================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 September 24, 1999

{_} 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: 0-23354

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

SINGAPORE NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

------------------------
514 Chai Chee Lane #04-13
Bedok Industrial Estate
SINGAPORE 469029
(65) 449-5255
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

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

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 {_}

At October 15, 1999, there were 50,316,600 Ordinary Shares, S$0.01 par
value per share, outstanding.

FLEXTRONICS INTERNATIONAL LIMITED
INDEX

PART I. FINANCIAL INFORMATION

Page
----

Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 24, 1999 and
March 31, 1999 ................................................. 3
Condensed Consolidated Statements of Income - Three Months Ended
September 24, 1999 and September 25, 1998 ....................... 4
Condensed Consolidated Statements of Income - Six Months Ended
September 24,1999 and September 25, 1998 ...................... 5
Condensed Consolidated Statements of Cash Flow - Six Months Ended
September 24, 1999 and September 25, 1998 ..................... 6
Notes to Condensed Consolidated Financial Statements ..................... 7-10

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ............................................................ 11-22

Item 3. Quantitative and Qualitative Disclosures About Market Risk ............... 22

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders ..................... 23

Item 6. Exhibits and Reports on Form 8-K ......................................... 24

Signatures ............................................................. 25

ITEM 1. FINANCIAL STATEMENTS

FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

Sept. 24, March 31,
1999 1999
----------- -----------
(Unaudited)
ASSETS

Current Assets:
Cash and cash equivalents .............................. $ 96,582 $ 184,860
Accounts receivable, net ............................... 417,101 273,203
Inventories ............................................ 415,632 221,352
Deferred income taxes and other current assets ......... 89,682 66,109
----------- -----------
Total current assets ........................... 1,018,997 745,524

Property and equipment, net .............................. 486,608 397,167
Other non-current assets ................................. 91,125 75,178
----------- -----------
Total assets ................................... $ 1,596,730 $ 1,217,869
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank borrowings and current portion of long-term debt .. $ 168,405 $ 83,976
Capital lease obligations .............................. 14,800 11,475
Accounts payable and accrued liabilities ............... 508,874 292,757
Other current liabilities .............................. 123,819 105,718
----------- -----------
Total current liabilities ...................... 815,898 493,926
----------- -----------
Long-term debt, net of current portion ................... 183,475 188,808
Capital lease obligations, net of current portion ........ 47,095 31,187
Deferred income taxes .................................... 4,496 4,831
Other long-term liabilities .............................. 7,046 10,157
Minority interest ........................................ 4,359 4,022
----------- -----------
Total long-term liabilities ................... 246,471 239,005
----------- -----------

Shareholders' Equity:
Ordinary shares ........................................ 312 310
Additional paid-in capital ............................. 432,491 426,230
Retained earnings ...................................... 119,643 82,245
Accumulated other comprehensive loss ................... (18,085) (23,847)
----------- -----------
Total shareholders' equity ..................... 534,361 484,938
----------- -----------
Total liabilities and shareholders' equity ..... $ 1,596,730 $ 1,217,869
=========== ===========

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

FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

Three months ended
Sept. 24, Sept. 25,
1999 1998
--------- ---------

Net sales ........................................ $ 870,820 $ 470,889
Cost of sales .................................... 809,146 431,893
--------- ---------
Gross margin ............................ 61,674 38,996
--------- ---------
Operating expenses:
Selling, general and administrative ............ 27,504 17,976
Goodwill and intangibles amortization .......... 1,460 890
--------- ---------
Total operating expenses ................ 28,964 18,866
--------- ---------
Income from operations .................. 32,710 20,130

Other income and expenses:
Interest expense ............................... 8,146 5,581
Interest income ................................ (1,349) (596)
Merger expenses ................................ 2,455 --
Other expense, net ............................. 519 376
--------- ---------
Income before income taxes .............. 22,939 14,769

Provision for income taxes ....................... 3,170 1,726
--------- ---------
Net income .............................. $ 19,769 $ 13,043
========= =========
Earnings per share:
Basic .......................................... $ 0.39 $ 0.30
Diluted ........................................ $ 0.36 $ 0.29

Shares used in computing per share amounts:
Basic .......................................... 50,312 43,476
Diluted ........................................ 54,483 44,972

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

FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

Six months ended
Sept. 24, Sept. 25,
1999 1998
----------- -----------

Net sales ...................................... $ 1,482,090 $ 868,163
Cost of sales .................................. 1,370,892 795,188
----------- -----------
Gross margin .......................... 111,198 72,975
----------- -----------
Operating expenses:
Selling, general and administrative .......... 50,953 32,959
Goodwill and intangibles amortization ........ 2,874 1,774
----------- -----------
Total operating expenses .............. 53,827 34,733
----------- -----------
Income from operations ................ 57,371 38,242

Other income and expenses:
Interest expense ............................. 14,017 10,533
Interest income .............................. (3,286) (1,481)
Merger expenses .............................. 2,455 --
Other expense, net ........................... 175 1,110
----------- -----------
Income before income taxes ............ 44,010 28,080

Provision for income taxes ..................... 5,793 3,302
----------- -----------
Net income ............................ $ 38,217 $ 24,778
=========== ===========
Earnings per share:
Basic ........................................ $ 0.76 $ 0.57
Diluted ...................................... $ 0.70 $ 0.55

Shares used in computing per share amounts:
Basic ........................................ 50,215 43,352
Diluted ...................................... 54,353 45,160

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

FLEXTRONICS INTERNATIONAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Six months ended
Sept. 24, Sept. 25,
1999 1998
--------- ---------

Net cash used in operating activities ....................... $ (4,948) $ (2,376)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment ....................... (107,617) (71,736)
Proceeds from sale of property and equipment .............. 779 1,389
Net cash paid for acquisition of net assets ............... (72,343) --
Other investments ......................................... (7,515) (2,123)
Payment of earnout and remaining purchase price related to
the acquisition of Astron ................................ -- (24,000)
--------- ---------
Net cash used in investing activities ....................... (186,696) (96,470)
--------- ---------
Cash flows from financing activities:
Bank borrowings and proceeds from long-term debt .......... 107,454 57,223
Repayment of bank borrowings and long-term debt ........... (20,091) (17,919)
Repayment of capital lease obligations .................... (10,684) (5,236)
Proceeds from mortgage of equipment ....................... 18,663 --
Proceeds from exercise of stock options and Employee Stock
Purchase Plan ........................................... 6,263 3,856
--------- ---------
Net cash provided by financing activities ................... 101,605 37,924
--------- ---------
Effect of exchange rate changes on cash ..................... 1,761 (1,782)
--------- ---------
Net decrease in cash and cash equivalents ................... (88,278) (62,704)
Cash and cash equivalents at beginning of period ............ 184,860 91,827
--------- ---------
Cash and cash equivalents at end of period .................. $ 96,582 $ 29,123
========= =========

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

FLEXTRONICS INTERNATIONAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 24, 1999
(unaudited)

Note A - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with the instructions to Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements, and should be read in conjunction with the annual audited
consolidated statements as of and for the year ended March 31, 1999 contained in
the Company's 1999 annual report on Form 10-K. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three and six month period ended September 24, 1999 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2000.

On July 15, 1999, Flextronics acquired 100% of Kyrel EMS Oyj ("Kyrel"), a
provider of electronics manufacturing services with two facilities in Finland
and one in Luneville, France in exchange for 1,821,825 Ordinary Shares, of which
182,183 Ordinary Shares are to be issued upon resolution of certain
contingencies. The acquisition was accounted for as a pooling-of-interests and,
accordingly, the Company's condensed consolidated financial statements have been
restated to reflect the merger as if it occurred at the beginning of the first
period presented. Kyrel's fiscal year ends December 31. The condensed
consolidated income statements combined Kyrel's results for the three and six
months ended September 24, 1999 with Flextronics results for the three and six
months ended September 24, 1999. The condensed consolidated income statements
also combined Kyrel's results for the three and six months ended June 30, 1998
with Flextronics results for the three and six months ended September 25, 1998.
The condensed consolidated balance sheets as of March 31, 1999 include Kyrel's
balance sheets as of December 31, 1998. Kyrel's net loss of $818,000 for the
three months ended March 31, 1999 has been recorded as an adjustment to retained
earnings. A reconciliation of the previously reported results for the three and
six months ended September 25, 1998 to the results in this form 10-Q is as
follows (in thousands):

Three months ended Six months ended
Sept. 25, 1998 Sept. 25, 1998
-------- --------

Net sales :
As previously reported .............. $422,948 $799,027
Kyrel ............................... 47,941 69,136
-------- --------
As restated ......................... $470,889 $868,163
======== ========

Net income :
As previously reported .............. $ 12,863 $ 24,520
Kyrel ............................... 180 258
-------- --------
As restated ......................... $ 13,043 $ 24,778
======== ========

Note B - Inventories

Inventories consist of the following (in thousands):

Sept. 24, March 31,
1999 1999
-------- --------
Raw materials .................. $328,163 $173,739
Work-in-process ................ 53,040 25,740
Finished goods ................. 34,429 21,873
-------- --------
$415,632 $221,352
======== ========

Note C - EARNINGS PER SHARE

Reconciliation between basic and diluted earnings per share is as
follows for the three and six month periods ended September 24, 1999 and
September 25, 1998 (in thousands, except per share data):

Three months ended Six months ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25
------- ------- ------- -------
1999 1998 1999 1998
------- ------- ------- -------

Shares issued and outstanding(1) ....................... 50,312 43,476 50,215 43,352
------- ------- ------- -------
Weighted average ordinary
shares - basic ......................................... 50,312 43,476 50,215 43,352
Ordinary share equivalents:
Stock options(2) ..................................... 4,171 1,496 4,138 1,808
------- ------- ------- -------
Weighted average ordinary shares
and equivalents - diluted ............................ 54,483 44,972 54,353 45,160
======= ======= ======= =======

Net income ............................................. $19,769 $13,043 $38,217 $24,778
======= ======= ======= =======
Basic earnings per share ............................... $ 0.39 $ 0.30 $ 0.76 $ 0.57
======= ======= ======= =======
Diluted earnings per share ............................. $ 0.36 $ 0.29 $ 0.70 $ 0.55
======= ======= ======= =======

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

(2) Stock options of the Company calculated based on the treasury stock method
using average market price for the period, if dilutive. Options to purchase
23,748 shares and 884,193 shares outstanding during the three months ended
September 24, 1999 and September 25, 1998, respectively, and options to
purchase 22,902 shares and 171,822 shares outstanding during the six months
ended September 24, 1999 and September 25, 1998, respectively, were
excluded from the computation of diluted earnings per share because the
options' exercise price were greater than the average market price of the
Company's Ordinary Shares during those periods.

Note D - COMPREHENSIVE INCOME (in thousands)

Three months ended Six months ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25
-------- -------- -------- --------
1999 1998 1999 1998
-------- -------- -------- --------

Net income .................................................... $ 19,769 $ 13,043 $ 38,217 $ 24,778
Other comprehensive gain(loss), net of tax:
Foreign currency translation adjustments .................... 1,449 2,415 (3,339) 3,118
Unrealized gain on available-for-sale
securities ............................................... 8,281 -- 8,344 --
-------- -------- -------- --------
Comprehensive income .......................................... $ 29,499 $ 15,458 $ 43,222 $ 27,896
======== ======== ======== ========

Note E - NEW ACCOUNTING STANDARDS

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

Note F - SEGMENT REPORTING

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

Information about segments were as follows (in thousands):

Three months ended Six months ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1999 1998 1999 1998
----------- ----------- ----------- -----------

Net Sales
Asia ........................................... $ 143,001 $ 99,387 $ 255,411 $ 178,555
Americas ....................................... 322,634 153,272 530,709 321,558
Western Europe ................................. 247,938 138,877 418,731 225,277
Central Europe ................................. 170,774 92,842 299,481 166,350
Intercompany eliminations ...................... (13,527) (13,489) (22,242) (23,577)
----------- ----------- ----------- -----------
$ 870,820 $ 470,889 $ 1,482,090 $ 868,163
=========== =========== =========== ===========

Income (Loss) Before Income Tax
Asia ........................................... $ 7,810 $ 4,577 $ 14,585 $ 10,276
Americas ....................................... 4,600 5,547 10,258 12,455
Western Europe ................................. 6,446 4,627 8,852 4,942
Central Europe ................................. 4,403 3,098 7,563 5,322
Intercompany eliminations ...................... (320) (3,080) 2,752 (4,915)
----------- ----------- ----------- -----------
$ 22,939 $ 14,769 $ 44,010 $ 28,080
=========== =========== =========== ===========

As of As of
Sept. 24, March 31,
1999 1999
-------- --------
Long-Lived Assets
Asia ..................................... $119,287 $109,513
Americas ................................. 143,183 117,526
Western Europe ........................... 91,361 75,435
Central Europe ........................... 132,777 94,693
-------- --------
$486,608 $397,167
======== ========

For purposes of the preceding tables, "Asia" includes China, Malaysia, and
Singapore; "Americas" includes the U.S., Mexico, and Brazil; "Western Europe"
includes Sweden, Finland, France, and the United Kingdom; and "Central Europe"
includes Austria, Hungary and Scotland.

Geographic revenue transfers are based on selling prices to unaffiliated
companies, less discounts. Income before tax is net sales less operating
expenses, interest or other expenses, but prior to income taxes.

Note G - SUBSEQUENT EVENTS

On October 13, 1999, the Company announced that it is commencing a public
offering of 5,000,000 Ordinary Shares pursuant to a currently effective shelf
registration statement. The Company intends to use the net proceeds from the
offering to fund the further expansion of its business, including additional
working capital and capital expenditures, and for other general corporate
purposes. The Company may use a portion of the net proceeds for strategic
acquisitions or investments.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Except for historical information contained herein, the matters discussed
in this Form 10-Q are forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. The words "expects," "anticipates,"
"believes," "intends," "plans" and similar expressions identify forward-looking
statements, which speak only as of the date hereof. In addition, any statements
which refer to expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. The Company undertakes
no obligation to publicly disclose any revisions to these forward-looking
statements to reflect events or circumstances occurring subsequent to filing
this Form 10-Q with the Securities and Exchange Commission. These
forward-looking statements are subject to certain risks and uncertainties,
including, without limitation, those discussed in "Item 2-Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Certain Factors Affecting Operating Results." Accordingly, our
future results may differ materially from historical results or from those
discussed or implied by these forward-looking statements.

OVERVIEW

Flextronics is a leading provider of advanced electronics manufacturing
services to original equipment manufacturers ("OEMs") primarily in the
telecommunications and networking, consumer electronics and computer industries.
The Company provides a wide range of integrated services, from initial product
design to volume production and fulfillment. In addition, the Company provides
advanced engineering services, including product design, PCB layout, quick-turn
prototyping and test development. Throughout the production process, the Company
offers logistics services, such as materials procurement, inventory management,
and packaging and distribution. In recent years, the Company has substantially
expanded its manufacturing capacity, technological capabilities and service
offerings, through both acquisitions and internal growth.

On June 30, 1999, Flextronics purchased the manufacturing facilities and
related assets of Ericsson's Visby, Sweden operations for approximately $39.4
million. Ericsson's Visby facility manufactures mobile systems infrastructure,
primarily radio base stations. Flextronics also offered employment to
approximately 900 persons who had been employed by Ericsson at this facility. In
connection with the acquisition of assets, the Company has also entered into a
manufacturing service agreement with Ericsson.

On May 31, 1999, Flextronics purchased the manufacturing facilities and
related assets of ABB Automation Products in Vasteras, Sweden for approximately
$24.5 million. This facility provides printed circuit board assemblies and other
electronic equipment. Flextronics has also offered employment to 575 ABB
personnel who had been previously employed by ABB Automation Products. In
connection with the acquisition of the manufacturing facilities, the Company has
also entered into a manufacturing service agreement with ABB Automation
Products.

In addition to acquisitions, the Company has substantially increased
overall capacity by expanding operations in its industrial parks in China,
Hungary, and Mexico. As a result of these acquisitions and expansions, the
Company's overall capacity has increased from approximately 3.2 million square
feet since the beginning of fiscal 1998 to over 4.7 million square feet of
capacity, providing an extensive network of manufacturing facilities in the
world's major electronics markets - Asia, the Americas and Europe. The Company
is continuing to expand operations and capacity at each of the industrial parks
and is developing an industrial park in Brazil. See "-Certain Factors Affecting
Operating Results -- If we do not manage effectively the expansion of our
operations, our business may be harmed."

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of net sales. This table
reflects the combined results of Flextronics and Kyrel.

Three months ended Six months ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25
--------- -------- --------- ---------
1999 1998 1999 1998
------ ------ ------ ------

Net sales .................................................... 100.0 100.0 100.0 100.0
Cost of sales ................................................ 92.9 91.7 92.5 91.6
------ ------ ------ ------
Gross margin ............................................... 7.1 8.3 7.5 8.4
Selling, general and administrative .......................... 3.2 3.8 3.4 3.8
Goodwill and intangibles amortization ........................ 0.2 0.2 0.2 0.2
------ ------ ------ ------
Income from operations ....................................... 3.7 4.3 3.9 4.4
Other expenses, net .......................................... 1.1 1.1 0.9 1.2
------ ------ ------ ------
Income before income taxes ................................. 2.6 3.2 3.0 3.2
Provision for income taxes ................................... 0.3 0.4 0.4 0.4
------ ------ ------ ------
Net income ................................................. 2.3 2.8 2.6 2.8
====== ====== ====== ======

Net Sales

Substantially all of the Company's net sales have been derived from the
manufacture and assembly of products for OEM customers. Net sales for the second
quarter of fiscal 2000 increased 85% to $870.8 million from $470.9 million for
the second quarter of fiscal 1999. Net sales for the six months ended September
24, 1999 increased 71% to $1.5 billion from $868.2 million for the same period
of fiscal 1999. The increase in net sales was primarily due to increased sales
to certain existing customers and, to a lesser extent, sales to new customers.
The Company's five largest customers in the first six months of fiscal 2000
accounted for approximately 54% of consolidated net sales with no single
customer exceeding 20% of consolidated net sales. During the second quarter of
fiscal 2000, the Company's five largest customers accounted for approximately
57% of consolidated net sales, with no single customer exceeding 20% of
consolidated net sales. See "-Certain Factors Affecting Operating Results - A
majority of our sales comes from a small number of customers; if we lose any of
these customers, our sales could decline significantly" and "We are dependent
upon the electronics industry which continually produces technologically
advanced products with short life cycles; our inability to continually
manufacture such products on a cost-effective basis would harm our business."

Gross Profit

Gross profit varies from period to period and is affected by, among other
things, product mix, component costs, customer's product life cycles, unit
volumes, expansion and consolidation of manufacturing facilities, pricing,
competition and new product introductions. Gross profit margin for the second
quarter of fiscal 2000 decreased to 7.1% from 8.3% for the second quarter of
fiscal 1999. Gross profit margin decreased to 7.5% for the first six months of
fiscal 2000 from 8.4% for the first six months of fiscal 1999. Gross profit was
adversely affected by several factors, including costs associated with expanding
facilities, manufacturing overhead costs associated with the startup of new
customers and projects, changes in product mix, as well as other factors. We
believe our gross margin will continue to be affected by start-up costs
associated with new programs, expansion of our facilities and other factors. See
"-Certain Factors Affecting Operating Results - If we do not manage effectively
the expansion of our operations, our business may be harmed."

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the second
quarter of fiscal 2000 increased to $27.5 million from $18.0 million in the
second quarter of fiscal 1999 but decreased as a percentage of net sales to 3.2%
for the second quarter of fiscal 2000 from 3.8% for the second quarter of fiscal
1999. SG&A increased to $51.0 million in the first six months of fiscal 2000
from $33.0 million in the first six months of fiscal 1999. The dollar increase
in SG&A was mainly due to SG&A expenses from increased expansion of operations
in Brazil and Hungary, increased staffing and related administrative expenses,
and increased sales and marketing expenses. The Company anticipates its SG&A
expenses will continue to increase in absolute terms in the future. However, to
the extent that net sales continue to grow faster than SG&A expenses, SG&A
expenses will decline as a percentage of net sales.

Goodwill and Intangibles Amortization

Goodwill and intangible assets are amortized on a straight-line basis over
the estimated life of the benefits received, which ranges from three to
twenty-five years. Goodwill and intangible asset amortization for the second
quarter of fiscal 2000 increased to $1.5 million from $890,000 for the same
period of fiscal 1999. Goodwill and intangible assets amortization was $2.9
million and $1.8 million for the first six months of fiscal 2000 and fiscal
1999, respectively. The increase in goodwill and intangible assets amortization
in the second quarter and first six months of fiscal 2000 was primarily due to
the goodwill and intangible assets amortization associated with acquisitions of
Advanced Component Labs HK Ltd. ("ACL") in Asia and the increase in the
Company's ownership interest in FICO Investment Holding Ltd ("FICO").

Interest Expense, Net

Interest expense, net was $6.8 million for the second quarter of fiscal
2000 compared to $5.0 million for the second quarter of fiscal 1999. Interest
expense, net increased to $10.7 million for the first six months of fiscal 2000
from $9.1 million for the first six months of fiscal 1999. The increase in
interest expense, net for the three and first six months of fiscal 2000 was
primarily attributable to a $1.0 million interest expense charge relating to the
write off of the remaining bank arrangement fees associated with the termination
of the Bank of Boston credit facilities during the quarter, increase in our
factoring costs of accounts receivable in Sweden after assuming Ericsson's and
ABB's facilities, offset by the increase in interest income from the Company's
investment in money market funds and corporate debt securities.

As discussed above, included in net interest expense of $6.8 million was
the accelerated amortization of approximately $1.0 million in bank arrangement
fees associated with the termination of the Bank of Boston credit facilities.
The Bank of Boston credit facilities were secured facilities that contained a
number of convenants that restrict the operations of the Company. During the
second quarter of fiscal 2000, the Company decided to replace the Bank of Boston
credit facilities with an unsecured credit facility from another bank that is
expected to contain fewer restrictions on the Company's operations.

Merger expenses

In the three months ended September 24,1999, the Company incurred $2.5
million of merger expenses associated with the pooling-of-interest merger with
Kyrel. The merger expenses included a transfer tax of $1.7 million and legal and
accounting fees of approximately $0.8 million.

Other expenses, net

Other expenses, net was a net expense of $519,000 for the second quarter of
fiscal 2000 compared to a net expense of $376,000 for the second quarter fiscal
1999. The net expense of $519,000 primarily consists of loss on disposal of
fixed assets and minority interests from FICO and the Company's Austrian
subsidiary, partially offset by compensation received in settlement of a claim.
Other expenses, net was a net expense of $175,000 for the first six months of
fiscal 2000 compared to a net expense of $1.1 million for the first six months
of fiscal 1999. The net expense of $1.1 million for the first six months of
fiscal 1999 was primarily due to a foreign exchange loss, partially offset by
income from the previous associated company, FICO. In March 1999, the Company
acquired an additional 50% interest in FICO and, accordingly, the Company has
consolidated the balance sheets and the results of operations of FICO from March
1999 onward.

Provision for Income Taxes

The Company's consolidated effective tax rates were 13.8% and 13.2% for
second quarter and first six months of fiscal 2000, respectively.

The Company is structured as a holding company, conducting its operations
through manufacturing and marketing subsidiaries in Austria, Brazil, China,
Finland, France, Hungary, Italy, Malaysia, Mauritius, Mexico, Singapore, Sweden,
the United Kingdom, and the United States. These subsidiaries are subject to
taxation in the country in which they have been formed. The Company's Asian and
Hungarian manufacturing subsidiaries have, at various times, been granted
certain tax relief in each of these countries, resulting in lower income taxes
than would otherwise be the case under ordinary tax rates. See "- Certain
Factors Affecting Operating Results - We are subject to Risk of Increased
Taxes."

Liquidity and Capital Resources

The Company has funded its operations from the proceeds of public offerings
of equity and debt securities, cash and cash equivalents generated from
operations, bank debt and lease financing of capital equipment. As of September
24, 1999, the Company had cash and cash equivalents balances totaling $96.6
million, total bank and other debts totaling $413.8 million and $65.0 million
available for future borrowing under its credit facilities subject to compliance
with certain financial covenants.

Cash used by operating activities was $4.9 million for the first six months
of fiscal 2000. Cash used in operating activities was $2.4 million for the first
six months of fiscal 1999. Cash provided by operating activities increased
primarily due to the increase in accounts receivable and inventories due to
increased revenues.

Cash used in investing activities was $186.6 million and $96.5 million for
the first six months of fiscal 2000 and fiscal 1999, respectively. Cash used in
investing activities for the first six months of fiscal 2000 was primarily
related to (i)capital expenditures of $107.6 million to purchase equipment and
expanded facilities and (ii)$72.3 million related to the acquisition of
manufacturing facilities and related assets from Ericsson and ABB in Sweden.
Cash used in investing activities for the first six months of fiscal 1999
consisted primarily of capital expenditures of $71.7 million to purchase
equipment.

Net cash provided by financing activities was $101.6 million and $37.9
million for the first six months of fiscal 2000 and fiscal 1999, respectively.
Cash provided by financing activities for the first six months of fiscal 2000
and fiscal 1999 both primarily resulted from net proceeds from bank borrowings,
partially offset by repayments of capital leases and repayment of bank
borrowings. In addition, the first six months of fiscal 2000, proceeds from the
mortgage of equipment in Austria amounted to $18.7 million.

The Company has currently incurred in excess of $18.0 million in total
hardware, software, and system related costs in connection with remediation of
Year 2000 issues. These costs are primarily costs associated with the
implementation of the Company's new information system and have primarily been
capitalized as fixed assets. The Company anticipates expending an additional
$1.0 million before January 1, 2000 to complete the implementation of the new
information system and address any Year 2000 compliance issues. See "- Year 2000
Compliance."

The Company anticipates that its working capital requirements will increase
in order to support anticipated increases in its business. In addition, the
Company anticipates incurring significant capital expenditures in order to
support the anticipated expansions of its facilities. Future liquidity needs
will depend on fluctuations in inventory levels, the timing of expenditures by
the Company on new equipment, the extent to which the Company utilizes leases to
finance new facilities and equipment, levels of shipments by the Company and
changes in volumes of customer orders. The Company believes that its existing
cash balances, together with anticipated cash flows from operations and amounts
available under its credit facilities, will be sufficient to fund its operations
at its current level of business. In addition, the Company is currently engaged
in a public offering of 5,000,000 Ordinary Shares. To the extent the Company
finances its working capital and capital expenditures through increased
borrowings, its interest expense may increase. From time to time, the Company
may consider alternative financing opportunities, including certain off-balance
sheet transactions such as sale leasebacks transactions or receivable
financings. See "- Certain Factors Affecting Operating Results -- If we do not
manage effectively the expansion of our operations, our business may be harmed."

YEAR 2000 COMPLIANCE

The Company is aware of the issues associated with programming code in
existing computer systems as the Year 2000 approaches. The Year 2000 computer
issue refers to a condition in computer software where a two digit field rather
than a four digit field is used to distinguish a calendar year. Unless
corrected, some computer programs could be unable to function on January 1, 2000
(and thereafter until corrected), as they will be unable to distinguish the
correct date. Such an uncorrected condition could significantly interfere with
the conduct of the Company's business, could result in disruption of its
operations, and could subject it to potentially significant legal liabilities.

The Company has been addressing the Year 2000 issue with a project plan
divided into major initiatives: enterprise wide applications, manufacturing and
related equipment and facilities and infrastructure. The Company has established
geographic regional teams to follow established policies and guidelines on the
remediation of the Year 2000 issue. The Company created an internal intranet
database to record the status and remediation activity on all internal
equipment.

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

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

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

The Company is currently working with many of its major customers to ensure
year 2000 compliance and has been audited by many of its customers. The Company
currently works with many of its major customers to formulate contingency plans.
These contingency plans include the movement of manufacturing production,
identification of alternative suppliers and logistics companies. The Company
intends to review its contracts with customers and suppliers with respect to
responsibility for Year 2000 issues and to seek to address such issues in future
agreements with customers and suppliers.

The Company has currently incurred in excess of approximately $18.0 million
in total hardware, software, and system related costs in connection with
remediation of Year 2000 issues. These costs are primarily costs associated with
the implementation of the Company's new information system and have primarily
been capitalized as fixed assets. The Company anticipates expending an
additional $1.0 before January 1, 2000 to complete the implementation of the new
information system and address any Year 2000 compliance issues. There can be no
assurances that the cost estimates associated with the Company's Year 2000
issues will prove to be accurate or that the actual costs will not have a
material adverse effect on the Company's results of operations and financial
condition.

The Company's operations utilize electronic commerce systems and electronic
data interchanges with suppliers and customers to implement a variety of supply
chain management programs. While the Company is actively seeking assurances of
Year 2000 compliance from suppliers and customers, the failure by any one of
these third parties to address Year 2000 issues could result in our temporary
inability to process these supply chain management programs with such third
parties, and this inability could have a material and adverse impact on our
business and results of operations. In addition, the Company would be harmed if
Year 2000 compliance issues resulted in serious disruptions in the operations of
our customers and suppliers.

The Company has facilities located in numerous countries throughout the
world, and these facilities depend on the local infrastructure for power,
telecommunications, transportation and other services. If Year 2000 issues cause
disruptions in these fundamental services, the Company's ability to conduct
operations could be seriously impaired. The Year 2000 issue also could affect
the Company's infrastructure and production lines.

CERTAIN FACTORS AFFECTING OPERATING RESULTS

If we do not manage effectively the expansion of our operations, our business
may be harmed.

We have grown rapidly in recent periods, and this growth may not continue.
Internal growth will require us to develop new customer relationships and expand
existing ones, improve our operational and information systems and further
expand our manufacturing capacity.

We plan to increase our manufacturing capacity by expanding our facilities
and by adding new equipment. Such expansion involves significant risks. For
example:

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

we may not efficiently and effectively integrate new operations, expand
existing ones and manage geographically dispersed operations;

we may incur cost overruns;

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

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

In addition, we expect to incur new fixed operating expenses associated
with our expansion efforts, including substantial increases in depreciation
expense and rental expense, that will increase our cost of sales. If our
revenues do not increase sufficiently to offset these expenses, our operating
results would be adversely affected. Our expansion, both through acquisitions
and internal growth, has contributed to our incurring significant accounting
charges and experiencing volatility in our operating results and may continue to
do so in the future.

We may encounter difficulties with acquisitions, which could harm our business.

We have completed a number of acquisitions of businesses and facilities and
expect to continue to pursue growth through acquisitions in the future.
Acquisitions involve a number of risks and challenges, including:

diversion of management's attention;

the need to integrate acquired operations;

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

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

an increase in our expenses and working capital requirements.

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

Any of these and other factors could adversely affect our ability to
achieve anticipated levels of profitability at acquired operations or realize
other anticipated benefits of an acquisition. Furthermore, any future
acquisitions may require additional debt or equity financing, which could
increase our leverage or be dilutive to our existing shareholders. No assurance
can be given that we will consummate any acquisitions in the future.

We have new customer relationships from which we are not yet receiving
significant revenues, and orders from these customers may not reach anticipated
levels.

We have recently announced major new customer relationships from which we
anticipate significant future sales. However, similar to our other customer
relationships, there are no volume purchase commitments under these new
programs, and the revenues we actually achieve may not meet our expectations. In
anticipation of future activities under these programs, we are incurring
substantial expenses as we add personnel and manufacturing capacity and procure
materials. Our operating results will be adversely affected if sales do not
develop to the extent and within the time frame we anticipate.

Our customer requirements and operating results vary significantly.

Electronics manufacturing service providers must provide increasingly rapid
product turnaround for their customers. We generally do not obtain firm,
long-term purchase commitments from our customers and we continue to experience
reduced lead-times in customer orders. Customers may cancel their orders, change
production quantities or delay production for a number of reasons.
Cancellations, reductions or delays by a significant customer or by a group of
customers would adversely affect our results of operations.

In addition to the variable nature of our operating results due to the
short-term nature of our customers' commitments, other factors may contribute to
significant fluctuations in our results of operations. These factors include:

the timing of customer orders;

the volume of these orders relative to our capacity;

market acceptance of customers' new products;

changes in demand for customers' products and product obsolescence;

the timing of our expenditures in anticipation of future orders;

our effectiveness in managing manufacturing processes;

changes in the cost and availability of labor and components;

changes in our product mix;

changes in economic conditions;

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

seasonality in customers' product requirements.

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

We make significant decisions, including the levels of business that we
will seek and accept, production schedules, component procurement commitments,
personnel needs and other resource requirements, based on our estimates of
customer requirements. The short-term nature of our customers' commitments and
the possibility of rapid changes in demand for their products reduces our
ability to estimate accurately future customer requirements. On occasion,
customers may require rapid increases in production, which can stress our
resources and reduce margins. Although we have increased our manufacturing
capacity and plan further increases, we may not have sufficient capacity at any
given time to meet our customers' demands. In addition, because many of our
costs and operating expenses are relatively fixed, a reduction in customer
demand can adversely affect our gross margins and operating income.

A majority of our sales comes from a small number of customers; if we lose any
of these customers, our sales could decline significantly.

Sales to our five largest customers have represented a majority of our net
sales in recent periods. Our five largest customers accounted for approximately
54% and 59% of consolidated net sales in the six months ended September 24, 1999
and September 25, 1998, respectively. Our largest customers during fiscal 1999
were Philips, Ericsson and Cisco accounting for approximately 16%, 15% and 11%
of consolidated net sales, respectively. The identity of our principal customers
has varied from year to year, and our principal customers may not continue to
purchase services from us at current levels, if at all. Significant reductions
in sales to any of these customers, or the loss of major customers, would have a
material and adverse effect on us. We may not be able to timely replace expired,
canceled, or reduced contracts with new business. See "--Our customer
requirements and operating results vary significantly."

We are dependent upon the electronics industry which continually produces
technologically advanced products with short life cycles; our inability to
continually manufacture such products on a cost-effective basis would harm our
business.

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

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

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

recessionary periods in our customers' markets.

There may be shortages of required electronic components.

A substantial majority of our net sales are derived from turnkey
manufacturing in which we are responsible for procuring materials, which
typically results in our bearing the risk of component price changes.
Accordingly, certain component price changes could adversely affect our
operating results. At various times, there have been shortages of some of the
electronic components that we use, and suppliers of some components have lacked
sufficient capacity to meet the demand for such components. In recent months,
component shortages have become more prevalent in our industry. In some cases,
supply shortages could curtail production of assemblies using a particular
component and could result in manufacturing and shipping delays.

Our industry is extremely competitive.

The electronics manufacturing services industry is extremely competitive
and includes hundreds of companies, several of which have achieved substantial
market share. Current and prospective customers also evaluate our capabilities
against the merits of internal production. Some of our competitors, including
Solectron and SCI Systems, have substantially greater market shares than us, and
substantially greater manufacturing, financial, research and development and
marketing resources. In recent years, many participants in the industry,
including us, have substantially expanded their manufacturing capacity. If
overall demand for electronics manufacturing services should decrease, this
increased capacity could result in substantial pricing pressures, which could
adversely affect our operating results.

We are subject to the risk of increased taxes.

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

We conduct operations in a number of countries and are subject to risks of
international operations.

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

fluctuations in the value of currencies;

changes in labor conditions;

longer payment cycles;

greater difficulty in collecting accounts receivable;

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

political and economic instability;

increases in duties and taxation;

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

limitations on imports or exports;

expropriation of private enterprises; and

reversal of the current policies including favorable tax and lending
policies encouraging foreign investment or foreign trade by our host
countries.

The attractiveness of our services to our U.S. customers can be affected by
changes in U.S. trade policies, such as "most favored nation" status and trade
preferences for certain Asian nations. In addition, some countries in which we
operate, such as Brazil, Mexico and Malaysia, have experienced periods of slow
or negative growth, high inflation, significant currency devaluations and
limited availability of foreign exchange. Furthermore, in countries such as
Mexico and China, governmental authorities exercise significant influence over
many aspects of the economy, and their actions could have a significant effect
on us. Finally, we could be adversely affected by inadequate infrastructure,
including lack of adequate power and water supplies, transportation, raw
materials and parts in countries in which we operate.

Risks Relating to China. Under its current leadership, the Chinese
government has been pursuing economic reform policies. However, the Chinese
government may not continue to pursue such policies and these policies may not
be successful even if pursued. In addition, China does not have a comprehensive
and highly developed system of laws, and enforcement of laws and contracts is
uncertain. The United States annually reconsiders the renewal of most favored
nation trading status of China. China's loss of most favored nation status could
adversely affect us by increasing the cost to U.S. customers of products
manufactured by us in China.

Risks relating to Mexico. The Mexican government exercises significant
influence over many aspects of the Mexican economy and its action could have a
significant effect on private sector entities in general and the Company in
particular.

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

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

We are subject to risks of currency fluctuations.

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

We depend on our key personnel.

Our success depends to a larger extent upon the continued services of our
key executives and skilled personnel. Generally our employees are not bound by
employment or non-competition agreements, and there can be no assurance that we
will retain our officers and key employees. We could be materially and adversely
affected by the loss of key personnel.

We are subject to risks from the Year 2000 issue.

The Year 2000 computer issue refers to a condition in computer software
where a two digit field rather than a four digit field is used to distinguish a
calendar year. Unless corrected, some computer programs could be unable to
function on January 1, 2000, and thereafter until corrected, as they will be
unable to distinguish the correct date. Such an uncorrected condition could
significantly interfere with the conduct of our business, could result in
disruption of our operations, and could subject it to potentially significantly
legal liabilities.

We are primarily addressing the Year 2000 issue concerning enterprise wide
applications by replacing our management information system with a new
enterprise management information system that is designed to provide enhanced
functionality. We have been advised that our new enterprise management
information system is Year 2000 compliant. However, we cannot provide assurances
that the new system will be Year 2000. We currently have implemented this new
information in a majority of our facilities in Asia, Central Europe, Western
Europe and the Americas. We are currently evaluating the implementation of this
new management information system at the facilities that we have recently
acquired in Finland, France and Sweden. The new system will significantly affect
many aspects of our business, including our manufacturing, sales and marketing
and accounting functions. The successful implementation of this system is
important to our future growth.

Our business operations utilize electronic commerce systems and electronic
data interchanges with suppliers and customers to implement a variety of supply
chain management programs. While we are actively seeking assurances of Year 2000
compliance from our suppliers and customers, the failure by any one of these
third parties to address Year 2000 issues could result in our temporary
inability to process these supply chain management programs with such third
parties, and this inability could have a material and adverse impact on our
business and results of operations. In addition, we would be harmed if Year 2000
compliance issues resulted in serious disruptions in the operations of our
customers and suppliers.

We have facilities located in numerous countries throughout the world, and
these facilities depend on the local infrastructure for power,
telecommunications, transportation and other services. If Year 2000 issues cause
disruptions in these fundamental services, our ability to conduct our operations
could be seriously impaired. The Year 2000 issue also could affect our
infrastructure and production lines.

We are subject to environmental compliance risks.

We are subject to a variety of environmental regulations relating to the
use, storage, discharge and disposal of hazardous chemicals. Although we believe
that our facilities are currently in material compliance with applicable
environmental laws, violations could occur. The costs and penalties that could
result from a violation of environmental laws could materially and adversely
affect us.

The market price of the ordinary shares is volatile.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes during the three and six months ended
September 24, 1999 to the Company's exposure to market risk for changes in
interest rates and foreign currency exchange rates.

PART II - OTHER INFORMATION

Item 1 through 3. Not applicable.

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

The Company held its Annual General Meeting of shareholders on August 27,
1999, at which the following matters were acted upon :

1a) Re-election of Mr. Michael E. Marks to the board of directors. For : 45,827,975
Against : 191,690

1b) Re-election of Mr. Tsui Sung Lam to the board of directors. For : 45,827,742
Against : 191,923

1c) Re-election of Mr. Chuen Fah Alain Ahkong to the board of directors. For : 45,261,233
Against : 758,432

2) Adoption of the Directors' report, auditors' report and For : 46,005,005
audited accounts for the fiscal year ended March 31, 1999. Against : 705
Abstain : 13,955

3) Appointment of Arthur Andersen as the Company's independent For : 45,989,508
auditors for the fiscal year ending March 31, 2000 and at a Against : 16,548
remuneration to be determined by the Board of Directors. Abstain : 13,609

4) Approval of the increase in the Company's authorized share capital For : 40,749,072
from 100,000,000 ordinary shares to 250,000,000 ordinary shares. Against : 1,178,713
Abstain : 36,549

5) Approval of an amendment to the Company's 1993 Share Option Plan For : 22,298,445
relating to the increase in the maximum number of shares Against : 19,123,199
authorized for issuance to 8,200,000 ordinary shares and Abstain : 674,015
approval of certain amendments to the 1993 Share Option Plan.

6) Approval of an amendment to the Company's 1997 Employee's Share For : 41,820,361
Purchase Plan relating to the increase in the maximum Against : 236,401
number of shares authorized for issuance to 400,000 ordinary Abstain : 38,897
shares.

7) Approval of grant to the Board of Directors of authority to allot For : 33,252,492
and issue or grant options in respect of ordinary shares. Against : 12,596,912
Abstain : 38,936

8) Approval of grant to the Board of Directors of authority to allot For : 45,578,416
and issue bonus shares. Against : 272,528
Abstain : 37,396

9) Approval of amendments to the Company's Articles of Association. For : 45,819,449
Against : 21,146
Abstain : 47,745

10) Approval of the share purchase mandate. For : 45,826,970
Against : 16,261
Abstain : 45,109

Item 5. Not applicable.

Item 6. Exhibits and reports on Form 8-K

(a) Exhibits

3.01 Articles of Association*

27.01 Financial Data Schedule

* To be filed by amendment

(a) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
September 24, 1999.

SIGNATURES

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.

FLEXTRONICS INTERNATIONAL LTD.
(Registrant)

Date : October 22, 1999 /s/ MICHAEL E.MARKS
----------------------------
Michael E. Marks
Chief Executive Officer

Date : October 22, 1999 /s/ ROBERT R.B. DYKES
----------------------------
Robert R.B. Dykes
President, Systems Group
and Chief Financial Officer
(principal financial and
accounting officer)