.......... 10,000 10,000
Promissory notes.................................... 15,000 15,000
Contingent ("earnout") consideration................ 3,125 --(i)
Service agreement................................... -- 14,124(ii)
Direct costs........................................ 700 700
------- -------
Total purchase consideration........................ $48,772 $59,771
======= =======

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

(i) Part of the conditions for the contingent earnout have been deemed by
management to have been met based on the management accounts of Astron at
March 31, 1996, but this amount was not accounted for as required by
generally accepted accounting principles where any contingent additional
consideration should be disclosed but not recorded as a liability.

(ii) The consultant and service agreement with an affiliate of the former
Chairman of Astron ("Service Agreement") required a $15 million payment on
June 30, 1998, of which $5 million is payable in cash and the balance in
Ordinary Shares. The Service Agreement was originally deemed a contingent
compensation agreement. However, no compensation expense was recorded in
1996 and no effect was given in the computation of earnings per share to
the portion payable in Ordinary Shares as required by generally accepted
accounting principles. On reconsideration, it was determined that the
agreement should be accounted for as the payment of purchase consideration.
The cash portion is included at its present value as of February 2, 1996,
and the stock portion has been included in the computation of earnings per
share. This Service Agreement was subsequently revised on March 27, 1997 to
remove the remaining conditions to payment of the fee and reduce the amount
payable to $14 million.

F-22
64

FLEXTRONICS INTERNATIONAL LTD.75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

In the Company's original accounting for the allocation of the purchase
price, certain intangible assets had been identified and valued. However, due to
an oversight, no value was recorded. The allocation of the purchase price as
originally reported and as reallocated on the basis of the new valuation are as
follows:

AS ORIGINALLY
REPORTED AS RESTATED
------------- -----------

Astron's net assets at fair value................... $16,960 $17,200
In-process research and development................. 31,562 29,000
Intangible assets................................... 250 11,910
Goodwill............................................ -- 4,758
Less: deferred tax liability........................ -- (3,097)
------- -------
Total............................................... $48,772 $59,771
======= =======

The Company has restated its March 31, 1996 financial statements to give
effect to the above changes in the consideration, and the new allocation of the
purchase price. The $17.4 million net loss previously reported for the year
ended March 1994, Flextronics (Singapore) Pte. Ltd. purchased $8,692,917 worth31, 1996 has been reduced by $2.3 million ($0.20 per share) to give
effect to the change in the amount of materialsin-process research and development
written off on behalf of FlexTracker Sdn. Bhd. The transfer of these materials
to FlexTracker Sdn. Bhd. was at original costacquisition offset in part by the amortization of the materials.

13. MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTSrecorded
goodwill and the increase in the acquired intangible assets. The per share
amount also includes the effect of restating the weighted average number of
outstanding Ordinary Shares and equivalents.

The effects of the adjustments described above are as follows:

Restatement of 1996 Net Loss

Net loss as originally reported................................. $(17,412)

Decrease in amount of in-process research and development
written off................................................... 2,562
Increase in:
Intangible asset amortization................................. (208)
Goodwill amortization......................................... (14)
Interest expense due from discounting of $5 million cash...... (60)
--------
Net loss as restated............................................ $(15,132)
========

The discussion of the Astron acquisition below gives effect to the
restatement of the 1996 amounts.

Current Year

In November 25, 1996, the Company acquired Fine Line Printed Circuit
Design, Inc. ("Fine Line"), a circuit board layout and prototype operation
located in San Jose, California. The acquisition was accounted for as a pooling
of interests and the Company has issued 223,321 Ordinary Shares in exchange for
all of the outstanding capital stock of Fine Line. Prior period financial
statements were not restated because the financial results of Fine Line do not
have a material impact on the consolidated result.

On December 20, 1996, the Company acquired 40% of FICO Investment Holding
Limited ("FICO") for $5.2 million of which $3 million was paid in December 1996
and the balance payment of $2.2 million which was paid in June 1997 was accrued
for in March 1997. The excess of the purchase price over the fair market value
of the net tangible assets acquired amounted to $3.2 million which are being
amortized over ten years. The Company has an option to purchase the remaining of
60% of FICO in 1998; the consideration for the remaining 60% is dependent on the
financial performance of FICO for the period ending December 31, 1997.

On March 27, 1997, the Company acquired the manufacturing facilities in
Karlskrona, Sweden and related inventory, equipment and assets from Ericsson
Business Networks AB ("Ericsson") for $82,354 which was financed by a bank loan.
The transaction has been accounted for under the purchase method and

F-23
76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

accordingly, the purchase price has been allocated to the assets based on their
estimated fair market values at the date of acquisition.

The consolidated financial statements contain the results of the acquired
companies from the date of acquisition.

Previous Years

On April 12, 1995, the Company acquired all of the issued share capital of
Assembly & Automation (Electronics) Limited, a private limited company
incorporated in the UK that provides contract manufacture of electronics and
telecommunications equipment, for a total consideration of $4.1 million by way
of cash and the issuance of 66,908 Ordinary Shares. The transaction has been
accounted for under the purchase method, and accordingly, the purchase price has
been allocated to the assets and liabilities assumed based upon their estimated
fair market values at the date of acquisition. The excess of the purchase price
over the fair market value of the net tangible assets acquired aggregated
approximately $4.6 million of which $237,000$237 was allocated to intangibleintangibles which are
being amortized on a straight line basis over their estimated useful life of
three years. Goodwill is amortized over twenty years.

On February 2, 1996, the Company acquired all of the issued share capital
of Astron Group Limited, a private limited company incorporated in the Hong Kong
who is a manufacturer of circuit boards used in electronics and
telecommunications, for a consideration of $45.6$59.8 million by way of cash;
issuance of 238,864238,684 Ordinary Shares and $10 million of Ordinary Shares of the
Company on June 30, 1998; and the issuance of promissory notes bearing interest
at 8%. The Company willhad originally agreed to pay an earnout of up to $12.5
million contingent upon Astron meeting certain pre-tax profit for calendar year
1996,1996.

In March 1997, management negotiated with the stockholders of Astron and an
earnout of $6.25 million was agreed. This amount has been added, in addition,March 1997
to the $45.6 million the Company has included $3.125 million of the earnout as
part of the purchase consideration.goodwill acquired.

The transaction has beenwas accounted for under the purchase method, and
accordingly, the purchase price has been allocated to the assets and liabilities
assumed based upon their estimated fair market values at the date of
acquisition. The valuation of Astron's In-processin-process research & development was
determined by an independent corporate valuation firm to be between $31 million to $37$29 million, and the Company
has written off $31.6this $29 million in the consolidated financial statements this year. An amountStatement of $250,000 was allocatedOperations for
the year ended March 31, 1996. The valuation has also resulted in the allocation
of $16.7 million to intangibles which are being amortized on a straight
line basis over their estimated useful lifegoodwill and identifiable intangible assets. Goodwill of
three years.$4.8 million and $11.9 million of identifiable intangible assets principally
related to developed technology, customer list, assembly workforce and
trademarks were recorded.

The Company has entered into consulting and service agreements with an affiliate of the former
Chairman of Astron, which provideprovided for an annual fee, plus a $15 million payment to be
made and expensed on June 30, 1998 subject to certain terms and conditionsconditions. A new agreement
was signed between the two parties in March 1997 which reduced the amount to be
met, which include continuation$14
million and removed the original terms and conditions. This revision to the
agreement has been accounted for as a reduction in the purchase price and
goodwill as of employment and non-competition clauses.this date of the new agreement.

The consolidated financial statements contain the results of the acquired
companies from the date of acquisition.

The following unaudited pro forma information of the Company reflects the
results of operations for the year ended March 31, 1995 and 1996 as if the
acquisitions of Assembly & Automation (Electronics) Limited and Astron Group
Limited had occurred as of April 1, 1994 and after giving effect to certain
adjustments including amortizing of intangibles and goodwill. The unaudited pro
forma information is based on acquired entities' results of operations for the
years ended December 31, 1994 and 1995 as the fiscal year and of these entities
and the rest of the group are non-coterminus. These pro forma results have been
prepared for

F-17
65

FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

comparative purposes only and do not purport to be indicative of what operating
results would have been had the acquisitions actually took place at April 1,
1994 or of operating results which may occur in the future.

YEAR ENDED MARCH 31,
---------------------
1995 1996
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATE
UNAUDITED)

Net sales...................................................... $273,872 $466,039
Net income/(loss).............................................. (28,017) 13,413
Net income/(loss) per share.................................... (2.26) 1.00

Previous Years

In January 1995, the Company acquired nCHIP by the issuance of 2,104,602
ordinary shares of S$0.01 par value each, in exchange for all of the outstanding
capital stock of nCHIP. In addition, outstanding nCHIP employee stock options
were converted into options to purchase approximately 345,389 of the Company's
ordinary shares. The transaction was accounted for as a pooling of interestinterests and
therefore, all prior period financial statements presented have been restated as
if the acquisition took place at the beginning of such periods.

F-24
77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

nCHIP has a calendar year end and, accordingly, the nCHIP statement of
income for the year ended December 31, 1993 have been combined with the
Company's statement of income for the fiscal years ended March 1994. Effective
April 1, 1994 nCHIP's fiscal year end has been changed from December 31 to March
31 to conform to the Company's fiscal year-end. Accordingly, nCHIP's operations
for the three months ended March 31, 1994 including net sales of $2,302,218$2,302 and net
loss of $595,868$596 have been excluded from consolidated results and have been reported
as an adjustment to the April 1, 1994 consolidated retained earnings.

Separate results of operations for the period prior to the acquisition are
as follows:

UNAUDITED
FISCAL YEAR NINE MONTHS
ENDED
ENDED
MARCH 31, DECEMBER 31,
1994
1994
----------- ------------
(IN THOUSANDS)

Net sales
Company.................................................... $ 122,948Company....................................................... $163,249
nCHIP...................................................... 8,397nCHIP......................................................... 7,623
--------
--------
Combined................................................... $ 131,345Combined...................................................... $170,872
========
========
Net income
Company.................................................... $ 2,896Company....................................................... $ 7,626
nCHIP...................................................... (745)nCHIP......................................................... (3,400)
--------
--------
Combined...................................................Combined...................................................... $ 2,151 $ 4,226
========
========
Other changes in shareholders' equity
Company.................................................... $ 50,098Company....................................................... $ (144)
nCHIP...................................................... 9nCHIP......................................................... 5,287
--------
--------
Combined...................................................Combined...................................................... $ 50,107 $ 5,143
========
========

F-18
66

FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 20, 1994, the Company had a 49% interest in FlexTracker and
accounted for this investment using the equity method. On December 30, 1994, the
Company acquired the net assets (except the $1.0 million loan made by the joint
venture partner, HTS, to FlexTracker) for approximately $3.3 million.

On March 1, 1994, the Company acquired all of the outstanding stock of Relevant,FTI,
a company that provides high value-added, high quality, just-in-time
manufacturing services to original equipment manufacturers in the computer and
electronics industry, for approximately $4.0 million. The transaction has been
accounted for under the purchase method, and accordingly, the purchase price has
been allocated to the assets acquired and liabilities assumed based upon their
estimated fair market values at the date of acquisition. Such allocatedallocation has
been based on the valuation by an independent corporate valuation firm. The
excess of the purchase price over the fair market value of the net tangible
assets acquired resulting in goodwill aggregated approximately $2.4 million and
arehas been allocated to goodwill which is being amortized on a straight-line basis
over theirits estimated useful life of twenty-five yearsyears.

The operating results of RelevantFTI are included in the Company's consolidated
results of operations from the date of acquisition.

The following unaudited pro forma information of the Company reflects the
results of operations for the years ended March 31, 19941995 and 19951996 as if the
acquisitions of nCHIP,Assembly & Automation (Electronics) Limited and Astron Group
Limited had occurred as of April 1, 1994 and as if the acquisitions of the net
assets and business of Flextracker and RelevantFTI also had, occurred as of April 1,
19931994 and after giving effect to certain adjustments including amortization of
intangibles and goodwill. The unaudited proforma information does not include
the effects of acquiring the Karlskrona Facilities in March 1997 because
information relating to its

F-25
78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

operation prior to the company's acquisition is not available. The unaudited pro
forma information is based on certainthe acquired entities' results of operations for
the years ended December 31, 19931994 and 19941995 as the fiscal year end of these
entities and the rest of the group are not co-terminus. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of what operating results would have been had the acquisition
actually took place at April 1, 19931994 or 1995 or of operating results which may
occur in the future.

YEAR ENDED MARCH 31, ---------------------
1994 1995 1996
-------------------------------------------------------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATE
UNAUDITED)-------

Net Sales...................................................... $155,349 $255,733sales............................................... $292,219 466,039
Net income before Extraordinary Gain........................... 92 4,301
Net income after Extraordinary Gain............................ 508 4,301income.............................................. (872)* 11,977*
Net income per share........................................... 0.07 0.36share.................................... (0.07) 0.89

14.- ---------------

* Excludes the effects of the write-off of $29,000 of in-process research and
development at the date of the acquisition of Astron.

15. SEGMENT REPORTING

The Company operates in one primary business segment -- providing
sophisticated electronics assembly and turnkey manufacturing services to a
select group of original equipment manufacturers engaged in the computer,
medical, consumer electronics and communications industries. Sales to major
customers who accounted for more than 10% of net sales were as follows:

MARCH 31,
---------------------------
1994------------------------
CUSTOMER 1995 1996 ------ ------ -------1997
----------------------------------------------------- ---- ----- -----

CUSTOMER
Visioneer................................................. 0.44%Visioneer............................................ 1.70% 13.14% Lifescan.................................................. 22.8%7.00%
Lifescan............................................. 20.1% 14.10% IBM....................................................... 14.4% 7.7% 2.80%13.34%
Global Village............................................ --Village....................................... 4.50% 10.50% 8.26%
U.S. Robotics........................................ 0.00% 0.00% 10.63%

F-19
67

FLEXTRONICS INTERNATIONAL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Sales for similar classes of products within the Company's business segment
is presented below (in thousands):

MARCH 31,
----------------------------------
1994PRODUCT TYPE 1995 1996 1997
------------------------------------------- -------- -------- --------
(IN THOUSANDS)

PRODUCT TYPE
Medical............................................ $ 30,076Medical.................................... $ 49,152 $ 78,322 Computer, computer peripherals and
telecommunications............................... 64,865 120,818 285,881
Industrial.........................................$ 89,682
Computer................................... 77,419 220,930 250,498
Telecommunication.......................... 43,399 60,466 75,947
PCB........................................ -- 4,485 28,470
Industrial................................. -- 9,664 6,832
Consumer products.................................. 15,792products.......................... 47,515 23,858 MCMs............................................... 8,397 11,84712,495
MCMs....................................... 11,847.. 19,817 Disk drive/tape drive.............................. 4,331 -- --
Others............................................. 7,88419,214
Others..................................... 8,054 30,804 7,447
-------- -------- --------
$131,345 $237,386 $448,346 $490,585
======== ======== ========

F-26
79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION

UNLESS OTHERWISE INDICATED)

A summary of the Company's operations by geographical area for the three
years ended March 31, 1994, 1995, 1996 and 19961997 was as follows (in thousands):

MARCH 31,
----------------------------------
1994PRODUCT TYPE 1995 1996 1997
------------------------------------------- -------- -------- --------
(IN THOUSANDS)

NET SALES:
Singapore:
Unaffiliated customers
Domestic............................................ $ 29,151Domestic............................ $ 3,596 $ 653 Export.............................................. --$ 1,401
Export.............................. 7,358 9,277 Intercompany.......................................... 32,849851
Intercompany.......................... 67,572 77,899 88,054
-------- -------- --------
62,000 78,526 87,829 90,306
Hong Kong/China andChina/Mauritius:
Unaffiliated customers
Domestic............................ 17,757 11,838 11,398
Export.............................. -- 2,980 21,203
Intercompany.......................... 29,353 60,780 129,162
-------- -------- --------
47,110 75,598 161,763
USA/Europe/Mexico:
Unaffiliated customers
Domestic............................ $ 50,506 $207,961 $208,225
Export.............................. -- 13,767 2,431
Intercompany.......................... -- 27 9
-------- -------- --------
50,506 221,755 210,665
Malaysia:
Unaffiliated customers
Domestic............................................ 6,452 17,757 11,838
Export.............................................. 83,668 158,169 204,850
Intercompany.......................................... 21,415 29,356 60,780Domestic............................ -- -- --
Export.............................. 158,168 $201,870 $245,075
Intercompany.......................... 4 -- --
-------- -------- --------
111,535 205,282 277,468
USA/UK:
Unaffiliated customers
Domestic............................................ 12,074 50,506 207,961
Export.............................................. -- -- 13,767
Intercompany........................................ -- -- 27158,172 201,870 245,075
Eliminations............................... (96,928) (138,706) (217,224)
-------- -------- --------
12,074 50,506 221,755
Eliminations............................................. (54,264) (96,928) (138,706)$237,386 $448,346 $490,585
======== ======== ========
INCOME/(LOSS) FROM OPERATIONS:
Singapore................................ $ 90 $(25,334) $ (934)
Hong Kong/China/Mauritius................ 638 (6,110) 4,787
USA/Mexico............................... (1,290) 4,570 (5,531)
Europe................................... 15 (1,514) (1,829)
Malaysia................................. 10,754 18,953 14,426
-------- -------- --------
$131,345 $237,386 $448,346$ 10,207 $ (9,435) $ 10,919
======== ======== ========

F-20F-27
68

FLEXTRONICS INTERNATIONAL LTD.80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION
UNLESS OTHERWISE INDICATED)

MARCH 31,
1994----------------------------------
PRODUCT TYPE 1995 1996 1997
-------- -------- --------
(IN THOUSANDS)

Income (loss) from operations:
Singapore................................................IDENTIFIABLE ASSETS:
Singapore................................ $ 55323,426 $ 90 $(27,674)48,434 $ 50,118
Hong Kong/China and Malaysia............................. 2,913 11,392 12,843China/Mauritius................ 17,020 50,284 68,695
USA/UK................................................... 369 (1,275) 3,056Mexico............................... 26,354 73,552 74,884
Europe................................... 22 11,060 116,919
Malaysia................................. 49,295 47,694 48,618
-------- -------- --------
$ 3,835 $ 10,207 $(11,775)
======== ======== ========
Identifiable assets:
Singapore................................................ $ 46,115 $ 23,426 $ 31,998
Hong Kong/China and Malaysia............................. 49,956 66,315 97,977
USA/UK................................................... 7,058 26,376 84,613
-------- -------- --------
$103,129 $116,117 $214,588$231,024 $359,234
======== ======== ========

Geographic revenue transfers are based on selling prices to unaffiliated
companies, less discounts. Income (loss) from operations is net sales less
operating expenses, goodwill amortization and provision for plant closings, but
prior to interest or other expenses and income taxes.

The Company's subsidiaries, with the exception of Astron Group Limited, are
interdependent and are not managed for stand alone results. Certain operational
functions for the entire Company, such as marketing and administration, may be
carried out by a subsidiary in one country. In addition, the Company may from
time to time shift responsibilities from a subsidiary in one country to a
subsidiary in another country, thereby changing the operating results of the
impacted subsidiaries but not the Company as a whole. For these reasons, the
Company believes that changes in results of operations in the individual
countries in which it operates are not necessarily reflective of material
changes in the Company's overall results.

F-21F-28
6981

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH DECEMBER 31, 31,
1996 1996*JUNE 30,
1997* 1997
----------- ------------
--------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)THOUSANDS)

ASSETS

Current Assets
Cash...............................................................assets
Cash................................................................ $ 13,57823,645 $ 6,54633,092
Accounts receivable, net........................................... 67,194 78,114net............................................ 69,331 74,001
Inventories -- Note B.............................................. 45,262 52,637B............................................... 106,583 108,926
Other current assets............................................... 4,343 4,087assets................................................ 10,769 12,308
-------- --------
Total current assets............................................... 130,377 141,384assets........................................ 210,328 228,327
-------- --------
Property and equipment
At cost............................................................ 110,716 98,998cost............................................................. 153,137 180,255
Accumulated depreciation........................................... (39,715) (37,896)depreciation............................................ (42,172) (44,420)
-------- --------
Net property and equipment......................................... 71,001 61,102equipment.......................................... 110,965 135,835
-------- --------
Other non-current assets............................................. 16,556 12,102assets............................................ 37,941 37,969
-------- --------
TOTAL ASSETS......................................................... $217,934 $214,588ASSETS................................................ $ 359,234 $ 402,131
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank borrowings....................................................borrowings..................................................... $ 5,710111,075 $ 14,37969,000
Current portion of capital lease and long-term debt................ 21,908 20,934debt................. 12,233 11,754
Accounts payable................................................... 59,500 64,625payable.................................................... 73,631 82,881
Other current liabilities.......................................... 17,054 13,770liabilities........................................... 38,436 63,368
-------- --------
Total current liabilities.......................................... 104,172 113,708liabilities................................... 235,375 227,003
-------- --------
Long term debt, less current portion................................. 18,985 17,554
Capitalportion.................................. 25,712 72,018
Obligations under capital leases less current portion................................. 9,034 10,120
Deferredand deferred income taxes................................................ 1,256 1,256taxes............ 13,847 13,860
Notes payable to shareholders........................................ 400 686shareholders......................................... 223 223
Minority interest....................................................interest..................................................... 485 485
Shareholders' equity
Ordinary shares, S$0.01 par value:
Authorized -- 100,000,000 shares at March 31, 19961997 and December
31, 1996June 30, 1997
Issued and outstanding -- 13,213,28913,676,243 shares at March 31, 19961997 and
13,581,79113,752,293 shares at December 31, 1996..................... 87 85June 30, 1997............................... 88 89
Additional paid-in capital......................................... 94,652 93,634capital.......................................... 95,570 95,207
Accumulated deficit................................................ (11,137) (22,940)deficit................................................. (12,066) (6,754)
-------- --------
Total shareholders' equity......................................... 83,602 70,779equity.................................. 83,592 88,542
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................... $217,934 $214,588EQUITY............................ $ 359,234 $ 402,131
======== ========

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

* The balance sheet at March 31, 19961997 has been derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.

See notes to condensed consolidated financial statements.

F-22F-29
7082

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

THREE MONTHS ENDED
DECEMBER 31,
---------------------JUNE 30,
-----------------------
1996 19951997
-------- --------

(UNAUDITED)

RESTATED
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)

Net sales.............................................................. $121,525 $131,816sales............................................................ $117,889 $196,883
Costs and expenses:
Cost of sales........................................................ 111,477 119,996sales...................................................... 106,143 177,212
Selling, general and administrative expenses......................... 6,922 4,989expenses....................... 5,611 10,549
Goodwill and intangible amortization................................. 288 264
Provision for plant closings......................................... 2,321 0intangibles amortization.............................. 659 742
Interest expense, and other, net...................................... 78 354net.............................................. 516 2,632
Income from associated company..................................... -- 300
-------- --------
121,086 125,603112,929 190,835
Income before income taxes........................................... 439 6,213taxes......................................... 4,960 6,048
Provision for income taxes........................................... 371 1,211taxes......................................... 763 736
-------- --------
Net income after income taxes.......................................... $ 68 $ 5,002taxes........................................ 4,197 5,312
======== ========
Earnings per share:
Net income per share.................................................share............................................... $ 0.010.28 $ 0.37
-------- --------0.36
======== ========
Weighted average ordinary shares and equivalents....................... 14,470 13,702equivalents..................... 14,914 14,955
======== ========

See notes to condensed consolidated financial statements.

F-23F-30
7183

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOMECASH FLOWS

(UNAUDITED)

NINETHREE MONTHS ENDED
DECEMBER 31,
---------------------JUNE 30,
-----------------------
1996 19951997
-------- --------
RESTATED
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)THOUSANDS)

Net sales.............................................................. $362,264 $322,645
Costscash provided by operating activities............................ $ 3,455 $ 17,955
Investing activities:
Purchases of property and expenses:
Costequipment................................ (5,739) (28,173)
Proceeds from sale of sales........................................................ 325,827 293,461
Selling, generalproperty and administrative expenses......................... 19,101 13,255
Goodwill and intangible amortization................................. 863 783
Provisionequipment....................... 39 88
Payment for plant closings......................................... 2,321 0
Interest expense and other, net...................................... 1,450 1,121
-------- --------
349,562 308,620
Income before income taxes........................................... 12,702 14,025
Provision for income taxes........................................... 2,166 2,399Astron................................................. -- (6,250)
-------- --------
Net income after income taxes.......................................... $ 10,536 $ 11,626cash used for investing activities............................... (5,700) (34,335)
======== ========
Earnings per share:Financing activities:
Borrowings from banks, net......................................... 4,605 27,925
Repayment of capital lease obligations............................. (701) (2,129)
Repayment of long-term debt........................................ (342) (277)
Repayment of loan from related party............................... 350 --
Net income per share................................................. $ 0.73 $ 0.89proceeds from issuance of share capital........................ 547 308
-------- --------
Net cash provided by financing activities............................ 4,459 25,827
======== ========
Weighted average ordinary shares and equivalents....................... 14,377 13,130Net increase in cash................................................. 2,214 9,447
Cash, beginning of period............................................ 6,546 23,645
-------- --------
Cash, end of period.................................................. $ 8,760 $ 33,092
======== ========

See notes to condensed consolidated financial statements.

F-24F-31
7284

FLEXTRONICS INTERNATIONAL LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

NINE MONTHS ENDED
DECEMBER 31,
---------------------
1996 1995
-------- --------
(IN THOUSANDS)

Net cash provided by (used for) operating activities................... $ 40,097 $(10,894)
Investing activities:
Purchases of property and equipment.................................. (17,857) (18,542)
Proceeds from sale of property and equipment......................... 732 103
Payment for business acquired, net of cash acquired.................. 0 (3,116)
Investment........................................................... (3,000) 0
-------- --------
Net cash used for investing activities................................. (20,125) (21,555)
-------- --------
Financing activities:
Borrowings from (repayment) to banks................................. (8,645) 8,225
Source (repayment) of capital lease obligations...................... (4,851) 3,023
Source (repayment) of long-term debt................................. 574 1,947
Repayment of loan from related party................................. 1,381 0
Loan made to related party........................................... (1,938)
Net proceeds from issuance of share capital.......................... 825 22,929
Payment of secondary public offering expenses and
nCHIP financing expenses.......................................... 0 0
Investment...........................................................
Repayment of notes payable........................................... (286) (23)
-------- --------
Net cash provided by (used for) financing activities................... (12,940) 36,101
-------- --------
Net increase in cash................................................... 7,032 3,652
Cash, beginning of period.............................................. 6,546 4,751
-------- --------
Cash, end of period.................................................... $ 13,578 $ 8,403
======== ========

See notes to condensed consolidated financial statements.

F-25
73

FLEXTRONICS INTERNATIONAL LTD.AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

DECEMBER 31, 1996

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals)adjustments) considered necessary for a fair
presentation have been included. Operating results for the ninethree month period
ended December 31, 1996June 30, 1997 are not necessarily indicative of the results that may be
expected for the year endedending March 31, 1997. For further information, refer to the consolidated financial statements
and footnotes thereto included elsewhere herein for the year ended March 31,
1996.1998.

NOTE B -- INVENTORIES

Inventories are stated at the lower of cost or market value. Cost is
comprised of direct materials on a first-in-first-out basis and, in the case of
finished products and work-in-progress, direct labor and attributable production
overheads based on normal levels of activity. The components of inventory
consist of the following:

DECEMBER 31, MARCH 31 1996 1996
------------JUNE 30
1997 1997
--------- --------
(IN THOUSANDS)

Raw materials................................................materials.......................................... $ 40,610 $42,202
Work-in-process.............................................. 9,573 14,04964,213 $ 95,612
Work-in-process........................................ 16,561 10,753
Finished goods............................................... 1,028 962
------- -------goods......................................... 25,809 2,561
-------- --------
Total........................................ $ 51,211 $57,213
Less: Allowance for obsolescence............................. (5,949) (4,576)
------- -------
$ 45,262 $52,637
======= =======106,583 $108,926
======== ========

NOTE C -- ACQUISITION

On November 25, 1996,RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
SFAS No. 128 establishes a different method of computing net income per share
than is currently required under the provisions of Accounting Principles Board
Opinion No. 15. Under SFAS No. 128, the Company acquired Fine Line Printed Circuit Design
Inc. ("Fine Line")will be required to present both
basic net income per share and diluted net income per share.

The Company plans to adopt SFAS No. 128 in its fourth fiscal quarter ending
March 31, 1998 and at that time all historical net income per share data
presented will be restated to conform to the provisions of SFAS No. 128. Under
the provisions of SFAS 128, basic and diluted net income per share for the three
month periods ended June 30, 1997 and June 30, 1996, would have been $0.38 and
$0.36 and $0.30 and $0.28, respectively.

In February 1997, FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", a circuit board layout and prototype operation located in
San Jose, California. The acquisition was accounted for as a pooling of
interests andwhich will be adopted by the Company has issued 223,321 Ordinary Sharesin the fourth
quarter of S$0.01 par value
per share in exchange for all of the outstanding1998. SFAS No. 129 requires companies to disclose certain information
about their capital stock of Fine Line.
Prior period financial statements werestructure. The Company does not restated because the financial
results of Fine Line did notanticipate that SFAS No. 129
will have a material impact on the consolidated result.

Onits financial statements.

In July 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for fiscal years ending after December 20, 1996, the Company acquired 40% of FICO Investment Holding's
Limited ("FICO") for $5.2 million, of which $3.0 million was paid in December
1996 and the balance is due in April15, 1997. The Company
has an option to purchasedoes not anticipate that SFAS No. 130 will have a material effect on its
financial position, results of operations, or cash flows.

F-32
85

FLEXTRONICS INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

NOTE D -- NET INCOME PER SHARE

Net income per share for each period is calculated by dividing net income
by the remaining 60%weighted average shares of FICO in 1998common stock and common stock equivalents
outstanding during the consideration forperiod using the remaining 60%treasury stock method. Common stock
equivalents consist of shares issuable upon the exercise of outstanding common
stock options and warrants. Fully diluted net income per share is dependent onsubstantially
the financial performance of FICO for period ending December 31,
1997. FICO produces injection molded plastics for electronics companies with
manufacturing facilities in Shenzhen, China.

F-26same as primary net income per share.

F-33
74

- ------------------------------------------------------
- ------------------------------------------------------86

======================================================

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or by any of the Underwriters. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the dates as of which information is given in this Prospectus. This
Prospectus does not constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such solicitation.

----------------------------
TABLE OF CONTENTS
----------------------------

Page

Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Acquisition of Karlskrona
Facilities.......................... 5
The Company........................... 65
Risk Factors.......................... 76
Enforcement of Civil Liabilities...... 14
Use of Proceeds....................... 1415
Dividends............................. 1415
Price Range of Ordinary Shares........ 1516
Capitalization........................ 1617
Selected Financial Data............... 1718
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 1819
Business.............................. 2632
Management............................ 3541
Principal Shareholders................ 3743
Description of Capital Shares......... 3945
Taxation.............................. 4248
Underwriting.......................... 4450
Certain Legal Matters................. 4551
Experts............................... 4551
Available Information................. 51
Consolidated Financial Statements..... F-1

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

- ------------------------------------------------------
- ------------------------------------------------------======================================================

======================================================
1,750,000 SHARES

[LOGO]

ORDINARY SHARES
-------------------------
PROSPECTUS
-------------------------
MONTGOMERY SECURITIES

COWEN & COMPANY

SALOMON BROTHERS INC

UBS SECURITIES

Dated , 1997

- ---------------------------------------------------
- ---------------------------------------------------===================================================
75

[SUBSTITUTE PAGE FOR INTERNATIONAL PROSPECTUS]

SUBJECT TO COMPLETION FEBRUARY 12, 1997

1,750,000 ORDINARY SHARES

[LOGO]

All of the 1,750,000 Ordinary Shares offered hereby are being sold by
Flextronics International Ltd. ("Flextronics" or the "Company"). Of the
1,750,000 Ordinary Shares offered hereby 437,500 shares initially are being
offered outside the United States and Canada by the International Managers and
1,312,500 shares initially are being offered in a concurrent offering in the
United States and Canada by the U.S. Underwriters. The public offering price and
the underwriting discount per share are identical for both of the offerings. See
"Underwriting."

The Company's Ordinary Shares are quoted on the Nasdaq National Market
under the symbol "FLEXF." On February 11, 1997, the last reported sale price for
the Ordinary Shares was $26 1/4 per share. See "Price Range of Ordinary Shares."

SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE ORDINARY SHARES
OFFERED HEREBY.
------------------------

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

Price to Underwriting Proceeds to
Public Discount(1) Company(2)

- ----------------------------------------------------------------------------------------
Per Share...................... $ $ $
Total(3)....................... $ $ $
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------

(1) See "Underwriting" for information concerning indemnification of the
International Managers and the U.S. Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at $360,000.

(3) The Company has granted to the International Managers and the U.S.
Underwriters 30-day options to purchase up to 65,625 and 196,875 additional
Ordinary Shares, respectively, in each case solely to cover over-allotments,
if any. If these options are exercised in full, the Price to Public will
total $ , the Underwriting Discount will total $ , and
the Proceeds to Company will total $ .

The Ordinary Shares are offered by the International Managers and the U.S.
Underwriters subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the certificates representing such shares will be made against payment therefor
at the office of Montgomery Securities on or about , 1997.
------------------------

UBS LIMITED
MONTGOMERY SECURITIES
COWEN & COMPANY
SALOMON BROTHERS INTERNATIONAL LIMITED

The date of this Prospectus is , 1997.
76

[SUBSTITUTE PAGE FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

The underwriters named below (the "International Managers") have severally
agreed, subject to the terms and conditions in the underwriting agreement (the
"International Underwriting Agreement") by and among the Company and the
International Managers, to purchase from the Company the number of Ordinary
Shares indicated below opposite their respective names, at the public offering
price less the underwriting discount set forth on the cover page of this
Prospectus. The International Underwriting Agreement provides that the
obligations of the International Managers are subject to certain conditions
precedent and that the International Managers are committed to purchase all of
the Ordinary Shares offered hereby (other than those covered by the
International Managers' over-allotment option described below) if they purchase
any.

NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------

UBS Limited...............................................................
Montgomery Securities.....................................................
Cowen & Company...........................................................
Salomon Brothers International Limited....................................
---------
Total........................................................... 437,500
=========

The Company also has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with certain underwriters in the United States and
Canada (the "U.S. Underwriters" and, together with the International Managers,
the "Underwriters"). Subject to the terms and conditions set forth in the U.S.
Underwriting Agreement, and concurrently with the sale of 437,500 Ordinary
Shares to the International Managers, the Company has agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters severally have agreed to purchase, an
aggregate of 1,312,500 Ordinary Shares. The offering price per share and the
total underwriting discount per share are identical under the International
Underwriting Agreement and the U.S. Underwriting Agreement.

In the International Underwriting Agreement and the U.S. Underwriting
Agreement, the International Managers and the U.S. Underwriters, respectively,
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the Ordinary Shares being sold pursuant to each such Agreement if any of
the Ordinary Shares being sold pursuant to each such Agreement are purchased.
Under certain circumstances, the commitments of non-defaulting International
Managers or U.S. Underwriters may be increased. The purchases of Ordinary Shares
by the International Managers and the U.S. Underwriters are conditioned upon one
another.

The International Managers propose initially to offer the shares to the
public at the public offering price set forth on the cover page of this
Prospectus, and to certain banks, brokers and dealers (the "Selling Group") at
such price less a concession not in excess of per share, and the
International Managers may allow, and the members of the Selling Group may
reallow, with the consent of Montgomery Securities, a discount not in excess of
$ per share to other International Managers or to other members of the
Selling Group. After the public offering, the public offering price, concession
and discount may be changed.

The Company has granted to the International Managers an over-allotment
option, exercisable during the 30-day period after the date of this Prospectus,
to purchase up to 65,625 additional Ordinary Shares at the same price per share
as the initial shares to be purchased by the International Managers. The
International Managers may exercise such option only to cover over-allotments
made in the sale of the Ordinary Shares that the International Managers have
agreed to purchase. To the extent the International Managers exercise such
option, each International Manager will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Company has also granted an
option to the U.S. Underwriters, exercisable during the 30-day period after the
date of this Prospectus, to purchase up to an aggregate of 196,875 additional
Ordinary Shares to cover over-allotments, if any, on terms similar to those
granted to the U.S. Underwriters.

The International Managers and the U.S. Underwriters have entered into an
Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the

X-2
77

[SUBSTITUTE PAGE FOR INTERNATIONAL PROSPECTUS]

Intersyndicate Agreement, sales may be made between the International Managers
and the U.S. Underwriters of such number of Ordinary Shares as may be mutually
agreed. The prices of any Ordinary Shares so sold shall be the public offering
price, less an amount not greater than the selling concession.

The International Underwriting Agreement provides that the Company will
indemnify the International Managers against certain liabilities, including
civil liabilities under the Securities Act, or will contribute to payments the
International Managers may be required to make in respect thereof.

The Company has agreed, following completion of this offering, not to
issue, offer, sell, contract to sell or otherwise dispose of any Ordinary Shares
or securities convertible into or exchangeable or exercisable for Ordinary
Shares without the prior written consent of Montgomery Securities for a period
of 90 days after the date of this Prospectus, except that the Company may,
without such consent, (i) grant options pursuant to its existing employee
benefit plans or issue Ordinary Shares upon exercise of outstanding stock
options, and (ii) issue Ordinary Shares in connection with acquisitions. The
officers and directors of the Company have agreed that they will not sell more
than an aggregate of 85,000 Ordinary Shares without the prior written consent of
Montgomery Securities for a period of 90 days after the date of this Prospectus.

Each International Manager has agreed that (i) it has not offered or sold,
and will not offer or sell, directly or indirectly, any Ordinary Shares offered
hereby in the United Kingdom by means of any document except in circumstances
which do not constitute an offer to the public for the purposes of the Public
Offers of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Public Offers of Securities Regulations 1995
and the Financial Services Act 1986 with respect to anything done by it in
relation to the Ordinary Shares in, from or otherwise involving the United
Kingdom, and (iii) it has only issued or passed on and will only issue or pass
on to any person in the United Kingdom any document received by it in connection
with the issuance of Ordinary Shares if that person is of a kind who falls
within Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements)(Exemptions) Order 1996.

In connection with this offering, certain U.S. Underwriters and selling
group members may engage in passive market making transactions in the Ordinary
Shares on the Nasdaq National Market immediately prior to the commencement of
sales in this offering, in accordance with Rule 10b-6A under the Exchange Act.
Passive market making consists of displaying bids on the Nasdaq National Market
that are limited by the bid prices of independent market makers and completing
purchases in response to order flow at prices limited by such bids. Net
purchases by a passive market maker on each day are limited to a specified
percentage of the passive market maker's average daily trading volume in the
Ordinary Shares during a specified period and must be discontinued for any day
in which such limit is reached. Passive market making may stabilize the market
price of the Ordinary Shares at a level above that which might otherwise prevail
and, if commenced, may be discontinued at any time.

CERTAIN LEGAL MATTERS

X-3
78

[SUBSTITUTE PAGE FOR INTERNATIONAL PROSPECTUS]

EXPERTS

The consolidated financial statements and schedules of Flextronics at March
31, 1994, 1995 and 1996 and for each of the three years in the period ended
March 31, 1996 included in this Prospectus and Registration Statement have been
audited by Ernst & Young, independent auditors, as set forth in their report
thereon included herein and in the Registration Statement, and are included in
reliance upon such report given upon the authority of such Firm as experts in
accounting and auditing.

The financial statements and schedules of Astron at December 31, 1995 and
for each of the two years in the period ended December 31, 1995 incorporated by
reference into this Prospectus and Registration Statement have been audited by
Deloitte Touche Tomatsu International, independent auditors, as set forth in
their report thereon incorporated by reference herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The financial statements and schedules of A&A as of June 30, 1993 and 1994
and for each of the two years in the period ended June 30, 1993 and for the
eighteen month period ended December 31, 1994 incorporated by reference in this
Prospectus have been audited by Coopers & Lybrand, independent auditors, as set
forth in their report thereon, and are incorporated by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

X-4
79

[SUBSTITUTE PAGE FOR INTERNATIONAL PROSPECTUS]

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

----------------------------
TABLE OF CONTENTS
----------------------------

Page

Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Acquisition of Karlskrona
Facilities.......................... 5
The Company........................... 6
Risk Factors.......................... 7
Enforcement of Civil Liabilities...... 14
Use of Proceeds....................... 14
Dividends............................. 14
Price Range of Ordinary Shares........ 15
Capitalization........................ 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 26
Management............................ 35
Principal Shareholders................ 37
Description of Capital Shares......... 39
Taxation.............................. 42
Underwriting.......................... 44
Certain Legal Matters................. 45
Experts............................... 45
Consolidated Financial Statements..... F-1

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

- ------------------------------------------------------
- ------------------------------------------------------
1,750,000 SHARES

[LOGO]

ORDINARY SHARES
-------------------------
PROSPECTUS
-------------------------
UBS LIMITED

MONTGOMERY SECURITIES

COWEN & COMPANY

SALOMON BROTHERS
INTERNATIONAL LIMITED
Dated , 1997
- ---------------------------------------------------
- ---------------------------------------------------

X-5
8087

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses to be paid by the
Registrant in connection with the sale of the Ordinary Shares being registered.
All amounts are estimates except for the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market filing fee.

Securities and Exchange Commission registration fee.......................fee...................... $ 16,085
NASD filing fee...........................................................fee.......................................................... 5,808
Nasdaq National Market filing fee.........................................fee........................................ 17,500
Accounting fees and expenses.............................................. 35,000expenses............................................. 440,000
Legal fees and expenses................................................... 200,000
Printing.................................................................. 75,000expenses.................................................. 500,000
Printing................................................................. 150,000
Blue sky fees and expenses................................................expenses............................................... 10,000
Miscellaneous.............................................................Miscellaneous............................................................ 607
-----
Total........................................................... $360,000
=====----------
Total.......................................................... $1,140,000
==========

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article 155 of the Company's Articles of Association provides that, subject
to the Companies Act, every director or officer shall be entitled to be
indemnified by the Company against all liabilities incurred by him in the
execution and discharge of his duties or in relation thereto including any
liability in defending any proceedings, civil or criminal, which relate to
anything done or omitted or alleged to have been done or omitted by him as an
officer or employee of the Company and (i) in which judgment is given in his
favor (or the proceedings otherwise disposed of without finding or admission of
any material breach of duty), (ii) in which he is acquitted or (iii) in
connection with any application under any statute for relief from liability in
respect of any such act or omission in which relief is granted to him by the
court and further, that no director or other officer shall be liable for the
acts, receipts, neglects or defaults of any other director or officer or for
joining in any receipt or other act for conformity or for any loss or expense
happening to the Company through the insufficiency or deficiency of title to any
property acquired by order of the directors for the Company or for the
insufficiency or deficiency of any security upon which any of the monies of the
Company are invested or for any loss or damage arising from the bankruptcy,
insolvency or tortious act of any person with whom any monies, securities or
effects are deposited or for any other loss or misfortune which happens in the
execution of his duties unless the same happens through his own negligence,
willful default, breach of duty or breach of trust. Section 172 of the Companies
Act prohibits a company from indemnifying its directors or officers against
liability which by law would otherwise attach to them in respect of any
negligence, default, breach of duty or breach of trust of which they may be
guilty in relation to a Company, except to the extent permitted under Article
155 of the Company's Articles of Association, and any such indemnity is void and
unenforceable. The Company has entered into Indemnification Agreements with its
officers and directors. The Indemnification Agreements provide the Company's
officers and directors with indemnification to the maximum extent permitted by
the Companies Act.

The Company has obtained a policy of directors' and officers' liability
insurance that will insure directors and officers against the cost of defense,
settlement or payment of a judgment under certain circumstances.

II-1
8188

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following exhibits are filed herewith or incorporated by reference
herein:

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

1.1 Form of U.S. Underwriting Agreement*.
1.2 Form of International Underwriting Agreement*.Agreement.+
2.1 Agreement and Plan of Reorganization dated as of September 12, 1994 among the
Registrant, nCHIP Acquisition Corporation and nCHIP (the "Reorganization
Agreement"). Certain
Disclosure Schedules of nCHIP and the Registrant setting forth various exceptions to
the representations and warranties pursuant to the Reorganization Agreement have
been omitted. The Company agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request. (Incorporated by reference to Exhibits 2.1
through 2.6 of the Registrant's registration statement on Form S-4, No. 33-85842.)
2.2 Amendment No. 1 to the Reorganization Agreement dated as of December 8, 1994 among
the Registrant, nCHIP Acquisition Corporation and nCHIP. (Incorporated by reference
to Exhibit 2.7 of the Registrant's registration statement on Form S-4, No.
33-85842.)
2.3 Share Purchase Agreement dated as of April 12, 1995 among the Registrant, A&A and
all of the shareholders of A&A. (Incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K for the event reported on April 12, 1995.)
2.4 Asset Sale Agreement dated December 29, 1994 between FlexTracker Sdn. Bhd. and
Flextronics Malaysia Sdn. Bhd. (Incorporated by reference to Exhibit 10.19 of the
Registrant's registration statement on Form S-4, No. 33-85842.)
2.5 Agreement among the Registrant, Alberton Holdings Limited and Omac Sales Limited
dated as of January 6, 1996. (Incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K for the event reported on February 2, 1996.)
2.6 Asset Transfer Agreement between Ericsson Business Networks AB and Flextronics
International Sweden AB dated as February 12, 1997. Certain schedules have been
omitted. The Company agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.+
3.1 Memorandum of Association of the Registrant. (Incorporated by reference to Exhibit
3.1 of the Registrant's registration statement on Form S-1, No. 33-74622.)
3.2 Articles of Association of the Registrant. (Incorporated by reference to Exhibit 3.2
of the Registrant's registration statement on Form S-4, No. 33-85842.)
5.1 Opinion and Consent of Allen & Gledhill with respect to the Ordinary Shares being
registered*.registered.+
11.1 Statement regarding computation of per share earnings.*
23.1 Consent of Ernst & Young.*
23.2 Consent of Allen & Gledhill (included in Exhibit 5.1).
23.3 Consent of Deloitte Touche Tomatsu International.*
23.4 Consent of Coopers & Lybrand.+
24.1 Power of Attorney (included in the signature page of this Registration Statement).+

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

*To* To be filed by amendment.

+ Previously filed.

II-2
8289

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

II-3
8390

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of San Jose,
State of California, on February 12,August 25, 1997.

FLEXTRONICS INTERNATIONAL LTD.

By: /s/ MICHAEL E. MARKS
------------------------------------
Michael E. Marks
Chairman of the Board of Directors
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 Goh Chan Peng 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 registration statement (including any and all amendments,
including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.

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

/s/ MICHAEL E. MARKS Chairman of the Board, and February 12,Chief August 25, 1997
- ------------------------------------------ Chief Executive Officer (principal
Michael E. Marks (principal executive officer)

/s/ TSUI SUNG LAM* President, Chief Operating February 12,August 25, 1997
- ------------------------------------------ Officer and Director
Tsui Sung Lam
/s/ GOH CHAN PENG Chief Financial Officer February 12,* Senior Vice President of Finance August 25, 1997
- ------------------------------------------ and Administration and Director
Robert R.B. Dykes (principal financial and
Goh Chan Peng accounting officer)

/s/ ROBERT R.B. DYKES* Director February 12, 1997
- ------------------------------------------
Robert R.B. Dykes

/s/ BERNARD J. LACROUTE Director February 12,August 25, 1997
- ------------------------------------------
Bernard J. Lacroute

/s/ MICHAEL J. MORITZ* Director February 12,August 25, 1997
- ------------------------------------------
Michael J. Moritz

/s/ STEPHEN J.L. REES* Chairman, Astron Group Limited February 12,August 25, 1997
- ------------------------------------------ Director
Stephen J.L. Rees

/s/ RICHARD L. SHARP* Director February 12,August 25, 1997
- ------------------------------------------
Richard L. Sharp

*By: /s/ MICHAEL E. MARKS
- ------------------------------------------
Michael E. Marks
Attorney-in-fact

II-4
8491

EXHIBIT INDEX

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------- ------------

1.1 Form of U.S. Underwriting Agreement*.
1.2 Form of International Underwriting Agreement*.Agreement.+
2.1 Agreement and Plan of Reorganization dated as of September 12, 1994 among
the Registrant, nCHIP Acquisition Corporation and nCHIP (the
"Reorganization Agreement"). Certain
Disclosure Schedules of nCHIP and the Registrant setting forth various
exceptions to the representations and warranties pursuant to the
Reorganization Agreement have been omitted. The Company agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon
request. (Incorporated by reference to Exhibits 2.1 through 2.6 of the
Registrant's registration statement on Form S-4, No. 33-85842.)
2.2 Amendment No. 1 to the Reorganization Agreement dated as of December 8,
1994 among the Registrant, nCHIP Acquisition Corporation and nCHIP.
(Incorporated by reference to Exhibit 2.7 of the Registrant's registration
statement on Form S-4, No. 33-85842.)
2.3 Share Purchase Agreement dated as of April 12, 1995 among the Registrant,
A&A and all of the shareholders of A&A. (Incorporated by reference to
Exhibit 2.1 of the Registrant's Current Report on Form 8-K for the event
reported on April 12, 1995.)
2.4 Asset Sale Agreement dated December 29, 1994 between FlexTracker Sdn. Bhd.
and Flextronics Malaysia Sdn. Bhd. (Incorporated by reference to Exhibit
10.19 of the Registrant's registration statement on Form S-4, No.
33-85842.)
2.5 Agreement among the Registrant, Alberton Holdings Limited and Omac Sales
Limited dated as of January 6, 1996. (Incorporated by reference to Exhibit
2.1 of the Registrant's Current Report on Form 8-K for the event reported
on February 2, 1996.)
2.6 Asset Transfer Agreement between Ericsson Business Networks AB and
Flextronics International Sweden AB dated as February 12, 1997. Certain
schedules have been omitted. The Company agrees to furnish supplementally
a copy of any omitted schedule to the Commission upon request.+
3.1 Memorandum of Association of the Registrant. (Incorporated by reference to
Exhibit 3.1 of the Registrant's registration statement on Form S-1, No.
33- 74622.33-74622.)
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.)
5.1 Opinion and Consent of Allen & Gledhill with respect to the Ordinary
Shares being registered*.registered.+
11.1 Statement regarding computation of per share earnings.*
23.1 Consent of Ernst & Young.*
23.2 Consent of Allen & Gledhill (included in Exhibit 5.1).
23.3 Consent of Deloitte Touche Tomatsu International.*
23.4 Consent of Coopers & Lybrand.+
24.1 Power of Attorney (included in the signature page of this Registration
Statement).+

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

*To* To be filed by amendment.

+ Previously filed.