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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

Commission file number 000-23354

FLEXTRONICS INTERNATIONAL LTD.

36 Robinson Road, #18-01
City House
Singapore 06887
(65) 299-8888
(Address, including zip code, and telephone number, including area code,
of registrant’s principal executive offices)

Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act: Ordinary Shares, S$0.01 Par Value

     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 o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x  No o

     As of September 30, 2002 there were 517,111,664 shares of the Registrant’s ordinary shares outstanding, and the aggregate market value of such shares held by non-affiliates of the registrant (based upon the closing sale price of such shares on the NASDAQ National Market on September 30, 2002) was approximately $3.5 billion.

     As of May 15, 2003, there were 520,931,534 shares of the Registrant’s ordinary shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s definitive proxy statement, to be delivered to shareholders in connection with the Registrant’s 2003 Annual General Meeting of Shareholders, are incorporated by reference into Part III of this Report on Form 10-K.

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PART I

FORWARD LOOKING STATEMENTS

     Except for historical information contained herein, the matters discussed in this annual report on Form 10-K are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “will,” “may,” “designed to,” “believe,” “should,” “anticipate,” “plan,” “expect,” “intend,” “estimate” and similar expressions identify forward-looking statements, which speak only as of the date of this annual report. These forward-looking statements are contained principally under Item 1, “Business,” and under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Because these forward-looking statements are subject to risks and uncertainties, actual results could differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include those described below in this section under “Risk Factors.” We undertake no obligation to update or revise these forward-looking statements to reflect subsequent events or circumstances.

     Unless otherwise specifically stated, references to “Flextronics”, “we”, “us” and similar terms refer to Flextronics International Ltd. and our subsidiaries.

ITEM 1. BUSINESS

OVERVIEW

     Flextronics International Ltd. is a leading provider of advanced electronics manufacturing services, or EMS, to original equipment manufacturers, or OEMs, primarily in the handheld electronics devices, information technologies and communications infrastructure, computer and office automation, and consumer devices industries. We provide design, engineering, manufacturing, logistics, and network services. Our strategy is to provide customers with end-to-end operational services where we take responsibility for engineering, supply chain management, new product introduction and implementation, manufacturing, and logistics management, with the goal of delivering a complete packaged product.

     In addition to the assembly of printed circuit boards and complete systems and products, our manufacturing services include the fabrication and assembly of plastic and metal enclosures, the fabrication of printed circuit boards and backplanes (which are printed circuit boards into which other printed circuit boards or cards may be inserted) and the fabrication and assembly of photonics components. Throughout the production process, we offer design and technology services; logistics services, such as materials procurement, inventory management, vendor management, packaging and distribution; and automation of key components of the supply chain through advanced information technologies. We have recently begun providing original design manufacturing, or ODM, services wherein we design and develop products, such as cell phones and related products, using Flextronics owned intellectual property. ODM products are sold to the end user by our OEM customers under their brand name. Finally, we offer after-market services such as repair and warranty services and network and communications installation and maintenance. By working closely with our customers and being highly responsive to their requirements throughout the design, manufacturing and distribution process, we believe that we can be an integral part of their operations, accelerate their time-to-market and time-to-volume production, and reduce their production costs.

     Through a combination of internal growth and acquisitions, we have become one of the world’s largest EMS providers, with revenues of $13.4 billion in fiscal 2003 with over 14.5 million manufacturing square feet in 28 countries across five continents as of March 31, 2003. We believe that our size, global presence, broad service offerings and expertise and advanced engineering and design capabilities enable us to win large programs from leading multinational OEMs for the design and manufacture of electronic products.

     Our customers include industry leaders such as Alcatel SA, Casio Computer Co., Ltd., Dell Computer Corporation, Ericsson Telecom AB, Hewlett-Packard Company, Microsoft Corporation, Motorola, Inc., Siemens AG, Sony-Ericsson, Telia Companies and Xerox Corporation.

     We have established an extensive network of manufacturing facilities in the world’s major electronics markets (the Americas, Asia and Europe) in order to serve the increased outsourcing needs of both multinational and regional OEMs. In fiscal 2003, production in the Americas, Asia and Europe, represented 22%, 36% and 42% of our net sales, respectively. We have established fully integrated, high volume industrial parks in low cost regions near our customers’ end markets. Our industrial parks are located in Brazil, China, Hungary, Mexico and Poland. These industrial parks provide total supply chain management by co-locating our manufacturing and distribution operations with our suppliers at a single location. This approach to production and distribution is designed to benefit our customers by reducing logistical barriers and costs, increasing flexibility, lowering transportation costs and reducing turnaround times. We also have a number of regional manufacturing operations located in the Americas, Asia and Europe. In addition, we have established design and engineering centers and product introduction centers which provide engineering expertise in developing new products and preparing them for high volume manufacturing. For more information about the geographic segments in which we operate, please see Note 12, “Segment Reporting,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

INDUSTRY OVERVIEW

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     As electronic products grow in technical complexity and experience shorter product lifecycles in response to customer requirements, the demand for advanced manufacturing capabilities and related services has grown rapidly, leading many OEMs in the electronics industry to increasingly utilize EMS providers as part of their business and manufacturing strategies. Outsourcing allows OEMs to take advantage of the manufacturing and supply chain management expertise and capital investments of EMS providers, so that OEMs may concentrate on their core competencies, such as product development, marketing and sales. We believe that by developing strategic relationships with EMS providers, OEMs can enhance their competitive position by:

	•		reducing production costs;
	•		accelerating time-to-market and time-to-volume production;
	•		accessing advanced manufacturing, design and engineering capabilities;
	•		reducing capital investment requirements and fixed overhead costs;
	•		improving inventory management and purchasing power; and
	•		accessing worldwide design, manufacturing and logistics capabilities.

     We believe that the market for electronics manufacturing services will continue to grow, driven largely by the need of OEMs for increasing flexibility to respond to rapidly changing markets, technologies and shortening of product life cycles, as well as for advanced manufacturing and engineering capabilities as a result of the increased complexity and shorter life cycles of electronic products.

STRATEGY

     Our objective is to provide customers with the ability to outsource, on a global basis, a complete product. We intend to achieve this objective by taking responsibility for the design, engineering, assembly, integration, test, supply chain management and logistics management, which is designed to accelerate our customers’ time-to-market and time-to-volume production. To achieve this objective, we will continue to implement the following strategies:

Enhance Our Customers’ Product Development and Manufacturing Strategy. We believe we can become an integral part of our customers’ operations by working closely with them throughout the design, manufacturing and distribution process, and by offering flexible, highly responsive services. We believe our customer relationships are strengthened through a management approach which fosters rapid decision-making and a customer service orientation that allows us to respond quickly to frequently changing customer design specifications and production requirements. Our approach allows our customers to focus on their core competencies and thus enables them to accelerate their time-to-market and time-to-volume production.

Expand Our Service Offerings. We have recently expanded our service offering to include original design manufacturing, or ODM services, where we design and develop products that are sold to the end user by our OEM customers under their brand name. We are actively pursuing ODM projects, focusing primarily on consumer related devices, such as cell phones and related products, and are utilizing our established internal design and manufacturing resources as well as investing in research and development, technology licensing, test and tooling equipment, patent applications, facility expansion and recruitment. This expanded service offering accelerates our customer’s time-to-market and time-to-volume production for their products and further enhances our goal of delivering a complete packaged product.

Leverage Our Global Presence. We have established an extensive network of design, manufacturing and logistics facilities in the world’s major electronics markets (the Americas, Asia and Europe) to serve the increased outsourcing needs of both multinational and regional OEMs. Our global network of manufacturing facilities in 28 countries gives us the flexibility to transition customer projects to any of our locations. This flexibility allows design, prototyping and initial production to be located near the customer’s own research and development centers, so that manufacturing can then be moved to locations closer to their end markets, or transitioned to low-cost regional manufacturing facilities or industrial parks as volumes increase over the product life cycle.

Expand Our Industrial Parks. Our industrial parks are self-contained facilities that co-locate our manufacturing and distribution operations with our suppliers in low-cost regions near our customers’ end markets. The industrial park strategy is based on minimizing logistics costs throughout the supply chain and production cycle time by co-locating a number of suppliers in one location. Each park incorporates the manufacture of printed circuit boards, components, cables, plastics and metal parts needed for product assembly. This approach to production and distribution benefits our customers by reducing logistical barriers and costs, improving communications, increasing flexibility, lowering transportation costs and reducing turnaround times. Our industrial parks enhance our total supply chain management, while providing a low cost solution for our customers. We have strategically established large industrial parks in Brazil, China, Hungary, Mexico and Poland.

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Expand and Invest in Low-Cost Locations. In order to provide customers with the lowest cost, we have invested in manufacturing facilities in low-cost locations. Currently, greater than 60% of our production is in low-cost locations such as Mexico, Brazil, Poland, Hungary, China and other parts of Asia. Several of our OEM customers are relocating their production to these locations, where our role in the local supply chain can create cost savings for them.

Offer Comprehensive Solutions. We offer a comprehensive range of engineering, assembly, integration, test, supply chain management and logistics management and network services to our customers that simplify the global product development process and provide them meaningful cost savings. Our capabilities help our customers improve product quality and performance, reduce costs and accelerate time-to-market.

Streamline Business Processes Through Information Technologies. We utilize new information technologies to streamline business processes for our customers. For example, we use innovative Internet supply chain solutions to improve order placement, tracking and fulfillment. We are also able to provide our customers with online access to product design and manufacturing process information. Integrating our information systems with those of our customers allows us to assist our customers in improving their communications and relationships across their supply chain.

Pursue Strategic Opportunities. We have actively pursued acquisitions and purchases of manufacturing facilities to expand our worldwide operations, broaden our service offerings, diversify and strengthen our customer relationships and enhance our management depth. We will continue to selectively pursue strategic transactions that we believe will further our business objectives. By enhancing our capability to provide a wide range of related electronics design and manufacturing services to a global market that is increasingly dependent on outsourcing providers, these acquisitions and strategic transactions have enabled us to enhance our competitive position as a leading provider of comprehensive outsourcing technology solutions. For more information on our acquisitions and strategic customer transactions, please see Note 11, “Business Combinations and Purchases of Assets,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

     We cannot assure that our strategies can be successfully implemented or will reduce the risks associated with our business.

SERVICES

     We offer a broad range of integrated services, providing customers with a total design, manufacturing and logistics solution that takes a product from its initial design through volume production, test, distribution and into post-sales service and support. Our integrated services include the following:

Design Services. We offer a comprehensive spectrum of value-added design services for products we manufacture for our customers from product design (hardware, software, mechanical and test) to semiconductor design. Products designed by this group range from commercial and military applications, including radio frequency/analog, high-speed digital, multi-chip module and flex circuits to high volume consumer products and small quantity prototypes. We work with our customers to develop product-specific test strategies and can custom design test equipment and software ourselves or use test equipment and software provided by our customers. Additionally, a significant competitive differentiator we possess is our semiconductor design group. We provide application specific integrated circuit, or ASIC, design services to our OEM customers, which include:

	•		Conversion services from field programmable gate arrays to ASICs. These services focus on designs that utilize primarily digital signals, with only a small amount of analog signals;
	•		Design services for mixed-signal ASICs. These services focus on designs that utilize primarily analog signals, with only a small amount of digital signals; and
	•		Silicon integration design services. These services utilize silicon design modules that are used to accelerate complex ASIC designs, including system-on-a-chip.

	We utilize external foundry suppliers for our customers’ silicon manufacturing requirements, thereby using a “fabless” manufacturing approach. This enables us to take advantage of the suppliers’ high volume economies of scale and access to advanced process technology.

We believe that our semiconductor design expertise provides us with a competitive advantage by enabling us to offer our customers reduced costs through the consolidation of components onto silicon chips. Additionally, by integrating the combined capabilities of design, engineering and semiconductor services, we can compress the time from product concept to market introduction and minimize product development costs.

	To assist customers with initial design, we provide computer-aided engineering and computer-aided design, engineering for manufacturability, printed circuit board layout and test development. At our product introduction centers, we employ hundreds of advanced engineers to provide the engineering expertise in developing new products and preparing them for high volume

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manufacturing. These centers coordinate and integrate our worldwide design, prototype, test development practices and, in some locations, provide dedicated production lines for prototypes.

     Printed Circuit Board and Backplane Fabrication. Printed circuit boards and backplanes are platforms that provide interconnection for integrated circuits and other electronic components. Backplanes also provide interconnection for other printed circuit boards. Semiconductor designs are currently so complex that they often require printed circuit boards with many layers of narrow, densely spaced wiring. The manufacture of complex multilayer interconnect products often requires the use of sophisticated circuit interconnections between layers, referred to as vias, and adherence to strict electrical characteristics to maintain consistent circuit transmission speeds. Our production of microvias, by laser ablation and our surface laminar circuit technology, a photo generated microvia capability, provides our customers with proven high volume production capacity in both of the major high density interconnect process solutions. We manufacture high density, complex multilayer printed circuit boards and backplanes on a low-volume, quick-turn basis, as well as on a high-volume production basis. Our quick-turn prototype service allows us to provide small test quantities to customers’ product development groups in as few as 24 hours. Our range of services enables us to respond to our customers’ demands for an accelerated transition from prototype to volume production. We have printed circuit board and backplane fabrication service capabilities on four continents (North America, South America, Europe and Asia).

     Systems Assembly and Manufacturing. Our assembly and manufacturing operations, which reflect the majority of our revenues, include printed circuit board assembly, assembly of systems, and subsystems that incorporate printed circuit boards and complex electromechanical components. A substantial portion of our net sales is derived from the manufacture and assembly of complete products. We employ just-in-time, ship-to-stock and ship-to-line programs, continuous flow manufacturing, demand flow processes and statistical process controls. As OEMs seek to provide greater functionality in smaller products, they increasingly require more sophisticated manufacturing technologies and processes. Our investment in advanced manufacturing equipment and our experience and expertise in innovative miniaturization, packaging and interconnect technologies, such as chip scale packaging, chip-on-board and ball grid array, enable us to offer a variety of advanced manufacturing solutions. In addition, we have significant expertise in the manufacture of wireless communications products employing radio frequency technology.

     We offer a comprehensive set of custom electronic enclosures and related products and services worldwide. Our services include design, manufacturing and integration of electronics packaging systems from custom enclosure systems, power and thermal subsystems to interconnect subsystems, cabling and cases. In addition to the typical sheet metal and plastic fabrication, we assist in the design of electronic packaging systems that protect sensitive electronics and enhance functionality. Our enclosure design services focus on functionality, manufacturability and testing. These services are integrated with our other assembly and manufacturing services to provide our customers with greater responsiveness, improved logistics and overall improved supply chain management.

     We offer computer-aided testing of assembled printed circuit boards, systems and subsystems, which contributes significantly to our ability to deliver high-quality products on a consistent basis. Our test capabilities include management defect analysis, in-circuit tests and functional tests. In addition, we also provide environmental stress tests of board or system assemblies.

     We provide materials procurement, information technology solutions and logistics services. Materials procurement and management consist of the planning, purchasing, expediting and warehousing of components and materials used in the manufacturing process. Our inventory management expertise and volume procurement capabilities contribute to cost reductions and reduce total cycle time. Our industrial parks include providers of many of the custom components that we use to reduce material and transportation costs, simplify logistics and facilitate inventory management. We also use sophisticated automated manufacturing resources planning systems and enhanced electronic data interchange capabilities to ensure inventory control and optimization. Through our manufacturing resources planning system, we have real-time visibility on material availability and real-time tracking of work in process. We also utilize electronic data interchange with our customers and suppliers to implement a variety of supply chain management programs. Electronic data interchange allows customers to share demand and product forecasts and deliver purchase orders while also assisting suppliers with just-in-time delivery and supplier-managed inventory.

     We offer our customers flexible, just-in-time delivery programs allowing product shipments to be closely coordinated with customers’ inventory requirements. Increasingly, we ship products directly into customers’ distribution channels or directly to the end-user. We believe that this service can provide our customers with a more comprehensive solution and enable them to be more responsive to market demands.

     We also provide design, industrialization, supply chain management and manufacturing services for the optical component and optical networking industries. We offer a broad range of photonic packaging design and industrialization services to assist in bringing products from schematics to shipment while meeting our customers time-to-market objectives. In addition, we offer advanced process development and volume manufacturing of active and passive photonic devices.

     Logistics. We provide global logistics services and turnkey supply chain solutions for our customers. Our worldwide logistics services include freight forwarding, warehousing/inventory management and outbound/e-commerce solutions through our global supply chain network. We leverage new technologies such as XML links to factories, extranet-based management, vendor managed inventory and build-to-order programs, to simultaneously connect suppliers, manufacturing operations and OEM customers. By

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	joining these logistics solutions with worldwide manufacturing operations and total supply chain management, we can significantly reduce market costs and can create tightly integrated processes and facilities worldwide. Moreover, the combination of these capabilities allows us to react quickly to demand signals from our customers worldwide, creating innovative links to suppliers while serving the world market.
	Network Services. We offer network and communications installation and maintenance services to OEMs in the data and telecommunications industries. Our services include project planning, documentation, engineering, production, installation and commissioning of equipment. We have expertise in the installation of public and mobile telecommunications systems, exchanges, corporate networks and peripheral equipment.

CUSTOMERS

     Our customers consist of a select group of OEMs primarily in the handheld electronics devices, information technologies and communications infrastructure and computer and office automation and consumer devices industries. Within these industries, our strategy is to establish relationships with leading companies that seek to outsource significant production volumes of their products. We have focused on building long-term relationships with these customers and expanding our relationship to include additional product lines and services. In fiscal 2003, our ten largest customers accounted for approximately 67% of our net sales. Our largest customers during fiscal 2003 were Hewlett-Packard and Sony-Ericsson, accounting for approximately 12% and 11% of net sales, respectively. No other customer accounted for more than 10% of net sales in fiscal 2003.

     The following table lists in alphabetical order a representative sample of our largest customers in fiscal 2003 and the products of those customers for which we provide manufacturing services:

notebook and desktop computers and personal computer motherboards, as well as provide consumer products and other technology manufacturing services.

     Some of our competitors may have greater design, engineering, manufacturing, financial or other resources than us. As competitors increase the scale of their operations, they may increase their ability to realize economies of scale, to reduce their prices and to more effectively meet the needs of large OEMs. We believe that the principal competitive factors in the segments of the EMS industry in which we operate are cost, technological capabilities, responsiveness and flexibility, delivery cycles, location of facilities, product quality, design capabilities, and range of services available. Failure to satisfy any of the foregoing requirements could seriously harm our business.

ENVIRONMENTAL REGULATION

     Our operations are subject to certain federal, state and local regulatory requirements relating to the use, storage, discharge and disposal of hazardous chemicals used during their manufacturing processes. We believe that our operations are currently in compliance in all material respects with applicable regulations and do not believe that costs of compliance with these laws and regulations will have a material effect on our capital expenditures, operating results or competitive position. Currently we have no commitments with environmental authorities regarding any compliance-related matters.

     We determine the amount of our accruals for environmental matters by analyzing and estimating the range of possible costs in light of information currently available. The imposition of more stringent standards or requirements under environmental laws or regulations, the results of future testing and analysis undertaken by us at our operating facilities, or a determination that we are potentially responsible for the release of hazardous substances at other sites could result in expenditures in excess of amounts currently estimated to be required for such matters. We do not believe that any of our potential or possible liabilities for environmental matters are material. There can be no assurance that additional environmental matters will not arise in the future or that costs will not be incurred with respect to sites as to which no problem is currently known.

EMPLOYEES

     As of March 31, 2003, our global workforce totaled approximately 95,000 employees. We have never experienced a work stoppage or strike and we believe that our employee relations are good.

     Our success depends to a large extent upon the continued services of key managerial and technical employees. The loss of such personnel could seriously harm our business, results of operations, prospects and debt service ability. To date, we have not experienced significant difficulties in attracting or retaining such personnel. Although we are not aware that any of our key personnel currently intend to terminate their employment, we cannot assure you of their future services.

ADDITIONAL INFORMATION

     Our Internet address is http://www.flextronics.com. We make available through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

     We were incorporated in the Republic of Singapore in May 1990. Our principal corporate office is located at 36 Robinson Road, #18-01, City House, Singapore 06887. Our U.S. corporate headquarters is located at 2090 Fortune Drive, San Jose, California, 95131.

RISK FACTORS

If we do not manage effectively changes in our operations, our business may be harmed.

     We have experienced growth in our business as a result of internal growth and acquisitions. Since the beginning of fiscal 2001, our global workforce has more than doubled in size. During that time, we have also reduced our workforce at some locations and closed certain facilities in connection with our restructuring activities. These changes are likely to considerably strain our management control systems and resources, including decision support, accounting management, information systems and facilities. If we do not continue to improve our financial and management controls, reporting systems and procedures to manage our employees effectively and to expand our facilities, our business could be harmed.

     We plan to continue to transition manufacturing to lower cost locations. We plan to increase our manufacturing capacity in our low-cost regions by expanding our facilities and adding new equipment. This expansion involves significant risks, including, but not limited to, the following:

•

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

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			operations;
	•		we may not efficiently and effectively integrate new operations and information systems, expand our existing operations 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 harm 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 that will increase our cost of sales, including increases in depreciation expense and rental expense. If our revenues do not increase sufficiently to offset these expenses, our operating results could be seriously harmed. Our transition to low-cost manufacturing regions has contributed to our incurring significant unusual charges that have resulted from reducing our workforce and capacity at higher-cost locations. We may be required to take additional unusual charges in the future, as a result of these activities, which could have a material adverse impact on operating results, financial position and cash flows.

We depend on the handheld electronics devices, computer and office automation, communications and information technologies infrastructure and consumer devices industries which continually produce technologically advanced products with short life cycles; our inability to continually manufacture such products on a cost-effective basis could harm our business.

     During fiscal 2003, we derived approximately 31% of our revenues from customers in the handheld devices industry, whose products include cell phones, pagers and personal digital assistants; approximately 26% of our revenues from customers in the computers and office automation industry, whose products include copiers, scanners, graphic cards, desktop and notebook computers and peripheral devices such as printers and projectors; approximately 15% of our revenues from providers of communications infrastructure, whose products include equipment for optical networks, cellular base stations, radio frequency devices, telephone exchange and access switches and broadband devices; approximately 13% of our revenues from the consumer devices industry, whose products include set-top boxes, home entertainment equipment, cameras and home appliances; and approximately 8% of our revenues from providers of information technologies infrastructure, whose products include servers, workstations, storage systems, mainframes, hubs and routers. The remaining 7% of our revenues was derived from customers in a variety of other industries, including the medical, automotive, industrial and instrumentation industries.

     Factors affecting these industries in general could seriously harm our customers and, as a result, us. These factors include:

	•		rapid changes in technology, which result in short product life cycles;
	•		seasonality of demand for our customers’ products;
	•		the inability of our customers to successfully market their products, and the failure of these products to gain widespread commercial acceptance; and
	•		recessionary periods in our customers’ markets.

Our customers have and may continue to cancel their orders, change production quantities or locations, or delay production.

     As a provider of electronics manufacturing services, we must provide increasingly rapid product turnaround for our customers. We generally do not obtain firm, long-term purchase commitments from our customers, and we often experience reduced lead-times in customer orders. Customers cancel their orders, change production quantities and delay production for a number of reasons. The uncertain economic conditions and geopolitical situation has resulted, and may continue to result, in some of our customers delaying the delivery of some of the products we manufacture for them, and placing purchase orders for lower volumes of products than previously anticipated. Cancellations, reductions or delays by a significant customer or by a group of customers have harmed, and may continue to harm, our results of operations by reducing the volumes of products manufactured by us for the customers and delivered in that period, as well as causing a delay in the repayment of our expenditures for inventory in preparation for customer orders and lower asset utilization resulting in lower gross margins. In addition, customers require that manufacturing of their products be transitioned from one facility to another to achieve cost and other objectives. Such transfers result in inefficiencies and costs due to resulting excess capacity and overhead at one facility and capacity constraints and related stresses at the other.

     In addition, we make significant decisions, including determining 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

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requirements. The short-term nature of our customers’ commitments and the rapid changes in demand for their products reduce our ability to estimate accurately future customer requirements. This makes it difficult to schedule production and maximize utilization of our manufacturing capacity. We often increase staffing, increase capacity and incur other expenses to meet the anticipated demand of our customers, which cause reductions in our gross margins if customer orders continue to be delayed or cancelled. Anticipated orders may not materialize, and delivery schedules may be deferred as a result of changes in demand for our customers’ products. On occasion, customers require rapid increases in production, which 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 harms our gross profit and operating income.

Our operating results vary significantly.

     We experience significant fluctuations in our results of operations. Some of the principal factors that contribute to these fluctuations are:

	•		changes in demand for our services;
	•		our effectiveness in managing manufacturing processes and costs in order to decrease manufacturing expenses;
	•		the mix of the types of manufacturing services we provide, as high-volume and low-complexity manufacturing services typically have lower gross margins than lower volume and more complex services;
	•		changes in the cost and availability of labor and components, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules;
	•		the degree to which we are able to utilize our available manufacturing capacity;
	•		our ability to manage the timing of our component purchases so that components are available when needed for production, while avoiding the risks of purchasing inventory in excess of immediate production needs; and
	•		local conditions and events that may affect our production volumes, such as labor conditions, political instability and local holidays.

Two of our significant end-markets are the handheld electronics devices market and the consumer devices market. These markets exhibit particular strength toward the end of the calendar year in connection with the holiday season. As a result, we have historically experienced stronger revenues in our third fiscal quarter as compared to our other fiscal quarters.

Our increased original design manufacturing activity may reduce our profitability.

     We have recently begun providing original design manufacturing, or ODM, activities, wherein we design and develop products that are sold to the end user by our OEM customers under their brand name. We are actively pursuing ODM projects, focusing primarily on consumer related devices, such as cell phones and related products, which requires that we make investments in research and development, technology licensing, test and tooling equipment, patent applications, facility expansion and recruitment. Our contracts with our customers can generally be terminated by either party on short notice, and there is no assurance that we will be able to maintain our current level of ODM activity at all or for an extended period of time. Due to the initial costs of investing in the resources necessary for this business, our increased ODM activities have adversely affected our profitability and may continue to do so in fiscal 2004.

     Customers for our ODM services typically require that we indemnify them against the risk of intellectual property infringement. If any claims are brought against our customers for such infringement, whether or not these have merit, we could be required to expend significant resources in defense of such claims. In the event of such an infringement claim, we may be required to spend a significant amount of money to develop non-infringing alternatives or obtain licenses. We may not be successful in developing such alternatives or obtaining such a license on reasonable terms or at all. Further, the products we design must satisfy safety and regulatory standards and some products must also receive government certifications. If we fail to timely obtain these approvals or certifications, we would be unable to sell these products, which would harm our sales, profitability and reputation.

We are exposed to intangible asset risk.

     We have a substantial amount of intangible assets. These intangible assets are generally attributable to acquisitions and represent the difference between the purchase price paid for the acquired businesses and the fair value of net tangible assets of acquired businesses. We are required to evaluate goodwill and other intangibles for impairment on at least an annual basis, and whenever changes in circumstances indicate that the carrying amount may not be recoverable from estimated future cash flows. As a result of our annual and other periodic evaluations, we may determine that the intangible asset values need to be written down to their fair values, which could

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result in material charges that could be adverse to our operating results and financial position.

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

     Since the beginning of fiscal 2001, we have completed over 40 acquisitions of businesses and we expect to continue to acquire additional businesses in the future. We are currently in preliminary discussions with respect to potential acquisitions and strategic customer transactions, however, we do not have any agreements or commitments to make any material acquisitions or strategic customer transactions. Any future acquisitions may require additional debt or equity financing, or the issuance of shares in the transaction. This could increase our leverage or be dilutive to our existing shareholders. We may not be able to complete acquisitions or strategic customer transactions in the future to the same extent as the past, or at all.

     In addition, acquisitions involve numerous risks and challenges, including:

	•		difficulties in integrating acquired businesses and operations;
	•		diversion of management’s attention from the normal operation of our business;
	•		potential loss of key employees and customers of the acquired companies;
	•		difficulties in managing and integrating operations in geographically dispersed locations;
	•		lack of experience operating in the geographic market or industry sector of the acquired business;
	•		increases in our expenses and working capital requirements, which reduce our return on invested capital; and
	•		exposure to unanticipated contingent liabilities of acquired companies.

     Any of these and other factors have harmed, and in the future could harm, our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business and operating results.

Our strategic relationships with major customers create risks.

     Over the past several years, we have completed numerous strategic transactions with OEM customers, including, among others, The Orbiant Group, Xerox, Alcatel, Casio and Ericsson. Under these arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease or acquire their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products. We intend to continue to pursue these OEM divestiture transactions in the future. There is strong competition among EMS companies for these transactions, and this competition may increase. These transactions have contributed to a significant portion of our revenue growth, and if we fail to complete similar transactions in the future, our revenue growth could be harmed. As part of these arrangements, we typically enter into manufacturing services agreements with these OEMs. These agreements generally do not require any minimum volumes of purchases by the OEM, and the actual volume of purchases may be less than anticipated. The arrangements entered into with divesting OEMs typically involve many risks, including the following:

	•		we may need to pay a purchase price to the divesting OEMs that exceeds the value we may realize from the future business of the OEM;
	•		the integration into our business of the acquired assets and facilities may be time-consuming and costly;
	•		we, rather than the divesting OEM, bear the risk of excess capacity at the facility;
	•		we may not achieve anticipated cost reductions and efficiencies at the facility;
	•		we may be unable to meet the expectations of the OEM as to volume, product quality, timeliness and cost reductions; and
	•		if demand for the OEM’s products declines, the OEM may reduce its volume of purchases, and we may not be able to sufficiently reduce the expenses of operating the facility or use the facility to provide services to other OEMs.

     As a result of these and other risks, we have been, and in the future may be, unable to achieve anticipated levels of profitability under these arrangements, and they have not, and in the future may not, result in any material revenues or contribute positively to our earnings per share.

We depend on the continuing trend of outsourcing by OEMs.

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     Future growth in our revenue depends on new outsourcing opportunities in which we assume additional manufacturing and supply chain management responsibilities from OEMs. To the extent that these opportunities are not available, either because OEMs decide to perform these functions internally or because they use other providers of these services, our future growth would be limited.

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

     Sales to our ten largest customers have represented a significant percentage of our net sales in recent periods. Our ten largest customers accounted for approximately 67% and 64% of net sales in fiscal 2003 and fiscal 2002, respectively. Our largest customers during fiscal 2003 were Hewlett-Packard and Sony-Ericsson, accounting for approximately 12% and 11% of net sales, respectively. Our largest customer during fiscal 2002 was Ericsson, accounting for approximately 15% of net sales. No other customer accounted for more than 10% of net sales in fiscal 2003 and fiscal 2002.

     Our principal customers have 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 seriously harm our business. If we are not able to timely replace expired, canceled or reduced contracts with new business, our revenues could be harmed.

Our industry is extremely competitive.

     The EMS 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 may have greater design, manufacturing, financial or other resources than us. Additionally, we face competition from Taiwanese ODM suppliers, who have a substantial share of the global market for information technology hardware production, primarily related to notebook and desktop computers and personal computer motherboards, as well as provide consumer products and other technology manufacturing services.

     In recent years, many participants in the industry, including us, have substantially expanded their manufacturing capacity. The overall demand for electronics manufacturing services has decreased, resulting in increased capacity and substantial pricing pressures, which has harmed our operating results. Certain sectors of the EMS industry are currently experiencing increased price competition, and if this increased level of competition should continue, our revenues and gross margin may continue to be adversely affected.

We may be adversely affected by shortages of required electronic components.

     At various times, there have been shortages of some of the electronic components that we use, as a result of strong demand for those components or problems experienced by suppliers. These unanticipated component shortages have resulted in curtailed production or delays in production, which prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled shipments could cause us to experience a reduction in our sales and an increase in our costs and could adversely affect our relationship with existing customers as well as prospective customers. Component shortages may also increase our cost of goods sold because we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components. As a result, component shortages could adversely affect our operating results for a particular period due to the resulting revenue shortfall and increased manufacturing or component costs.

Our customers may be adversely affected by rapid technological change.

     Our customers compete in markets that are characterized by rapidly changing technology, evolving industry standards and continuous improvement in products and services. These conditions frequently result in short product life cycles. Our success will depend largely on the success achieved by our customers in developing and marketing their products. If technologies or standards supported by our customers’ products become obsolete or fail to gain widespread commercial acceptance, our business could be adversely affected.

We are subject to the risk of increased income 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
	•		income tax rates are low.

     We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by taxing authorities and to possible changes in law, which may have retroactive effect. We cannot determine in advance the extent to

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which some jurisdictions may require us to pay taxes or make payments in lieu of taxes.

     Several countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. These tax incentives expire over various periods from 2004 to 2010 and are subject to certain conditions with which we expect to comply. We have obtained tax holidays or other incentives where available, primarily in China, Malaysia and Hungary. In these three countries, we generated an aggregate of approximately $5.8 billion of our total revenues for the fiscal year ended March 31, 2003. Our taxes could increase if certain tax holidays or incentives are not renewed upon expiration, or tax rates applicable to us in such jurisdictions are otherwise increased. In addition, further acquisitions of businesses may cause our effective tax rate to increase.

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

     The geographical distances between the Americas, Asia and Europe create a number of logistical and communications challenges for us. These challenges include managing operations across multiple time zones, directing the manufacture and delivery of products across distances, coordinating procurement of components and raw materials and their delivery to multiple locations, and coordinating the activities and decisions of the core management team, which is based in a number of different countries. Facilities in several different locations may be involved at different stages of the production of a single product, leading to additional logistical difficulties.

     Because our manufacturing operations are located in a number of countries throughout the Americas, Asia and Europe, we are subject to the risks of changes in economic and political conditions in those countries, including:

	•		fluctuations in the value of local currencies;
	•		labor unrest and difficulties in staffing;
	•		longer payment cycles;
	•		increases in duties and taxation levied on our products;
	•		imposition of restrictions on currency conversion or the transfer of funds;
	•		limitations on imports or exports of components or assembled products, or other travel restrictions;
	•		expropriation of private enterprises; and
	•		a potential reversal of current favorable 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 some Asian countries. In addition, some countries in which we operate, such as Brazil, Hungary, Mexico, Malaysia and Poland, have experienced periods of slow or negative growth, high inflation, significant currency devaluations or limited availability of foreign exchange. Furthermore, in countries such as China and Mexico, 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 seriously harmed by inadequate infrastructure, including lack of adequate power and water supplies, transportation, raw materials and parts in countries in which we operate.

     The recent outbreak of severe acute respiratory syndrome, or SARS, that began in China, Hong Kong and Singapore may have a negative impact on our operations. Our operations may be impacted by a number of SARS-related factors, including, but not limited to, disruptions at our manufacturing operations located in China, reduced demand for our customers’ products and increased supply chain costs.

We are exposed to fluctuations in foreign currency exchange rates.

     We transact business in various foreign countries. As a result, we are exposed to fluctuations in foreign currencies. We have currency exposure arising from both sales and purchases denominated in currencies other than the functional currencies of our entities. Volatility in the exchange rates between the foreign currencies and the functional currencies of our entities could seriously harm our business, operating results and financial condition. We try to manage our foreign currency exposure by borrowing in various foreign currencies and by entering into foreign exchange forward contracts. Mainly, we enter into foreign exchange forward contracts intended to reduce the short-term impact of foreign currency fluctuations on current assets and liabilities denominate in foreign currency. These exposures are primarily, but not limited to, cash, receivables, payables and inter-company balances, in currencies other than the functional currency unit of the operating entity. We will first evaluate and, to the extent possible, use non-financial techniques, such as currency of invoice, leading and lagging payments, receivable management or local borrowing to reduce transactions exposure before taking steps to minimize remaining exposure with financial instruments. Foreign exchange forward contracts are treated as cash flow hedges and such contracts generally expire within three months. The credit risk of these forward contracts if minimal since the contracts are with large

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financial institutions. The gains and losses on forward contracts generally offset the gains and losses on the assets, liabilities and transactions hedged.

We depend on our executive officers.

     Our success depends to a large extent upon the continued services of our executive officers. Generally our employees are not bound by employment or non-competition agreements, and we cannot assure that we will retain our executive officers and other key employees. We could be seriously harmed by the loss of any of our executive officers. In addition, in order to manage our growth, we will need to recruit and retain additional skilled management personnel and if we are not able to do so, our business and our ability to continue to grow could be harmed.

We are subject to environmental compliance risks.

     We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. In addition, we are responsible for cleanup of contamination at some of our current and former manufacturing facilities and at some third party sites. If more stringent compliance or cleanup standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites that we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional loss contingencies, the quantification of which cannot be determined at this time.

The market price of our ordinary shares is volatile.

     The stock market in recent years has 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 these 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 cause the market price of our ordinary shares to decline.

We are a defendant in several securities class action lawsuits and this litigation could harm our business whether or not determined adversely to us.

     Between June and August 2002, Flextronics and certain of our officers and directors were named as defendants in several securities class action lawsuits filed in the Untied States District Court for the Southern District of New York. These actions, which were filed on behalf of those who purchased, or otherwise acquired, Flextronics’ ordinary shares between October 2, 2001 and June 4, 2002, generally allege that, during this period, the defendants made misstatements to the investing public about the financial condition and prospects of Flextronics. After the Court consolidated these actions, plaintiffs amended their allegations to change the class period to January 18, 2001 to June 4, 2002. They also added claims on behalf of plaintiffs who purchased shares pursuant to, or traceable to, the secondary offerings of Flextronics on February 1, 2001 and January 7, 2002. In addition, plaintiffs added claims against the underwriters involved in those offerings. On April 23, 2003, the Court entered an order transferring these lawsuits to the United States District Court for the Northern District of California.

     These actions seek unspecified damages. Although we believe that the plaintiffs’ claims lack merit and intend to vigorously defend these lawsuits, we are unable to predict the ultimate outcome of these lawsuits. There can be no assurance we will be successful in defending the lawsuits, and, if we are unsuccessful, we may be subject to significant damages. Even if we are successful, defending the lawsuits may be expensive and may divert management’s attention from other business concerns and harm our business.

ITEM 2. PROPERTIES

     Our facilities consist of a global network of industrial parks, regional manufacturing operations, design and engineering and product introduction centers, providing over 14.5 million square feet of manufacturing capacity as of March 31, 2003 (excluding facilities we have identified for closure, as described in Note 9, “Unusual Charges” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data”). We own facilities with approximately 1.7 million square feet in the Americas, 3.7 million square feet in Asia and 3.6 million square feet in Europe. We lease facilities with approximately 1.5 million square feet in the Americas, 1.4 million square feet in Asia and 2.6 million square feet in Europe.

     Our facilities include large industrial parks, ranging in size from approximately 300,000 to 1.5 million square feet, in Brazil, China, Hungary, Mexico and Poland, and we have commenced construction on an additional industrial park in China. We also have regional manufacturing operations, ranging in size from approximately 50,000 to 500,000 square feet, in Austria, Brazil, China, Denmark, Finland, France, Germany, Hungary, India, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, Norway, Singapore, Sweden,

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Switzerland, Taiwan, Thailand and the United States. We also have smaller design and engineering centers and product introduction centers at a number of locations in the world’s major electronics markets.

     Our facilities are well maintained and suitable for the operations conducted. The productive capacity of our plants is adequate for current needs.

terms of our outstanding senior subordinated notes also restrict our ability to pay cash dividends. For more information, please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

RECENT SALE OF UNREGISTERED SECURITIES

     On March 20, 2003, we issued a $200.0 million zero coupon, zero yield, convertible junior subordinated note maturing in 2008 in a private placement transaction with funds associated with Silver Lake Partners. The notes are callable by us after three years and do not provide a put option prior to maturity. The notes are convertible into our ordinary shares at a conversion price of $10.50 per share and are payable in cash or stock at maturity, at our option. The sale and issuance of the note was determined to be exempt from registration under Section 4(2) of the Securities Act of 1933 as a transaction by an issuer not involving a public offering. The purchasers of the notes are sophisticated investors who have access to the kind of information that registration would disclose as well as the ability to understand the risk of their investment.

TAXATION

     This summary of Singapore and U.S. tax considerations is based on current law and is provided for general information. The discussion does not purport to deal with all aspects of taxation that may be relevant to particular shareholders in light of their investment or tax circumstances, or to certain types of shareholders (including insurance companies, tax-exempt organizations, regulated investment companies, financial institutions or broker-dealers, and shareholders that are not U.S. shareholders subject to special treatment under the U.S. federal income tax laws). Shareholders should consult their own tax advisors regarding the particular tax consequences to such shareholders of any investment in our ordinary shares.

Income Taxation Under Singapore Law

     Under current provisions of the Income Tax Act, Chapter 134 of Singapore, corporate profits are taxed at a rate equal to 22%. In addition, 75% of up to the first S$10,000, and 50% of up to the next S$90,000 of a company’s chargeable income (other than Singapore dividends received by the company) will be exempt from corporate tax.

     Singapore does not impose withholding tax on dividends. Prior to January 1, 2003, Singapore applied a full imputation system to all dividends (other than exempt dividends) paid by a Singapore resident company. With effect from January 1, 2003, tax on corporate profits is final and dividends paid by a Singapore resident company will be tax exempt in the hands of a shareholder, whether or not the shareholder is a company or an individual and whether or not the shareholder is a Singapore resident. However, if the resident company was previously under the imputation system and has unutilized dividend franking credits as at December 31, 2002, there will be a 5-year transition period from January 1, 2003 to December 31, 2007, during which a company may remain on the imputation system. Dividends declared by non-resident companies are not subject to the imputation system.

     Under current Singapore tax law there is no tax on capital gains, and, thus, any profits from the disposal of shares are not taxable in Singapore unless the vendor is regarded as carrying on a trade in shares in Singapore (in which case, the disposal profits would be taxable as trade profits rather than capital gains).

     There is no stamp duty payable in respect of the holding of shares. No duty is payable on the acquisition of new shares. Where existing shares are acquired in Singapore, stamp duty is payable on the instrument of transfer of the shares at the rate of S$2 for every S$1,000 of the market value of the shares. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where the instrument of transfer is executed outside of Singapore, stamp duty must be paid if the instrument of transfer is received in Singapore. Under Article 22 (iii) of our Articles of Association, our directors are authorized to refuse to register a transfer unless the instrument of transfer has been duly stamped.

Income Taxation Under United States Law

     Individual shareholders that are U.S. citizens or resident aliens (as defined in Section 7701(b) of the Internal Revenue Code of 1986), corporations or partnerships or other entities created or organized under the laws of the United States, or any political subdivision thereof, an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust which is subject to the supervision of a court within the United States and the control of section 7701(b)(30) of the Internal Revenue Code will, upon the sale or exchange of a share, recognize gain or loss for U.S. income tax purposes in an amount equal to the difference between the amount realized and the U.S. shareholder’s tax basis in such a share. If paid in currency other than U.S. dollars, certain currency translation rules will apply to determine the U.S. dollar amount realized. Such gain or loss will be capital gain or loss if the share was a capital asset in the hands of the U.S. shareholder and generally will be short-term capital gain or loss if the share has been held for less than one year, and long-term capital gain or loss if the share has been held for one year or longer. If a U.S. shareholder receives any currency other than U.S. dollars on the sale of a share, such U.S. shareholder may recognize ordinary income or loss as a result of currency fluctuations between the date of such sale and the date such sale proceeds are converted into U.S. dollars.

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     U.S. shareholders will be required to report as income for U.S. income tax purposes the amount of any dividend received from us to the extent paid out of our current or accumulated earnings and profits, as determined under current U.S. income tax principles. If over 50% of our stock (by vote or value) were owned by U.S. shareholders who individually held 10% or more of our voting stock, such U.S. shareholders potentially would be required to include in income a portion or all of their pro rata share of our and our non-U.S. subsidiaries’ earnings and profits. Certain attribution rules apply in this regard. If 50% or more of our assets during a taxable year produced or were held for the production of passive income, as defined in section 1297(b) of the Code (e.g., certain forms of dividends, interest and royalties), or 75% or more of our gross income for a taxable year was passive income, adverse U.S. tax consequences could result to U.S. shareholders. As of March 31, 2003, we were not aware of any U.S. shareholder who individually held 10% or more of our voting stock.

     Shareholders that are not U.S. shareholders will not be required to report for U.S. federal income tax purposes the amount of any dividend received from us. Non-U.S. shareholders, upon the sale or exchange of a share, would not be required to recognize gain or loss for U.S. federal income tax purposes.

Estate Taxation

     In the case of an individual who is not domiciled in Singapore and who died before January 1, 2002, a Singapore estate tax is imposed on the value of all movable and immovable properties situated in Singapore. Our shares are considered to be situated in Singapore. Thus, an individual shareholder who is not domiciled in Singapore at the time of his or her death will be subject to Singapore estate tax on the value of any such shares held by the individual upon the individual’s death. Such a shareholder will be required to pay Singapore estate tax to the extent that the value of the shares (or in aggregate with any other assets subject to Singapore estate tax) exceeds S$600,000. Any such excess will be taxed at a rate equal to 5% on the first S$12,000,000 of the individual’s Singapore chargeable assets and thereafter at a rate equal to 10%. If the individual who is not domiciled in Singapore, dies on or after January 1, 2002, no estate duty is payable on his moveable property in Singapore.

     An individual shareholder who is a U.S. citizen or resident (for U.S. estate tax purposes) also will have the value of the shares included in the individual’s gross estate for U.S. estate tax purposes. An individual shareholder generally will be entitled to a tax credit against the shareholder’s U.S. estate tax to the extent the individual shareholder actually pays Singapore estate tax on the value of the shares; however, such tax credit is generally limited to the percentage of the U.S. estate tax attributable to the inclusion of the value of the shares included in the shareholder’s gross estate for U.S. estate tax purposes, adjusted further by a pro rata apportionment of available exemptions. Individuals who are domiciled in Singapore should consult their own tax advisors regarding the Singapore estate tax consequences of their investment.

ITEM 6. SELECTED FINANCIAL DATA

     These historical results are not necessarily indicative of the results to be expected in the future. The following table is qualified by reference to and should be read in conjunction with the consolidated financial statements, related notes thereto and other financial data included elsewhere herein.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     This report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “expects,” “anticipates,” “believes,” “intends,” “plans” and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-K with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those discussed in this section. Accordingly, our future results could differ materially from historical results or from those discussed or implied by these forward-looking statements.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

     We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For further discussion of our significant accounting policies, refer to Note 2, “Summary of Accounting Policies,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

Long-Lived Assets

     We review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value. Recoverability of property and equipment is measured by comparing its carrying amount to the projected discounted cash flows the property and equipment are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property and equipment exceeds its fair value.

     We evaluate goodwill and other intangibles for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable from its estimated future cash flows. Recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second test is performed to measure the amount of impairment loss. If, at the time of our annual evaluation, the net asset value (or “book value”) of any reporting unit is greater than its fair value, some or all of the related goodwill would likely be considered to be impaired. To date, we have not

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recognized any impairment of our goodwill and other intangible assets in connection with our impairment evaluations. However, we have recorded impairment charges relating to our restructuring activities as further described in Note 9, “Unusual Charges,” of the notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.” No assurances can be given that future evaluations of goodwill will not result in charges as a result of future impairment.

Allowance for Doubtful Accounts

     We perform ongoing credit evaluations of our customers’ financial condition and make provisions for doubtful accounts based on the outcome of our credit valuations. We evaluate the collectibility of our accounts receivable based on specific customer circumstances, current economic trends, historical experience with collections and the age of past due receivables. Unanticipated changes in the liquidity or financial position of our customers may require additional provisions for doubtful accounts.

Inventory Valuation

     Our inventories are stated at the lower of cost (on a first-in, first-out basis) or market value. Our industry is characterized by rapid technological change, short-term customer commitments and rapid changes in demand. We make provisions for estimated excess and obsolete inventory based on our regular reviews of inventory quantities on hand and the latest forecasts of product demand and production requirements from our customers. If actual market conditions or our customers’ product demands are less favorable than those projected, additional provisions may be required. In addition, unanticipated changes in liquidity or financial position of our customers and/or changes in economic conditions may require additional provisions for inventories due to our customers’ inability to fulfill their contractual obligations with regard to inventory being held on their behalf.

Exit Costs

     We recognized unusual charges in fiscal 2003, fiscal 2002 and fiscal 2001, related to our plans to close or consolidate duplicate manufacturing and administrative facilities. In connection with these exit activities, we recorded unusual charges for employee termination costs, long-lived asset impairment and other exit-related costs. These charges were incurred pursuant to formal plans developed by management. Until December 31, 2002, a liability for the exit costs was recognized at the date of our commitment to the exit plans in accordance with the provisions of Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” In June 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which addresses accounting for restructuring and similar costs. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred and not at the date of our commitment to the exit plan. We have adopted the provisions of SFAS No. 146 for restructuring activities initiated after December 31, 2002. Accordingly, SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized.

     The recognition of the unusual charges required that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. If our actual results in exiting these facilities differ from our estimates and assumptions, we may be required to revise the estimates of future liabilities, requiring the recording of additional unusual charges or the reduction of liabilities already recorded. At the end of each reporting period, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans.

     Refer to Note 9, “Unusual Charges,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” for further discussion of our restructuring activities.

Deferred Income Taxes

     Our deferred income tax assets represent temporary differences between the financial statement carrying amount and the tax basis of existing assets and liabilities that will result in deductible amounts in future years, including net operating loss carryforwards. Based on estimates, the carrying value of our net deferred tax assets assumes that it is more likely than not that we will be able to generate sufficient future taxable income in certain tax jurisdictions. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. If these estimates and related assumptions change in the future, we may be required to increase our valuation allowance against the deferred tax assets resulting in additional income tax expense.

ACQUISITIONS AND STRATEGIC CUSTOMER TRANSACTIONS

     We have actively pursued business acquisitions and strategic transactions with customers to expand our global reach, manufacturing capacity and service offerings and to diversify and strengthen customer relationships.

     Prior to June 30, 2001, we made several acquisitions, which were accounted for as pooling of interests and our consolidated financial statements have been restated to reflect the combined operations of the merged companies for all periods presented. We also completed

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other immaterial pooling of interests transactions, for which prior period statements had not been restated. In July 2001, the FASB issued SFAS No. 141, “Business Combinations.” SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method.

     We have also made a number of acquisitions and strategic customer transactions, which were accounted for using the purchase method. Accordingly our consolidated financial statements include the operating results of each business from the date of acquisition. Proforma results of operations have not been presented because the effects of these acquisitions were not material on either an individual or an aggregate basis.

RESULTS OF OPERATIONS

     Certain operating results discussed below are not based on any standardized methodology prescribed by accounting principles generally accepted in the United States of America, or GAAP, and are not necessarily comparable to similar measures presented by other companies. As a result of the significant number of acquisitions made by us during the past few years, coupled with an unprecedented downturn in the technology industry and related end market demand for electronics hardware, we believe certain non-GAAP operating results are useful measures that facilitate period-to-period operating comparisons. These non-GAAP operating results should not be considered in isolation or as a substitute for operating results prepared in accordance with GAAP. Where disclosed, we have provided a reconciliation of non-GAAP operating results to GAAP. Non-GAAP operating results as discussed exclude the effects of unusual charges primarily associated with the consolidation and closure of several manufacturing facilities.

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

Net Sales

     We derive our net sales from the assembly of printed circuit boards and complete systems and products, the fabrication and assembly of plastic and metal enclosures, the fabrication of printed circuit boards and backplanes (which are printed circuit boards into which other printed circuit boards or cards may be inserted) and the fabrication and assembly of photonics components. Throughout the production process, we offer design and technology services; logistics services, such as materials procurement, inventory management, vendor management, packaging and distribution; and automation of key components of the supply chain through advanced information technologies. We have recently begun providing original design manufacturing, or ODM, services where we design and develop products, such as cell phones and related products, that are sold to the end user by our OEM customers under their brand name. Finally, we offer after-market services such as repair and warranty services and network and communications installation and maintenance.

     Net sales for fiscal 2003 increased 2% to $13.4 billion from $13.1 billion in fiscal 2002. The increase in net sales in fiscal 2003 was primarily attributed to revenues generated from our new customer and program wins, along with acquisitions and strategic customer transactions completed in the second half of fiscal 2002 and in fiscal 2003, including Xerox, The Orbiant Group, NatSteel Broadway and Casio. The increase was partially offset by weakness in customer demand, particularly in the information technology infrastructure and communications infrastructure markets, as a consequence of a continuing downturn in economic conditions worldwide. Our ten largest customers during fiscal 2003 accounted for approximately 67% of net sales, with Hewlett-Packard and Sony-Ericsson accounting for approximately 12% and 11% of net sales, respectively. No other customer accounted for more than 10% of net sales during fiscal 2003.

     Net sales for fiscal 2002 increased 8% to $13.1 billion from $12.1 billion in fiscal 2001. The economic downturn experienced by the electronics industry throughout fiscal 2002, which was driven by a combination of weakening end-market demand and our customers’ inventory imbalances, slowed the rate of growth in our net sales. The increase in sales for fiscal 2002 was primarily a result of the incremental revenues associated with the purchase of several manufacturing facilities during the fiscal year, and to a lesser extent, the further expansion of sales to certain of our existing customers as well as sales to new customers. During fiscal 2002, our ten largest customers accounted for approximately 64% of net sales, with Ericsson accounting for approximately 15% of net sales. No other customer accounted for more than 10% of net sales during fiscal 2002.

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Gross Profit

     Gross profit varies from period to period and is affected by a number of factors, including product mix, component costs and availability, product life cycles, unit volumes, startup, expansion and consolidation of manufacturing facilities, capacity utilization, pricing, competition and new product introductions.

     Gross margin for fiscal 2003 increased to 3.5% compared to 3.2% in fiscal 2002. The increase in gross margins in fiscal 2003 primarily related to lower unusual pre-tax charges recorded of $266.3 million in fiscal 2003 compared to $464.4 million in fiscal 2002. Excluding the unusual pre-tax charges gross margins were 5.5% and 6.7% for fiscal 2003 and fiscal 2002, respectively. The unusual charges were associated with facility closure costs, as more fully described below in “Unusual Charges.” Excluding the impact of unusual charges, gross margin declined as a result of several factors, primarily, (i) a shift in the product mix towards higher volume printed circuit board assembly projects and final system assembly projects, which typically have a lower gross margin because of their higher material content as a percentage of total unit cost, (ii) industry pricing pressures as a consequence of the excess capacity resulting from the continued economic downturn, (iii) under-absorbed fixed costs caused by under utilization of capacity, resulting in part from the continued decline in our customers’ markets and (iv) changes in product mix to lower margin consumer-related products business from our historically higher margin information technology and communications infrastructure markets.

     Gross margin for fiscal 2002 decreased to 3.2% from 3.9% in fiscal 2001. Excluding the unusual pre-tax charges of $464.4 million and $510.5 million in fiscal 2002 and fiscal 2001, respectively, gross margin decreased to 6.7% in fiscal 2002 from 8.1% in fiscal 2001. Excluding the impact of unusual charges, gross margin declined as a result of several factors, primarily, (i) under-absorbed fixed costs caused by under utilization of capacity, resulting from the economic downturn experienced by the electronics industry, most significantly experienced by our printed circuit fabrication unit and (ii) changes in product mix to higher volume printed circuited board assembly projects and final system assembly projects, which typically have a lower gross margin. The decline was due to a lesser extent to, (i) costs associated with the integration of newly acquired operations and (ii) costs associated with the startup of new customers and new projects, which typically carry higher levels of unabsorbed manufacturing overhead costs until the projects reach higher volume production.

     Increased mix of products that have relatively high material costs as a percentage of total unit costs has historically been a factor that has adversely affected our gross margins. We believe that this and other factors may continue to adversely affect our gross margins, but we do not expect that this will have a material effect on our income from operations.

Unusual Charges

     We recognized net unusual pre-tax charges of approximately $304.4 million in fiscal 2003, of which $297.0 million related to the closures and consolidations of various manufacturing facilities and $7.4 million related to the impairment of investments in certain technology companies. Of the total amount, approximately $266.3 million of the charges relating to facility closure was classified as a component of cost of sales.

     We recognized unusual pre-tax charges of approximately $574.4 million during fiscal 2002, of which $530.0 million related to closures of several manufacturing facilities and $44.4 million related primarily to the impairment of investments in certain technology companies. Approximately $464.4 million of the charges relating to facility closures were classified as a component of cost of sales.

     We recognized unusual pre-tax charges of approximately $973.3 million during fiscal year 2001. Of this amount, $574.9 million was related to the closures of numerous manufacturing facilities, $102.4 million was associated with direct transactional costs associated with several mergers and acquisitions, primarily our acquisition of the Dii Group, Inc., and $9.5 million related to the impairment of investments in certain technology companies. Additionally, we recorded approximately $286.5 million related to the issuance of an equity instrument to Motorola, which was equal to the excess of the fair value of the equity instrument issued over the proceeds received. Approximately $510.5 million of the charges relating to the facility closures were classified as a component of cost of sales.

     We believe that the potential cost of goods savings achieved through lower depreciation and reduced employee expenses will be offset in part by reduced revenues at the affected facilities. In addition, we may incur further restructuring charges in the future as we continue to reconfigure our operations in order to address excess capacity concerns, which may materially affect our results of operations in future periods.

Refer to Note 9, “Unusual Charges,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” for further discussion of our restructuring activities

Selling, General and Administrative Expenses

     Selling, general and administrative expenses, or SG&A for fiscal 2003 increased to $456.2 million from $443.6 million in fiscal 2002. As a percentage of net sales, SG&A remained flat at 3.4%. The absolute dollar increase in SG&A in fiscal 2003 was primarily due

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to various business acquisitions and strategic transactions, which were completed in the second half of fiscal 2002 and in fiscal 2003. Additionally, our SG&A costs increased due to the initial costs associated with our investments in resources necessary for our ODM activities. These increases were partially offset by efficiencies resulting from our restructuring activities. We expect SG&A will continue to increase next quarter as we expand our ODM activities.

     SG&A for fiscal 2002 increased to $443.6 million from $430.1 million in fiscal 2001. As a percentage of net sales, SG&A decreased to 3.4% in fiscal 2002 from 3.6% in fiscal 2001. The absolute dollar increase in SG&A was primarily due to several business acquisitions completed during fiscal 2002. The percentage decrease in SG&A reflects savings generated by our focus on controlling discretionary spending combined with efficiencies gained from our restructuring activities.

Goodwill and Other Intangibles Amortization

     Goodwill and other intangibles amortization for fiscal 2003 increased to $22.1 million from $12.6 million in fiscal 2002. The increase was attributable to amortization expense associated with intangible assets acquired through various business acquisitions completed in the second half of fiscal 2002 and in fiscal 2003, in particular due to the completion of our assessment of the value of intangible assets acquired from The Orbiant Group.

     Goodwill and other intangibles amortization for fiscal 2002 decreased to $12.6 million from $63.5 million in fiscal 2001. The decrease in goodwill and other intangibles amortization was the direct result of the adoption of SFAS 142, which effectively discontinued the amortization of goodwill. See Note 2, “Summary of Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data.”

Interest and Other Expense, Net

     Interest and other expense, net for fiscal 2003 increased by $0.9 million to $92.8 million from $91.9 million in fiscal 2002. The slight increase in fiscal 2003 was driven primarily by reduced gains from sales of marketable securities combined with increased expenses related to minority ownership interests in certain subsidiaries. The increase was offset to some extent by higher invested cash balances and reduced outstanding borrowings.

     Interest and other expense, net increased to $91.9 million in fiscal 2002 from $67.1 million in fiscal 2001. This increase was driven primarily by lower gains recorded on the sale of marketable securities as compared to the $33.4 million gain recorded in fiscal 2001, combined with the realization of approximately $4.5 million of foreign exchange losses compared to foreign exchange gains of $4.0 million in fiscal 2001. The foreign exchange losses in fiscal 2002 primarily related to net non-functional currency monetary liabilities in France, Hungary and Sweden. Additionally, foreign exchange losses in fiscal 2002 included amounts related to changes in fair values of derivative instruments due to hedge ineffectiveness, which were immaterial, as a result of our adoption of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” in April 2001.

Provision for Income Taxes

     Certain of our subsidiaries have, at various times, been granted tax relief in their respective countries, resulting in lower income taxes than would otherwise be the case under ordinary tax rates. See Note 7, “Income Taxes,” of the Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data.”

     Our consolidated effective tax rate was a benefit of 43%, 37% and 19% for fiscal 2003, fiscal 2002 and fiscal 2001, respectively. Excluding the unusual charges, the effective income tax rate was 10% for fiscal 2003 and 2002 and 11% for fiscal 2001. The consolidated effective tax rate for a particular period varies depending on the amount of earnings from different jurisdictions, operating loss carryforwards, income tax credits, changes in previously established valuation allowances for deferred tax assets based upon management’s current analysis of the realizability of these deferred tax assets, as well as certain tax holidays and incentives granted to us and our subsidiaries primarily in China, Hungary and Malaysia.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 2003 we had cash and cash equivalents balances totaling $424.0 million, total bank and other debts amounting to $1.1 billion and $880.0 million available for borrowing under our credit facilities subject to compliance with certain financial ratios.

     Cash provided by operating activities was $607.8 million and $858.9 million in fiscal 2003 and fiscal 2002, respectively. In fiscal 2001, operating activities used cash amounting to $469.7 million. Working capital as of March 31, 2003 and March 31, 2002, was approximately $897.7 million and $1.4 billion, respectively. During fiscal 2003, cash provided by operating activities resulted from reductions in accounts receivable and inventory of approximately $449.5 million and $150.7 million, respectively, offset by reductions in trade payables and other current liabilities of approximately $338.4 million. During fiscal 2002, cash provided by operating activities resulted from reductions in accounts receivable and inventory of approximately $215.3 million and $494.8 million, respectively, as well as increases in trade payables and other current liabilities of approximately $643.6 million.

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     Cash used in investing activities was $813.0 million, $1.1 billion and $1.1 billion in fiscal 2003, fiscal 2002 and fiscal 2001, respectively. Cash used in investing activities in fiscal 2003 primarily related to:

	•		net capital expenditures of $208.3 million for the purchase of equipment and including our continued expansion of our high volume manufacturing facilities in lower cost regions, primarily Asia,
	•		payments of $501.6 million for acquisitions of businesses, primarily NatSteel Broadway and;
	•		other investments and notes receivable of $95.0 million, of which $83.5 million related to our participation in our trade receivables securitization program.

     Cash used in investing activities in fiscal 2002 primarily related to:

	•		$330.4 million of net capital expenditures to purchase equipment and the continued expansion of our manufacturing facilities worldwide, for our continued expansion of our industrial parks, primarily at our China, Hungary and Poland industrial parks,
	•		$396.3 million for purchases of manufacturing facilities and related asset purchases, related to our acquisitions of several manufacturing operations from Ericsson and Alcatel,
	•		$314.5 million for acquisitions of businesses, primarily related to Xerox and The Orbiant Group and;
	•		$62.6 million of other investments, of which $53.5 million related to our accounts receivables securitization program.

Additionally, we received proceeds of $20.6 million from the sale of marketable securities in fiscal 2002.

     Net cash used in financing activities was $103.5 million in fiscal 2003, compared to net cash provided by financing activities of $369.3 million and $1.5 billion in fiscal 2002 and fiscal 2001, respectively. Cash used in financing activities during fiscal 2003 primarily related to repayments of debt obligations of approximately $1.0 billion, offset by additional borrowings of $893.0 million, which included the issuance of $200.0 million zero coupon, zero yield, convertible junior subordinated notes, and $27.9 million in proceeds from the issuance of our ordinary shares pursuant to our employee stock plans.

     Cash provided by financing activities in fiscal 2002 primarily related to our completion of a secondary offering of our ordinary shares. In January 2002, we sold a total of 20,000,000 ordinary shares at a price of $25.96 per share resulting in net proceeds to us of approximately $503.8 million, which was used to repay our bank borrowings under our credit facility and for general corporate purposes. Additionally, cash provided by financing activities in fiscal 2002 resulted from $57.7 million in proceeds from the issuance of our ordinary shares pursuant to our employee stock plans. Our financing activities in fiscal 2002 used $112.0 million for the repurchase of the equity instrument issued to Motorola and $33.8 million for the repayment of capital lease obligations.

     Subsequent to March 31, 2003, we issued 6.5% senior subordinated notes due in May 2013 for gross proceeds of $400.0 million, in accordance with the Securities and Exchange Commission Rule 144A and Regulation S. We intend to use the net proceeds of the issuance for general corporate purposes and to redeem or repurchase our outstanding 8.75% senior subordinated notes maturing in October 2007, of which $150.0 million in principal was outstanding at March 31, 2003.

     Our working capital requirements and capital expenditures could increase in order to support future expansions of our operations. It is possible that future acquisitions may be significant and may require the payment of cash. Future liquidity needs will also depend on fluctuations in levels of inventory and accounts receivable, the timing of capital expenditures by us for new equipment, the extent to which we utilize operating leases for the new facilities and equipment, the extent of unusual cash charges associated with future restructuring activities and levels of shipments and changes in volumes of customer orders.

     We believe that our existing cash balances, together with anticipated cash flows from operations and borrowings available under our credit facility will be sufficient to fund our operations through at least the next twelve months. Historically, we have funded our operations from the proceeds of public offerings of equity and debt securities, cash and cash equivalents generated from operations, bank debt, sales of accounts receivable and capital equipment lease financings. We anticipate that we will continue to enter into debt and equity financings, sales of accounts receivable and lease transactions to fund our acquisitions and anticipated growth. The sale of equity or convertible debt securities could result in dilution to our current shareholders. Further, we may issue debt securities that have rights and privileges senior to those of holders of our ordinary shares, and the terms of this debt could impose restrictions on our operations. Such financings and other transactions may not be available on terms acceptable to us or at all.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     In March 2003, we renewed and increased our existing revolving credit facility with a syndicate of domestic and foreign banks from $800.0 million to $880.0 million. The credit facility consists of two separate credit agreements, one providing for up to $440.0 million principal amount of revolving credit loans to us and designated subsidiaries; and one providing for up to $440.0 million principal amount of revolving credit loans to a U.S. subsidiary of the Company. Of the total amount of each agreement, $173.3 million relates to a new 364-day facility and $266.7 million expires in March 2005. Borrowings under the credit facility bear interest, at our option, either at

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(i)  the base rate (as defined in the credit facility); or (ii) the LIBOR rate (as defined in the credit facility) plus the applicable margin for LIBOR loans ranging between 1.125% and 2.50%, based on our credit ratings and facility usage. We are required to pay a quarterly commitment fee ranging from 0.15% to 0.50% per annum, based on our credit ratings, of the unutilized portion of the credit facility.

     The credit facility is unsecured, and contains certain restrictions on our ability to (i) incur certain debt, (ii) make certain investments and (iii) make certain acquisitions of other entities. The credit facility also requires that we maintain certain financial covenants, including, among other things, a maximum ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation, and amortization), a minimum ratio of fixed charge coverage, and a minimum net worth, as defined, during the term of the credit facility. Borrowings under the credit facility are guaranteed by us and certain of our subsidiaries. As of March 31, 2003, there were no borrowings outstanding under the credit facility.

     As of March 31, 2003, our outstanding debt obligations included: (i) borrowings outstanding related to our senior subordinated notes, (ii) borrowings outstanding related to our convertible junior subordinated notes, (iii) amounts drawn by subsidiaries on various lines of credit, (iv) equipment financed under capital leases and (v) other term obligations, including mortgage loans. Additionally, we have leased certain of our facilities under operating lease commitments. Future payments due under our debt and lease obligations are as follows (in thousands):

     In March 2002, we entered into a trade receivables securitization agreement. Under this agreement, we continuously sell a designated pool of trade receivables to a third party qualified special purpose entity, which in turn sells an undivided ownership interest to a conduit, administered by an unaffiliated financial institution. In addition to this financial institution, we participate in the securitization agreement as an investor in the conduit. The securitization agreement allows the operating subsidiaries participating in the securitization to receive a cash payment for sold receivables, less a deferred purchase price receivable. Our share of the total investment varies depending on certain criteria, mainly the collection performance on the sold receivables. The agreement, which expires in March 2004, is subject to annual renewal. Currently, the unaffiliated financial institution’s maximum investment limit is $250.0 million. We sold $320.8 million of our accounts receivable as of March 31, 2003, which represents the face amount of the total outstanding trade receivables on all designated customer accounts at that date. We received net cash proceeds of $168.3 million from the unaffiliated financial institution for the sale of these receivables. We have a recourse obligation that is limited to the deferred purchase price receivable, which approximates 5% of the total sold receivables, and our own investment participation, the total of which was $152.5 million as of March 31, 2003. The accounts receivable balances that were sold were removed from the consolidated balance sheet and are reflected as cash provided by operating activities in the consolidated statement of cash flows.

     In fiscal 2002, we entered into operating leases with respect to properties located in Mexico and Texas. During fiscal 2002, we completed construction on the property in Mexico and began construction on the property in Texas, which was completed by the end of fiscal 2003. The amounts outstanding on the Mexico and Texas properties as of March 31, 2003, were $22.9 million and $67.0 million, respectively. Upon the expiration of these leases in 2006 and 2007, respectively, we may renew the leases for an additional five years subject to certain approvals and conditions, or arrange a sale of the buildings to a third party. We also have the right to purchase the buildings at cost at the end of the lease terms, or to terminate the leases at any time by paying the outstanding termination value. We have provided a residual value guarantee, which means that if the building is sold to a third party, we are responsible for making up any shortfall between the actual sales price and the amount funded under the leases. The maximum potential amount of the residual value guarantee is $76.4 million.

RELATED PARTY TRANSACTIONS

     We have loaned approximately $12.4 million to several of our executive officers. Each loan is evidenced by a promissory note in favor of Flextronics and is generally secured by a deed of trust on property of the officer. Certain notes are non-interest bearing and others have interest rates ranging from 2.48% to 7.25%. The remaining outstanding balance of the loans, including accrued interest, as of March 31, 2003, was approximately $12.9 million. Additionally, in connection with an investment partnership, we made loans to several of our executive officers to fund their contributions to the investment partnership. Each loan is evidenced by a full-recourse promissory note in favor of the subsidiary. Interest rates on the notes range from 5.05% to 6.40%. The remaining balance of these loans, including accrued interest, as of March 31, 2003 was approximately $2.6 million. We will not make any further loans to our executive officers.

NEW ACCOUNTING PRONOUNCEMENTS

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Asset Retirement Obligations

     In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” to be effective for all fiscal years beginning after June 15, 2002, with early adoption permitted. SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. We will adopt SFAS No. 143 in fiscal 2004. We do not believe the adoption of SFAS No. 143 will have a material impact on our financial position, results of operations or cash flows.

Extinguishment of Debt and Sale-Leaseback Transactions

     In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” will now be used to classify those gains and losses. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item shall be reclassified. SFAS No. 145 also amends SFAS No. 13, “Accounting for Leases,” to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. We will adopt the provisions of SFAS No. 145 related to the rescission of Statement No. 4 in the first quarter of fiscal 2004. We do not believe the adoption of these provisions will have a material impact on our financial position, results of operations or cash flows. The provisions in paragraphs 8 and 9(c) of SFAS No. 145 related to Statement No. 13 are required to be effective for transactions occurring after May 15, 2002 and thus the Company has adopted these provisions. The adoption of these provisions did not have any impact on our financial position, results of operations or cash flows.

Exit or Disposal Activities

     In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue No. 94-3, a liability for an exit cost was recognized at the date of our commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized. We adopted the provisions of SFAS No. 146 for restructuring activities initiated after December 31, 2002. The adoption of these provisions did not have a material impact on our financial position, results of operations or cash flows.

Variable Interest Entities

     In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities”, which expands upon and strengthens existing accounting guidance concerning when a company should include in its financial statements the assets, liabilities and activities of another entity. Prior to the issuance of FIN 46, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 now requires a variable interest entity, as defined in FIN 46, to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. FIN 46 also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. It is reasonably possible that we will consolidate our synthetic leases when we adopt the consolidation requirements of FIN 46 in the first quarter of fiscal 2004. We do not believe the adoption of FIN 46 will have a material impact on our financial position, results of operations or cash flows.

Guarantees

     In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation specifies the disclosures to be made by a guarantor in its interim and annual financial statements concerning its obligations under certain guarantees that it has issued. FIN 45 also requires a guarantor to recognize a liability, at the inception of the guarantee, for the fair value of obligations it has undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods ending after December 15, 2002. The initial recognition and initial measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 31, 2002. Accordingly, we have adopted the provisions of FIN 45. The adoption of these provisions did not have a material impact on our financial position, results of operations or cash flows.

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     In April 2003, the FASB issued SFAS No. 149, “Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. In particular, SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative. It also clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 is generally effective for contracts entered into or modified after June 30, 2003 and the adoption is not expected to have a material impact on our financial position, results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

     A portion of our exposure to market risk for changes in interest rates relates to our investment portfolio. We do not use derivative financial instruments in our investment portfolio. We place cash and cash equivalents with various major financial institutions and limit the amount of credit exposure to the greater of 20% of the total investment portfolio or $10.0 million in any single institution. We protect our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities and by constantly positioning the portfolio to respond appropriately to a reduction in credit rating of any investment issuer, guarantor or depository to levels below the credit ratings dictated by our investment policy. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. Maturities of short-term investments are timed, whenever possible, to correspond with debt payments and capital investments. As of March 31, 2003, the outstanding amount in the investment portfolio was $190.4 million, comprised mainly of money market funds with an average return of 1.20% for dollar investments and 2.75% for Euro investments.

     We had a portfolio of fixed and variable rate debt of approximately $1.1 billion as of March 31, 2003, of which approximately 94% related to fixed rate debt obligations. Our fixed rate debt consists primarily of $807.4 million of senior subordinated notes with a weighted average interest rate of 9.64%, $200.0 million of zero coupon, zero yield junior convertible subordinated notes and $21.8 million of other fixed rate obligations. As of March 31, 2003, the approximate fair values of our 9.875% notes, 9.75% notes and 8.75% notes based on broker trading prices were 110.125%, 106.0% and 104.5% of the face values on March 31, 2003, respectively. Our variable rate debt includes demand notes, mortgage loans and certain variable lines of credit. These credit lines are located throughout the world and are based on a spread over that country’s inter bank-offering rate. Our variable rate debt instruments create exposures for us related to interest rate risk. As of March 31, 2003, the balance outstanding on our variable rate debt obligation was approximately $65.3 million. A hypothetical 10% change in interest rates would not have a material effect on our financial position, results of operations and cash flows over the next fiscal year.

FOREIGN CURRENCY EXCHANGE RISK

     We transact business in various foreign countries and are, therefore, subject to risk of foreign currency exchange rate fluctuations. We have established a foreign currency risk management policy to manage this risk. To the extent possible, we manage our foreign currency exposure by evaluating and using non-financial techniques, such as currency of invoice, leading and lagging payments and receivable management. In addition, we borrow in various foreign currencies and enter into short-term foreign currency forward contracts to hedge only those currency exposures associated with certain assets and liabilities, mainly accounts receivable and accounts payable, and cash flows denominated in non-functional currencies.

     We try to maintain a fully hedged position for certain transaction exposures. These exposures are primarily, but not limited to, revenues, customer and vendor payments and inter-company balances in currencies other than the functional currency unit of the operating entity. The credit risk of our foreign currency forward contracts is minimal since all contracts are with large financial institutions. The gains and losses on forward contracts generally offset the gains and losses on the assets, liabilities and transactions hedged. On April 1, 2001, we adopted SFAS No. 133, as amended by SFAS No. 137 and No. 138, and as such the fair value of currency forward contracts are reported on the balance sheet. The aggregate notional amount of outstanding contracts as of March 31, 2003 amounted to $807.2 million with a fair value on the balance sheet of a liability of $1.1 million. The majority of these foreign exchange contracts expire in less than one month and almost all expire within three months. They will settle in Euro, British pound, Hong Kong dollar, Hungarian forint, Japanese yen, Malaysian ringgit, Norwegian kronor, Polish zloty, Singapore dollar, Swedish krona, Swiss franc, Thai baht and U.S. dollar.

     Based on our overall currency rate exposures at March 31, 2003, including derivative financial instruments and nonfunctional currency-denominated receivables and payables, a near-term 10% appreciation or depreciation of the U.S. dollar would not have a material effect on our financial position, results of operations and cash flows over the next fiscal year.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholders of
Flextronics International Ltd. and Subsidiaries:

We have audited the accompanying consolidated balance sheet of Flextronics International Ltd. and Subsidiaries (the “Company”) as of March 31, 2003, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the year then ended. Our audit also included the fiscal 2003 consolidated financial statement schedule listed in Item 15(a)(2). These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the fiscal 2003 financial statements and financial statement schedule based on our audit. The financial statements and financial statement schedules as of March 31, 2002, and for each of the years in the two-year period then ended, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements and stated that such fiscal 2002 and fiscal 2001 financial statement schedules, when considered in relation to the fiscal 2002 and fiscal 2001 basic financial statements taken as a whole, presented fairly, in all material respects, the information set forth therein, in their report dated April 25, 2002.

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

In our opinion, the fiscal 2003 consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2003 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the fiscal 2003 consolidated financial statement schedule, when considered in relation to the fiscal 2003 basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

San Jose, California
April 21, 2003
(May 5, 2003 as to Note 13)

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This is a copy of the audit report previously issued by Arthur Andersen LLP, the Company’s former independent accountants, in connection with the Company’s Annual Report on Form 10-K for the year ended March 31, 2002. This audit report has not been reissued by Arthur Andersen LLP nor has Arthur Andersen LLP provided consent to the inclusion of its report in this Form 10-K. The consolidated balance sheet as of March 31, 2001, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the year ended March 31, 2000 and the information in the financial statement schedule (Schedule II – Valuation and Qualifying Accounts) for the year ended March 31, 2000, each of which is referenced in the audit report, are not included in the Company’s Form 10-K for the year ended March 31, 2003.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Flextronics International Ltd.:

     We have audited the accompanying consolidated balance sheets of Flextronics International Ltd. (a Singapore Company) and subsidiaries (collectively the “Company”) as of March 31, 2002 and 2001 and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2002. These financial statements and the schedule referred to below are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We did not audit the consolidated statement of operations, shareholders’ equity and cash flows of The DII Group, Inc., a company acquired during fiscal 2001 in a transaction accounted for as a pooling of interests, for the year ended January 2, 2000, as discussed in Note 11. Such statements are included in the consolidated financial statements of Flextronics International Ltd. and reflect total revenues of 19% of the related consolidated total for the year ended March 31, 2000. These statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to amounts included for The DII Group, Inc., is based solely upon the report of the other auditors.

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

     In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly in all material respects, the financial position of Flextronics International Ltd. and subsidiaries as of March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

     Our audits and the report of other auditors were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed under Item 14(a)2 is presented for the purpose of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

San Jose, California
April 25, 2002

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED BALANCE SHEETS

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

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

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FLEXTRONICS INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the Three Years Ended March 31, 2003
(In thousands)