Multi Fineline Electronix (MFLX) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number 000-50812

MULTI-FINELINE ELECTRONIX, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3947402
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3140 East Coronado Street

Anaheim, CA 92806

(Address of principal executive offices, Zip Code)

(714) 238-1488

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨            Accelerated filer  x            Non-accelerated filer  ¨            Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of April 30, 2009 was 24,879,094.

Multi-Fineline Electronix, Inc.

Index

PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 4.	Submission of Matters to a Vote of Security Holders	37
Item 6.	Exhibits	39
Signatures		41

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

	March 31, 2009			September 30, 2008
	(unaudited)
ASSETS
Cash and cash equivalents	$	106,478		$	62,090
Restricted cash		59			1
Short-term investments		206			—
Accounts receivable, net of allowances of $1,004 and $1,520		114,489			162,419
Inventories		29,858			59,774
Deferred taxes		6,571			6,571
Income tax receivable		4,440			3,445
Assets held for sale		3,160			—
Other current assets		2,050			2,983
Total current assets		267,311			297,283
Property, plant and equipment, net		146,954			160,217
Land use rights		3,133			—
Long-term investments		11,084			12,138
Restricted cash		—			203
Deferred taxes		5,156			4,964
Goodwill		7,846			3,629
Intangible assets, net of amortization		6,385			—
Other assets		8,125			9,176
Total assets	$	455,994		$	487,610
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	82,087		$	128,642
Accrued liabilities		17,094			22,938
Due to affiliates		869			3,138
Other current liabilities		2,381			8,665
Total current liabilities		102,431			163,383
Notes payable		10,558			—
Other long-term liabilities		15,945			13,909
Total liabilities		128,934			177,292
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; none issued or outstanding		—			—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 24,813,355 and 25,011,649 shares issued and outstanding		2			2
Additional paid-in capital		118,864			116,100
Treasury stock at cost: 562,500 shares		(8,410	)		—
Retained earnings		195,606			172,770
Accumulated other comprehensive income		20,998			21,446
Total stockholders’ equity		327,060			310,318
Total liabilities and stockholders’ equity	$	455,994		$	487,610

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

1

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Share and Per Share Data)

(unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2009			2008			2009			2008
Net sales	$	174,097		$	163,936		$	390,727		$	348,088
Cost of sales		149,429			135,009			332,987			288,375
Gross profit		24,668			28,927			57,740			59,713
Operating expenses
Research and development		1,241			588			2,412			1,081
Sales and marketing		6,070			4,528			11,405			9,145
General and administrative		6,300			7,753			13,317			14,530
Impairment and restructuring costs		(185	)		—			127			—
Total operating expenses		13,426			12,869			27,261			24,756
Operating income		11,242			16,058			30,479			34,957
Other income and expense
Interest income		252			488			637			847
Interest expense		(198	)		(12	)		(217	)		(71	)
Other income (expense), net		169			(2,129	)		(1,312	)		(1,780	)
Income before provision for income taxes		11,465			14,405			29,587			33,953
Provision for income taxes		(2,720	)		(3,981	)		(6,751	)		(9,943	)
Net income	$	8,745		$	10,424		$	22,836		$	24,010
Net income per share
Basic	$	0.35		$	0.42		$	0.91		$	0.97
Diluted	$	0.34		$	0.41		$	0.90		$	0.95
Shares used in computing net income per share
Basic		24,997,153			24,760,848			25,032,444			24,706,958
Diluted		25,431,068			25,390,410			25,331,818			25,282,228

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

2

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(unaudited)

	Six Months Ended March 31, 2009			Six Months Ended March 31, 2008
Cash flows from operating activities
Net income	$	22,836		$	24,010
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		19,930			13,935
Provision for doubtful accounts		(166	)		1,052
Stock-based compensation expense		1,884			1,510
Impairment of long term investments		1,054			—
Impairment of cost investment		—			450
Impairment of asset and restructuring costs		324			—
(Gain) loss on disposal of equipment		(114	)		161
Deferred taxes		(191	)		—
Changes in operating assets and liabilities, net of amounts acquired
Accounts receivable		47,381			4,582
Inventories		30,491			16,307
Due to/from affiliates, net		(1,788	)		1,987
Other current assets		(131	)		(2,131	)
Other long-term assets		(1,302	)		1,546
Accounts payable		(46,654	)		(28,053	)
Accrued liabilities		(5,485	)		1,561
Income taxes payable		(7,284	)		7,888
Other current liabilities		(7	)		(283	)
Other long-term liabilities		2,217			152
Net cash provided by operating activities		62,995			44,674
Cash flows from investing activities
Purchase of long-term investments		—			(6,300	)
Cash paid for property and equipment		(9,716	)		(11,451	)
Purchases of software		(728	)		(83	)
Deposits on property and equipment		(414	)		(695	)
Proceeds from sale of equipment		535			191
Change in restricted cash		145			19
Acquisition of subsidiary, net of cash acquired		(872	)		—
Net cash used in investing activities		(11,050	)		(18,319	)
Cash flows from financing activities
Proceeds from exercise of stock options		871			1,227
Repurchase of common stock		(8,410	)		—
Income tax benefit related to stock option exercise		11			25
Net cash (used in) provided by financing activities		(7,528	)		1,252
Effect of exchange rate changes on cash		(29	)		455
Net increase in cash		44,388			28,062
Cash and cash equivalents at beginning of period		62,090			27,955
Cash and cash equivalents at end of period	$	106,478		$	56,017
Non cash transactions:
Issuance of notes payable in connection with acquisition	$	10,377		$	—

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

3

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

1. Description of Business

Multi-Fineline Electronix, Inc. (the “Company”) was incorporated in 1984 in the State of California and reincorporated in the State of Delaware in June 2004. The Company is primarily engaged in the engineering, design and manufacture of flexible printed circuit boards along with related component assemblies.

Affiliates and subsidiaries of WBL Corporation Limited (collectively “Wearnes”), a Singapore company, owned approximately 60% and 59% of the Company’s outstanding common stock as of March 31, 2009 and September 30, 2008, respectively, allowing Wearnes to exercise operating control over the Company.

2. Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has three wholly owned subsidiaries located in China: Multi-Fineline Electronix (Suzhou) Co., Ltd. (“MFC1”), Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. (“MFC2”), and MFLEX Chengdu Co., Ltd.; one located in the Cayman Islands: M-Flex Cayman Islands Inc.; one located in Singapore: Multi-Fineline Electronix Singapore Pte. Ltd. (“MFLEX Singapore”); one located in Malaysia: Multi-Fineline Electronix Malaysia Sdn. Bhd.; one located in Arizona: Aurora Optical, Inc. (“Aurora Optical”); and one located in Cambridge, England: Pelikon Limited (“Pelikon”). All significant intercompany transactions and balances have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s 2008 Annual Report on Form 10-K. The financial information presented in the accompanying statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the periods indicated. All such adjustments are of a normal recurring nature. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the U.S.

Investments

The Company’s long-term investments represent auction rate securities in debt obligations, which are collateralized by student loans. These auction rate securities were intended to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals (twenty eight days), allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests at par. In fiscal 2008, the Company began experiencing failed auctions for the auction rate securities that have gone to auction, resulting in the Company’s inability to sell these securities. The valuation of the Company’s investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, market interest rates, discount rates and ongoing strength of the bond issuer. Market variables utilized in developing the valuation model for these securities include relative yields on federal student loan securities, average 90 day T-Bill rates, 90 day LIBOR rates, interest rate spreads as determined by the changing credit market environment and quality of market credit and liquidity. The Company has historically classified these securities as short-term investments. However, based on the lack of liquidity related to these investments, as described above, in the second quarter of fiscal 2008, the Company re-classified these investments as long-term assets. As of March 31, 2009, the fair value of these securities of $11,600 was determined using a model that calculates the present value of the expected future cash flows from the securities and other indications of value, using the factors previously described.

The Company reviews impairments associated with the above in accordance with Emerging Issues Task Force (“EITF”) 03-1 and FSP Statement on Financial Accounting Standard (“SFAS”) 115-1 and 124-1, The Meaning of Other-Than-Temporary-Impairment and Its Application to Certain Investments, to determine the classification of the impairment as “temporary” or “other-than-temporary.” The factors evaluated to differentiate between temporary and other-than-temporary include the projected future cash flows, credit ratings actions and the assessment of the credit quality of the underlying

4

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

collateral. The Company analyzes changes and trends in the financial and credit markets and specific factors that impact student loan based auction rate securities on an on-going basis. Most notably, the rates on 90 day Treasuries fell sharply due to the high market interest in these securities as being a “safe” investment. The interest rate caps on many of the student loan issues are structured such that the spread of 120 basis points added to the 90 day Treasury rate makes the current yield on these issues extremely low, thereby making them unattractive compared to most other alternative debt issues available in the marketplace. Due to these changing circumstances, during the year ended September 30, 2008, the Company determined that the impairment of its investments was of an other-than-temporary nature. During the three and six months ended March 31, 2009, the Company recorded impairment charges in non-operating expenses of $0, and $1,054 respectively. No impairment charges were recorded in non-operating expenses in the comparable period of the prior year.

Inventories

Inventories are comprised of the following:

	March 31, 2009		September 30, 2008
Raw materials and supplies	$	10,780	$	21,503
Work-in-progress		11,029		24,729
Finished goods		8,049		13,542
	$	29,858	$	59,774

Property, Plant and Equipment

Property, plant and equipment are comprised of the following:

	March 31, 2009			September 30, 2008
Land	$	3,730		$	4,054
Building		32,805			37,530
Machinery and equipment		193,878			192,188
Furniture and fixtures		1,842			1,750
Leasehold improvements		17,852			16,552
		250,107			252,074
Accumulated depreciation		(103,153	)		(91,857	)
	$	146,954		$	160,217

Depreciation expense for the three and six months ended March 31, 2009 and 2008 was $9,588, $19,085, $7,408, and $13,598, respectively.

Included in other assets as of March 31, 2009 and September 30, 2008 is capitalized purchased software and internally developed software costs. Amortization of software costs for the three and six months ended March 31, 2009 and 2008 was $256, $430, $222, and $337, respectively. Amortization of intangible assets for the three and six months ended March 31, 2009 and 2008 was $354, $415, $0, and $0, respectively.

Land use rights

Land use rights include a long-term leasehold of land for the Company’s proposed new facility located in Suzhou, China, which the Company refers to as “MFC3.”

5

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Goodwill and long-lived intangible assets

The Company considers this to be one of the critical accounting estimates used in the preparation of its financial statements, and believes the current assumptions and other considerations used to value goodwill and long-lived intangible assets to be appropriate. However, if actual experience differs from the assumptions and considerations used in the Company’s analysis, the resulting change could have a material adverse impact on the Company’s consolidated results of operations and statement of position. In accordance with SFAS No. 142,Goodwill and Other Intangible Assets, goodwill is assigned to reporting units, which may be one level below the Company’s operating segments. Goodwill is assigned to the reporting units that benefit from the synergies arising from each particular business combination. Goodwill and long-lived intangible assets are reviewed annually, or more frequently, if changes in circumstances indicate the carrying value may not be recoverable. To test for recoverability, the Company typically utilizes valuations, discounted estimated future cash flows or other acceptable methods to measure fair value for each asset value. During the quarter ended December 31, 2008, the Company’s stock price, along with that of its competitors and the stock market in general, declined, resulting in the Company’s market capitalization falling below its book value. The Company considers this decline temporary and based on general economic conditions, and not based on any events or conditions specific to the Company. As such, the Company determined that no goodwill impairment was required. However, the Company will consider goodwill impairment in the future if the Company’s stock price falls again, an action which could have a material impact on the Company’s results of operations. During the quarter ended March 31, 2009, there were no triggering events that warranted a goodwill impairment analysis.

In accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), the Company assesses potential impairment to its long-lived assets when events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. During the quarter ended December 31, 2008, the market value of the Company, as determined by its publicly traded share price, fell below the carrying value of its assets. Due to this event the Company undertook a review to determine whether a further impairment test should be performed. As part of this review, the Company considered a number of factors including the length and severity of the decline in stock price and the underlying reasons. In addition, other factors such as the current operating performance of the Company, cash flow position and business outlook were considered. Based on its review, the Company determined that the decline in fair value had only recently occurred, was heavily influenced by outside factors impacting the overall financial markets and its operating performance and business outlook were favorable. Therefore, no impairment of long-lived assets was considered to have occurred.

Warranty

The Company warrants its products from two to 36 months. The standard warranty requires the Company to replace defective products returned to the Company at no cost to the customer. The Company records an estimate for warranty related costs at the time revenue is recognized based on historical amounts incurred for warranty expense and historical return rates. The warranty accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Changes in product warranty accrual for the three months ended March 31, 2009 and 2008 were as follows:

	Warranty Accrual Balance at December 31,		Warranty Expenditures			Provision for Estimated Warranty Cost		Warranty Accrual Balance at March 31,
2009	$	3,181	$	(2,260	)	$	660	$	1,581
2008	$	1,528	$	(629	)	$	175	$	1,074

Changes in product warranty accrual for the six months ended March 31, 2009 and 2008 were as follows:

	Warranty Accrual Balance at September 30,		Warranty Expenditures			Provision for Estimated Warranty Cost		Warranty Accrual Balance at March 31,
2009	$	2,601	$	(2,835	)	$	1,815	$	1,581
2008	$	1,673	$	(2,885	)	$	2,286	$	1,074

6

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Comprehensive Income

Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during the period from transactions and other events and circumstances from non-owner sources. The difference between net income and comprehensive income for the three and six months ended March 31, 2009 and 2008 was comprised of the Company’s foreign currency translation adjustment and the temporary impairment charge related to the Company’s auction rate securities, which is summarized in the following table:

	Three Months Ended March 31,						Six Months Ended March 31,
	2009			2008			2009			2008
Net income	$	8,745		$	10,424		$	22,836		$	24,010
Other comprehensive (loss) income:
Translation adjustment		(35	)		5,185			(448	)		8,504
Unrealized loss on auction rate securities		—			(579	)		—			(579	)
Total other comprehensive income		(35	)		4,606			(448	)		7,925
Total comprehensive income	$	8,710		$	15,030		$	22,388		$	31,935

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is the local currency or U.S. dollars. Foreign currency balances are translated into U.S. dollars using the exchange rates at each balance sheet date for assets and liabilities and an average exchange rate for each period for statement of operations amounts. Currency translation adjustments are recorded in other comprehensive income, a component of stockholders’ equity.

Foreign currency transactions occur when there is a receivable or payable denominated in other than the respective entity’s functional currency. The Company records the changes in the exchange rate for these transactions in the consolidated statements of operations. Foreign exchange transaction gains and losses were included in other expenses and were a net loss of $80, $677, $1,743, and $1,567 for the three and six months ended March 31, 2009 and 2008, respectively.

Net Income Per Share-Basic and Diluted

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities. The impact of potentially dilutive securities is determined using the treasury stock method.

The following table presents a reconciliation of basic and diluted income per share:

	Three Months Ended March 31,		Six Months Ended March 31,
	2009	2008	2009	2008
Basic weighted-average number of common shares outstanding	24,997,153	24,760,848	25,032,444	24,706,958
Dilutive effect of outstanding stock options and restricted stock units	433,915	629,562	299,374	575,270
Diluted weighted-average number of common and potential common shares outstanding	25,431,068	25,390,410	25,331,818	25,282,228
Potential weighted-average common shares excluded from the per share calculation because the effect of their inclusion would be anti-dilutive	246,269	163,530	272,331	152,817

Commitments and Contingencies

Litigation

The Company is involved in litigation from time to time in the ordinary course of business; the outcome of which the Company’s management currently believes will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

7

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Other Commitments

As of March 31, 2009 and September 30, 2008, the Company had outstanding purchase commitments primarily related to capital equipment projects which totaled $4,563 and $9,203, respectively.

Pursuant to the laws applicable to the People’s Republic of China’s Foreign Investment Enterprises, the Company’s two wholly owned subsidiaries in China, MFC1 and MFC2, are restricted from paying cash dividends on 10% of net income, subject to certain cumulative limits. These restrictions on net income as of March 31, 2009 and as of September 30, 2008 were $8,387 and $8,106, respectively.

Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (“FASB”) issued three related FASB Staff Positions (“FSP”): (i) FSP 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”), (ii) FSP Statement of Financial Accounting Standard (“SFAS”) 115-2 and SFAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments (“FSP SFAS 115-2” and “SFAS 124-2”), and (iii) FSP SFAS 107-1 and Accounting Principles Board (“APB”) 28-1,Interim Disclosures about Fair Value of Financial Instruments (“FSP SFAS 107” and “APB 28-1”), each of which will be effective for interim and annual periods ending after June 15, 2009. FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities under SFAS 157Fair Value Measurements in the current economic environment and reemphasizes that the objective of a fair value measurement remains the determination of an exit price. FSP SFAS 115-2 and SFAS 124-2 modify the requirements for recognizing other-than-temporarily impaired debt securities and revise the existing impairment model for such securities by modifying the current intent and ability indicator in determining whether a debt security is other-than-temporarily impaired. FSP SFAS 107 and APB 28-1 enhance the disclosure of instruments under the scope of SFAS No. 157, Fair Value Measurements(“SFAS 157”) for both interim and annual periods. The Company is currently evaluating the potential impact of these Staff Positions, and is unable to determine the effects these Staff Positions will have on the Company’s consolidated financial position, results of operations or cash flows.

In October 2008, the FASB issued FASB Staff Position No. FAS 157-3,Determining the Fair Value of a Financial Asset in a Market That Is Not Active (“FSP 157-3”), which clarifies the application of SFAS 157 when the market for a financial asset is inactive. Specifically, FSP 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value. The guidance in FSP FAS 157-3 is effective immediately and management notes that there is no impact on the Company’s consolidated financial position, results of operations or cash flows.

In June 2008, the FASB issued a FSP on the FASB’s Emerging Issues Task Force (“EITF”) Issue No. 03-06-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-06-1”). This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”) under the two-class method described in SFAS No. 128,Earnings Per Share. It affects entities that accrue or pay non-forfeitable cash dividends on share-based payment awards during the awards’ service period. FSP EITF 03-06-1 is effective for fiscal years beginning after December 15, 2008, which is October 1, 2009 for the Company, and interim periods within those fiscal years. The Company does not believe that FSP EITF 03-06-1 will have an impact on its consolidated financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities— an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The guidance in SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 for the Company, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Company has determined that SFAS 161 did not have an impact on its consolidated financial position, results of operations or cash flows.

8

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R establishes principles and requirements for how the acquiror of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning December 15, 2008, which is October 1, 2009 for the Company. SFAS 141R will have an impact on the Company’s accounting for business combinations completed after October 1, 2009.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company beginning October 1, 2009. The Company does not believe that SFAS 160 will have an impact on its consolidated financial position, results of operations or cash flows.

In February 2008, the FASB issued SFAS 157-2, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157-2 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. In accordance with FASB Staff Position SFAS 157-2,Effective Date of SFAS 157, the Company deferred the adoption of SFAS 157,Fair Value Measurements (“SFAS 157”) for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company is unable to determine the effect that SFAS 157-2 will have on its consolidated financial position, results of operations or cash flows.

Significant Concentrations

Net sales to the Company’s four largest original equipment manufacturer (“OEM”) customers, inclusive of net sales made to their designated sub-contractors as a percentage of total Company sales, are presented below:

	Three Months Ended March 31,				Six Months Ended March 31,
	2009		2008		2009		2008
OEM A	5	%	19	%	8	%	25	%
OEM B	8	%	58	%	15	%	50	%
OEM C	35	%	7	%	34	%	11	%
OEM D	48	%	10	%	40	%	9	%

In the three and six months ended March 31, 2009 and 2008, 71%, 70%, 94% and 94%, respectively, of net sales were derived from sales to companies that provide products or services to the wireless industry. In the three and six months ended March 31, 2009 and 2008, 25%, 26%, 0% and 1%, respectively, of net sales were derived from sales to companies in the consumer products industry. Both industries have been subject to economic cycles and have experienced periods of slowdown in the past.

3. Acquisition of Pelikon

In December 2008, the Company acquired Pelikon, which develops printed segmented electroluminescent display and keypad technologies, primarily for use in cell phones and with the potential for future application to other electronic devices. The initial consideration for the purchase was $10,377, which consisted of notes payable to all former shareholders (the “Sellers”) of Pelikon and notes payable to certain unsecured debt holders (the “Lenders”) of Pelikon.

9

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

In addition to the initial consideration, the Sellers may receive contingent consideration (the “Contingent Consideration”) based on the net amount of sales for certain products, during calendar years 2009 and 2010 (each calendar year, an “Earn-Out Period”), conditional upon certain sales levels being achieved during the applicable calendar year (each, an “Earn-Out Target”). Any Contingent Consideration paid shall not exceed $2,190 in 2009 and $7,236 in 2010, and if one or both of the Earn-Out Targets are not achieved, the Contingent Consideration will not be paid for one or both of the Earn-Out Periods, as applicable. Any Contingent Consideration payable is subject to reduction, on a dollar for dollar basis, in the event that MFLEX Singapore or any of its affiliates is entitled to recover damages from the Sellers pursuant to the terms of the Agreement and the aggregate principal amount and accrued interest under the Sellers Promissory Notes is not sufficient to cover such damages. In connection with the acquisition, the Company recorded $11,249 of net assets, which included $6,800 of intangible assets, and $4,217 of goodwill and $232 of other assets.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the initial consideration at the date of acquisition. Should Contingent Consideration be paid under the terms of the Agreement, such payments will be recorded as an increase in goodwill.

The total purchase price of Pelikon was as follows:

Fair value of notes issued to Selling Shareholders	$	5,520
Fair value of notes issued to Lenders		4,857
Direct transaction fees and expenses		892
Cash acquired		(20	)
Total purchase price	$	11,249

The above purchase price has been allocated based on the fair value of assets acquired and liabilities assumed and was allocated as follows:

Inventories	$	128
Current assets		136
Property, plant and equipment		494
Intangible assets		6,800
Goodwill		4,217
Accounts payable		(336	)
Current liabilities		(190	)
Net assets acquired	$	11,249

The unaudited consolidated financial statements for the three months and six months ended March 31, 2009 include the results of operations of Pelikon commencing as of the acquisition date. The acquisition of Pelikon was not material to the historical consolidated financial position, results of operations or cash flows of the Company.

4. Related party transactions

During the three months ended March 31, 2009 and 2008, the Company recognized revenue and recorded purchases from and made other payments to the following affiliated companies: (a) MFS Technology Pte. Ltd. (“MFS”); (b) MFS Technologies (Hunan) Co. Ltd., a subsidiary of MFS; (c) Wearnes Electronics Malaysia Sdn. Bhd. (“WEM”); and (d) Wearnes Global (Suzhou) Co. Ltd. As discussed in Note 1, Wearnes owns 60% and 59% of the Company’s common stock as of March 31, 2009 and September 30, 2008, respectively. MFS is an indirect subsidiary of Wearnes.

During the three and six months ended March 31, 2009 and 2008, the Company made purchases of $1,190, $3,693, $1,720 and $1,728, respectively, from MFS and sold $16, $104, $605 and $718, respectively, to MFS Technologies (Hunan) Co. Ltd.

10

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Net amounts due from/to affiliated companies comprise the following:

	March 31, 2009(1)		September 30, 2008(1)
Due from affiliates
MFS Technologies (Hunan) Co. Ltd.	$	13	$	1,130
	$	13	$	1,130

⁽¹⁾ Due from affiliates balances are included in other current assets on the balance sheet.

	March 31, 2009		September 30, 2008
Due to affiliates
MFS	$	861	$	3,138
Wearnes Global (Suzhou) Co. Ltd.		8		—
	$	869	$	3,138

5. Goodwill and intangible assets

Goodwill

The Company records the excess of an acquisition’s purchase price over the fair value of the identified assets and liabilities as goodwill. The changes in the carrying amount of goodwill for the six months ended March 31, 2009 were as follows:

	Balance at September 30, 2008		Pelikon Acquisition		Balance at March 31, 2009
Goodwill	$	3,629	$	4,217	$	7,846

Intangible Assets

The Company’s intangible assets as of March 31, 2009, December 31, 2008 and September 30, 2008 were as follows:

	Balance at December 31, 2008		Intellectual Property Acquired		Accumulated Amortization			Balance at March 31, 2009
Intangible Assets	$	6,738	$	—	$	(353	)	$	6,385
	Balance at September 30, 2008		Intellectual Property Acquired		Accumulated Amortization(1)			Balance at March 31, 2009
Intangible Assets	$	—	$	6,800	$	(415	)	$	6,385

⁽¹⁾ Amortization from December 10, 2008 through March 31, 2009.

11

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Estimated future annual pre-tax amortization expense of intangible assets as of March 31, 2009, over the estimated useful life of five years is as follows:

Fiscal Years
2009 (remaining 6 months)	$	680
2010		1,360
2011		1,360
2012		1,360
2013		1,360
Thereafter		265
Total	$	6,385

6. Notes Payable

On December 10, 2008, and in connection with the acquisition of Pelikon, the Company issued unsecured promissory notes to the Sellers (the “Sellers Promissory Notes”) totaling $5,520 and to the Lenders (the “Lender Promissory Notes”) totaling $4,857. The Sellers Promissory Notes and Lender Promissory Notes accrue interest at the rate of six percent per year, and the aggregate principal amount and any accrued interest is due and payable on December 9, 2010. The Sellers Promissory Notes are subject to further reduction in the event that MFLEX Singapore or any of its affiliates is entitled to recover damages from the Sellers pursuant to the terms of the Share Purchase Agreement between the parties.

Notes Payables consists of:	March 31, 2009
Sellers Promissory Notes payable for the purchase of 100% of the equity interest in Pelikon, plus accrued interest	$	5,611
Lender Promissory Notes payable to debt holders of Pelikon, plus accrued interest		4,947
Total Notes payable	$	10,558
Less: Current Portion		—
Notes payable net of Current Portion	$	10,558

7. Lines of credit

In February 2009, the Company and MFLEX Singapore (each, a “Borrower,” and collectively, the “Borrowers”) entered into a Loan and Security Agreement (the “Agreement”) with Bank of America, N.A., as a lender and agent (“BOA”), for a senior revolving credit facility (the “Facility”) in an amount up to $30,000, which may be increased to $60,000 at the Company’s discretion upon satisfaction of certain additional requirements (the “Revolver Commitment”).

Availability under the Facility for each Borrower will be an amount equal to the lesser of: (1) 85% of the eligible accounts receivable attributable to such Borrower minus $6,000 (or minus $10,000 if the credit facility has been increased to $40,000 or more) or (2) the Revolver Commitment minus the Availability Reserve (as defined in the Agreement) to the extent attributable to such Borrower in BOA’s discretion.

Amounts outstanding under the Facility will bear interest at a rate equal to LIBOR or SIBOR/Singapore Swap Rate, as Borrower may elect from time to time, plus the Applicable Margin (as defined in the Agreement). The Facility has a three year term, subject to earlier termination by Borrowers at their discretion or by BOA upon occurrence of an event of default.

As collateral for its obligations under the Facility, the Company has granted BOA a security interest in all the Company’s assets (which does not include assets of any foreign subsidiary that is treated as a corporation for U.S. federal income tax purposes), except for its equipment, real property and intellectual property and 34% of the voting stock of each of its foreign subsidiaries. As collateral for its obligations under the facility, MFLEX Singapore has granted BOA a security interest in all of its assets, except for its equipment, real property and intellectual property. The Company has also guaranteed all of MFLEX Singapore’s obligations under the Agreement.

12

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

The Agreement imposes customary affirmative, negative and financial covenants on the Borrowers and their subsidiaries. The negative covenants impose limitations on, among other things, the Company’s ability to make distributions on its capital stock or repurchase equity interests unless certain requirements are met, with limited exceptions. The financial covenants require that the Borrowers maintain a Fixed Charge Coverage Ratio (as defined in the Agreement) of 1.0 for each period of 12 fiscal months ending on or after June 30, 2009. However, the financial covenants are only applicable if the aggregate availability is less than 20% of the Revolver Commitment.

The Agreement also contains customary events of default including defaults related to the following, among other things: failure to make payments; breach of a representation or warranty; covenant breaches; judgments or loss or theft of collateral in excess of specified amounts; injunction or governmental pronouncement preventing the operation of the Borrowers’ business; criminal indictment of any Borrower or senior officer; change of control; insolvency; and Employee Retirement Income Security Act (“ERISA”) violations. An event of default is also triggered if the Singapore Minister of Finance declares MFLEX Singapore to be a “declared company” under the Singapore Companies Act. A “declared company” is one over which the Minister of Finance may exercise certain powers to investigate such company to protect the public, shareholders or creditors. Upon the occurrence and continuance of an event of default, BOA may, without notice or demand, declare all obligations under the Facility immediately due and payable, terminate or reduce the Revolver Commitment, adjust the borrowing base or proceed against the collateral, among other rights and remedies. As of March 31, 2009 and September 30, 2008, neither the Company nor MFLEX Singapore had any borrowings outstanding under the Facility.

In January 2009, MFC1 and MFC2 entered into credit line agreements with Bank of China (“BC”) providing for two lines of credit in an aggregate amount of 200,000 Chinese Renminbi (“RMB”) ($29,257 at March 31, 2009). The lines of credit will mature in January 2010 and bear interest at a rate determined within the scope ruled by the People’s Bank of China (“PBOC”). The credit facilities contained covenants restricting the pledging of assets. As of March 31, 2009 and September 30, 2008, the Company had no borrowings outstanding under these, or their predecessor, lines of credit.

In July 2008, MFC1 and MFC2 entered into credit line agreements with Shanghai Pudong Development Bank (“SPDB”), which provide for two borrowing facilities, for 75,000 RMB each ($10,971 each at March 31, 2009). The lines of credit will mature in July 2009 and pursuant to such agreements, for so long as MFC1 or MFC2, as applicable, has at least U.S. $3,000 on deposit with SPDB, the interest rate under the applicable credit line will be LIBOR (1.19188% at March 31, 2009), minus 15 basis points. Otherwise, interest shall be determined within the scope ruled by the PBOC and if there is no such rule, as determined by SPDB. The credit facility documents contain covenants restricting the pledging of assets. SPDB also has the right to adjust the credit lines and the duration of such credit in the event of specified events. These specified events include: (i) a significant adjustment in the country’s currency policy; (ii) significant change in MFC1 or MFC2’s financial position, business environment or marketplace or that of the Company as guarantor; (iii) MFC1 or MFC2 undergo a significant organizational change such as merger, termination, or divestiture; (iv) MFC1 or MFC2 do not use the facility according to the agreed terms or violate the terms of the facility; (v) there is damage or loss to pledged assets or hidden assets, withdrawn funds; (vi) MFC1 or MFC2 fail to meet its debt obligations; and (vii) other occasions or situations where in the analysis of SPDB, situations would lead to the reduction of MFC1 or MFC2’s debt re-payment ability. As of March 31, 2009 and September 30, 2008, the Company had no borrowings outstanding under these lines of credit.

A summary of the lines of credit is as follows:

	Amounts Available at				Amounts Outstanding at
	March 31, 2009		September 30, 2008		March 31, 2009		September 30, 2008
Line of credit (BOA)	$	30,000	$	—	$	—	$	—
Lines of credit (BC)		29,257		29,333		—		—
Lines of credit (SPDB)		21,942		22,000		—		—
	$	81,199	$	51,333	$	—	$	—

13

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

As of March 31, 2009, the Company is in compliance with the covenants under the lines of credit.

8. Segment information

Based on the evaluation of the Company’s internal financial information, management believes that the Company operates in one reportable segment which is primarily engaged in the engineering, design and manufacture of flexible circuit boards along with related component assemblies. The Company operates in four geographical areas: United States, China Singapore and Other (which includes Malaysia and the United Kingdom). Net sales are presented based on the country in which the sales originate, which is where the legal entity is domiciled. The financial results of the Company’s geographic segments are presented on a basis consistent with the consolidated financial statements. Segment net sales and asset amounts include intra-company product sales transactions and subsidiary investment amounts, respectively, which are offset in the elimination line. For the three and six months ended March 31, 2009, net sales reflect certain sales related to customer purchase orders that were transferred from the U.S. geographic segment to the Singapore geographic segment.

Financial information by geographic segment is as follows:

	Three Months Ended March 31,						Six Months Ended March 31,
	2009			2008			2009			2008
Net sales
United States	$	71,969		$	159,532		$	210,465		$	335,539
Singapore		100,545			—			173,490			—
Other		145			—			148			—
China		115,774			119,055			266,331			250,608
Eliminations		(114,336	)		(114,651	)		(259,707	)		(238,059	)
Total	$	174,097		$	163,936		$	390,727		$	348,088
Operating income
United States	$	10,601		$	3,333		$	10,274		$	10,105
Singapore		2,118			—			9,395			—
Other		(1,666	)		—			(2,474	)		—
China		43			12,659			13,063			24,273
Eliminations		146			66			221			579
Total	$	11,242		$	16,058		$	30,479		$	34,957
Depreciation and amortization
United States	$	893		$	954		$	1,606		$	1,685
Singapore		6			—			11			—
Other		463			—			608			—
China		8,836			6,676			17,705			12,250
Total	$	10,198		$	7,630		$	19,930		$	13,935
Capital expenditures for property, plant, and equipment
United States	$	1,840		$	516		$	3,813		$	996
Singapore		39			—			46			—
Other		729			—			1,719			—
China		1,268			4,788			4,138			10,455
Total	$	3,876		$	5,304		$	9,716		$	11,451

14

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

	March 31, 2009			September 30, 2008
Total assets
United States	$	276,177		$	382,229
Singapore		172,133			59,999
Other		13,788			—
China		172,060			204,250
Eliminations		(178,164	)		(158,868	)
Total	$	455,994		$	487,610

9. Equity incentive plans

Stock Options

Stock option activity for the six months ended March 31, 2009 under the Company’s 1994 Stock Plan and 2004 Plan Stock Incentive Plan (the “2004 Plan”) is summarized as follows:

	Number of Shares		Weighted- Average Exercise Price
Options outstanding at September 30, 2008	1,155,412		$	8.66
Exercised	(240,422	)		3.63
Forfeited	(30,346	)		16.72
Options outstanding at March 31, 2009	884,644			9.75
Exercisable at March 31, 2009	881,387			9.68
Vested and expected to vest at March 31, 2009	884,417		$	9.75

The intrinsic value of options exercised during the three and six months ended March 31, 2009 and 2008, was $1,825, $2,341, $1,826 and $3,082, respectively. During the three and six months ended March 31, 2009 and 2008, the Company recognized compensation expense of $224, $263, $275 and $516 respectively, related to stock options. Unearned compensation of $36 existed at March 31, 2009 related to non-vested stock options which will be recognized into expense over a weighted average period of 0.2 years.

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2009:

Outstanding							Exercisable
Range of Exercise Prices	Number of Options Outstanding	Weighted- Average Remaining Contractual Life (in years)	Weighted- Average Exercise Price		Aggregate Intrinsic Value		Number of Shares Exercisable	Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life (in Years)
$3.73—$4.00	179,821	0.3	$	4.00	$	2,309	179,821	$	4.00	$	2,309	0.3
$8.75	10,000	5.4		8.75		81	10,000		8.75		81	5.4
$10.00	600,823	5.2		10.00		4,110	600,823		10.00		4,110	5.2
$17.37—$18.08	49,000	6.2		17.79		—	45,743		17.78		—	6.2
$20.81	45,000	5.9		20.81		—	45,000		20.81		—	5.9
	884,644		$	9.75	$	6,500	881,387	$	9.68	$	6,500

15

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Restricted Stock Units

During the three and six months ended March 31, 2009 and 2008, the Company made non-performance-based restricted stock unit (“RSU”) grants equal to 67,032, 204,825, 93,543 and 207,643, respectively, shares of the Company’s common stock under the 2004 Plan to certain employees (including executive officers) and directors at no cost to such individual. Each RSU represents one hypothetical share of the Company’s common stock, without voting or dividend rights. The RSUs granted to employees vest over a period of three years with one-third vesting on each of the anniversary dates of the vesting commencement date. No shares are delivered until the employee satisfies the vesting schedule. Unearned compensation related to the RSUs is determined based on the fair value of the Company’s stock on the date of grant and is amortized to expense over the vesting period. Unearned compensation of $5,798 existed at March 31, 2009, related to non-vested RSUs which will be recognized into expense over a weighted average period of 2.0 years. During the three and six months ended March 31, 2009 and 2008, the Company recognized compensation expense of $941, $1,587, $598 and $994, respectively, related to RSUs. The Company currently anticipates making future grants of RSUs in lieu of stock options.

Performance-Based Restricted Stock Units

On June 11, 2008, the Company’s Board approved the grant of 22,000 performance-based RSUs to certain employees, including executive officers, under the 2004 Plan. These performance-based RSU’s vest and become fully exercisable subject to the achievement of defined performance objectives pertaining to each grant, with vesting to occur between the date of grant and through March 31, 2011. In accordance with SFAS No. 123R, at the end of each reporting period, the Company evaluates the probability that the performance-based RSUs will vest. The Company records share-based compensation cost based on the grant-date fair value and the probability that the performance metrics will be achieved. As of March 31, 2009, the Company reviewed each of the underlying performance targets related to its outstanding performance based RSU grants and determined that it was probable that 9,000 of the performance based RSU’s will not vest.

RSU activity for the six months ended March 31, 2009 under the 2004 Plan is summarized as follows:

	Number of Shares		Weighted- Average Grant-Date Fair Value
Non-vested shares outstanding at September 30, 2008	404,731		$	20.87
Granted	204,825			11.63
Vested	(123,784	)		20.93
Forfeited	(25,267	)		21.79
Non-vested shares outstanding at March 31, 2009	460,505		$	16.69

For the three and six months ended March 31, 2009 and 2008, the Company realized a tax benefit due to stock option and restricted stock unit exercises of:

	March 31
	Three Months		Six Months
2009	$	442	$	693
2008	$	153	$	457

16

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

The following table summarizes information about RSUs outstanding as of March 31, 2009:

Range of Grant Prices	Number of Units	Average Remaining Contractual Life (Years)	Weighted Average Grant- Date Fair Value
$10.44 – $19.88	403,532	8.3	$	14.99
$20.04 – $25.84	40,675	9.0		23.51
$38.65	14,298	6.7		38.65
$64.50	2,000	7.0		64.50
	460,505	8.3	$	16.69

Stock Appreciation Rights

On December 5, 2008, the Company’s Board approved defined dollar value stock appreciation rights to be settled in Company common stock (“SSARs”) of $2,225, for certain employees, including executive officers, under the 2004 Plan. These SSARs will be granted in four tranches (on December 5, 2008, and March 5, June 5 and September 4, 2009, subject to certain requirements being met – each a “grant date”), will vest and be exercisable on December 5, 2011, and will expire December 4, 2018. Each SSAR will have a base appreciation amount that is equal to the closing price of a share of the Company’s common stock, on each applicable grant date as reported on the NASDAQ Global Select Market. The number of SSARs that will be received by each participant, on each grant date, will be determined by dividing one-fourth of the defined dollar value set for each grantee by the closing price of a share of the Company’s common stock on the applicable grant date, rounded down to the nearest whole number of shares. If a participant terminates service with the Company prior to December 5, 2011, all of that participant’s SSAR awards will be forfeited and cancelled.

Upon exercise, each SSAR will be settled in the Company’s common stock. Whole Company shares will be issued based on the percentage of share appreciation between the weighted average price per share for all grant dates and the fair market value per share on the exercise date, multiplied by the number of SSARs units being exercised. Future compensation expense will be equal to the whole number of shares issued multiplied by the fair market value per share on the exercise date.

In accordance with SFAS No. 123R, the Company’s SSARs are treated as equity awards. The Company measures the initial compensation element of the award at the time of grant and the expense is recognized over the service period (the vesting period). The fair value of SSAR awards was estimated using the Black-Scholes option pricing model with the following assumptions and weighted-average fair values:

	December 5, 2008			March 5, 2009
Weighted-average fair value of grants	$	10.76		$	12.70
Risk-free interest rate		1.61	%		1.96	%
Dividend yield		0.0	%		0.0	%
Expected volatility		73.55	%		73.53	%
Expected life in months		36			33

Based on the initial SSARs grants on December 5, 2008 and March 5, 2009, the Company estimated the initial compensation expense at $256 and $247, to be recognized over the vesting period (three years from December 5, 2008). During the three and six months ended March 31, 2009, the Company recognized compensation expense of $8 and $33 related to SSARs. Unearned compensation expense for the quarter ended March 31, 2009, was $469 related to non-vested SSARs.

17

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

10. Income taxes

As of March 31, 2009, the liability for income taxes associated with uncertain tax positions increased to $14,667 from $12,900 at September 30, 2008. As of March 31, 2009 and September 30, 2008, these liabilities can be reduced by $6,801 and $6,710, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments. The net amount of $7,866 at March 31, 2009 and $6,190 at September 30, 2008, if recognized, would favorably affect the Company’s effective tax rate. Changes to interest during the quarter were immaterial. The Company expects a reduction of approximately $2,800 of unrecognized tax benefits within the next twelve months, primarily due to the expiration of statutes of limitation and audit settlement. The Company anticipates that there will be other changes to the unrecognized tax benefit associated with uncertain tax positions due to audit settlements. However, due to the uncertainty regarding the timing of these events, a current estimate of the range of other changes that may occur within the next twelve months cannot be made.

The Company currently enjoys tax holidays and other tax incentives for its operations in China and Singapore. The Company has obtained two tax holidays for its second manufacturing facility in China, MFC2. The first tax holiday rate of 12.5% expired on December 31, 2008. Beginning on January 1, 2009, MFC2 is subject to a tax holiday rate of 12.5% on approximately 39% of its profit and the statutory tax rate of 25% on approximately 61% of its profits. MFC2 will continue to enjoy its second tax holiday rate of 12.5% on approximately 39% of its profit until December 31, 2010. The Company has also obtained a tax incentive for its operations in Singapore, and MFLEX Singapore will be subject to taxes at a tax rate of 10% of its profits.

11. Restructuring and long-lived asset impairment

At the end of the fourth quarter of fiscal 2008, due to the closure of the Tucson, Arizona facility of Aurora Optical, the Company completed its long-lived asset impairment analysis and a restructuring cost analysis in accordance with the guidance of SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets andSFAS 146, Accounting for Costs Associated with Exit or Disposal Activities.

Long-Lived Asset Impairment

Based on the Company’s analysis of the net book value and fair market value of the Aurora Optical assets which were planned for sale, after deducting the net book value of assets being transferred to the Company’s Anaheim facility, the Company determined that the remaining assets of Aurora Optical were impaired, and recorded a pre-tax impairment charge of $2,000 in the fourth quarter of fiscal 2008, including $1,300 related to buildings, $600 for machinery and equipment and $100 for other assets. During the three months ended December 31, 2008, $3,527 of land and building and manufacturing equipment was classified as assets held for sale. During the three months ended March 31, 2009, the Company sold the Aurora Optical machinery and equipment previously classified as assets held for sale and recorded a $197 gain on the sale, which was reported under impairment and restructuring costs. As of March 31, 2009, $3,160, primarily related to land and buildings, was classified as held for sale. Based on an arms-length offer for the former Aurora Optical land and building received, an additional impairment charge of $110 was recorded during the quarter ended March 31, 2009. The added charge resulted from an additional drop in commercial real estate values since the original impairment was recorded as of September 30, 2008. There were no impairments to long-lived assets for the quarter ended March 31, 2008.

Restructuring

Based on the Company’s analysis, a pre-tax restructuring charge comprised of severance, relocation, and other costs related to the closure of Aurora Optical was estimated at $540, of which $180 was recorded in the fourth quarter of 2008, with the remainder of $360 recorded as incurred during the first quarter of fiscal 2009.

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MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

The $180 recorded in fiscal 2008 related to severance and outplacement charges and was accrued as of September 30, 2008. The following table reflects the movement activity of the restructuring reserve for the six months ended March 31, 2009. There were no restructuring costs for the three and six months ended March 31, 2009.

	Severance and Outplacement Charges
Accrual Balance as of September 30, 2008	$	180
Restructuring charges		311
Utilization		(244	)
Adjustments		(49	)
Accrual balance as of December 31, 2008	$	198
Restructuring charges		—
Utilization		(74	)
Adjustments		(97	)
Accrual balance as of March 31, 2009	$	27

12. Fair Value Measurements

On October 1, 2008, the Company adopted SFAS No. 157. This standard addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. In accordance with FASB Staff Position FAS 157-2, Effective Date of SFAS 157 (“Staff Position 157-2”), the Company deferred the adoption of SFAS 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.

SFAS 157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: quoted market prices in active markets for identical assets and liabilities

Level 2: observable market based inputs or unobservable inputs that are corroborated by market data

Level 3: unobservable inputs that are not corroborated by market data

Auction rate securities

For recognition purposes, on a recurring basis, the Company measures available for sale auction rate securities (“ARS”) as long-term investments at fair value. The ARS had an aggregate fair value of $11.6 million at March 31, 2009, and $12.1 million at September 30, 2008. The fair value of these investments is determined using models that consider various assumptions including current market prices of the underlying securities, contractual terms of the underlying securities, economic and market conditions applicable to the underlying securities, time value and volatility factors.

Pursuant to SFAS 157, the fair value of the Company’s marketable securities is determined based on “Level 2” inputs, which consist of observable market-based inputs or unobservable inputs that are corroborated by market data. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

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MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Assets and liabilities measured at carrying value and fair value on a recurring basis include the following as of March 31, 2009:

Item Asset/Liability	Carrying Value		Using Significant Other Observable Inputs (Level 2)
Long Term Investments	$	11,084	$	11,600

13. Share Repurchase Program

On December 5, 2008, the Company’s Board approved the establishment of a share repurchase program for up to 2,250,000 shares in the aggregate of the Company’s common stock on the open market. This amount represents nine percent of the Company’s common stock outstanding as of November 30, 2008, as reported on the Company’s most recent Form 10-K filed with the SEC on December 9, 2008. Stock repurchases may be made from time to time, based on market conditions and other factors, including price, regulatory requirement and capital availability. As of March 31, 2009, the Company had repurchased a total of 562,500 shares, at a weighted average purchase price of $14.95 per share, for a total value of $8,410 pursuant to a 10b5-1 plan.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements include, but are not limited to, statements and predictions as to our expectations regarding our revenues, net sales, sales, net income, operating expenses, research and development expenses, earnings, operations, gross margins, including without limitation, our targeted gross margin range, achievement of margins within or outside of such range and factors that could affect gross margins, yields, anticipated cash needs and uses of cash, capital requirements and capital expenditures, payment terms, expected tax rates, results of audits of us in China and the U.S., needs for additional financing, use of working capital, the benefits and risks of our China operations, anticipated growth strategies, ability to attract customers and diversify our customer base, including without limitation the relative size of each customer to us, sources of net sales, anticipated trends and challenges in our business and the markets in which we operate, the adequacy and expansion of our facilities, capability, capacity and equipment, the impact of economic and industry conditions on our customers and our business, current and upcoming programs and product mix and the learning curves associated with our programs, market opportunities and the utilizations of flex and flex assemblies, customer demand, our competitive position, critical accounting policies and the impact of recent accounting pronouncements. Additional forward-looking statements include, but are not limited to, statements pertaining to other financial items, plans, strategies or objectives of management for future operations, our financial condition or prospects, and any other statement that is not historical fact, including any statement which is preceded by the word “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,” “aim,” “potential,” “plan,” or similar words. For all of the foregoing forward-looking statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially from our expectations. Important factors that could cause actual results to differ materially from those stated or implied by our forward-looking statements include, but are not limited to, the impact of changes in demand for our products, our success with new and current customers, our ability to develop and deliver new technologies, our ability to diversify our customer base, our effectiveness in managing manufacturing processes and costs and expansion of our operations, the degree to which we are able to utilize available manufacturing capacity, achieve expected yields and obtain expected gross margins, the impact of competition, the economy and technological advances, and the risks set forth below under “Item 1A. – Risk Factors.” These forward-looking statements represent our judgment as of the date hereof. We disclaim any intent or obligation to update these forward-looking statements.

Overview

We are a global provider of high-quality, technologically advanced flexible printed circuits and value-added component assembly solutions to the electronics industry. We believe that we are one of a limited number of manufacturers that provide a seamless, integrated flexible printed circuit and assembly solution from design and application engineering and prototyping through high-volume fabrication, component assembly and testing. We target our solutions within the electronics market and, in particular, we focus on applications where flexible printed circuits facilitate human interaction with an electronic device and are the enabling technology in achieving a desired size, shape, weight or functionality of the device. Current applications for our products include mobile phones, smart mobile devices, consumer products, portable bar code scanners, personal digital assistants, computer/storage devices and medical devices. We provide our solutions to original equipment manufacturers (“OEMs”) such as Motorola, Inc. and Sony Ericsson Mobile Communications and to electronic manufacturing services (“EMS”) providers such as Foxconn Electronics, Inc., Tech Full, and Flextronics International Ltd.

Critical Accounting Policies

Information with respect to our critical accounting policies which we believe have the most significant effect on our reported results and require subjective or complex judgments of management are contained on pages 26-28 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2008.

In accordance with SFAS No. 142,Goodwill and Other Intangible Assets(“SFAS 142”), goodwill is assigned to reporting units, which may be one level below the Company’s operating segments. Goodwill is assigned to the reporting units that benefit from the synergies arising from each particular business combination. We consider this to be one of the critical accounting estimates used in the preparation of our financial statements, and believe the current assumptions and other considerations used to value goodwill and long-lived intangible assets to be appropriate. However, if actual experience differs from the assumptions and considerations used in our analysis, the resulting change could have a material adverse impact on our consolidated results of operations and statement of position. Goodwill and long-lived intangible assets are reviewed annually, or more frequently, if changes in circumstances indicate the carrying value may not be recoverable. To test for recoverability, we typically utilize valuations, discounted estimated future cash flows or other acceptable methods to measure fair value for each asset value. During the quarter ended December 31, 2008, our stock price, along with that of our

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competitors and the stock market in general, declined, resulting in our market capitalization falling below our book value. We consider this decline temporary and based on general economic conditions, and not based on any events or conditions specific to us. During the quarter ended March 31, 2009, there were no triggering events that warranted a goodwill impairment analysis.

Comparison of the Three Months Ended March 31, 2009 and 2008

The following table sets forth our Statement of Operations data expressed as a percentage of net sales for the periods indicated:

	Three Months Ended March 31,
	2009		2008
Net sales	100.0	%	100.0	%
Cost of sales	85.8		82.4
Gross profit	14.2		17.6
Operating expenses:
Research and development	0.7		0.3
Sales and marketing	3.5		2.8
General and administrative	3.6		4.7
Impairment and restructuring expense	(0.1	)	0.0
Total operating expenses	7.7		7.9
Operating income	6.5		9.8
Interest income	0.1		0.3
Interest expense	(0.1	)	0.0
Other income / (expense), net	0.1		(1.3	)
Income before income taxes	6.6		8.8
Provision for income taxes	1.6		2.4
Net income	5.0	%	6.4	%

Net Sales.Net sales increased to $174.1 million for the three months ended March 31, 2009, from $163.9 million in the three months ended March 31, 2008. The increase of $10.2 million, or 6%, was primarily attributable to an increase in the average selling price as a result of added material content, offset by a decline in total unit volumes and some price reduction activity. Sales into the consumer products sector were $42.8 million for the three months ended March 31, 2009, up from $500,000 for the three months ended March 31, 2008, driven primarily by the ramp up in unit volume shipments to one of our key customers related to new programs that were started in fiscal 2008. This sector accounted for approximately 25% and 0% of total net sales for the three months ended March 31, 2009 and 2008, respectively, and is a result of our on-going efforts to diversify both our customers and the market sectors into which we sell.

Net sales into the wireless sector decreased to $124.3 million for the three months ended March 31, 2009, from $153.5 million in the three months ended March 31, 2008. The decrease of $29.2 million, or 19%, versus the comparable period of the prior year was primarily due to decreased unit volume shipments as a result of reduced demand from two of our major customers. Sales into the wireless sector comprised 71% and 94% of total net sales for the three months ended March 31, 2009 and 2008, respectively.

Sales to two customers each accounted for more than 25% of our net sales during the three months ended March 31, 2009, as compared to three customers who each accounted for 10% or more of our net sales for the comparable period in the prior year, with one of these customers accounting for more than 25% of our net sales.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to approximately 86% for the three months ended March 31, 2009, versus approximately 82% for the comparable period in the prior year. The increase in cost of sales as a percentage of net sales was driven by several factors, and was primarily attributable to the impact of increased material content in programs, an increase in fixed costs as we added satellite facilities and infrastructure to meet increased demand for the second half of fiscal 2008 as well as expected future demand and some price reduction activity, offset by improved manufacturing yields and labor efficiencies.

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Gross profit decreased to $24.7 million for the three months ended March 31, 2009, versus $28.9 million in the comparable period in the prior year, a decrease of approximately 15% as a result of the higher material content and the deleveraging impact on fixed overhead costs. As a percentage of net sales, gross profit decreased to approximately 14% for the three months ended March 31, 2009, from approximately 18% in the comparable period in the prior year.

Research and Development.Research and development expense increased to $1.2 million for the three months ended March 31, 2009, from $588,000 in the comparable period in the prior year, an increase of 104%. The increase was primarily due to an increase in compensation and benefits expenses related to increased headcount and bonus accruals of $162,000, increased depreciation expense of $179,000 on research and development equipment purchases, $117,000 for increased information technology and human resource expense due to the expanded activities and increased purchases of test materials of $116,000. Our research and development activities focus on new technologies, primarily those which are expected to provide for additional miniaturization, cost reduction, and differentiation from our competition, as well as activities related to Pelikon Limited (“Pelikon”). We expect these expenses to continue to grow as we focus on expanding our product development activities.

Sales and Marketing Expense. Sales and marketing expense increased by $1.6 million to $6.1 million in the three months ended March 31, 2009, from $4.5 million in the comparable period in the prior year, an increase of 36%. As a percentage of net sales, sales and marketing expense increased to 3.5% versus 2.8% for the comparable period in the prior year. The increase is primarily attributable to a $1.0 million increase in compensation and benefit expense due to headcount to support expanded program management activities, stock-based compensation and bonus increases, and $280,000 increased information technology and human resource support expenses due to expanded infrastructure growth. As a percentage of net sales, we expect sales and marketing expenses to remain relatively unchanged in our next fiscal quarter.

General and Administrative Expense. General and administrative expense decreased to $6.3 million during the three months ended March 31, 2009, from $7.8 million for the comparable period in the prior year, a decrease of $1.5 million or 19%. As a percentage of net sales, general and administrative expense declined to 3.6% versus 4.7% for the comparable period of the prior year. This was primarily attributable to a decrease of $900,000 for information technology and human resource expenses as activities were shifted to support expanded manufacturing operations and infrastructure growth in other areas, reduced bad debt expenses of $430,000 and reduced depreciation of $317,000. As a percentage of net sales, we expect our general and administrative expense to remain relatively unchanged in our next fiscal quarter.

Restructuring Cost.During the three months ended March 31, 2009, we recorded a net gain from restructuring and impairment of $185,000 which consisted of $12,000 of additional expense related to the restructuring of our wholly owned subsidiary, Aurora Optical in Tucson, Arizona, offset by a gain of $197,000 related to the sale of equipment. No charges were recorded during the comparable period of the prior fiscal year.

Interest Income. Interest income decreased to $252,000 for the three months ended March 31, 2009, from $488,000 for the three months ended March 31, 2008. The decrease is primarily attributable to a significant decline in interest rates.

Interest Expense. Interest expense increased to $198,000 for the three months ended March 31, 2009, from $12,000 for the three months ended March 31, 2008. The increase in interest expense is primarily related to interest accrued against the notes payable issued as part of our acquisition of Pelikon and unused line fees on our new bank loan facilities.

Other Income (Expense), Net. Other income (expense), net changed to income of $169,000 for the three months ended March 31, 2009, from net expense of $2.1 million for the comparable period in the prior year. This change from expense to income is primarily attributable to $1.8 million recorded in the prior year period related to foreign exchange losses as a result of the accelerated weakening of the U.S. dollar against foreign currencies and a $450,000 write down related to an investment.

Income Taxes. The effective tax rate for the three months ended March 31, 2009, was 24% versus 28% for the comparable period in the prior year. The tax rate declined as a result of our international restructuring efforts and the migration of technology to further strengthen our Asian operations and enhance our operational efficiencies.

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Comparison of the Six Months Ended March 31, 2009 and 2008

The following table sets forth our Statement of Operations data expressed as a percentage of net sales for the periods indicated:

	Six Months Ended March 31,
	2009		2008
Net sales	100.0	%	100.0	%
Cost of sales	85.2		82.8
Gross profit	14.8		17.2
Operating expenses:
Research and development	0.6		0.3
Sales and marketing	2.9		2.6
General and administrative	3.4		4.2
Impairment and restructuring expense	0.1		0.0
Total operating expenses	7.0		7.1
Operating income	7.8		10.1
Interest income	0.1		0.2
Interest expense	(0.1	)	0.0
Other expense, net	(0.3	)	(0.5	)
Income before income taxes	7.5		9.8
Provision for income taxes	1.7		2.9
Net income	5.8	%	6.9	%

Net Sales. Net sales increased to $390.7 million in the six months ended March 31, 2009, from $348.1 million in the six months ended March 31, 2008. The increase of $42.6 million, or 12%, was primarily attributable to an increase in overall average unit prices resulting from added material content, offset by a decline in total unit volumes. Sales into the consumer products sector were $100.6 million for the six months ended March 31, 2009, up from $2.7 million for the six months ended March 31, 2008. The increase was driven primarily by increases in unit volume shipments to one of our key customers related to several programs that were started in fiscal 2008. Shipments into the consumer products sector accounted for approximately 26% and 1% of total net sales for the six months ended March 31, 2009 and 2008, respectively.

Net sales into the wireless sector decreased to $273.7 million for the six months ended March 31, 2009, from $327.2 million in the six months ended March 31, 2008. The decrease of $53.5 million, or 16%, versus the comparable period of the prior year was primarily due to reduced unit volume shipments to two of our major customers as a result of reduced demand. Sales into the wireless sector comprised 70% and 94% of total net sales for the six months ended March 31, 2009 and 2008, respectively.

Sales to three customers each accounted for more than 10% of our net sales during the six months ended March 31, 2009, with sales to two of these customers each equal to or accounting for more than 25% of our net sales, as compared to three customers who accounted for more than 10% of our net sales each, with two of these customers each equaling or accounting for more than 25% of our net sales for the comparable period in the prior year.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to 85% for the six months ended March 31, 2009, versus 83% for the comparable period in the prior year. The increase in cost of sales as a percentage of net sales of 2% was driven by several factors, and was primarily attributable to the increase of average material content as a percent of new programs in the current fiscal year and the deleveraging of fixed overhead costs, resulting from higher current year infrastructure costs, and the negative impact of operating at less-than-optimum capacity levels. These increases were only partially offset by cost reductions from improved manufacturing yields resulting from operational improvement initiatives.

Gross profit decreased to $57.7 million for the six months ended March 31, 2009, versus $59.7 million in the comparable period in the prior year, a decrease of 3%. As a percentage of net sales, gross profit decreased to 15% for the six months ended March 31, 2009 from 17% in the comparable period in the prior year for the reasons identified above.

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Research and Development. Research and development expense increased to $2.4 million for the six months ended March 31, 2009, from $1.1 million in the comparable period in the prior year, an increase of 118%. The increase was primarily due to an increase in compensation and benefits of $672,000 resulting from headcount and salary increases related to our increased emphasis on expanding our research and development activities in Anaheim and from our Pelikon subsidiary, increased depreciation of $234,000 on research and development equipment purchases, increased purchased materials of $101,000 related to research and development activities, and $207,000 for increased information technology and human resource support expenses due to expanded activities.

Sales and Marketing Expense. Sales and marketing expense increased by $2.3 million to $11.4 million in the six months ended March 31, 2009, from $9.1 million in the comparable period in the prior year, an increase of 25%. The increase is primarily attributable to compensation and benefit expense increase of $1.9 million as a result of headcount growth and compensation and benefit increases, $488,000 for information technology and human resource support expenses to support the expanded infrastructure, offset by reduced commissions expense of $494,000. As a percentage of net sales, sales and marketing expense increased to 2.9% versus 2.6% for the prior year.

General and Administrative Expense. General and administrative expense decreased by $1.2 million to $13.3 million in the six months ended March 31, 2009, from $14.5 million in the comparable period in the prior year, a decrease of 8%. The decrease was primarily attributable to a decrease of $1.7 million for information technology and human resource expenses as activities were shifted to support expanded manufacturing operations and infrastructure growth, reduced depreciation of $210,000, offset by an increase in compensation and benefits expense of $773,000 due to the increase in headcount at various locations to support business growth, increased telecommunications expenses of $232,000 and increased professional fees of $142,000. As a percentage of net sales, general and administrative expense decreased to 3.4% of net sales for the six months ended March 31, 2009, from 4.2% for the comparable period in the prior year, attributable to the favorable leveraging impact on our operating expenses from the increased net sales.

Restructuring Cost.During the six months ended March 31, 2009, we recorded a net restructuring charge $127,000 which consisted of $324,000 related to the restructuring of our wholly owned subsidiary, Aurora Optical, in Tucson, Arizona, offset by a gain of $197,000 related to the sale of equipment. No charges were recorded during the comparable period of the prior fiscal year. Going forward, we believe that we can achieve approximately $2 to $3 million dollars per year in cost savings resulting from reduced compensation and benefit cost, reduced overhead and other operating expenses.

Interest Income. Interest income decreased to $637,000 for the six months ended March 31, 2009, from $847,000 for the six months ended March 31, 2008. The decrease is primarily attributable to a significant decline in interest rates.

Interest Expense. Interest expense increased to $217,000 for the six months ended March 31, 2009, from $71,000 for the six months ended March 31, 2008. The increase in interest expense is primarily related to interest accrued against the notes payable issued as part of our acquisition of Pelikon and unused line fees on our new bank loan facilities.

Other Income (Expense), Net. Other income (expense), net decreased to net expense of $1.3 million for the six months ended March 31, 2009, from net expense of $1.8 million for the comparable period in the prior year. The reduced expense was primarily attributable to a reduction in foreign currency exchange losses of $889,000 experienced during the six months ended March 31, 2009, versus the comparable period in the prior year. The decrease in net losses from foreign exchange is due to the strengthening of the U.S. dollar versus the Chinese Renminbi (“RMB”) and other foreign currencies. The decrease was partially offset by $419,000 of scrap material sales.

Income Taxes. The effective tax rate for the six months ended March 31, 2009, was 23% versus 29% for the comparable period of the prior year. The tax rate declined as a result of our international restructuring efforts and the migration of technology to further strengthen our Asian operations and enhance our operational efficiencies.

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations and borrowings under our various credit facilities. Our principal uses of cash have been to finance working capital, facility expansions and other capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets recently have been, and continue to be, extremely unstable and unpredictable. Worldwide economic conditions have been weak and may be further deteriorating. Continued, and potentially increased, volatility, instability and weakness in the financial and credit markets could affect our ability to sell our investment securities and other financial assets, which in turn could adversely affect our liquidity and financial position. This instability also could affect the prices at which we could make any such sales, which could also adversely affect our earnings and financial condition. These conditions could also negatively affect our ability to secure funds or raise capital at a reasonable cost, if needed.

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It is our practice to carefully monitor the state of our business, cash requirements and capital structure. We believe that funds generated from our operations and available from our borrowing facilities will be sufficient to fund current business operations as well as anticipated growth over at least the next twelve months. We also believe we will have sufficient capital to fund our operations without the need to derive cash from the sale of our auction rate securities; however, there can be no assurance that any growth will occur and unexpected events may result in our need to raise additional capital. The valuation of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities, as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, market interest rates, discount rates and ongoing strength. Market variables utilized in developing the valuation model for these securities include relative yields on federal student loan securities, average 90 day T-Bill rates, 90 day LIBOR rates, interest rate spreads as determined by the changing credit market environment and quality of market credit and liquidity.

During the six months ended March 31, 2009, net income of $22.8 million, adjusted for depreciation and amortization, gain on equipment disposal, stock-based compensation expense, deferred taxes, impairments and provision for doubtful accounts, generated $45.6 million of operating cash. This amount was increased by $17.4 million generated from working capital.

Changes in the principal components of working capital for the six months ended March 31, 2009, were as follows:

• Net accounts receivable decreased 29% to $114.5 million at March 31, 2009, from $162.4 million at September 30, 2008. The decrease in outstanding accounts receivable was primarily attributable to reduced sales compared to the first quarter of 2009 as a result of decreased unit volume shipments, partially offset by more aggressive collections activity during the three months ended March 31, 2009.

• Inventory decreased 50% to $29.9 million at March 31, 2009, from $59.8 million at September 30, 2008. The principal reason for the decrease relates to reduced inventory deliveries at the end of the quarter related to reduced second quarter 2009 compared to the preceding quarter’s sales and improved inventory management and the implementation of just-in-time delivery arrangements with raw material vendors during the three months ended March 31, 2009. In addition, inventory balances were high at the end of September 30, 2008 in anticipation of the high first quarter sales backlog.

• Accounts payable decreased 36% to $82.1 million at March 31, 2009, from $128.6 million at September 30, 2008, as a result of vendor payments made for the increased purchases made in the fourth quarter of the prior year, and reduced inventory deliveries at the end of the current fiscal quarter on the lower business volumes. Accounts payable balances were higher at the end of September 30, 2008, as a result of increased inventory purchases in the fourth fiscal quarter of 2008 in anticipation of the high first quarter sales backlog.

• Depreciation and amortization expense was $19.9 million for the six months ended March 31, 2009, versus $13.9 million in the comparable period in the prior year due to the increased fixed asset base, mainly at MFC2.

Our principal investing and financing activities for the six months ended March 31, 2009, were as follows:

• Net cash used in investing activities was $11.1 million for the six months ended March 31, 2009. Capital expenditures included $9.7 million of capital equipment, which were primarily related to manufacturing capacity expansion and research and development, deposits of $414,000 for fixed asset purchases and $728,000 for purchased software. Cash used in investing activities also included $872,000 paid for the acquisition of Pelikon, net of cash received.

As of March 31, 2009, and September 30, 2008, we had outstanding purchase commitments related to expansion activities at various locations in Suzhou, China, and for research and development related equipment purchases at our Anaheim, California facility which totaled $4.6 million and $9.2 million, respectively. In conjunction with our acquisition of Pelikon, additional Contingent Consideration may be paid based on the net amount of sales for certain products, during calendar years 2009 and 2010. Any Contingent Consideration paid shall not exceed $2.2 million in 2009 and $7.2 million in 2010, and if one or both of the Earn-Out Targets are not achieved, the Contingent Consideration will not be paid for one or both of the Earn-Out Periods.

In April 2009, we entered into an engineering, design and construction contract for MFC3 which involves aggregate costs of approximately $24 million, although we may delay construction in our discretion.

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• Net cash utilized by financing activities was $7.5 million for the six months ended March 31, 2009. During the quarter ended March 31, 2009, we repurchased a total of 562,500 shares of our common stock for a total value of $8.4 million pursuant to a 10b5-1 plan, offset by $871,000 provided by proceeds from stock option exercises.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market risk represents the risk of loss arising from adverse changes in liquidity, market rates and foreign exchange rates. At March 31, 2009, no amounts were outstanding under our loan agreements with Bank of America, N.A., Shanghai Pudong Development Bank or Bank of China. The amounts outstanding under these loan agreements at any time may fluctuate and we may from time to time be subject to refinancing risk. We do not believe that a change of 100 basis points in interest would have a material effect on our results of operations or financial condition based on our current borrowing level.

Foreign Currency Risk

We derive a substantial portion of our sales outside of the U.S. Approximately $330 million, or 98%, of total shipments to these foreign manufacturers for the six months ended March 31, 2009, were made in U.S. dollars. The balance of our net sales is denominated in RMB. The exchange rate for the RMB to the U.S. dollar has been an average of 6.84 RMB per U.S. dollar for the six months ended March 31, 2009. We are subject to a 0.3% maximum daily appreciation against the U.S. dollar. We generally do not consider it necessary to hedge against currency risk, as a significant portion of our material cost of sales is denominated in U.S. dollars, eliminating much of the need to hedge and recently the appreciation of the RMB versus the U.S. dollar has stabilized; however, we continue to be vulnerable to appreciation or depreciation of foreign currencies against the U.S. dollar.

Liquidity Risk

As a result of the liquidity issues experienced in the global credit and capital markets, during 2008 auctions for investment in auction rate securities held by us failed. An auction fails when there is insufficient demand. However, a failed auction does not represent a default by the issuer. The auction rate securities continue to pay interest in accordance with the terms of the underlying security; however, liquidity will be limited until there is a successful auction or until such time as other markets for these investments develop. However, due to the current absence of a liquid market, we have reclassified our investments in auction rate securities from current assets to non-current assets in our consolidated condensed balance sheet. When liquidity for these types of investments returns in the market, we intend to sell these investments or reclassify them back to current assets. We do not believe that the lack of liquidity relating to auction rate securities will have an impact on our ability to fund operations.

All of our auction rate securities are rated AAA/Aaa, are collateralized by student loans substantially guaranteed by the U.S. government and continue to pay interest in accordance with their contractual terms. The valuation of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact the valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity. As of March 31, 2009, the fair value of our auction rate securities of $11.1 million was determined using a model that calculates the present value of the expected future cash flows from our securities and other indications of value, and as a consequence of our belief that the impairment is of an other than temporary nature, we have recorded aggregate charges of $2.2 million in our results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation carried out as of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective.

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

FACTORS THAT MAY AFFECT OUR OPERATING RESULTS

Our business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth below, any of which could cause our results to be adversely impacted and could result in a decline in the value or loss of your investment in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.

Risks Related to Our Business

We are heavily dependent upon the wireless and consumer products industries, and any downturn in these sectors may reduce our net sales.

For the six months ended March 31, 2009 and 2008, 70% and 94%, respectively, of our net sales were derived from sales to companies that provide products or services to the wireless industry, including wireless handsets, and approximately 26% and 1% of our net sales were derived from sales to companies that provide products to the consumer products industry. In general, the wireless and consumer products industries are subject to economic cycles and periods of slowdown. Intense competition, relatively short product life cycles and significant fluctuations in product demand characterize these industries, and both industries are also generally subject to rapid technological change and product obsolescence. Fluctuations in demand for our products as a result of periods of slowdown in these markets (including the current economic downturn) or discontinuation of products or modifications developed in connection with next generation products could reduce our net sales.

We depend on a limited number of key customers for significant portions of our net sales and if we lose business with any of these customers, our net sales could decline substantially.

For the past several years, a substantial portion of our net sales has been derived from products that are incorporated into products manufactured by or on behalf of a limited number of key customers and their subcontractors, including Apple Inc., Motorola, Inc., Research in Motion LTD and Sony Ericsson Mobile Communications. For the six months ended March 31, 2009, approximately 96% of our net sales were to these four customers in the aggregate. In addition, 45%, 57% and 86% of our net sales in each of the fiscal years ended September 30, 2008, 2007 and 2006, respectively, were to one customer (not the same customer in each of the three years). The loss of one of these major customers or a significant reduction in sales to any of them would seriously harm our business. Although we are continuing our efforts to reduce dependence on a limited number of customers, net sales attributable to a limited number of customers and their subcontractors are expected to continue to represent a substantial portion of our business for the foreseeable future.

We will have difficulty selling our products if customers do not design our flexible printed circuit products into their product offerings or our customers’ product offerings are not commercially successful.

We sell our flexible printed circuit products directly or indirectly to OEMs, who include our products and component assemblies in their product offerings. We must continue to design our products into our customers’ product offerings in order to remain competitive. However, our OEM customers may decide not to design our products into their product offerings in the future. If an OEM selects one of our competitors to provide a product instead of us or switches to alternative technologies developed or manufactured by one or more of our competitors, it becomes significantly more difficult for us to sell our products to that OEM because changing component providers after the initial production runs begin involves significant cost, time, effort and risk for the OEM. Even if an OEM designs one of our products into its product offering, the product may not be commercially successful, we may not receive any orders from that manufacturer, the OEM may qualify additional vendors for the product or we could be undercut by a competitor’s pricing. Additionally, if an OEM selects one or more of our competitors, they may rely upon such competitors for the life of specific offering and, to the extent possible, subsequent generations of similar offerings. Any of these events would result in fewer sales and reduced profits for us.

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Our customers have in the past and likely will continue to cancel their orders, change production quantities, delay production or qualify additional vendors, any of which could reduce our net sales and/or increase our expenses.

Substantially all of our sales are made on a purchase order basis, and we are not always able to predict with certainty the number of orders we will receive or the timing or magnitude of the orders. Our customers may cancel, change or delay product purchase orders with little or no advance notice to us for a variety of reasons, including changes in their prospects, the success of their products in the market, reliance on a new vendor and the overall economic forecast. In general, we do not have long-term contractual relationships with our customers that require them to order minimum quantities of our products, and our customers may decide to use another manufacturer or discontinue ordering from us in their discretion. As a result of these factors, we are not always able to forecast accurately the net sales that we will make in a given period. Changes in orders can also result in layoffs and associated severance costs, which in any given financial period could materially adversely affect our earnings.

In addition, we are increasingly being required to purchase materials, components and equipment before a customer becomes contractually committed to an order so that we may timely deliver the expected order to the customer. We may increase our production capacity, working capital and overhead in expectation of orders that may never be placed, or, if placed, may be delayed, reduced or canceled. As a result, we may be unable to recover costs that we incur in anticipation of orders that are never placed, such as costs associated with purchased raw materials, components or equipment. Delayed, reduced or canceled orders could also result in write-offs of obsolete inventory and the underutilization of our manufacturing capacity if we decline other potential orders because we expect to use our capacity to produce orders that are later delayed, reduced or canceled.

Our industry is extremely competitive, and if we are unable to respond to competitive pressures we may lose sales and our market share could decline.

We compete primarily with large flexible printed circuit board manufacturers located throughout Asia, including Taiwan, China, Korea, Japan and Singapore. We believe that the number of companies producing flexible printed circuit boards has increased materially in recent years and may continue to increase. Certain EMS providers have developed or acquired their own flexible printed circuit manufacturing capabilities or have extensive experience in electronics assembly, and in the future may cease ordering products from us or even compete with us on OEM programs. In addition, the number of customers in the market has been decreasing through consolidation and otherwise. Furthermore, many companies in our target customer base may move the design and manufacturing of their products to ODMs in Asia. These factors, among others, make our industry extremely competitive. We believe that one of our principal competitive advantages is our ability to interact closely with our customers throughout the design and engineering process. If we are not successful in addressing these competitive aspects of our business, including maintaining or establishing close relationships with customers in markets in which we compete, we may not be able to grow or maintain our market share or net sales.

Our products and their terms of sale are subject to various pressures from our customers and competitors, any of which could harm our gross profits.

Our selling prices are affected by changes in overall demand for our products, changes in the specific products our customers buy, pricing of competitors’ products, our products’ life cycles and general economic conditions. In addition, from time to time we may elect to reduce the price of certain programs we produce in order to gain additional orders on those programs. A typical life cycle for one of our products begins with higher prices when the product is introduced and decreasing prices as it matures. To offset price decreases during a product’s life cycle, we rely primarily on higher sales volume and improving our manufacturing yield and productivity to reduce a product’s cost. If we cannot reduce our manufacturing costs as prices decline during a product’s life cycle, or if we are required to pay damages to a customer due to a breach of contract or other claim, including due to quality or delivery issues, our cost of sales may increase, which would harm our profitability.

In addition, our key customers and their subcontractors are able to exert significant pricing pressure on us and often require us to renegotiate the terms of our arrangements with them, including liability and indemnification thresholds and payment terms, among other terms. Changes in contract terms, the extension of payment terms and regular price reductions may result in lower gross margins for us. These trends make it more difficult to compete effectively and put increased pressure on our pricing.

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Significant product failures could harm our reputation and our business.

Continued improvement in manufacturing capabilities, quality control, material costs and successful product testing capabilities are critical to our growth. Our efforts to monitor, develop, modify and implement stringent testing and manufacturing processes for our products may not be sufficient. If any flaw in the design, production, assembly or testing of our products were to occur, we could experience a rate of failure in our products that would result in significant delays in product shipments by, or cancellation of orders or substantial penalties from, our customers and their customers, substantial repair or replacement costs, an increased return rate for our products and potential damage to our reputation.

Problems with manufacturing yields could result in higher operating costs and could impair our ability to meet customer demand for our products.

We could experience low manufacturing yields due to, among other things, design errors, manufacturing failures in new or existing products, the inexperience of new employees, or the learning curve experienced during the initial and ramp up stages of new product introduction. If we cannot achieve expected yields in the manufacture of our products, we may incur higher per unit costs, reduced product availability and may be subject to substantial penalties by our customers. In addition, reduced yields can significantly harm our gross margins, resulting in lower profitability or even losses.

We must develop and adopt new technology and manufacture new products and product features in order to remain competitive, and we may not be able to do so successfully.

Our long-term strategy relies in part on timely adopting, developing and manufacturing technological advances and new products and product features to meet our customers’ needs, including advanced technologies such as rigid flex and high density interconnects. However, any new technology and products adopted or developed by us may not be selected by existing or potential customers. Our customers could decide to switch to alternative technologies, adopt new or competing industry standards with which our products are incompatible or fail to adopt standards with which our products are compatible. If we choose to focus on new technology or a standard that is ultimately not accepted by the industry and/or does not become the industry standard, we may be unable to sell those products. If we are unable to obtain customer qualifications for new products or product features, cannot qualify our products for high-volume production quantities or do not execute our operational and strategic plans for new products or advanced technologies in a timely manner, our net sales may decrease. In addition, we may incur higher manufacturing costs in connection with new technology, products or product features, as we may be required to replace, modify, design, build and install equipment, all of which would require additional capital expenditures.

If we are unable to attract or retain personnel necessary to operate our business, our ability to develop and market our products successfully could be harmed.

We believe that our success is highly dependent on our current executive officers and management team. We do not have an employment contract with Reza Meshgin, our president and chief executive officer, or any of our other key personnel, and their knowledge of our business and industry would be extremely difficult to replace. The loss of any key employee or the inability to attract or retain qualified personnel, including engineers, sales and marketing personnel, management or finance personnel could delay the development and introduction of our products, harm our reputation or otherwise damage our business.

Furthermore, we have experienced higher than average employee turnover in our facilities in China. A large number of our employees work in our facilities in China, and our costs associated with hiring these employees have increased over the past several years. The high turnover rate and our difficulty in retaining employees have resulted in an increase in our expenses related to recruitment and training of qualified employees, and a continuation of this trend could result in even higher costs for us.

We must continue to be able to procure raw materials and components on commercially reasonable terms to manufacture our products profitably.

Generally, we do not maintain a large surplus stock of raw materials or components for our products because the specific assemblies are uniquely applicable to the products we produce for our customers; therefore, we rely on third-party suppliers to provide these raw materials and components in a timely fashion and on commercially reasonable terms. In addition, we are often required by our customers to seek components from a limited number of suppliers that have been pre-qualified by the customer, and from time to time we have experienced shortages of the components and raw materials used in

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the fabrication of our products. For example, during one such shortage of flexible printed circuit materials we had to qualify an additional supplier in order to maintain the delivery of our largest production run, and during certain quarters of fiscal 2006 we experienced component shortages, which resulted in delayed shipments to customers. We expect that these delays could occur in future periods. We may not be successful in managing any shortage of raw materials or components that we may experience in the future, which could adversely affect our relationships with our customers and result in a decrease in our net sales. Component shortages could also increase our cost of goods sold because we may be required to pay higher prices for components in short supply. In addition, suppliers could go out of business, discontinue the supply of key materials, or consider us too small of a customer to sell to directly, and could require us to buy through distributors, increasing the cost of such components to us.

Our manufacturing and shipping costs may also be impacted by fluctuations in the cost of oil and gas. Any fluctuations in the supply or prices of these commodities could have an adverse effect on our profit margins and financial condition.

Our global operations expose us to additional risk and uncertainties.

We have operations in a number of countries, including the United States, the United Kingdom, The Netherlands, China, Malaysia and Singapore. Our global operations may be subject to risks that may limit our ability to operate our business. We manufacture the bulk of our products in China and sell our products globally, which exposes us to a number of risks that can arise from international trade transactions, local business practices and cultural considerations, including:

• political unrest, terrorism and economic instability;

• restrictions on our ability to repatriate earnings;

• unexpected changes in regulatory requirements and uncertainty related to developing legal and regulatory systems related to economic and business activities;

• nationalization programs that may be implemented by foreign governments;

• import-export regulations;

• difficulties in enforcing agreements and collecting receivables;

• difficulty in ensuring compliance with the laws and regulations of multiple jurisdictions;

• limited intellectual property protection;

• longer payment cycles;

• currency exchange fluctuations;

• inadequate local infrastructure and disruptions of service from utilities or telecommunications providers, including electricity shortages;

• transportation delays and difficulties in managing international distribution channels;

• difficulties in staffing foreign subsidiaries;

• potentially adverse tax consequences;

• differing employment practices and labor issues;

• the occurrence of natural disasters or other acts of force majeure; and

• public health emergencies such as SARS, avian flu and Swine flu.

We also face risks associated with currency exchange and convertibility, inflation and repatriation of earnings as a result of our foreign operations. In some countries, economic, monetary and regulatory factors could affect our ability to convert funds to U.S. dollars or move funds from accounts in these countries. We are also vulnerable to appreciation or depreciation of foreign currencies against the U.S. dollar. Although we have significant operations in Asia, a substantial portion of transactions are denominated in U.S. dollars, including approximately 97% of the total shipments made to foreign manufacturers during fiscal year 2008. The balance of our net sales is denominated in RMB. As a result, if appreciation against the U.S. dollar were to increase, it would result in an increase in the cost of our business expenses in China. Further, downward fluctuations in the value of foreign currencies relative to the U.S. dollar may make our products less price competitive than local solutions. We do not currently engage in currency hedging activities to limit the risks of currency fluctuations.

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In addition, our activities in China are subject to administrative review and approval by various national and local agencies of China’s government. Given the changes occurring in China’s legal and regulatory structure, we may not be able to secure required governmental approval for our activities, which could impede our ability to operate our business.

We are in the process of restructuring our operations and increasing our manufacturing capacity, and we may have difficulty managing these changes.

We have been engaged in a number of manufacturing expansion projects, including a new MFC3 manufacturing facility, the addition of satellite facilities in Suzhou, China and the establishment of manufacturing functions in Malaysia. In addition, we have been engaged in an international restructuring effort to transition various business functions to our offices in Singapore, in order to better align these activities with our international operations. Although we intend to manage development of these expansion activities and requisite capital expenditures in discrete phases, these efforts require significant investment by us, and have in the past and could continue to result in increased expenses and inefficiencies and reduced gross margins. For example, we recently entered into an engineering, design and construction contract for MFC3 which involves aggregate costs of approximately $24 million, although we may delay construction in our discretion.

Our management team may have difficulty managing our manufacturing expansion projects or otherwise managing any growth in our business that we may experience. Risks associated with managing expansion and growth may include those related to:

• managing multiple, concurrent major manufacturing expansion projects in China and Malaysia;

• hiring and retaining employees, particularly in China;

• accurately predicting any increases or decreases in demand for our products and managing our manufacturing capacity appropriately;

• managing increased employment costs and scrap rates often associated with periods of growth;

• implementing, integrating and improving operational and financial systems, procedures and controls, including our computer systems;

• construction delays, equipment delays or shortages, labor shortages and disputes and production start-up problems;

• cost overruns and charges related to our expansion activities; and

• managing expanding operations in multiple locations and multiple time zones.

Our management team may not be effective in expanding our manufacturing facilities and operations, and our systems, procedures and controls may not be adequate to support such expansion. Any inability to manage our growth may harm our profitability and growth.

WBL Corporation Limited beneficially owns 60% of our outstanding common stock and is able to exert influence over us and our major corporate decisions.

WBL Corporation Limited, together with its affiliates and subsidiaries (“Wearnes”) beneficially owns 60% of our outstanding common stock and we expect to be a principal subsidiary of Wearnes for the foreseeable future. As a result of this ownership interest and the resulting influence over the composition of our board of directors, Wearnes has influence over our management, operations and potential significant corporate actions. For example, so long as Wearnes continues to control more than a majority of our outstanding common stock, it will have the ability to control who is elected to our board of directors each year. In addition, for so long as Wearnes effectively owns at least one-third of our voting stock, it has the ability, through a stockholders agreement with us, to approve the appointment of any new chief executive officer or the issuance of securities that would reduce Wearnes’ effective ownership of us to a level that is below a majority of our outstanding shares of common stock, as determined on a fully diluted basis. As a result, Wearnes could preclude us from engaging in an acquisition or other strategic opportunity that we may want to pursue if such acquisition or opportunity required the issuance of our common stock. This concentration of ownership may also discourage, delay or prevent a change of control of our company, which could deprive our other stockholders of an opportunity to receive a premium for their stock as part of a sale of our company, could harm the market price of our common stock and could impede the growth of our company. Wearnes could also sell a controlling interest in us to a third party, including a participant in our industry, or buy additional shares of our stock.

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Wearnes and its designees on our board of directors may have interests that conflict with, or are different from, the interests of our other stockholders. These conflicts of interest could include potential competitive business activities, corporate opportunities, indemnity arrangements, sales or distributions by Wearnes of our common stock and the exercise by Wearnes of its ability to influence our management and affairs. In general, our certificate of incorporation does not contain any provision that is designed to facilitate resolution of actual or potential conflicts of interest. If any conflict of interest is not resolved in a manner favorable to our stockholders, our stockholders’ interests may be substantially harmed.

Wearnes is currently unable to vote its shares on specified matters that require stockholder approval without obtaining its own stockholders’ and regulatory approval and it is possible that Wearnes’ stockholders or the relevant regulators may not approve the proposed corporate action.

Wearnes’ ordinary shares are listed on the Singapore Securities Exchange Trading Limited (the “Singapore Exchange”). Under the rules of the Singapore Exchange, to the extent that we constitute a principal subsidiary of Wearnes as defined by the rules of the Singapore Exchange at any time that we submit a matter for the approval of our stockholders, Wearnes may be required to obtain the approval of its own stockholders for such action before it can vote its shares with respect to our proposal or dispose of our shares of common stock. Examples of corporate actions we may seek to take that may require Wearnes to obtain its stockholders’ approval include an amendment of our certificate of incorporation, a sale of all or substantially all of our assets, a merger or reorganization transaction, and certain issuances of our capital stock.

To obtain stockholder approval, Wearnes must prepare a circular describing the proposal, obtain approval from the Singapore Exchange and send the circular to its stockholders, which may take several weeks or longer. In addition, Wearnes is required under its corporate rules to give its stockholders advance notice of the meeting. Consequently, if we need to obtain the approval of Wearnes at a time in which we qualify as a principal subsidiary (including this year), the process of seeking Wearnes’ stockholder approval may delay our proposed action and it is possible that Wearnes’ stockholders may not approve our proposed corporate action. It is also possible that we might not be able to establish a quorum at our stockholder meeting if Wearnes was unable to vote at the meeting as a result of the Singapore Exchange rules. The rules of the Singapore Exchange that govern Wearnes are subject to revision from time to time, and policy considerations may affect rule interpretation and application. It is possible that any change to or interpretation of existing or future rules may be more restrictive and complex than the existing rules and interpretations.

Our business requires significant investments in capital equipment, facilities and technological improvements, and we may not be able to obtain sufficient funds to make such capital expenditures.

To remain competitive we must continue to make significant investments in capital equipment, facilities and technological improvements. We expect that substantial capital will be required to expand our manufacturing capacity and fund working capital requirements for our anticipated growth. In addition, we expect that new technology requirements may increase the capital intensity of our business. We may need to raise additional funds through further debt or equity financings in order to fund our anticipated growth and capital expenditures, and we may not be able to raise additional capital on reasonable terms, or at all, particularly given the current turmoil in global credit markets. If we are unable to obtain sufficient capital in the future, we may have to curtail our capital expenditures. Any curtailment of our capital expenditures could result in a reduction in net sales, reduced quality of our products, increased manufacturing costs for our products, harm to our reputation, reduced manufacturing efficiencies or other harm to our business.

In addition, Wearnes’ approval is required for the issuance of securities that would reduce its effective ownership of us to below a majority of the outstanding shares of our common stock as determined on a fully diluted basis. If Wearnes’ approval is required for a proposed financing, it is possible that it may not approve the financing and we may not be able to complete the transaction, which could make it more difficult to obtain sufficient funds to operate and expand our business.

The global credit market crisis and economic weakness may adversely affect our earnings, liquidity and financial condition.

Global financial and credit markets recently have been, and continue to be, extremely unstable and unpredictable. Worldwide economic conditions have been weak and may be further deteriorating. The instability of the markets and weakness of the economy could affect the demand for our customers’ products, the amount, timing and stability of their orders to us, the financial strength of our customers and suppliers, their ability or willingness to do business with us, our willingness to do business with them, and/or our suppliers’ and customers’ ability to fulfill their obligations to us. These factors could adversely affect our operations, earnings and financial condition.

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In addition, continued, and potentially increased, volatility, instability and weakness in the financial and credit markets could affect our ability to sell our investment securities and other financial assets, which in turn could adversely affect our liquidity and financial position. We encountered a situation in which we were unable to sell our auction rate securities, as more fully described above in Item 3,“Quantitative and Qualitative Disclosures About Market Risk.” This instability also could affect the prices at which we could make any such sales, which also could adversely affect our earnings and financial condition. These conditions could also negatively affect our ability to secure funds or raise capital, if needed.

We incurred an other-than-temporary impairment charge in our consolidated statement of income during the quarter ended December 31, 2008 to reduce the carrying value of certain auction rate securities we hold, and we may incur additional impairment charges with respect to auction rate securities in the future.

Our investments consist of auction rate obligation securities issued by state agencies, which are collateralized by student loans. These auction rate securities were intended to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals (every twenty-eight days), allowing investors to either roll over their holdings or gain immediate liquidity by selling such interest at par. As a result of current negative conditions in the global credit markets, during the second quarter of our fiscal 2008, auctions for investment in these securities, including the auction rate securities we hold, continued to fail to settle on their respective settlement dates. Consequently, the investments are not currently liquid through the normal auction process and we determined to reclassify these investments as long-term investments instead of short-term investments during the second quarter. Our long-term investments at March 31, 2009 represented $11.1 million of auction rate securities net of the cumulative other-than-temporary impairment charge of $2.2 million which has been recorded in the consolidated statements of operations.

We determined the fair value of these securities using a model that calculates the present value of the expected future cash flows from the securities and other indications of value. The valuation of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity. If the current market conditions deteriorate further such that these investments remain illiquid or recovery in market values does not occur, the value of these securities may decline further such that we may be required to record additional unrealized or realized losses for impairment, with such losses reducing our income.

We cannot predict whether or if future auctions related to auction rate securities will be successful. We are currently seeking alternatives for reducing our exposure to the auction rate market, including assessing whether our auction rate securities are eligible for participation in any recently announced settlements with the various entities that marketed auction rate securities; however, there is no guarantee that we will able to achieve alternate financing or other liquidity for some or all of our auction rate securities in the near term, or at all.

We are subject to the risk of increased income tax rates and other taxes.

A number of countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. We currently enjoy tax holidays and other tax incentives for certain of our operations in Asia, including a tax holiday for our second manufacturing facility in China, MFC2, and a tax incentive for our facility in Singapore. However, any tax holidays we may receive may be challenged, modified or even eliminated by taxing authorities or changes in law. Our taxes could increase if tax holidays or incentives are not renewed upon expiration, or if tax rates applicable to us are otherwise increased. For example, in March of 2007, the Chinese government passed a new unified enterprise income tax law which became effective on January 1, 2008. Among other things, this law cancelled certain income tax incentives and increased the standard withholding rate on earnings distributions. The effect of these and other changes in Chinese tax laws on our overall tax rate will be affected by, among other things, our income, the manner in which China interprets, implements and applies the new tax provisions and our ability to qualify for any exceptions or new incentives. In addition, from time to time we may be subject to various types of tax audits and in light of recent proposed tax law changes in the U.S., it is possible our tax rates in future periods may increase.

If we fail to secure or protect our intellectual property rights, competitors may be able to use our technologies, which could weaken our competitive position and harm our business.

We rely primarily on trade secrets and confidentiality procedures relating to our manufacturing processes to protect our proprietary rights. Despite our efforts, these measures can only provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and use our intellectual property. If we fail to protect our proprietary rights adequately, our competitors could offer similar products using processes or technologies developed by us, potentially harming our competitive position. In addition, other parties may independently develop similar or competing technologies.

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We also rely on patent protection for the intellectual property that we have developed. Our patents may be expensive to obtain and there is no guarantee that either our current or future patents will provide us with any competitive advantages. A third party may challenge the validity of our patents, or circumvent our patents by developing competing products based on technology that does not infringe our patents. Further, patent protection is not available at all in certain countries and some countries that do allow registration of patents do not provide meaningful redress for patent violations. As a result, protecting intellectual property in those countries is difficult, and competitors could sell products in those countries that have functions and features that would otherwise infringe on our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business may be harmed.

We may be sued by third parties for alleged infringement of their proprietary rights.

From time to time, we have received, and expect to continue to receive, notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights. We could also be subject to claims arising from the allocation of intellectual property rights among us and our customers. Any claims brought against us or our customers, with or without merit, could be time-consuming and expensive to litigate or settle, and could divert management attention away from our business plan. Adverse determinations in litigation could subject us to significant liability and could result in the loss of our proprietary rights. A successful lawsuit against us could also force us to cease selling or require us to redesign any products that incorporate the infringed intellectual property. In addition, we could be required to seek a license from the holder of the intellectual property to use the infringed technology, and it is possible that we may not be able to obtain a license on reasonable terms, or at all. If we fail to develop a non-infringing technology on a timely basis or to license the infringed technology on acceptable terms, our business, financial condition and results of operations could be harmed.

Complying with environmental laws and regulations may increase our costs and reduce our profitability.

We are subject to a variety of environmental laws and regulations relating to the storage, discharge, handling, emission, generation, manufacture, use and disposal of chemicals, solid and hazardous waste and other toxic and hazardous materials used in the manufacture of flexible printed circuits and component assemblies in our operations in the United States and Asia. A significant portion of our manufacturing operations are located in China, where we are subject to constantly evolving environmental regulation. The costs of complying with any change in such regulations and the costs of remedying potential violations or resolving enforcement actions that might be initiated by governmental entities in China could be substantial.

In the event of a violation, we may be required to halt one or more segments of our operations until such violation is cured. Although we attempt to operate in compliance with all applicable environmental laws and regulations, we may not succeed in this effort at all times. The costs of remedying violations or resolving enforcement actions that might be initiated by governmental authorities could be substantial. Any remediation of environmental contamination would involve substantial expense that could harm our results of operations. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our operations may be subject or the manner in which existing or future laws will be administered or interpreted. Future regulations may be applied to materials, products or activities that have not been subject to regulation previously. The costs of complying with new or more stringent regulations could be significant.

Potential future acquisitions could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our financial results.

In December 2008, Multi-Fineline Electronix Singapore Pte. Ltd., one of our wholly owned subsidiaries, acquired all of the issued ordinary shares of Pelikon, a privately held technology company focused on the development of printed segmented electroluminescent displays and keypads, from the shareholders of Pelikon. As part of our business strategy, we intend to continue to consider acquisitions of companies, technologies and products that we feel could enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. We have limited experience in acquiring other businesses and technologies. Potential and completed acquisitions and strategic investments involve numerous risks, including:

• difficulties in integrating operations, technologies, accounting and personnel;

• problems maintaining uniform standards, procedures, controls and policies;

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• difficulties in supporting and transitioning customers of our acquired companies;

• diversion of financial and management resources from existing operations;

• risks associated with entering new markets in which we have no or limited prior experience;

• potential loss of key employees; and

• inability to generate sufficient revenues to offset acquisition or start-up costs.

Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate.

We face potential risks associated with loss, theft or damage of our property or property of our customers.

Some of our customers have entrusted us with proprietary equipment to be used in the manufacture and testing of the products we make for them. In some instances, we face potentially millions of dollars in financial exposure to those customers if such equipment is lost, damaged or stolen. Although we take precautions against such loss, theft or damage and we may insure against a portion of these risks, such insurance is expensive, may not be applicable to any loss we may experience and, even if applicable, may not be sufficient to cover any such loss. Further, deductibles for such insurance may be substantial and may adversely affect our operations if we were to experience a loss, even if insured.

Litigation may distract us from operating our business.

Litigation that may be brought by or against us could cause us to incur significant expenditures and distract our management from the operations and conduct of our business. Furthermore, there can be no assurance that we would prevail in such litigation or resolve such litigation on terms favorable to us, which may adversely affect our operations.

The trading price of our common stock is volatile.

The trading prices of the securities of technology companies, including the trading price of our common stock, have historically been highly volatile. During the three months ended March 31, 2009, our common stock traded between $11.42 and $20.95 per share. Factors that could affect the trading price of our common stock include:

• fluctuations in our financial results;

• announcements of technological innovations or events affecting other companies in our industry;

• changes in the estimates of our financial results;

• changes in the recommendations of any securities analysts that elect to follow our common stock; and

• market conditions in our industry, the industries of our customers and the economy as a whole.

In addition, although we have approximately 25 million shares of common stock outstanding, approximately 14.8 million of those shares are held by a few investors. As a result, there is a limited public float in our common stock. If any of our significant stockholders were to decide to sell a substantial portion of its shares the trading price of our common stock could decline.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our operating results could be misstated, current and potential stockholders could lose confidence in our financial reporting and the trading price of our stock could be negatively affected. There can be no assurance that our internal controls over financial processes and reporting will be effective in the future.

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Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management including, among other things, provisions providing for a classified board of directors, authorizing the board of directors to issue preferred stock and the elimination of stockholder voting by written consent. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may discourage, delay or prevent certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These provisions in our charter, bylaws and under Delaware law could discourage, delay or prevent potential takeover attempts that stockholders may consider favorable.

Because we do not intend to pay dividends, our stockholders will benefit from an investment in our common stock only if our stock price appreciates in value.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which it was purchased.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents stock repurchases by month during the second quarter of fiscal 2009:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1)
01/01/2009 – 01/31/2009	120,386	$	16.5612	120,386	442,114
02/01/2009 – 02/28/2009	199,943	$	15.4556	320,329	242,171
03/01/2009 – 03/31/2009	242,171	$	13.7330	562,500	—
Total	562,500			562,500

(1) On December 5, 2008, our Board of Directors approved the establishment of a share repurchase program for up to 2,250,000 shares in the aggregate of our common stock on the open market; this amount represents nine percent of our common stock outstanding as of November 30, 2008, as reported on our most recent Form 10-K filed with the SEC on December 9, 2008. Stock repurchases may be made from time to time, based on market conditions and other factors, including price, regulatory requirement and capital availability. On January 7, 2009, we entered into the first of these repurchase plans, covering up to 562,500 shares. We subsequently entered into a second 10b5-1 plan covering a second tranche of 562,500 shares, and we expect to enter into additional repurchase plans from time to time covering the balance of such shares. As of March 31, 2009, we had repurchased a total of 562,500 shares for a total value of $8.4 million pursuant to a 10b5-1 plan.

Item 4. Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Stockholders was held on March 11, 2009. Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to the management’s nominees as listed in the proxy statement to elect three directors. All such nominees were elected. The terms for our other six directors continued following the Annual Meeting with Sanford L. Kane, Reza Meshgin and Huat Seng Lim, Ph.D.’s terms set to expire at our annual meeting of stockholders to be held in 2010 and Philip A. Harding, Linda Y. C. Lim, Ph.D. and Sam Yau’s terms set to expire at our annual meeting of stockholders to be held in 2011.

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The matters voted at the meeting and the results were as follows:

Election of Directors:

To elect three directors to serve for a term to expire at the Annual Meeting in 2012 or until their successors are elected and qualified.

	For	Withheld
Philippe Lemaitre	24,039,487	141,271
Donald Schwanz	24,047,123	133,635
Choon Seng Tan	18,605,935	5,574,823

Ratification of Appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending September 30, 2009:

For	Against	Abstain
24,058,245	107,390	15,123

Approval of the amendment of the Company’s Amended and Restated 2004 Stock Incentive Plan:

For	Against	Abstain	Broker Non-Votes
20,933,889	1,446,635	14,675	1,785,559

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Item 6. Exhibits

3.2(1)	Restated Certificate of Incorporation of the Company.
3.4(2)	Amended and Restated Bylaws of the Company.
4.1(1)	Form of Common Stock Certificate.
10.1(1)	Form of Indemnification Agreement between the Company and its officers, directors and agents.
10.2(1)	1994 Stock Plan of the Company, as amended.
10.3(5)	2004 Stock Incentive Plan of the Company, as amended and restated.
10.20(3)	Amended and Restated Stockholders Agreement dated October 25, 2005 by and among Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited.
10.21(4)	Form of Restricted Stock Unit Agreement.
10.38(6)	Master Purchase Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix (Suzhou) Co., Ltd., and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Sony Ericsson Mobile Communications (USA) Inc. dated April 19, 2006.
10.41(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.42(8)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.43(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.44(8)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.45(9)	Form of Stock Appreciation Right Agreement.
10.46(9)	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited, Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47(10)	Master Development and Supply Agreement by and between Apple Computer Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
10.48(7)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Bank of China Co., Ltd. Wuzhong Branch dated January 25, 2009.
10.49(7)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Bank of China Co., Ltd. Wuzhong Branch dated January 25, 2009.
10.50(11)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among Multi-Fineline Electronix (Suzhou) Co., Ltd, Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute dated April 24, 2009.
10.51(12)*	Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 12, 2009.
31.1*	Section 302 Certification by the Company’s chief executive officer.
31.2*	Section 302 Certification by the Company’s principal financial officer.
32.1*	Section 906 Certification by the Company’s chief executive officer and principal financial officer.

* Filed herewith

⁽¹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

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⁽²⁾ Incorporated by reference to an exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on May 24, 2005.

⁽³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁴⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on December 9, 2005.

⁽⁵⁾ Incorporated by reference to exhibit (as Appendix A) to the Company’s Proxy Statement for its 2006 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 26, 2006 and to exhibit (as Appendix A) to the Company’s Proxy Statement for its 2009 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 21, 2009.

⁽⁶⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2007. Confidential treatment has been granted for certain portions of this agreement.

⁽⁷⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on January 29, 2009.

⁽⁸⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2008.

⁽⁹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008.

⁽¹⁰⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008. Portions of the exhibit have been omitted pursuant to a request for confidential treatment.

⁽¹¹⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 29, 2009.

⁽¹²⁾ Portions of the exhibit have been omitted pursuant to a request for confidential treatment.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Multi-Fineline Electronix, Inc., a Delaware corporation
Date: May 7, 2009	By:	/s/ Thomas Liguori
		Thomas Liguori Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer of the Registrant)

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EXHIBIT INDEX

3.2(1)	Restated Certificate of Incorporation of the Company.
3.4(2)	Amended and Restated Bylaws of the Company.
4.1(1)	Form of Common Stock Certificate.
10.1(1)	Form of Indemnification Agreement between the Company and its officers, directors and agents.
10.2(1)	1994 Stock Plan of the Company, as amended.
10.3(5)	2004 Stock Incentive Plan of the Company, as amended and restated.
10.20(3)	Amended and Restated Stockholders Agreement dated October 25, 2005 by and among Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited.
10.21(4)	Form of Restricted Stock Unit Agreement.
10.38(6)	Master Purchase Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix (Suzhou) Co., Ltd., and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Sony Ericsson Mobile Communications (USA) Inc. dated April 19, 2006.
10.41(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.42(8)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.43(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.44(8)	Collaboration Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.45(9)	Form of Stock Appreciation Right Agreement.
10.46(9)	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited, Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47(10)	Master Development and Supply Agreement by and between Apple Computer Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
10.48(7)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Bank of China Co., Ltd. Wuzhong Branch dated January 25, 2009.
10.49(7)	Line of Credit Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Bank of China Co., Ltd. Wuzhong Branch dated January 25, 2009.
10.50(11)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among Multi-Fineline Electronix (Suzhou) Co., Ltd, Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute dated April 24, 2009.
10.51(12)*	Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 12, 2009.
31.1*	Section 302 Certification by the Company’s chief executive officer.
31.2*	Section 302 Certification by the Company’s principal financial officer.
32.1*	Section 906 Certification by the Company’s chief executive officer and principal financial officer.

* Filed herewith

⁽¹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

⁽²⁾ Incorporated by reference to an exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on May 24, 2005.

⁽³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁴⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on December 9, 2005.

⁽⁵⁾ Incorporated by reference to exhibit (as Appendix A) to the Company’s Proxy Statement for its 2006 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 26, 2006 and to exhibit (as Appendix A) to the Company’s Proxy Statement for its 2009 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 21, 2009.

⁽⁶⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2007. Confidential treatment has been granted for certain portions of this agreement.

⁽⁷⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on January 29, 2009.

⁽⁸⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2008.

⁽⁹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008.

⁽¹⁰⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008. Portions of the exhibit have been omitted pursuant to a request for confidential treatment.

⁽¹¹⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 29, 2009.

⁽¹²⁾ Portions of the exhibit have been omitted pursuant to a request for confidential treatment.