Flextronics Software Systems

Dear Shareholders,
 
 The year 2006 was truly memorable. Kohlberg Kravis Roberts & Co. (KKR)
 and Sequoia Capital, respectively the leaders in the worlds of private
 equity and venture capital, purchased 85% of Flextronics software
 development and solutions business. Flextronics retains a 15% stake in
 the business and will continue to be an important business partner and
 customer. The change in ownership is an exciting development for our
 business and positions us as the leading, independent communications
 software `pure play company.
 
 Despite the challenges of integrating various businesses and the change
 in ownership, our results were very favorable. Over the years, we have
 built a very strong foundation for consistent performance. The talent
 of our employees, their unwavering focus on creating value for clients,
 and our clients reliance on us as a strategic partner have been
 critical factors in our long-term success.
 
 The breadth and depth of our offerings as a communications software
 pure play, from handset to network equipment, differentiate us. We
 have the unique ability to deliver communications software solutions
 that range from strategic design consulting, to maintenance and life
 extension. We count the worlds leading network infrastructure OEMs,
 handset OEMs, and service providers among our 350+ customers.
 
 We will continue to build world class technology capabilities and
 intellectual property in the communications software segment. Aside
 from our core business of providing communications software services,
 we will build on our track record of delivering great software
 products. In addition, we are confident that we will grow existing
 accounts and accelerate the size and global reach of our onsite
 services business.
 
 To foster continuous growth, we must maintain our intense focus on
 client success. Emerging markets for our business are extremely
 important. We are in the fortunate position of being able to see
 communications industry trends from multiple vantage points, many years
 in advance. By being dynamic and flexible as an organization, we can
 rapidly respond to changes in the market and accelerate our growth.
 
 We are committed to our mission of enabling communications through
 world class software solutions, products, and full-spectrum services.
 
 I would like to thank all of our stakeholders: our clients, our
 partners, our employees and our investors. We are excited about our
 evolution as a company and foresee much growth and success in the
 future, which will not be possible without the continued support of all
 of our stakeholders.
 
                                                   Ashish Kumar Bhardwaj
                                                                Chairman