830916--12/13/2006--MULTI_FINELINE_ELECTRONIX

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FACTORS THAT MAY AFFECT OUR OPERATING RESULTS Risks Related to Our Business We depend on Motorola and subcontractors of Motorola for a significant portion of our net sales and if we lose these relationships, our net sales would decline. We are heavily dependent upon the wireless telecommunications industry, and any downturn in the industry may reduce our net sales. Our customers have and may continue to cancel their orders, change production quantities, delay production or qualify additional vendors, any of which could reduce our net sales. We will have difficulty selling our products if customers do not design our flexible printed circuit products into their product offerings, if our customers product offerings are not commercially successful, or if we do not timely execute our operational and strategic plans. WBL Corporation beneficially owns 61% of our outstanding common stock and is able to exert influence over us and our major corporate decisions. WBL Corporation and its designees on our board of directors may have interests that conflict with our interests. WBL Corporation is 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 WBL Corporation s stockholders or the relevant regulators may not approve the proposed corporate action. 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. Rapidly changing standards and competing technologies could make our products obsolete, which would cause our net sales to decrease. Problems with manufacturing yields could result in higher operating costs and could impair our ability to meet customer demand for our products. We may not be able to compete effectively, which will cause our net sales and market share to decline. Our products and their terms of sale are subject to various pressures from our customers and our competitors, any of which could harm our gross profit. Significant product failures could harm our reputation and our business. Any failure to maintain ongoing sales through our independent sales representatives could harm our business. We must continue to be able to procure raw materials and components on commercially reasonable terms to manufacture our products profitably. We face business, political, regulatory, operational, financial and economic risks because a significant portion of our operations and sales are to customers outside of the United States. Our manufacturing capacity may be interrupted, limited or delayed if we cannot maintain sufficient sources of electricity in China, or if there is a natural disaster or other catastrophic event in China. China s legal system embodies uncertainties that could harm our business operations. We may have difficulty managing any growth that we might experience. The Sarbanes-Oxley Act and other rules and regulations may increase the time and costs of certain activities. Our business is capital intensive and the failure to obtain capital could require that we curtail capital expenditures. We are subject to the risk of increased income and other taxes in China. Our bank facilities contain restrictive covenants that, if not satisfied or waived, could impact our ability to borrow money under these facilities and could result in acceleration of our debt obligations under these facilities that may be outstanding from time to time. 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, reduce our net sales or increase our costs. We may be sued by third parties for alleged infringement of their proprietary rights. Complying with environmental laws and regulations may increase our costs and reduce our profitability. We may not address successfully problems encountered in connection with any acquisition. Risks Related to the Market for our Common Stock Our stock price may be volatile, and you may not be able to resell our shares at a profit or at all. In the event we are unable to remedy any deficiency we identify in our system of internal controls over financial reporting, or if our internal controls are not effective, our business and our stock price could suffer. Fluctuations in our operating results on a quarterly and annual basis could cause the market price of our common stock to decline. Future sales of our common stock in the public market could cause our stock price to fall. Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable. Risks Relating to the Offer to Acquire All of the Issued and Outstanding Ordinary Shares of MFS In light of MFS recent financial performance, we believe that the consummation of the Offer would cause serious harm to us. We may not be successful in our litigation against WBL Corporation. The Stark hedge funds interests in the Offer may conflict with the interests of our disinterested stockholders in light of the Stark hedge funds equity positions in both MFS and us. Our litigation strategies may distract us from operating our business. We can give no assurances as to when, or if, the Offer will proceed or close. If the Offer is completed, the combined company may not realize any benefits of the transaction and may have a weakened financial condition. Due to the decline in the financial performance of MFS, we may be required to evaluate whether to record an impairment charge as of the date of the consummation of the acquisition related to goodwill recorded in connection with the acquisition of MFS. If less than 90% of the minority shares of MFS were not tendered in the Offer, the combined company would have increased operating expenses and will be limited in its ability to consolidate MFS operations. There is a risk that the expected sales of the combined company could decrease if common customers elect to reduce their reliance on the combined company. MFS owns its factories in the People s Republic of China, or the PRC, under a joint venture with an unrelated third party and management of any significant business initiative pertaining to those factories will require approval of that party. We are uncertain of the impact that intangible and fixed assets will have on the combined company s earnings per share. The issuance of shares of New M-Flex common stock to MFS shareholders in the Offer could substantially reduce the percentage ownership interests of our stockholders. Members of the companies respective management and boards of directors, as well as significant stockholders, may have interests in the Offer that may present them with actual or potential conflicts of interest in connection with the Offer. To be successful, the combined company must retain and motivate key employees, and failure to do so could seriously harm the combined company. We expect to incur significant costs associated with the Offer. If we proceed with the Offer, and if we are unable to finance it through existing cash balances and financings, the completion of the Offer could be jeopardized. If the transaction proceeds notwithstanding the recommendation of our Special Committee and board of directors, we will have substantially more indebtedness, which will adversely affect our cash flows and business. The price of our common stock is volatile, which affects the value of the stock consideration to be received by MFS shareholders in the Offer. Unaudited pro forma financial information is presented for illustrative purposes only and may not be an indication of the combined company s financial condition or results of operations following the closing of the Offer, if the Offer closes. If the transaction proceeds notwithstanding the recommendation of our Special Committee and Board of Directors, the integration of our and MFS businesses would be expensive and would require significant focus on staffing, training and compliance procedures, as well as significant additional expense, for our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002. We will encounter material adverse consequences if we are unable to process and report, on a timely basis, the combined business financial results under U.S. GAAP and SEC requirements.

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830916--12/13/2006--MULTI_FINELINE_ELECTRONIX_INC