**Exhibit 99-a**

 

**RISK FACTORS**

 

*Our business faces many risks.  The risks described below may not be theonly risks we face.  Additional risksthat we do not yet know of or that we currently think are immaterial may alsoimpair our business operations.  If anyof the events or circumstances described in the following risks actually occur,our business, financial condition or results of operations could suffer, andthe trading price of our common stock could decline.*

 

**Risks Related to Our Business**

 

**Our operating results have been, and willcontinue to be, adversely affected by the significant downturn in thecommunications equipment industry and the slowdown in the United Stateseconomy.**

 

Our operatingresults during fiscal 2002 and 2001 and the first half of fiscal 2003 have beensignificantly impacted by the substantial downturn in the telecommunicationsequipment industry.  In this marketenvironment, many of our customers have deferred capital spending, reducedtheir equipment purchases and announced plans to further reduce capitalexpenditures in 2003.  As a result, ourrevenues have decreased each quarter compared to the prior year and priorquarter since the first quarter of fiscal 2001 and have decreased materially fromlevels prior to 2001.  We expect revenuesto decline in the third quarter and cannot assure you that they will notcontinue to do so.

 

A majority ofour revenues are derived from telecommunication service providers.  These customers have greatly reduced theirspending on communications equipment. Our business has also been negatively impacted by reduced or deferredcapital spending by our cable industry customers.  Some of our customers have experienced serious financialdifficulties, which in certain cases has resulted in bankruptcy filings orcessation of operations.  Demand forproducts in the telecommunications equipment market remains at low levelscompared to pre-2001 levels.

 

If capitalspending levels by service providers continue to decline, or if thetelecommunications market does not improve, our revenues and profitability willcontinue to be adversely affected.  As aresult of the significant slowdown in capital spending in our target market, itis difficult to predict the level of future demand in those markets, even inthe very short term.  In addition, thelevel of demand can change quickly and vary over short periods of time, makingaccurate forecasts of revenues, operating results and cash flow increasinglydifficult.  For example, we experienceda sequential increase in revenue in our broadband connectivity products in thesecond quarter of 2003, but currently anticipate no further growth, or a slightdecline in revenue from those products in the third quarter of 2003.

 

The generalslowdown in the United States economy has also negatively impacted, and maycontinue to adversely affect, our business and operating results.  We expect any recovery in the communicationsmarket to lag behind a general economic recovery.  Terrorists attacks in the United States, the war with Iraq and otherworldwide events have increased uncertainty in the United States economy.  If general economic conditions in the UnitedStates and globally do not improve, or if there is a worsening of the UnitedStates or global economy, we may continue to experience material adverseeffects on our business, financial condition and results of operations.

 

**We incurred significant net losses in fiscal2001 and 2002, and we have continued to incur net losses during the first halfof fiscal 2003.  No assurance can be giventhat we will achieve operating profitability in the future.**

 

We incurrednet losses of approximately $1.29 billion and $1.15 billion in fiscal 2001 and2002, respectively.  During the sixmonths ended April 30, 2003, we had a net loss of $70.9 million, and weexpect to incur a net loss for the full fiscal year 2003. Depending uponconditions in the telecommunications equipment market and the United States andglobal economy generally, such net losses may continue for the foreseeablefuture.

 

When the significantreduction in communications equipment spending became evident in fiscal 2001,we began implementing a restructuring plan to reduce operating expenses andcapital expenditures and to narrow the strategic focus of our business.  As a result in large part of thisstructuring plan, ADC incurred impairment and special charges of $697.1 millionand $567.9 million in fiscal 2001 and 2002, respectively.  Although most of the restructuring planinitiatives have been implemented, we do not expect to complete therestructuring plan until the end of fiscal 2003.  Accordingly, we expect to continue to incur special chargesthroughout the current fiscal year, and may incur such charges in later fiscalyears.

 

As a result ofthe restructuring plan, ADC has significantly reduced expenses and lowered itsquarterly revenue break-even point. However, we may not be able to achieve anticipated revenue levels infuture quarters or

 

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further reduce our expenses ifrevenue shortfalls occur.  As a result,no assurance can be given that ADC will achieve operating profitability.

 

**The future of the market for communicationsequipment products is uncertain.**

 

We cannotpredict whether the market for communications equipment products and serviceswill improve and grow in the foreseeable future.  The slowdown in the United States and global economy over thepast two years, changes and consolidation in the communications serviceprovider market, and the constraints on capital availability have had amaterial adverse effect on many of our customers.

 

In addition,as the downturn in the communications services industry continues, we expectincreased consolidation among our customers in order for them to increasemarket share, diversify product portfolios and achieve greater economies ofscale.  Consolidation is likely toimpact our business as our customers focus on integrating their operations andchoosing their equipment vendors.  Aftera consolidation occurs, there can be no assurance that we will continue tosupply equipment to the surviving communications service provider.  For example, the acquisition of AT&TBroadband by Comcast Corporation, as well as declining performance by cableproviders, has caused a marked reduction in our IP cable sales.

 

In the past,our principal product offerings have been copper-based and fiber-optic-basedproducts designed to connect and transmit information on traditional telephonynetworks.  With the growth of multimediaapplications and the development of enhanced Internet, data, video and voice services,our recent product and service offerings and research and development effortshave been and are focused on emerging technologies and network equipment,software and systems integration services for communications service providers.  The market for communications networkequipment, software and integration services is rapidly changing, and we maynot be able to compete successfully.

 

**Ourmarket is subject to rapid technological change, and to compete effectively, wemust continually introduce new products that achieve market acceptance.**

 

Thecommunications equipment industry is characterized by rapid technologicalchange.  In our industry, we also faceevolving industry standards, changing market conditions and frequent newproduct and service introductions and enhancements by our competitors.  The introduction of products using newtechnologies or the adoption of new industry standards can make our existingproducts or products under development obsolete or unmarketable.  In order to grow and remain competitive, wewill need to adapt to these rapidly changing technologies, to enhance ourexisting solutions and to introduce new solutions to address our customers’changing demands.

 

We cannotpredict technological trends or new products in the telecommunicationsequipment market.  In addition, we donot know whether our products and services will meet with market acceptance orbe profitable or how their sales may be impacted by possible consolidation ofcommunications service provider customers. We may not be able to compete successfully, and competitive pressuresmay have a material adverse effect on our business, operating results andfinancial condition.

 

New productdevelopment often requires long-term forecasting of market trends, developmentand implementation of new technologies and processes, and a substantial capitalcommitment.  We have invested, and wewill continue to invest, substantial resources for the development of newproducts.  We may experiencedifficulties that could delay or prevent the successful design, development,introduction or marketing of new solutions. In addition, these new solutions and enhancements must meet therequirements of our current and prospective customers and must achievesignificant market acceptance.  If we failto anticipate or respond in a cost-effective and timely manner to technologicaldevelopments, changes in industry standards or customer requirements, or if wehave any significant delays in product development or introduction, ourbusiness, operating results and financial condition could be materiallyadversely affected.

 

**We may need to make additional strategicchanges to our product portfolio but our strategic changes and restructuringprograms may not yield the benefits that we expect.**

 

In 2001, we announcedan initiative to focus our business on core operations and products and improveour operating performance by restructuring and streamlining operations.  As part of this initiative, the Company soldor closed a number of non-strategic businesses and product lines, disposed ofcertain facilities, significantly reduced our workforce and outsourced somemanufacturing and other functions in fiscal 2001, 2002 and 2003.  These activities may not yield the benefitswe expect and may give rise to unforeseen costs.  As a result of these activities, we have recorded substantialimpairment and special charges during those periods, which adversely affect thecomparability of our reported financial results during those periods.

 

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We recentlyannounced a new product portfolio review initiative to focus on otheropportunities to enhance shareowner value in the difficult and changingcommunications equipment industry.  Weintend to focus on product markets in which we are, or believe we can become,one of the leading suppliers.  As partof the current product portfolio review, ADC may make strategic additions andsubtractions to its product line. Accordingly, we may acquire businesses and product lines in our areas offocus and de-emphasize other businesses and product lines.  We may also divest, eliminate or scale backexisting businesses and product lines.

 

The extent ofthis additional restructuring effort, and its effects on our business,operating results and financial condition, are unknown at this time.  If we determine to acquire complementarybusinesses in our areas of strategic focus, we may have difficulty assimilatingthese businesses and their products, services, technologies and personnel intoour operations.  These difficultiescould disrupt our ongoing business, distract our management and workforce,increase our expenses and adversely affect our operating results and financialcondition.  Divestitures or eliminationof existing businesses or product lines could also have disruptive effects andmay cause us to incur material expenses. In addition, if we acquire new businesses, we may not realize all of theanticipated benefits of these acquisitions, and we may not be able to retainkey management, technical and sales personnel after an acquisition.

 

**Our industry is highly competitive andsubject to pricing pressure.**

 

Competition inthe communications equipment industry is intense.  We believe that competition may increase substantially with theincreased use of broadband networks.  Webelieve our success in competing with other manufacturers of communicationsequipment products and services will depend primarily on our engineering,manufacturing and marketing skills, the price, quality and reliability of ourproducts, our delivery and service capabilities and our control of operatingexpenses.  We have experienced andanticipate experiencing increasing pricing pressures from current and futurecompetitors as well as general pricing pressure from our customers as part oftheir cost reduction efforts.  Many ofour competitors have more extensive engineering, manufacturing, marketing,financial and personnel resources than we do. Competition may also be affected by consolidation among communicationsequipment providers, which may increase their resources.  As a result, other competitors may be ableto respond more quickly to new or emerging technologies and changes in customerrequirements.

 

We cannotpredict whether we will be able to compete successfully with our existing andnew products and services or with current and future competitors.  In addition, we believe that technologicalchange, the convergence of Internet, data, video and voice on a singlebroadband network, the possibility of regulatory changes and industryconsolidation or new entrants will continue to cause rapid evolution in thecompetitive environment.  The full scopeand nature of these changes are difficult to predict at this time.  Increased competition could lead to pricecuts, reduced profit margins and loss of market share, which may seriously harmour business, operating results and financial condition.

 

**Our sales could be negatively impacted if oneor more of our key customers substantially reduce orders for our products.**

 

Our customerbase is relatively concentrated with our top ten customers accounting for 55%of net sales for the first six months of fiscal 2003, and VerizonCommunications accounting for more than 10% of consolidated sales in the firstsix months of fiscal 2003.  If we lose asignificant customer, our sales and gross margins would be negativelyimpacted.  In addition, the loss ofsales may require us to record additional impairment charges or exit aparticular business or product line.

 

Over recentperiods, most of our major customers have reduced their capital spending andpurchases of our products and have expressed uncertainty as to their futurerequirements.  As a result, our saleshave declined and it is difficult to predict future sales accurately.  The conditions contributing to thisdifficulty include:

 

•                  the prolongeddownturn in the telecommunications industry, resulting in increased pricingpressure and competition by equipment providers for the remaining spending bythe surviving industry participants;

 

•                  uncertaintyregarding the capital spending plans of the major telecommunications carriers,upon which we depend for sales;

 

•                  consolidation inthe industry;

 

•                  thetelecommunications carriers’ current limited access to the capital required forexpansion; and

 

•                  general marketand economic uncertainty.

 

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While we haveresponded to the depressed market by reducing excess capacity and cuttingcosts, we cannot assure you that our plans will be successful in mitigating theadverse effects of a prolonged downturn. The current downturn in the telecommunications industry may be moresevere and prolonged than expected.  Ifour net sales continue to decline, our ability to meet financial expectationsfor future periods may be impaired.

 

**Our operating results fluctuatesignificantly, and if we miss quarterly financial expectations, our stock pricecould decline.**

 

Our operatingresults are difficult to predict, and fluctuate significantly from quarter toquarter.  It is likely that ouroperating results in some periods will be below investor expectations.  If this happens, the market price of ourcommon stock is likely to decline. Fluctuations in our future quarterly earnings results may be caused bymany factors, including:

 

•                  the volume andtiming of orders from and shipments to our customers;

 

•                  work stoppagesand other developments affecting the operations of our customers;

 

•                  the timing ofand our ability to obtain new customer contracts;

 

•                  the timing ofnew product and service announcements;

 

•                  the availabilityof products and services;

 

•                  the overalllevel of capital expenditures by our customers;

 

•                  the marketacceptance of new and enhanced versions of our products and services orvariations in the mix of products and services we sell;

 

•                  the utilizationof our production capacity and employees; and

 

•                  the availabilityand cost of key components.

 

Our expenselevels are based in part on expectations of future revenues.  If revenue levels in a particular period arelower than expected, our operating results will be affected adversely.

 

In addition,our operating results are subject to seasonal factors.  We historically have had stronger demand forour products and services in the fourth fiscal quarter ending October 31,primarily as a result of our year-end incentives and customer budgetcycles.  We typically have experiencedweaker demand for our products and services in the first fiscal quarter endingJanuary 31, primarily as a result of the number of holidays in lateNovember, December and early January, the development of annual capital budgetsby our customers during that period, and a general industry slowdown duringthat period.

 

We cannotpredict if these historical seasonal trends will continue or worsen in thefuture, particularly in light of the economic downturn of the past twoyears.  For instance, due to theeconomic downturn in the communications equipment and services market duringfiscal 2001 and 2002, this historical trend of seasonality was not evidentduring these two fiscal years.

 

**The regulatory environment in which weoperate is changing.**

 

Thecommunications equipment industry is subject to regulation in the United Statesand other countries.  Our business isdependent upon the continued growth of the telecommunications industry in theUnited States and globally.  Federal andstate regulatory agencies regulate most of our United States customers.  In early 1996, the United StatesTelecommunications Act of 1996 was enacted. The Telecommunications Act lifted certain restrictions on the ability ofcompanies, including the Regional Bell Operating Companies and other ADCcustomers, to compete with one another. The Telecommunications Act also made other significant changes in theregulation of the telecommunications industry. These changes generally have increased our opportunities to providesolutions for our customers’ Internet, data, video and voice needs.

 

However, theestablished telecommunications providers have stated that some of these changeshave diminished the profitability of additional investments made by them intheir business, which reduces their demand for our products.  During the quarter ended January 31,2003, the Federal Communications Commission released their adoption of a Reportand Order concerning incumbent local exchange carriers’ network unbundlingobligations.  The

 

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FCC essentially kept in placethe carriers’ current UNE-P obligations, with state interpretations anddecisions, and ruled not to require the unbundling of certain network elementsin next generation hybrid and fiber networks.  Overall, we do notanticipate that this decision will result in increased capital spending by theincumbent carriers in the near term. With respect to the broadband portion of the ruling, it is too early todetermine what the impact of this ruling may be.  Moreover, the FCC has yet to release specific details of itsruling, which could alter our views as to the effect of this ruling on our business.

 

Futureregulatory changes affecting the communications industry are anticipated bothin the United States and internationally. These changes could negatively affect our customers and reduce demandfor our products.  In addition,competition in our markets could intensify as the result of changes to existingregulations or new regulations. Accordingly, changes in the regulatory environment could adverselyaffect our business and results of operations.

 

**Customer payment defaults could have anadverse effect on our financial condition and results of operations.**

 

As a result ofadverse conditions in the telecommunications market, some of our customers haveand may continue to experience serious financial difficulties, which in somecases have resulted or may result in bankruptcy filings or cessation ofoperations.  In the future, if customersexperiencing financial problems default and fail to pay amounts owed to us, wemay not be able to collect these amounts and recognize expected revenue.  In the current environment in thetelecommunications equipment industry and the United States and global economy,it is possible that customers from whom we expect to derive substantial revenuewill default or that the level of defaults will increase.  Any material payment defaults by ourcustomers would have an adverse effect on our results of operations andfinancial condition.

 

We also haveprovided financing to some of our customers for purchases of ourequipment.  As of April 30, 2003,we had commitments to extend credit of approximately $57.8 million, of whichapproximately $21.6 million was outstanding on this date.  At such date, we had recorded approximately$19.0 million in loss reserves in the event of non-performance related to thesefinancing arrangements.

 

Many of ourcompetitors engage in similar financing transactions in order to obtaincustomer orders.  To remain competitive,we believe that it may be necessary for us to continue to offer financingarrangements in the future.  We intendunder certain circumstances to sell all or a portion of these commitments andoutstanding receivables to third parties. In the past, we have sold some receivables with recourse and have had tocompensate the purchaser for the loss.

 

Our ability tocollect on these financing arrangements is contingent on the financial healthof the companies to which we extend credit. The condition of these companies is affected by many factors, including,among others, general conditions in the communications equipment and servicesindustry, general economic conditions and changes in telecommunicationsregulations.  We may experience creditlosses that could adversely affect our operating results and financialcondition.

 

**Conditions in global markets could affect ouroperations.**

 

Our non-UnitedStates sales accounted for approximately 37.6% of our net sales for the firstsix months in fiscal 2003, 27% of our net sales in fiscal 2002 and 29% of ournet sales in fiscal 2001.  We expectnon-United States sales to increase as a percentage of net sales in thefuture.  In addition to sales anddistribution in numerous countries, we own or lease operations located inArgentina, Australia, Belgium, Brazil, Canada, China, France, Germany, HongKong, Hungary, India, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Puerto Rico, Russia, Singapore, South Africa,South Korea, Spain, the United Arab Emirates, the United Kingdom andVenezuela.  Due to our non-United Statessales and our non-United States operations, we are subject to the risks ofconducting business globally.  Theserisks include:

 

•                  local economicand market conditions;

 

•                  political andeconomic instability;

 

•                  unexpectedchanges in or impositions of legislative or regulatory requirements;

 

•                  fluctuations inthe exchange rate of the United States dollar;

 

•                  tariffs andother barriers and restrictions;

 

•                  longer paymentcycles;

 

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•                  difficulties inenforcing intellectual property and contract rights;

 

•                  greaterdifficulty in accounts receivable collection;

 

•                  potentiallyadverse taxes; and

 

•                  the burdens ofcomplying with a variety of non-United States laws and telecommunicationsstandards.

 

We also aresubject to general geopolitical risks, such as terrorism, political andeconomic instability and changes in diplomatic and trade relationships.  We maintain business operations and havesales in many non-United States markets. Economic conditions in many of these markets represent significant risksto us.  We cannot predict whether oursales and business operations in these markets will be affected adversely bythese conditions.

 

Instability innon-United States markets, particularly in the Middle East, Asia and LatinAmerica, could have a negative impact on our business, financial condition andoperating results.  The aftermath of thewar in Iraq and other turmoil in the Middle East also may have negative effectson the operating results of some of our businesses, especially those located inIsrael.  Also, the effect of SevereAcute Respiratory Syndrome, or SARS, could adversely affect our business inAsia.  In addition to the effect ofglobal economic instability on non-United States sales, sales to United Statescustomers having significant non-United States operations could be impactednegatively by these conditions.

 

**Our intellectual property rights may not beadequate to protect our business.**

 

Our futuresuccess depends in part upon our proprietary technology.  Although we attempt to protect ourproprietary technology through patents, trademarks, copyrights and tradesecrets, these protections are limited. Accordingly, we cannot predict whether such protection will be adequate,or whether our competitors can develop similar technology independently withoutviolating our proprietary rights.

 

Also, rightsthat may be granted under any patent application in the future may not providecompetitive advantages to us. Intellectual property protection in foreign jurisdictions may be limitedor unavailable.  In addition, many ofour competitors have substantially larger patent portfolios than we do.

 

**Weface intellectual property litigation and infringement claims that could becostly to defend and result in our loss of significant rights.**

 

As thecompetition in the communications equipment industry increases and thefunctionality of the products in this industry further overlaps, we believethat companies in the communications equipment industry are becomingincreasingly subject to infringement claims. We have received and may continueto receive notices from third parties, including some of our competitors,claiming that we are infringing third-party patents or other proprietaryrights.  We cannot predict whether wewill prevail in any litigation over third-party claims, or whether we will beable to license any valid and infringed patents on commercially reasonableterms.  It is possible that unfavorableresolution of such litigation could have a material adverse effect on ourbusiness, results of operations or financial condition.  Any of these claims, whether with or withoutmerit, could result in costly litigation, divert our management’s time,attention and resources, delay our product shipments or require us to enterinto royalty or licensing agreements, which could be expensive.  A third party may not be willing to enterinto a royalty or licensing agreement on acceptable terms, if at all.  If a claim of product infringement againstus is successful and we fail to obtain a license or develop or license non-infringingtechnology, our business, financial condition and operating results could beaffected adversely.

 

**If we seek to secure additional financing, wemay not be able to obtain it.  Also, ifwe are able to secure additional financing, our shareowners may experiencedilution of their ownership interest or we may be subject to limitations on ouroperations.**

 

We currentlyanticipate that our available cash resources, which include existing cash andcash equivalents, will be sufficient to meet our anticipated needs for workingcapital and capital expenditure for the foreseeable future.  If our estimates are incorrect and we areunable to generate sufficient cash flows from operations to meet ouranticipated needs for working capital and capital expenditures, we may need toraise additional funds to develop new or enhanced products, respond tocompetitive pressures, take advantage of acquisition opportunities or raisecapital for strategic purposes. Commercial bank financing is not available at this time to us or to manycompanies in our industry and currently have no sources of committedcapital.  If we raise additional funds through the issuance of equity orequity-related securities, our shareowners may experience dilution of theirownership interests, and the newly issued securities may have rights superiorto those of common stock.  See “RiskFactors—Risk Related to our Common Stock” If we raise additional funds by issuing debt, we may be subject torestrictive covenants that could limit our operating flexibility.

 

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**We are dependent upon key personnel.**

 

Like alltechnology companies, our success is dependent on the efforts and abilities ofour employees.  Our ability to attract,retain and motivate skilled employees is critical to our success.  In addition, because we may acquire one ormore businesses in the future, our success will depend, in part, upon ourability to retain and integrate our own personnel with personnel from acquiredentities who are necessary to the continued success or the successfulintegration of the acquired businesses.

 

Our recentinitiatives to focus our business on core operations and products byrestructuring and streamlining operations, including substantial reductions inour workforce, have created uncertainty on the part of our employees regardingfuture employment with ADC.  Inaddition, our workforce reductions have generally resulted in broaderresponsibilities for certain individual employees and managers, often withoutcommensurate increases in base compensation. These factors, together with our operating losses and lower stock price,may have an adverse effect on our ability to retain and attract key personnel.

 

**Shifts in our product mix may result indeclines in gross profit, as a percentage of net sales.**

 

Our grossprofit, as a percentage of net sales, varies among our product groups.  Our overall gross profit, as a percentage ofnet sales, has fluctuated from quarter to quarter as a result of shifts inproduct mix, the introduction of new products, decreases in average sellingprices and our ability to reduce manufacturing costs.  We expect such fluctuation in gross profit to continue in thefuture.

 

**Product defects could cause us to losecustomers and revenue or to incur unexpected expenses.**

 

If ourproducts do not meet our customers’ performance requirements, our customerrelationships may suffer.  Also, ourproducts may contain defects in design or manufacture.  Any failure or poor performance of ourproducts could result in:

 

•                  delayed marketacceptance of our products;

 

•                  delays inproduct shipments;

 

•                  unexpectedexpenses and diversion of resources to replace defective products or identifythe source of errors and to correct them;

 

•                  damage to ourreputation;

 

•                  delayed or lostrevenue; and

 

•                  product liabilityclaims.

 

Our productsare often critical to the performance of communication systems.  Many of our supply agreements containlimited warranty provisions.  If thesecontractual limitations are unenforceable in a particular jurisdiction or if weare exposed to product liability claims that are not covered by insurance, asuccessful claim could harm our business.

 

**We may encounter difficulties obtaining rawmaterials and supplies needed to make our products.**

 

Our ability toproduce our products is dependent upon the availability of certain rawmaterials and supplies.  Theavailability of these raw materials and supplies is subject to market forcesbeyond our control.  From time to timethere may not be sufficient quantities of raw materials and supplies in themarketplace to meet the customer demand for our products.  In addition, the costs to obtain these rawmaterials and supplies are subject to price fluctuations because of marketdemand.  Many companies utilize the sameraw materials and supplies in the production of their products as we use in ourproducts.  Companies with more resourcesthan our own may have a competitive advantage in obtaining raw materials andsupplies due to greater buying power. Reduced supply and higher prices of raw materials and supplies mayaffect our business, operating results and financial condition adversely.

 

In addition,we have increased our reliance on the use of contract manufacturers to make ourproducts on our behalf.  We estimatethat products made by contract manufacturers accounted for approximately 33% ofour net sales in fiscal 2002.  If thesecontract manufacturers do not fulfill their obligations to us, or if we do notproperly manage these relationships, our existing customer relationships maysuffer.  We intend to outsourceadditional functions in the future.

 

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**We are subject to risks associated withchanges in security prices, interest rates and foreign exchange rates.**

 

We face marketrisks from changes in security prices and interest rates.  Market fluctuations could affect our resultsof operations and financial condition adversely.  At times, we reduce this risk through the use of derivativefinancial instruments.  However, we donot enter into derivative instruments for the purpose of speculation.

 

Also, we areexposed to market risks from changes in foreign exchange rates.  To mitigate this risk, we have instituted abalance sheet hedging program.  Theobjective of this program is to protect our net monetary assets and liabilitiesin non-functional currencies from fluctuations due to movements in foreignexchange rates.  We attempt to minimizeexposure to currencies in which hedging instruments are unavailable or prohibitivelyexpensive by managing our operating activities and net assets position.

 

**We have been named as a defendant insecurities and other litigation.**

 

We are thedefendant in several shareowner class action lawsuits.  The complaints allege that we violated thesecurities laws and our fiduciary duties by making false and misleadingstatements about our financial performance and business prospects.  We anticipate that the shareowner classactions will be consolidated in the near future.

 

We haverecently been named as a defendant in two lawsuits alleging breach of fiduciaryduties under ERISA.  These claims havebeen brought by individuals who seek to represent a class of participants inour Retirement Savings Plan who purchased our common stock as one of theinvestment alternatives under the plan.

 

We believethat all of the above lawsuits are without merit and intend to defend theseactions vigorously.  However, litigationis by its nature uncertain and unfavorable resolutions of these lawsuits couldmaterially adversely affect our business, results of operations or financialcondition.

 

We are a party to variousother lawsuits, proceedings and claims arising in the ordinary course ofbusiness or otherwise.  The amount of monetary liability resulting from anadverse result in many of such lawsuits, proceedings or claims cannot bedetermined at this time.  As of April30, 2003, we had recorded approximately $17.4 million in loss reserves in theevent of such adverse outcomes in these matters.  Litigation by its nature is uncertain.  Therefore, it is possible that unfavorable resolutions of theselawsuits, proceedings and claims could exceed the amount currently reserved andcould have a material adverse affect on our business, results of operations orfinancial condition.

 

**Risks Related to Our Common Stock**

 

**Our stock price is volatile.**

 

Based on thetrading history of our common stock and the nature of the market for publiclytraded securities of companies in our industry, we believe that some factorshave caused and are likely to continue to cause the market price of our commonstock to fluctuate substantially.  Thefluctuations could occur from day-to-day or over a longer period of time.  The factors that may cause such fluctuationsinclude:

 

•                  announcements ofnew products and services by us or our competitors;

 

•                  quarterlyfluctuations in our financial results or the financial results of ourcompetitors or our customers;

 

•                  customercontract awards to us or our competitors;

 

•                  increasedcompetition with our competitors or among our customers;

 

•                  consolidationamong our competitors or customers;

 

•                  disputesconcerning intellectual property rights;

 

•                  the financialhealth of ADC, our competitors or our customers;

 

•                  developments intelecommunications regulations;

 

•                  generalconditions in the communications equipment industry; and

 

•                  general economicconditions.

 

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In addition,communications equipment company stocks in the past have experiencedsignificant price and volume fluctuations that are often unrelated to theoperating performance of such companies. This market volatility may adversely affect the market price of ourcommon stock.

 

**We have not in the past and do not intend inthe foreseeable future to pay cash dividends on our common stock.**

 

We currentlydo not pay any cash dividends on our common stock and do not anticipate payingany cash dividends on our common stock in the foreseeable future.  We intend to retain future earnings, if any,to finance our operations and for general corporate purposes.

 

**Wehave few shares of common stock available for new issuances in connection withfuture transactions.**

 

A substantialnumber of shares of our common stock have been reserved for issuance uponconversion of our outstanding convertible unsecured subordinated notes, theexercise of the warrants issued in a hedging transaction relating to the notes,and under our stock option plans and employee stock purchase plan.  After taking into account these sharereservations, we have approximately 10 million shares available for futureissuances.  In order to issue more thanthis number of shares, we would need to obtain approval by our shareowners ofan amendment to our articles of incorporation increasing the number of authorizedshares.  The limitation on new shareissuances could adversely affect our ability to engage in future equityfinancing transactions or acquisition transactions using our common stock asconsideration.

 

**Anti-takeover provisions in our charterdocuments, our shareowner rights plan and Minnesota law could prevent or delaya change in control of our company.**

 

Provisions ofour articles of incorporation and bylaws, our shareowner rights plan (alsoknown as a “poison pill”) and Minnesota law may discourage, delay or prevent amerger or acquisition that a shareowner may consider favorable and may limitthe market price for our common stock. These provisions include the following:

 

•                  advance noticerequirements for shareowner proposals;

 

•                  authorizationfor our Board of Directors to issue preferred stock without shareownerapproval;

 

•                  authorizationfor our Board of Directors to issue common stock purchase rights upon a thirdparty’s acquisition of 15% or more of our outstanding shares of common stock;and

 

•                  the limitationof business combinations with interested shareowners.

 

Some of these provisions maydiscourage a future acquisition of ADC even though our shareowners wouldreceive an attractive value for their shares or a significant number of ourshareowners believed such a proposed transaction would be in their bestinterest.

 

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