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UNITED STATESSECURITIES
 AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K

(MARK ONE)

|[X] | ANNUAL REPORT
 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | -------------------------------------------------------------------------------------

For the fiscal year ended
 August 30, 2002OR



|[   ] | TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | -----------------------------------------------------------------------------------------
|      | FOR THE
 TRANSITION PERIOD FROM ___________ TO _____________                             

Commission File Number
 001-11098

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SOLECTRON CORPORATION

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(Exact name of Registrant as
 Specified in its Charter)




|Delaware                                                       |  | 94-2447045                             
|-------------------------------------------------------------- |  | ---------------------------------------
|                                                               |  |                                        
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)



777 Gibraltar Drive


Milpitas, California 95035


---

(Address of Principal
 Executive Offices including Zip Code)(408) 957-8500


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(Registrants Telephone Number, Including
 Area Code)


Securities registered
 pursuant to Section 12(b) of the Act:7.25% Adjustable Conversion-Rate Equity
 Security Units3.25% Liquid Yield Option Notes due 20202.75% Liquid Yield
 Option Notes due 2020Common Stock
Securities registered pursuant to Section 12(g) of the
 Act:None

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 [   ]

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 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. [   ]

The aggregate market value of the Registrants
 Common Stock held by non-affiliates on November 1, 2002 was approximately
 $1,588 million (based upon the last reported price of the Common Stock on the New
 York Stock Exchange on such date). Shares of Common Stock held by each officer,
 director, and holder of 5% or more of the outstanding Common Stock have been excluded
 in that such persons may be deemed to be affiliates. This determination of affiliate
 status is not necessarily a conclusive determination for other purposes.

As of November 1, 2002, there were approximately
 826 million shares of the Registrants common stock outstanding (including
 approximately 37 million shares of Solectron Global Services Canada, Inc. which
 are exchangeable on a one-to-one basis for the Registrants common stock).

DOCUMENTS INCORPORATED BY REFERENCE

The Registrants definitive Proxy
 Statement for the Annual Meeting of Stockholders to be held on January 15, 2003,
 which Solectron will file with the Securities and Exchange Commission within 120
 days after the end of the fiscal year covered by this report, is incorporated by
 reference in Part III of this Form 10-K to the extent stated herein.



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TABLE OF CONTENTS



|                  |                                                                                               |  |  |  |  |  |  | 
|----------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I           
|                  | ITEM 1: BUSINESS                                                                             
|                  | ITEM 2: PROPERTIES                                                                           
|                  | ITEM 3: LEGAL PROCEEDINGS                                                                    
|                  | ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II          
|                  | ITEM 5: MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS            
|                  | ITEM 6: SELECTED FINANCIAL DATA                                                              
|                  | ITEM 7: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                  | ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                  | ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                  | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III         
|                  | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                  | ITEM 11: EXECUTIVE COMPENSATION                                                              
|                  | ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                  | ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|                  | ITEM 14: CONTROLS AND PROCEDURES                                                             
|PART IV          
|                  | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|SIGNATURES       
|INDEX TO EXHIBITS
|EXHIBIT 12.1     
|EXHIBIT 21.1     
|EXHIBIT 23.1     
|EXHIBIT 99.1     
|EXHIBIT 99.2     



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SOLECTRON CORPORATION2002 FORM 10-K ANNUAL REPORTTABLE OF CONTENTS



|           |  |                                                                                        |  | Page
|---------- |  | -------------------------------------------------------------------------------------- |  | ----
|Part I.    |  |                                                                                        |  |     
|Item 1.    |  | Business                                                                               |  | 3   
|Item 2.    |  | Properties                                                                             |  | 9   
|Item 3.    |  | Legal Proceedings                                                                      |  | 11  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                    |  | 12  
|Part II.   |  |                                                                                        |  |     
|Item 5.    |  | Market for the Registrants Common Equity and Related Stockholder
 Matters             |  | 15  
|Item 6.    |  | Selected Financial Data                                                                |  | 15  
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition
 and Results of Operations |  | 16  
|Item 7a.   |  | Quantitative and Qualitative Disclosures About Market Risk                             |  | 35  
|Item 8.    |  | Financial Statements and Supplementary Data                                            |  | 35  
|Item 9.    |  | Changes in and Disagreements with Accountants on
 Accounting and Financial Disclosure  |  | 74  
|Part III.  |  |                                                                                        |  |     
|Item 10.   |  | Directors and Executive
Officers of the Registrant                                     |  | 75  
|Item 11.   |  | Executive Compensation                                                                 |  | 75  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and
 Management                        |  | 75  
|Item 13.   |  | Certain Relationships and Related Transactions                                         |  | 75  
|Item 14.   |  | Controls and Procedures                                                                |  | 75  
|Part IV.   |  |                                                                                        |  |     
|Item 15.   |  | Exhibits, Financial Statement Schedule and Reports on Form 8-K                         |  | 76  
|Signatures |  |                                                                                        |  | 77  

Solectron and the Solectron logo are
 registered trademarks of Solectron Corporation. All other names are trademarks and/or
 registered trademarks of their respective owners.

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PART I




ITEM 1: BUSINESS

The information contained in this business
 overview is qualified in its entirety by, and is subject to, the detailed information,
 consolidated financial statements and notes thereto contained within this document
 under the Managements Discussion and Analysis of Financial Condition and Results
 of Operations and the Financial Statements and Supplementary Data sections.

Overview

We provide supply-chain and product life-cycle
 services to original equipment manufacturers (OEMs) around the world. These companies
 contract with us to build their products or to obtain services related to product
 development, manufacturing and post-production requirements. In many cases, we build
 and service products that carry the brand names of our customers.

We serve several segments of the electronics
 products and technology markets. Much of our business is related to the following
 products:



| | Networking
 equipment such as routers and switches that move traffic across the Internet;                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------
| 
| | Telecommunications equipment;                                                                                                       
| 
| | Computing equipment, including workstations,
 notebooks, desktops, servers, storage systems and peripherals;                        
| 
| | Consumer products such as high-end cellular
 phones, set-top boxes, personal/handheld communications devices and home game consoles;
| 
| | Electronic sub-systems for the automotive,
 aviation and industrial markets; and                                                    
| 
| | Other electronics equipment and products.                                                                                           

Our customers include many of the worlds leading
 technology companies, such as Cisco, Nortel, Ericsson, Sun Microsystems, IBM, Apple, Sony, Lucent,
 HP/Compaq and Wavecom.

We have a comprehensive range of services
 that meet customer supply chain needs throughout the product life cycle. Our services
 include:



| | Advanced technology building block products
 and design;                                                           
|- | -------------------------------------------------------------------------------------------------------------------
| 
| | Product design;                                                                                                    
| 
| | New product introduction (NPI) management;                                                                         
| 
| | Prototyping;                                                                                                       
| 
| | Product testing;                                                                                                   
| 
| | Full product manufacturing, including printed
 circuit board assembly (PCBA) and complete product systems assembly;
| 
| | Materials purchasing and supply-base management;                                                                   
| 
| | Distribution and installation;                                                                                     
| 
| | Product repair and warranty service; and                                                                           
| 
| | End-consumer technical support and customer
 relationship management (CRM) services.                               

We bring these services together to provide
 integrated solutions for customers in electronics and technology markets. By utilizing
 our services, customers gain cost and time advantages that help improve their competitiveness
 and enable them to focus on their core competencies of sales, marketing, and research
 and development. More specifically, we provide several benefits to OEMs:

Faster Time-to-Market: Due to intense competitive
 pressures in the electronics industry, shorter product life cycles require OEMs
 to reduce the time needed to bring a product to market. OEMs can reduce time-to-market
 by using our services, expertise and infrastructure. For example, our customer engineered
 products, such as embedded systems and microcircuits, form technology building blocks
 that enable OEMs to rapidly develop complex electronic products and systems. OEMs
 can further reduce time-to-market by partnering with us during the stages of product
 design and product improvement to expedite the transition into large volume production
 in our manufacturing centers.

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Lower Total Costs: OEMs that work with us
 can realize significantly lower costs as a result of several factors: our ability
 to perform services in the most value-adding, cost-effective locations around the
 world; our ability to pool purchasing across our customer base resulting in lower
 costs; our ability to produce multiple products within a given facility; and our
 flexibility to adapt our operations to changing customer demand.

Better Asset Utilization: By using us to
 provide supply-chain services, OEMs can lower their investment in property, plant
 and equipment, as well as systems and infrastructure. This lower investment can
 lead to better asset utilization and higher return on assets for our OEM customers.

Focused Resource Allocation: As a result
 of market demands, many OEMs focus their resources on activities that add the greatest
 value. By offering comprehensive electronics supply-chain and product life-cycle
 services, we allow OEMs to focus on their own core competencies, such as next-generation
 product development, marketing and sales.

Access to Leading Manufacturing and Service
 Technologies: Electronic products, electronics manufacturing and service technologies
 have become increasingly sophisticated and complex. This makes it difficult for
 OEMs to maintain the necessary technological expertise to manufacture and repair
 products internally. OEMs are motivated to work with us to gain access to our expertise
 in interconnect, test, process, repair and other technologies.

Access to Worldwide Capabilities: We have
 facilities in Asia/Pacific, Europe, North America and Latin America. Through our global
 presence, we perform supply-chain and product life-cycle services in locations to
 best address our customers objectives, including cost containment; compliance
 with local content regulations; proximity to end markets and end consumers; and
 the elimination of expensive freight costs, tariffs and time-consuming customs clearances.

We are benefiting from increased worldwide
 market acceptance of, and reliance upon, the outsourcing of manufacturing, supply-chain
 and product life-cycle services by electronics OEMs. Many OEMs in the electronics
 and other industries outsource manufacturing and related supply-chain services as
 part of their business strategies.

Solectron was first incorporated in California
 in August 1977 and was reincorporated in Delaware in February 1997. Our principal
 executive offices are at 777 Gibraltar Drive, Milpitas, California 95035. Our telephone
 number is (408) 957-8500 and Internet address is www.solectron.com.

Industry Overview

OEMs in electronics and technology markets
 around the world are seeking to increase their competitiveness by expanding their
 utilization of Electronic Manufacturing Service (EMS) companies. Faced with shorter
 product life cycles, more complex technology and market pressures to reduce costs
 and product ramp time, OEMs are turning to EMS providers for a broader range of
 supply-chain and product life-cycle services. Outsourcing enables OEMs to concentrate
 on their core competencies of product research and development, marketing and sales.

Strategy

Our strategy is to offer our customers significant
 competitive advantages by having them outsource to us their supply-chain and product
 life-cycle service needs. We differentiate ourselves from our competitors by providing
 superior levels of quality, service and value. We accomplish this by offering value-added
 solutions based on our broad range of services. As a result, we create compelling
 outsourcing solutions that our customers can utilize in whole or in part.

Capitalize on Industry Growth Trends
Our business benefits from the increased OEM acceptance of, and reliance upon, outsourced
 manufacturing services and supply-chain management services. To meet the growing outsourcing
 needs of OEMs, we have strategically expanded our range of services to cover the entire supply
 chain and product life cycle including technology building block products, product design,
 manufacturing and extensive after-sales technical support, repair and CRM services.

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Uncompromising Quality
Quality is a core part of our culture. We strive to continuously improve our processes, and
 we use several quality improvement and measurement techniques to monitor our performance. We
 have received many service and quality awards, including the Malcolm Baldrige National Quality
 Award for Manufacturing in 1991 and again in 1997. Substantially all of our manufacturing facilities
 are certified under ISO-9000 international quality standards for design, manufacturing and
 distribution management systems.

Strategic Relationships
We seek to establish long-term strategic
 relationships with major and emerging OEM leaders in diverse electronics and technology
 industry segments. Our goal is to strengthen these relationships by delivering total
 supply-chain solutions across the entire product life cycle, from design to full
 product manufacturing and distribution, to after-sales services such as product
 repair and support.

Turn-key Capabilities
We believe that, as technologies become
 more complex and as product life cycles continue to shorten, OEMs will outsource
 more of their supply-chain and product life-cycle needs. As they do this, we believe
 they will look to a primary provider of these services on a turn-key, or seamless,
 basis. We believe we are positioned to be a primary provider to OEMs by delivering
 value-added services and solutions.

Advanced Technology Processes
We offer customers access to advanced technology
 processes, including design, NPI and repair expertise. Our
 involvement during the early design stage helps reduce product time-to-market and
 enable a fast ramp to volume manufacturing. We have developed common tools for industrial,
 electrical, mechanical and manufacturing applications designed to shorten the design
 cycle and maintain cost effectiveness. Our repair expertise also spans a wide range
 of products and advanced technologies, from the system to the component level.

Diverse Geographic Operations
We locate our operations based on several
 considerations including where we can generate manufacturing efficiencies and lower
 total costs, proximity to customers, proximity to end markets and end users, and
 where we can cost-effectively generate the greatest value. We have operations throughout
 the Asia/Pacific region, the Americas and Europe. We believe our facilities in these
 regions enable us to best meet our customers requirements.

Global Footprint

Our footprint  or facilities location
  strategy is to locate specific services and capabilities where they can generate
 the greatest value at the lowest total cost. These decisions are made based on low-cost
 manufacturing options, proximity to our customers, proximity to end markets and
 end users, and the location of specific resources needed to deliver value.

Regarding our manufacturing footprint, we
 are shifting our capacity to lower-cost locations  Mexico, Eastern Europe
 and, particularly, Asia. This reflects our belief that OEM customers will be driven
 by the cost advantages associated with these locations, among other factors, in
 the coming years. By the end of fiscal 2003, we expect that approximately 60% of
 our manufacturing capacity for our Global Operations business unit will be in low-cost
 regions including Eastern Europe, Latin America and Asia. As part of this effort,
 we are consolidating selected facilities in the Americas and Europe and transferring
 work to lower cost locations, particularly in Asia.

We locate our other services based on how
 best to add value and to gain access to pools of people with the skills and experience
 we need to create solutions and deliver world-class services. For example, we have
 a major design and NPI center in California. This enables us to draw from a highly
 skilled pool of resources, and it gives us close proximity and immediate access
 to interact with customers at critical phases of the product life cycle.

For our after-sales services, we operate
 repair and warranty centers based on proximity to transportation infrastructure
 and proximity to end users. We also operate customer contact centers in various
 locations that provide qualified workers skilled at handling end-user inquiries.

Our ability to serve our customers effectively
 is also dependent upon our materials management and logistic capabilities. Our locations
 are served by a world-class materials organization, consisting of multiple groups
 across multiple locations, backed by information technology. The materials group
 is responsible for ordering, tracking and ensuring that the correct parts are delivered
 to the correct locations on a just-in-time basis to meet our customers needs.

North America

Our North American facilities are increasingly
 focused on higher value activities, such as a variety of design services, technology
 development, after-sales services, and manufacturing low-volume, highly complex
 products.

In fiscal 2002, we expanded our optical
 manufacturing capabilities through the acquisition of Iphotonics in the United States.
 We also further strengthened our post-manufacturing services through the addition
 of U.S. sites related to the acquisition of Artesyn Solutions, Inc. In addition, we enhanced our total service offerings
 through the acquisition of Stream International, a global CRM outsourcing and support

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services provider. In addition, we added after-sales capabilities in the communications, computer and
 electronics storage markets with our acquisition of Magnetic Data Technologies (MDT).

Approximately 50 additional facilities in
 Canada and the U.S. came with our fiscal 2002 acquisition of C-MAC Industries, Inc.
 (C-MAC). Many of these facilities are smaller in size and perform services complementary
 to PCBA work performed at selected other North American locations. Some of these
 locations also design and manufacture advanced technology building block products,
 such as microcircuits and sensors.

Throughout the year, we reduced our overall
 manufacturing presence in North America as a result of our restructuring activities
 and our strategic shift of manufacturing capacity toward lower-cost regions.

Asia/Pacific

In line with our strategy to provide low-cost
 solutions for our customers, we are growing our facilities footprint in the Asia/Pacific
 region. This region is emerging as a significant end-market for our customers and
 our facilities in Asia/Pacific are located to take advantage of the regions
 well-developed supply-base, transportation and logistics infrastructure, and educated
 workforce. In particular, we have strategically located several of our manufacturing
 facilities in China and Malaysia to better serve the needs of OEMs requiring price-sensitive,
 high-volume production capabilities. The demand for low-cost, high-complexity
 manufacturing in these countries is also growing. During fiscal 2002, the acquisition
 of Northern C&C Technology Ltd. (NC&C) expanded our after-sales service
 presence in Beijing, Shanghai and Hong Kong.

In addition, we have located facilities
 in countries such as Japan and Singapore to provide high value activities, such
 as NPI, systems assembly, fulfillment and repair services near our customers
 end-markets. Our recent acquisition of MDT also added a repair and logistics hub
 in Singapore.

Latin America

Our Mexican facility provides low-cost,
 medium complexity manufacturing and related services, mainly for the North American
 market. The Latin American regions proximity to North America is also ideal
 for production where low-cost and time-to-market are particular concerns for OEMs.
 Our operations in Brazil support the South American market.

Europe

Driven by our strategy and the general economic
 downturn, we are streamlining our operations in Europe. Our Western Europe operations
 in France and Scotland will be focused on providing high value services to our customers,
 such as design, systems assembly and integration, and repair. Our Eastern Europe
 locations in Romania and Hungary continue to provide our customers with high-volume,
 low-cost manufacturing services for the European region.

Our operations are divided into four business
 units as follows:

Global Operations Business Unit

Global Operations is the largest of our four
 business units. In fiscal 2002, it generated sales of $10.3 billion, or 83.8% of
 our total net sales. Through Global Operations, we provide customers with pre-manufacturing,
 manufacturing, materials management and fulfillment services for printed circuit
 boards, backplanes, system enclosures and complete electronic products.

We offer a wide selection of pre-manufacturing
 services to customers, from electrical and mechanical design, structural and functional
 test development, prototyping, qualification and agency approval. All of our pre-manufacturing
 services are guided by Solectrons NPI process, dedicated to shorten product
 development cycles and optimize a products design for manufacturing.

The core function of Global Operations provides
 manufacturing services to meet a wide range of customer needs, from large-volume/low-complexity
 products to highly complex configure-to-order/build-to-order systems. These manufacturing
 services include systems and product testing, PCBA, sub-systems assembly, configure-to-order
 and build-to-order systems assembly; and product installation. Our advanced manufacturing
 technology processes and failure analysis and test capabilities enable customers
 products to reach the market faster and at lower cost.

During the year we added to our manufacturing
 capabilities through acquisitions that enhanced our optical technology expertise,
 as well as sub-system and full-system manufacturing services. The addition of these
 new capabilities is consistent with our intent to build full products and our strategy
 to provide complete product life-cycle solutions.

Our materials management and fulfillment
 services ensure that the necessary parts and products are in the right place at
 the right time to meet customer requirements. Materials management includes the
 planning, purchasing, expediting, warehousing and preparation of

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components and
 materials required to assemble products or portions of products. Our global materials
 and procurement expertise helps customers lower materials costs and improve their
 overall materials reliability, availability and flexibility. Through product fulfillment,
 we manufacture, package and ship the products directly to our customers or their
 customers.

Technology Solutions Business Unit

Technology Solutions provides modular memory
 and embedded systems design and related manufacturing services. Within Technology
 Solutions, SMART Modular Technologies (SMART) and Force Computers offer a wide
 range of memory and input/output (I/O) products, and embedded computer boards and
 systems that form pre-developed technology building blocks to increase product time
 to market for our customers. With sophisticated design and product expertise, Technology
 Solutions plays a significant role in our life-cycle solutions. In fiscal 2002,
 Technology Solutions generated sales of $860.3 million, or 7.0% of our total net
 sales.

Through SMART, Technology Solutions offers
 memory and communications products for OEMs that demand proven technology, quality
 and logistical support. SMARTs memory division is a market leader with an
 array of high-end products, including DRAM and SRAM modules, flash modules and flash
 cards. SMARTs I/O division focuses on both standard and customized I/O products,
 such as wireless modems for use with CDMA and GSM cell phones, and xDSL adapters,
 as well as advanced wireless product design and manufacturing.

Through Force Computers, Technology Solutions
 offers a variety of embedded boards and systems serving the telecom/datacom, military
 and aerospace, medical, and industrial markets. These products are based on a variety
 of standards (cPCI, VME, cPSB, PMC) as well as custom form factors utilizing the
 latest Intel, Power PC, and Sparc CPU technology. Forces building block approach
 to boards, peripheral cards, backplanes, and systems tied together with value-added
 software offerings allow OEMs a time-to-market advantage at a competitive cost.

Global Services Business Unit

Global Services is our primary provider
 of post-manufacturing services with solutions from the time a product is put in
 service until it is removed from the market. These services include: product repair;
 upgrades; re-manufacturing and maintenance through factory and fast-hub service
 centers located around the world; help-desk support through customer call centers
 for end users; logistics and parts management including management of strategic
 stocking locations; returns processing; warehousing; engineering
change management;
 and end-of-life manufacturing. In fiscal 2002, Global Services generated sales of
 $822.7 million, or 6.7% of our total net sales.

Through these services and working directly
 with end users on technical support and returns, we provide faster service to end
 users and provide greater value to our OEM customers. In this way, we add value
 to their business by enhancing their brand with their customers.

Whether at the system or the component levels,
 we provide the technical expertise necessary to service a wide range of electronic
 products. Our highly skilled technicians support todays most advanced technologies,
 including liquid crystal display, optical and radio frequency products, components
 and systems. We also minimize shipping costs and repair time by handling repairs
 at our various international locations. In addition, our data collection systems
 can provide valuable information from customers and repair history to improve product
 design and reliability.

We operate service and support centers worldwide,
 including specially designated rapid-repair hubs in Memphis, Tennessee; Amsterdam,
 the Netherlands; and Singapore. Our service and support facilities are located in
 strategic end markets to provide the fast turnaround essential to service products,
 such as laptop and desktop computers, cell phones, and advanced telecommunications
 and networking equipment, all of which contain information vital to the products
 end user. By offering a broad array of global, post-manufacturing service
 options across multiple market segments, we can provide a full range of integrated
 solutions to our diverse customer base.

In fiscal 2002, our acquisition of MDT added
 after-sales capabilities in the communications, computer and electronic storage
 markets. In addition, our acquisition of NC&C increased our repair capabilities
 and presence in China.

During the year, we also acquired Artesyn
 Solutions, which expanded our materials return processing, repair and refurbishment
 capabilities. Also, the acquisition of Stream International significantly increased
 Global Services capabilities extending to global CRM outsourcing and support
 services.

MicroSystems Business Unit



MicroSystems was established as a business
 unit upon the completion of our acquisition of C-MAC. It offers a broad portfolio
 of enabling solutions to the communications, automotive and military markets. It
 has manufacturing facilities in the United States, Canada, the United Kingdom, France,
 Germany, Belgium, and India, which in turn are supported by an international network
 of technical sales offices and distributors. In fiscal 2002, MicroSystems generated
 sales of $305.8 million, or 2.5% of total net sales.

MicroSystems aims to satisfy specific customer
 or application requirements through industry-leading design and manufacturing expertise
 in advanced electronic components, sub-systems and systems. MicroSystems customers
 include many of the worlds leading

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telecommunications, automotive, military,
 aerospace and wireless communications manufacturers that demand exacting product
 and service standards.

MicroSystems is involved in every stage
 of the fabrication of hybrid microcircuits from design to manufacturing. It uses
 state-of-the-art technologies to provide integrated solutions for applications as
 varied as optical transceivers and pressure sensors. Customer needs for high functionality
 and miniaturization are supported by MicroSystems low-temperature co-fired
 ceramic (LTCC) operations. The ceramic-based technologies find broad application
 within the automotive, military, aerospace and telecommunications markets.

A second core technology is based on
 quartz crystals and frequency products. MicroSystems offers a full range of products
 and technologies from low-end oscillators to highly sophisticated TCXOs, OCXOs and
 SAWs. In addition, state of the art ceramic-based and micro-machined silicon (MEM)
 sensors satisfy a comprehensive range of applications in automotive, industrial
 and aerospace applications.

Sales and Marketing

Sales and marketing are integrated processes
 involving direct salespersons, project managers and senior executives. We direct
 our sales resources and activities at several management and staff levels within
 customer and prospective customer companies. We also use independent sales representatives
 in certain geographic areas. We receive unsolicited inquiries resulting from word
 of mouth, from advertising and public relations activities, and through referrals
 from current customers. We evaluate these opportunities against our customer selection
 criteria and assign direct salespersons or independent sales representatives, as
 appropriate.

Historically, we have had substantial recurring
 sales from existing customers. About 96% of our fiscal 2002 net sales came from
 customers that also used our services in fiscal 2001. While we seek to diversify
 our customer base, a small number of customers currently generate a significant
 portion of our sales.

Our top 10 customers accounted for approximately
 65% of net sales in fiscal 2002, 72% of net sales in fiscal 2001 and 74% of net
 sales in fiscal 2000. Several customers each accounted for more than 10% of net
 sales during these periods: Nortel (14%), HP/Compaq (11%) and Cisco (11%) in fiscal
 2002; Ericsson (14%), Cisco (12%), Nortel (12%) and HP/Compaq (11%) in fiscal 2001;
 and HP/Compaq (16%), Ericsson (13%) and Cisco (12%) in fiscal 2000. Sales to HP
 and Compaq are combined in each period for comparability purposes due to their merger
 in May 2002.

Backlog

Backlog consists of contracts or purchase
 orders with delivery dates scheduled within the next 12 months. At August 31, 2002,
 our backlog was approximately $1.6 billion, compared with backlog of approximately
 $2.2 billion at August 31, 2001. Because customers may cancel or reschedule deliveries,
 backlog is not a meaningful indicator of future financial results.

Competition

The EMS industry consists of a large number
 of companies, several of which have substantial market share. We also face competition
 from current and prospective customers that evaluate our capabilities against the
 merits of manufacturing products internally. We compete with different companies
 depending on the type of service or geographic area. We believe the primary basis
 of competition in our targeted markets is proven execution, reliability, manufacturing
 technology, continuity of supply, quality, responsiveness, a full range of value-adding
 services, ability to serve global customers and price. To remain competitive, we
 must continue to provide technologically advanced services; deliver solutions that
 integrate our range of services; maintain high quality levels; offer flexible delivery
 schedules; deliver finished products on a reliable basis; and compete favorably
 on price.

Associates

As of August 31, 2002, we employed approximately
 73,000 associates worldwide, including approximately 9,000 temporary associates.
 Our international operations employed approximately 50,000 associates.

Patents and Trademarks

We have United States patents related to
 the processes and equipment used in our surface mount technology, as well as patents
 related to memory module technology and Versa Module Eurocard (VME) technology.
 In addition, we have access to a number of IBM patents and license rights. We also
 have registered trademarks (service marks) in the United States and many countries
 throughout the world.

Although we do not believe that our trademarks,
 manufacturing process, patents and license rights to which we have access infringe
 on the intellectual property rights of others, we cannot ensure that third parties
 will not assert infringement claims against us in the future. If such an assertion
 were to be made, it may become necessary or useful for us to enter into licensing
 arrangements or to resolve such an issue
through litigation. However, we cannot ensure that such
 license rights would be available to us on commercially acceptable terms or that

8



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any such litigation
 would be resolved favorably. Any litigation could be lengthy and costly and, regardless of its
 outcome, could materially harm our financial condition.

Environmental Matters

We are required to comply with local, state,
 federal and international environmental laws and regulations relating to the treatment,
 storage, use, discharge, emission and disposal of hazardous materials used in our
 manufacturing and service processes. We are also required to comply with laws and
 regulations relating to occupational safety and health, product take back and product
 content and labeling. Failing to comply with these present and future laws and regulations
 could restrict our ability to expand facilities, or could require us to acquire
 costly equipment or to incur other significant expenses to comply with environmental
 regulations. Moreover, to the extent we are found non-compliant with any of these
 laws and regulations, we may incur substantial fines and penalties. We are committed
 to maintaining compliance in all of our facilities and to continuously improving
 our environmental practices.

We are also required to obtain and maintain
 environmental permits for many of our facilities. These permits, which must be renewed
 periodically, are subject to revocation if we violate environmental laws. There
 can be no assurance that violations will not occur as a result of equipment failure,
 human error or other causes. If a violation of environmental laws occurs, we could
 be held liable for damages, fines and costs of remedial actions, and our permits
 could be revoked. Any such revocation could require us to cease or limit production
 at one or more of our facilities, and may adversely impact our results of operations.

We obtained a large number of facilities
 through the 2002 acquisitions of C-MAC and other companies as well as various asset
 purchases. It is possible that some of those facilities could have soil, groundwater
 or interior facility contamination that requires remediation. We have obtained environmental
 insurance to mitigate certain environmental liabilities posed by C-MACs operations
 and facilities. We believe, based on our current knowledge, that the cost of any
 groundwater or soil clean-up that may be required at C-MAC facilities or any other
 facility we have acquired would not materially harm our business, financial condition
 and results of operations. Nevertheless, it is costly to remediate contamination,
 and there can be no assurance that any remediation costs would not harm our business,
 financial condition and results of operations in the future. In addition, we have
 been, and in the future may be, held liable for remediation of sites where our hazardous
 materials (or those of companies we have acquired) have been disposed of. To date,
 these liabilities have not been substantial or material to our business, financial
 condition and results of operations.




ITEM 2: PROPERTIES

Our manufacturing facilities are located
 throughout the Americas, Europe, and Asia/Pacific. The table below lists the major
 facilities leased or owned as of August 31, 2002.

9



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|Location                                     |  | Square Footage |  | Leased/Owned                  |  | Primarily Used                               
|-------------------------------------------- |  | -------------- |  | ----------------------------- |  | ---------------------------------------------
|                                             |  |                |  |                               |  |                                              
|Global Operations                            |  |                |  |                               |  |                                              
|Milpitas, Fremont, Mountain View; California |  | 554,000        |  | leased*                       |  | PCBA & Systems Integration                   
|Westborough, Massachusetts                   |  | 198,000        |  | leased                        |  | PCBA                                         
|Charlotte, North Carolina                    |  | 706,000        |  | 76,000 leased/630,000 owned   |  | PCBA                                         
|Creedmoor, North Carolina                    |  | 290,000        |  | owned                         |  | Systems Integration                          
|Columbia, South Carolina                     |  | 357,000        |  | leased*                       |  | Systems Integration                          
|Austin, Texas                                |  | 824,000        |  | leased                        |  | PCBA                                         
|Sherbrooke, Quebec, Canada                   |  | 108,000        |  | 7,000 leased/101,000 owned    |  | Systems Integration                          
|Kanata, Ontario, Canada                      |  | 87,000         |  | leased                        |  | PCBA & Systems Integration                   
|Dollard des Ormeaux, Quebec, Canada          |  | 165,000        |  | leased                        |  | Metal Fabrication                            
|Winnipeg, Manitoba, Canada                   |  | 94,000         |  | owned                         |  | PCBA & Systems Integration                   
|Guadalajara, Mexico                          |  | 632,000        |  | leased                        |  | PCBA & Systems Integration                   
|Hortolandia, Brazil                          |  | 191,000        |  | leased                        |  | Back Plane                                   
|Bordeaux, France                             |  | 480,000        |  | owned                         |  | PCBA & Systems Integration                   
|Herrenberg, Germany                          |  | 110,000        |  | owned                         |  | Systems Integration                          
|Budapest, Hungary                            |  | 307,000        |  | owned                         |  | Systems Integration                          
|Carrickfergus, Northern Ireland              |  | 211,000        |  | leased                        |  | Systems Integration                          
|Timisoara, Romania                           |  | 358,000        |  | owned                         |  | PCBA & Systems Integration                   
|Dunfermline, Scotland                        |  | 221,000        |  | owned                         |  | PCBA                                         
|Ostersund, Sweden                            |  | 280,000        |  | owned                         |  | PCBA                                         
|Suzhou, China                                |  | 333,000        |  | owned                         |  | PCBA                                         
|Shanghai, China                              |  | 272,000        |  | leased                        |  | PCBA                                         
|Shenzhen, China                              |  | 230,000        |  | owned                         |  | PCBA                                         
|Batam, Indonesia                             |  | 106,000        |  | leased                        |  | PCBA                                         
|Ibaraki, Japan                               |  | 137,000        |  | leased                        |  | PCBA                                         
|Nakaniida, Japan                             |  | 379,000        |  | leased                        |  | PCBA                                         
|Penang, Malaysia                             |  | 1,063,000      |  | 31,000 leased/1,032,000 owned |  | PCBA                                         
|Singapore                                    |  | 443,000        |  | 326,000 leased/117,000 owned  |  | PCBA, Systems Integration & Metal Fabrication
|Others                                       |  | 622,000        |  | leased/owned                  |  | PCBA, Systems Integration & Metal Fabrication
|                                             |  |                |  |                               |  |                                              
|Total                                        |  | 9,758,000      |  |                               |  |                                              
|                                             |  |                |  |                               |  |                                              
|Technology Solutions                         |  |                |  |                               |  |                                              
|Aguada, Puerto Rico                          |  | 84,000         |  | leased                        |  | Memory Mfg & Engineering                     
|Aguadilla, Puerto Rico                       |  | 90,000         |  | leased                        |  | Memory Mfg & Engineering                     
|Fremont, California                          |  | 191,000        |  | leased                        |  | Memory Mfg & Engineering                     
|Munich, Germany                              |  | 276,000        |  | leased                        |  | Boards, Systems & Engineering                
|Others                                       |  | 171,000        |  | leased                        |  | Boards, Systems, Memory Mfg & Engineering    
|                                             |  |                |  |                               |  |                                              
|Total                                        |  | 812,000        |  |                               |  |                                              
|                                             |  |                |  |                               |  |                                              
|Global Services                              |  |                |  |                               |  |                                              
|Sacramento, California                       |  | 405,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Milpitas, California                         |  | 253,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Canton, Massachusetts                        |  | 184,000        |  | leased                        |  | Call center                                  
|Austin, Texas                                |  | 113,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Dallas, Texas                                |  | 248,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Memphis, Tennessee                           |  | 185,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Lavergne, Tennessee                          |  | 113,000        |  | leased                        |  | Warehouse                                    
|Louisville, Kentucky                         |  | 407,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Kalispell, Montana                           |  | 89,000         |  | leased                        |  | Call center                                  
|Beaverton, Oregon                            |  | 93,000         |  | leased                        |  | Call center                                  
|Belleville, Ontario, Canada                  |  | 104,000        |  | leased                        |  | Call center                                  
|Newmarket, Ontario, Canada                   |  | 185,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Cape Breton, Nova Scotia, Canada             |  | 100,000        |  | leased                        |  | Call center                                  
|Bordeaux, France                             |  | 107,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Amsterdam, Netherlands                       |  | 268,000        |  | 68,000 leased/200,000 owned   |  | Systems Repair & Refurbish                   
|Sydney, Australia                            |  | 133,000        |  | leased                        |  | Systems Repair & Refurbish                   
|Singapore                                    |  | 98,000         |  | leased                        |  | Systems Repair & Refurbish                   
|Others                                       |  | 780,000        |  | leased                        |  | Systems Repair, Refurbish & Call center      
|                                             |  |                |  |                               |  |                                              
|Total                                        |  | 3,865,000      |  |                               |  |                                              
|                                             |  |                |  |                               |  |                                              
|MicroSystems                                 |  |                |  |                               |  |                                              
|Moorpark, California                         |  | 279,000        |  | leased                        |  | Sensor Design & Manufacture                  
|Argenteuil, France                           |  | 84,000         |  | owned                         |  | Design & Manufacture Oscillators             
|Ronse, Belgium                               |  | 90,000         |  | owned                         |  | Design & Manufacture Resistor Networks       
|Others                                       |  | 354,000        |  | leased/owned                  |  | Design & Manufacture Electronics             
|                                             |  |                |  |                               |  |                                              
|Total                                        |  | 807,000        |  |                               |  |                                              

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|Corporate            |  |            |  |         |  |               
|-------------------- |  | ---------- |  | ------- |  | --------------
|Milpitas, California |  | 169,000    |  | leased  |  | Headquarters  
|San Jose, California |  | 93,000     |  | leased* |  | Administration
|Others               |  | 9,000      |  | leased  |  | Administration
|                     |  |            |  |         |  |               
|Total                |  | 271,000    |  |         |  |               
|Grand total          |  | 15,513,000 |  |         |  |               
|                     |  |            |  |         |  |               



|* | includes properties under
synthetic leases, see
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
 Operations for a discussion of the synthetic leases.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Around the world, we are subject to a variety of
 environmental regulations relating to the use, storage, discharge and disposal of hazardous
 chemicals used during our manufacturing process. Any failure by us to comply with present and
 future regulations could subject us to future liabilities or the suspension of production. In
 addition, such regulations could restrict our ability to expand our facilities or could
 require us to acquire costly equipment or to incur other significant expenses to comply
 with environmental regulations.




ITEM 3: LEGAL PROCEEDINGS

We from time to time are involved
 in various litigation and legal matters including those described below. We are not a party
 to legal proceedings that individually or in the aggregate are believed to be material
 to our business.

On August 29, 2002, ATEL Leasing Corporation, a
 lessor of manufacturing equipment to us, filed suit against us in the California Superior
 Court for the City and County of San Francisco (ATEL Leasing Corp. v. Solectron
 Corp., Case No. 412011), alleging that ATEL is entitled to recover as liquidated
 damages and not as a penalty amounts equal to the stipulated loss
 value of all of the equipment leased to us by ATEL under two equipment lease
 agreements, even though the equipment in question was neither lost nor damaged, and
 even though we were current on all lease installment payments (and had paid all
 applicable late payment fees) under the leases. ATELs complaint seeks liquidated
 damages of approximately $26 million, plus additional interest allegedly accruing
 thereon, and litigation expenses. We believe ATELs claims are without merit, and
 that we have meritorious defenses, including that the liquidated damages provision
 upon which ATEL relies is an unenforceable penalty under California law. In fact, the United
 States District Court for the Northern District of California ruled in a March 2001 opinion
 (ATEL Financial Corp. v. Quaker Coal Company, 132 F.Supp.2d 1233) that a liquidated
 damages provision which ATEL had attempted to enforce in that case was an
 unenforceable penalty under California law. While ATEL has appealed that ruling, we
 believe the U.S. District Courts decision was correct, and that the liquidated
 damages provisions which ATEL is attempting to enforce against us should similarly
 be held unenforceable under applicable California law. We have filed a crosscomplaint
 against ATEL seeking damages and other appropriate relief.

On September 19, 2002, one of our former employees
 filed a complaint in the Superior Court of the State of California, Santa Clara County,
 against us asserting two claims for wrongful termination. The case is encaptioned Ronald
 Sorisho v. Solectron Corporation, et al., Case No. CV811243. In the complaint, plaintiff
 alleges that he was wrongfully terminated by us in supposed retaliation for his alleged
 efforts to ensure that we timely recognized a charge for excess, obsolete and slow
 moving inventory in the Technology Solutions business unit. Plaintiff seeks compensatory
 damages in an amount not less than $2.5 million as well as punitive damages.
 We believe Mr. Sorishos claims of wrongful termination are without merit and intend
 to vigorously defend ourselves.

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ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security
 holders during the fourth quarter of the fiscal year covered by this report.

Executive Officers of Solectron

Our executive officers and their ages as
 of November 13, 2002 are as follows:



|Name                           |  | Age |  |  | Position                                                                                       
|------------------------------ |  | --- |  |  | -----------------------------------------------------------------------------------------------
|                               |  |     |  |  |                                                                                                
|                              
|Koichi Nishimura, Ph.D.        |  | 64  |  |  | Chairman of the Board of Directors, President
 and Chief Executive Officer                     
|                              
|Brian Hamilton Antell          |  | 64  |  |  | Senior Vice President and President, Solectron MicroSystems                                    
|                              
|Massued Behrouzi               |  | 47  |  |  | Senior Vice President and President, Solectron North America                                   
|                              
|Kevin Burns                    |  | 38  |  |  | Executive Vice President and Chief Materials Officer                                           
|                              
|Harry H. (Kurt) Colehower      |  | 38  |  |  | Senior Vice President and President, Solectron Europe                                          
|                              
|Philip Fok                     |  | 41  |  |  | Senior Vice President, Chief Administrative
 Officer and Corporate Secretary                   
|                              
|Alejandro Gomez-Montoy         |  | 51  |  |  | Senior Vice President and
 President, Solectron Latin America                                  
|                              
|Chester Chien Lin              |  | 61  |  |  | Executive Vice President
 and President, Solectron Asia/Pacific                                
|                              
|Craig London                   |  | 56  |  |  | Executive Vice President and
 President, Technology Solutions                                  
|                              
|William Mitchell               |  | 58  |  |  | Executive Vice President and President, Solectron
 Global Services                             
|                              
|George W. Moore                |  | 46  |  |  | Executive Vice President and
 President, Solectron Electronics Manufacturing and Test Solutions
|                              
|Kevin OConnor                 |  | 44  |  |  | Senior Vice President, Worldwide Human Resources                                               
|                              
|Kiran Patel                    |  | 54  |  |  | Executive Vice President and
 Chief Financial Officer                                          
|                              
|Daniel Perez                   |  | 51  |  |  | Executive Vice President, Worldwide
 Account Management and Marketing                          
|                              
|Sen-Yuan (Sandy) Ro            |  | 45  |  |  | Senior Vice President and General Manager, System
 Components and Asia Systems Solutions       
|                              
|Frederick (Rick) Rollinson III |  | 46  |  |  | Senior Vice President and President, Solectron
 Systems Solutions                              
|                              
|Joe Tang                       |  | 52  |  |  | Senior Vice President and Managing
 Director, Solectron Asia/Pacific                           
|                              
|Saeed Zohouri, Ph.D.           |  | 51  |  |  | Executive Vice President and Chief
 Operating Officer                                          

Dr. Nishimura oversees Solectrons
 corporate, strategic and emerging business units worldwide. He has served as
 Chairman of the Board since 1996, Chief Executive Officer since 1992 and President
 since 1990. Dr. Nishimura was Co-Chief Executive Officer from 1991 to 1992 and Chief
 Operating Officer from 1988 to 1991. Dr. Nishimura was elected a director of the Board
 in 1991. From 1964 to 1988, Dr. Nishimura was with IBM in various technology and
 management positions. Dr. Nishimura serves as a Director on the Boards of OMM
 Inc., Investor AB, E2open, the Center for Quality Management and the Silicon Valley
 Manufacturing Group, and serves on the board of trustees of the Santa Fe
 Institute. Dr. Nishimura is the 2001 recipient of the Silicon Valley Manufacturing
 Groups Lifetime Achievement Award.

Mr. Antell joined Solectron in 2001 during
 the acquisition of C-MAC Industries. As Senior Vice President and President of Solectron
 MicroSystems Division since December 2001, he is responsible for increasing Solectrons penetration in
 Automotive, Industrial and Military market sectors at the component, module and
 integrated system levels. Previously, Mr. Antell spent 25 years in general management
 in a variety of international companies including STC Components Ltd, Analog
 Devices Inc. and Nortel.

Mr. Behrouzi joined Solectron in 1981, and has
 more than 20 years experience in operations, electronics manufacturing and management.
 As Senior Vice President and President of Solectrons North
American Region since September 2001, Mr.
 Behrouzi is responsible for all manufacturing operations in the United States, Canada
 and Puerto Rico. Prior to Solectron, Mr. Behrouzi was a design engineer for 2 years at
 Brentwells Corp. in Palo Alto, California.

Mr. Burns joined Solectron in 1998 and has more
 than 17 years of experience in operations and supply-chain management. As Executive
 Vice President and Chief Materials Officer since September 2001, he is responsible for Solectrons
 global materials management activities. Prior to joining Solectron, Mr. Burns worked
 for Westinghouse Electric Corporation, where he was the Vice President and General
 Manager of Operations

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for the Power Generation division. Before Westinghouse, Mr.
 Burns was with McKinsey & Company Inc. and General Electric Corporation.

Mr. Colehower joined Solectron in 1992 with
 extensive experience in management, operations and consulting. In his role as Senior
 Vice President and President of Solectron Europe since December 2001, he is responsible for directing
 the development, growth and strategic deployment of Solectrons operations in
 the European region. Prior to Solectron, Mr. Colehower worked at Merrill Lynch in
 investment banking and corporate finance.

Mr. Fok joined Solectron in 1993 with extensive
 experience in industrial and mechanical engineering. As Senior Vice President and Chief
 Administrative Officer since September 2001, Mr. Fok is responsible for the Companys corporate
 communications, government and community affairs, corporate facilities, corporate
 quality and business transformation organizations. He also serves as the Companys
 Corporate Secretary. Prior to Solectron, Mr. Fok worked at IBM for 8 years as a
 manufacturing engineer. Mr. Fok is currently a member of the Institute of Industrial
 Engineers and the American Society of Mechanical Engineers.

Mr. Gomez-Montoy joined Solectron in 1996. In
 his role as Senior Vice President and President of Solectron Latin
America since September 2001, Mr.
 Gómez-Montoy is responsible for all manufacturing operations in Mexico and
 Brazil. Prior to Solectron, Mr. Gomez-Montoy was one of the founders of
 Aerolitoral, a company of Aeromexico, the first regional airline company in
 Mexico. Mr. Gómez-Montoy is also the first Executive Vice President of the American
 Chamber of Commerce of Guadalajara for 2000-2002. In addition, he is resident of the
 In-Bond Association and sits on a number of boards dedicated to developing business
 throughout Latin and North Americas.

Mr. Lin joined Solectron in 2001 as a result of
 the Companys acquisition of NatSteel Electronics. As Executive Vice President and
 President of Solectrons Asia/Pacific region since September
2001, he is responsible for customer satisfaction,
 profit and loss, performance and organizational growth. In addition, he specializes in the regions
 manufacturing operations. Prior to joining Solectron, Mr. Lin was Chief
 Executive Officer of NatSteel Electronics from 1993 to 2001. Previously, Mr. Lin
 held management positions with SCI Systems, General Electric and
General Instruments. Mr. Lin serves as a Director on the Boards of
ECS Holdings Limited, Pacific City International Holdings (PCI) and
Lite-On Enclosure Inc.

Mr. London joined Solectron in 2002 with nearly 30
 years of sales, marketing and engineering management experience in the electronics industry. As
 Executive Vice President and President, Technology Solutions since
March 2002, Mr. London is responsible for leading
 Solectrons Technology Solutions business unit, which is the combination of
 SMART Modular Technologies Inc., FORCE Computers and Solectrons corporate
 technology centers. Prior to joining Solectron, Mr. London worked for Safeguard
 Scientifics Inc., where he was an Executive Officer and Managing Director, technology
 products. Previously, Mr. London was President and Chief Executive Officer of Diva
 Communications Inc. Mr. Londons experience also includes 8 years with Nortel
 and various management positions at Rockwell International Telecommunications, Electronic
 Systems Associates, Pacific Telephone and AT&T.

Mr. Mitchell joined Solectron in March 1999 as a result of
 the acquisition of Sequel Inc. As Executive Vice President and President of Solectron Global
 Services since September 2001, he is responsible for providing strategic direction, day-to-day management, and new
 business development for Solectrons after-sales service business unit. Prior
 to joining Solectron, Mr. Mitchell was President and Chief Executive Officer of
 Sequel Inc. Previously, Mr. Mitchell worked in various senior management roles for
 Nashua, Raychem and Exxon.

Mr. Moore joined Solectron in 2000 with an extensive
 background in manufacturing operations, engineering and corporate management. As a corporate
 officer, Executive Vice President and President, Solectron Electronics Manufacturing and Test
 Solutions since September 2001, Mr. Moore is responsible for worldwide electronics manufacturing operations across
 Europe, Asia and North and South Americas. Prior to Solectron, Mr. Moore spent
 22 years with IBM. Mr. Moore currently serves on the board of directors of the
 National Association of Manufacturers.

Mr. OConnor joined Solectron in October 2002 with
 more than 20 years of experience in human resources. As Senior Vice President, Worldwide Human
 Resources, he is responsible for Solectrons corporate human resources program and infrastructure
 to support the needs of the corporation and its business units. Prior to joining
 Solectron, Mr. OConnor was Senior Vice President, Global Human Resources for
 Axcelis Technologies. Previously, Mr. OConnor worked in various senior human
 resources roles for Iomega Corporation, Dell Computer and Frito-Lay.

Mr. Patel joined Solectron in 2001, and has more than
 29 years of financial and senior management experience. As Executive Vice President and Chief
 Financial Officer since September 2001, Mr. Patel directs Solectrons investor relations, legal and financial
 operations worldwide. Prior to Solectron, Mr. Patel was the Chief Financial Officer of iMotors.
 Previously, Mr. Patel was with Cummins Inc. for 27 years, serving in a broad range
 of finance and operations positions at the operating unit and corporate level.
 He is a member of the American Institute of Certified Public Accountants (AICPA),
 the Tennessee Society of Certified Public Accountants (TSCPA) and the Financial
 Executive Institute.

Mr. Perez joined Solectron in 1991 and has more than
 25 years of experience in electronics, program management, materials management and administration.
 As Executive Vice President of Worldwide Account Management and
Marketing since September 2001, he is responsible for the
 demand creation processes, including strategic planning, marketing and market research
 functions. Prior to joining Solectron, Mr. Perez spent 14

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years with IBM in various
management positions in corporate administration, manufacturing,
materials planning, and acquisition and control. Mr. Perez
serves on the board of directors of the American Electronics
Association, the Tech Museum of Innovation, the Mexican Heritage
Corporation, the Center for Training and Careers in San Jose,
California, El Teatro Campesino, and Lifeguard, Inc., and is the Vice
Chairman of California State Center for Quality Education and
Development.

Mr. Ro joined Solectron
in 1984 and has extensive engineering, materials, finance and
operations experience. As Senior Vice President and General Manager
of systems components and Asia systems solutions since September
2001, Mr. Ro provides direction for all system component
operations, including sheet metal, PCB fabrication, backplane
assembly, connector fabrication and enclosure assembly. Prior to
Solectron, Mr. Ro worked with the Industrial Technology Research
Institution in Taiwan. Mr. Ro is also an advisor for the
Taiwanese Engineering Association.

Mr. Rollinson joined
Solectron in 2001 as a result of the acquisition of C-MAC Industries.
As Senior Vice President and President of the Solectron Systems
Solutions Group since December 2001, Mr. Rollinson has global
responsibility for the strategic development, implementation and
management of Solectron's systems solutions capabilities Previously,
Mr. Rollinson was Vice President of C-MAC Industries and
President of its Electronics Manufacturing Services division.
Mr. Rollinson began his career at Nortel Networks, where he
spent 17 years in various senior management positions.
Mr. Rollinson is also a member of the Vance Granville Community
College Advisory Council, the Granville County United Way board of
directors and the North Carolina Citizens for business and Industry
Council.

Mr. Tang joined Solectron in
1990 and has an extensive background in manufacturing management in
the electronics industry. In his role as Senior Vice President and
managing director of Solectrons Asia/Pacific region since
September 2001, Mr. Tang has responsibility for all
manufacturing operations in the Asia/Pacific region. Before
joining Solectron, Mr. Tang was a business manager at Intel for
10 years and also worked for General Instruments. Mr. Tang was also awarded
 the Pingat Kelakuan Terpuji, a medal of exemplary conduct presented by the governor of the
 state of Penang, for his contributions to the local community.

Dr. Zohouri joined Solectron in 1980 and has more than 23
 years of experience in research and development, operations, electronics manufacturing and senior
 management experience. As Executive Vice President and Chief
Operating Officer since September 2001, he is responsible
 for the efficient execution and integration of the companys business operations.
 Dr. Zohouris prior experience includes teaching chemistry at a major international
 university.

There is no family relationship among any of the
 executive officers.

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##### Table of Contents






PART II




ITEM 5: MARKET FOR THE REGISTRANTS
 COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common Stock Information

The following table sets forth the quarterly
 high and low per share sales prices of our common stock for the fiscal periods,
 as quoted on the New York Stock Exchange under the symbol SLR.



|               | High |       | Low
|-------------- | ---- | ----- | ---
|               |      |       |    
|Fiscal 2002    |      |       |    
|Fourth quarter | $    | 8.11  |    
|Third quarter  |      | 10.68 |    
|Second quarter |      | 16.45 |    
|First quarter  |      | 15.50 |    



|Fiscal 2001    |   |       |  |   |      
|-------------- | - | ----- |  | - | -----
|Fourth quarter | $ | 23.35 |  | $ | 13.44
|Third quarter  |   | 30.69 |  |   | 16.06
|Second quarter |   | 41.95 |  |   | 24.53
|First quarter  |   | 52.63 |  |   | 28.00

We have not paid any cash dividends since
 inception and do not intend to pay any cash dividends in the foreseeable future.
 Additionally, the covenants to our financing agreements prohibit the payment of
 cash dividends. As of November 1, 2002, there were approximately 9,600 stockholders of record
 based on data obtained from our transfer agent.

Recent Sales of Unregistered Securities

Iphotonics Acquisition

On October 16, 2001, we issued 10,163,509
 shares of our common stock to the shareholders of Iphotonics, Inc. in exchange for
 their outstanding shares of capital stock pursuant to the Agreement and Plan of
 Reorganization executed on August 15, 2001. We issued our shares based on the exemption
 from registration under Section 3(a)10 of the Securities Act after a hearing on
 the fairness of the transaction by the California Corporations Commissioner and
 the Commissioners subsequent qualification of our common stock by the issuance
 of a permit under Section 25121 of the California Corporate Securities Law of 1968,
 as amended.

Series B Preferred Stock  Special
 Voting Share

On December 3, 2001, a special voting share
 of our Series B preferred stock, par value of $0.001 per share, was issued in a
 private placement to National Bank Trust Company Inc., the trustee appointed under
 the voting and exchange trust agreement entered into in connection with the transaction
 with C-MAC pursuant to the amended combination agreement and plan of arrangement
 for $1.00 and other good and valuable consideration. We relied on section 4(2) of
 the Securities Act based upon the fact that the issuance of the Series B preferred
 stock was a transaction not involving any public offering.




ITEM 6: SELECTED FINANCIAL DATA

The following selected historical financial
 information of Solectron has been derived from the historical consolidated financial
 statements and should be read in conjunction with the consolidated financial statements
 and the notes included therein. For further discussion of factors that could affect
 comparability of these financial statements, see Note 1 to the consolidated financial
 statements, Summary of Significant Accounting Policies.

15



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##### Table of Contents



Five-Year Selected Financial Highlights
(in millions, except per-share data)



|Consolidated Statements of Operations Data:                                                | Years Ended August 31,*
|------------------------------------------------------------------------------------------ | -----------------------
|                                                                                           |                        
|                                                                                           | 2002                   
|                                                                                           |                        
|Net Sales                                                                                  | $                      
|Operating income (loss)                                                                    |                        
|Income (loss) before income taxes
 and cumulative effect of change in accounting principle |                        
|Income (loss) before cumulative effect
 of change in accounting principle                  |                        
|Net income (loss)                                                                          |                        
|Basic net income (loss) per share:                                                         |                        
|Income (loss) before cumulative
 effect of change in accounting principle                  |                        
|Cumulative effect
 of change in accounting principle                                       |                        
|                                                                                           |                        
|                                                                                           | $                      
|                                                                                           |                        
|Diluted net income (loss) per share:                                                       |                        
|Income (loss) before
 cumulative effect of change in accounting principle                  | $                      
|Cumulative effect of change
 in accounting principle                                       |                        
|                                                                                           |                        
|                                                                                           | $                      
|                                                                                           |                        



|Consolidated Balance Sheet Data: | August 31,*
|-------------------------------- | -----------
|                                 |            
|                                 | 2002       
|                                 |            
|Working capital                  | $          
|Total assets                     |            
|Long-term debt                   |            
|Stockholders equity             |            

* On September 1,
1999, Solectron adopted American Institute of Certified Public
Accountants Statement of Position No. 98-5,
Reporting on the Costs of Start-Up Activities. In
accordance with Statement of Financial Accounting Standards (SFAS)
No. 141, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, Solectron
is accounting for all business combinations initiated or completed
after June 30, 2001 using the purchase method of accounting.
Solectron adopted the remaining provisions of SFAS No. 141 and
SFAS No. 142, Goodwill and Other Intangible Assets
effective September 1, 2001. These accounting changes are
discussed in Notes 1 and 17 to the consolidated financial
statements. In addition, business combinations are discussed and
related pro forma disclosures are provided in Note 15 to the
consolidated financial statements.




ITEM 7: MANAGEMENTS DISCUSSION
 AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking
 Statements

With the exception of historical facts,
 the statements contained in this discussion are forward-looking statements within
 the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
 Securities Exchange Act of 1934, as amended (the Exchange Act), and
 are subject to the Safe Harbor provisions created by that statute. Certain statements
 contained in the following Managements Discussion and Analysis of Financial
 Condition and Results of Operations, including, without limitation, statements containing
 the words believes,

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anticipates, estimates, expects,
 and words of similar
 import, constitute forward-looking statements that involve risks and uncertainties.
 Such statements are based on current expectations and are subject to risk, uncertainties
 and changes in condition, significance, value and effect, including those discussed
 under the heading Risk Factors within the section of this report
 entitled Managements Discussion and Analysis of Financial
 Condition and Results of Operations and reports filed by Solectron with the Securities
 and Exchange Commission, specifically, Forms 8-K, 10-Q, 10-K, S-3, S-4 and S-8. Such
 risks, uncertainties and changes in condition, significance, value and effect could cause
 our actual results to differ materially from our anticipated outcomes. Although we believe that the
 assumptions underlying the forward-looking statements are reasonable, any of the assumptions could
 prove inaccurate, including, but not limited to, statements about our future operating results and
 business plans. We disclaim any intention or obligation to update or revise any forward-looking
 statements as a result of new information, future events or otherwise.

Critical Accounting Policies

Management is required to make judgments, assumptions and
 estimates that affect the amounts reported when we prepare financial statements and related
 disclosures in conformity with generally accepted accounting principles in the United States.
 Note 1 to the consolidated financial statements describes the significant accounting
 policies and methods used in the preparation of our consolidated financial statements.
 Estimates are used for, but not limited to, our accounting for contingencies, allowance
 for doubtful accounts, inventory reserves, goodwill and other intangible asset
 impairments, and restructuring costs. Actual results could differ from these estimates.
 The following critical accounting policies are impacted significantly by judgments,
 assumptions and estimates used in the preparation of our consolidated financial
 statements.

Revenue Recognition

Our net sales are primarily derived from full
 product manufacturing including, but not limited to, PCBA,
 sub-system and complete system assembly and manufacturing of memory products and embedded systems.
 We also offer services consisting of repair, warranty and end-customer technical support services.
 Revenue from manufacturing services is recognized upon shipment of the manufactured
 product. Revenue from other services is recognized as the services are performed.

Loss Contingencies

We are subject to the possibility of various loss
 contingencies arising in the ordinary
 course of business. We consider the likelihood and our ability to reasonably estimate
 the amount of loss in determining loss contingencies. Estimated loss contingencies
 are accrued when it is probable that a liability has been incurred or an asset has
 been impaired and the amount of loss can be reasonably estimated. We regularly evaluate
 information available to us to determine whether such accruals should be adjusted.

Inventory Reserves

The majority of our inventory purchase commitments
 are based upon demand forecasts
 that our customers provide to us. The forecasted period is generally three months,
 except for long lead-time items for which the period is longer. Customers frequently
 make changes to their forecasts, thereby often requiring that we make changes to
 our inventory purchases, commitments, and production scheduling and may require
 us to cancel open purchase commitments with our vendors. This process may lead to
 on-hand inventory quantities and on-order purchase commitments that are in excess
 of the customers revised needs, or parts that become obsolete before use in
 production.

We execute supply agreements with our
 most significant customers in our Global Operations
 business unit. Under these supply agreements, the responsibility for excess or obsolete
 inventory related to raw materials that we purchased or ordered to meet customers
 demand forecasts lies with the customers. However, we are responsible for
 excess and obsolete inventory resulting from inventory purchases in excess of inventory
 needed to meet customer demand forecasts at the time the purchase commitments were
 made, as well as inventory purchases generally not covered by our supply agreements
 with our customers or for inventory purchases for customers with whom we have no
 supply agreements (as is generally the case in our business units other than Global
 Operations).

Each supply agreement specifies the
 agreed-upon definition of excess and obsolete
 inventory and the procedures for disposition including our right to sell the inventory
 back to the customer. The supply agreements generally allow a period of time during
 which we and our customers work together to reduce or eliminate the amount of potentially
 excess and obsolete inventory. After the expiration of the specified time period,
 we may exercise our contractual right to sell the remaining excess and obsolete
 inventory back to the customer. The time period allowed to mitigate excess and obsolete
 inventory can be up to 12 months. Consequently, there will be time lags between
 when excess or obsolete inventory is first identified and when we are paid from
 the exercise of our right to sell this inventory to the customer.

We do not provide inventory allowances
 for excess and obsolete inventory when (i)
 the supply agreement provides us with the contractual right to sell inventory that
 is considered excess or obsolete back to our customers, and (ii) we believe the
 customer is capable of honoring its contractual obligation to purchase the inventory.
 If our customers do not comply with their contractual obligations, the inventory
 reserves included in our financial statements may be understated. For example, we
 are subject to the risk that a customer may not comply with its contractual obligation
 to purchase the excess and obsolete inventory under a supply agreement because the
 customer is experiencing weakening financial conditions. In fiscal 2002, several
 of our customers, including customers who accounted for 10% or more

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of our fiscal
 2002 revenue, were in the telecommunications industry, an industry that has experienced
 declining revenue, large losses, negative cash flows, and several bankruptcies or
 defaults on borrowing arrangements. There is a risk that these customers may not
 purchase inventory back from us which could harm our financial condition. During
 2002, no material customer informed us that it would be unable to honor its contractual
 obligation under a supply agreement to purchase excess or obsolete inventory from
 us.

For our Global Operations business unit, we
 record inventory reserves for excess
 and obsolete inventory for inventory which we have determined that our customers
 are not responsible for or for which we believe they are unable to live up to their
 obligation to purchase such inventory from us. For our other business units, we
 make judgments with respect to recording inventory reserves based on various factors
 such as the aging and anticipated future demand of the inventory. In these other
 units, we generally do not have the right to require our customers to purchase excess
 or obsolete inventory.

Allowance for Doubtful Accounts

We evaluate the collectibility
 of our accounts receivable based on a combination
 of factors. In cases where we are aware of circumstances that may impair a specific
 customers ability to meet its financial obligations to us, we record a specific
 allowance against amounts due to us, and thereby reduce the net recognized receivable
 to the amount we reasonably believe will be collected. For all other customers,
 we recognize allowances for doubtful accounts based on the length of time the receivables
 are outstanding, industry and geographic concentrations, the current business environment
 and our historical experience. If the financial condition of our customers deteriorates
 or if economic conditions worsen, additional allowances may be required in the future.

Goodwill

We perform goodwill impairment tests annually
 during the fourth quarter of our fiscal
 year and more frequently if an event or circumstance indicates that an impairment
 loss has been incurred. Such events or circumstances may include significant adverse
 changes in the general business climate, among others. We perform the impairment
 tests at the reporting unit level which we have determined to be consistent with
 our business units as defined in Note 12 to the consolidated financial statements
 except for our Technology Solutions and Global Services business
 units which were disaggregated further. The tests are performed by determining the fair values of our reporting units
 using a discounted future cash flow model and comparing those fair values to the
 carrying values of the reporting units, including goodwill. If the fair value of
 a reporting unit is less than its carrying value, we then allocate the fair value
 of the unit to all the assets and liabilities of that unit (including any unrecognized
 intangible assets) as if the reporting units fair value was the purchase price
 to acquire the reporting unit. The excess of the fair value of the reporting unit
 over the amounts assigned to its assets and liabilities is the implied fair value
 of the goodwill. If the carrying amount of the reporting units goodwill exceeds
 the implied fair value of that goodwill, an impairment loss is recognized in an
 amount equal to that excess. The process of evaluating the potential impairment
 of goodwill is subjective and requires judgment at many points during the test including
 future revenue forecasts, discount rates and various reporting unit allocations.

Other Intangible Assets

We perform quarterly impairment tests for other
 intangible assets. Our intangible
 assets are primarily related to supply agreements and intellectual property obtained
 from asset acquisitions. Such an asset is considered impaired if its carrying amount
 exceeds the future net undiscounted cash flows that the asset is expected to generate.
 If such asset is considered to be impaired, the impairment to be recognized is the
 amount by which the carrying amount of the asset, if any, exceeds its fair value
 determined using a discounted cash flow model. While our cash flow assumptions
 and estimated useful lives are consistent with our business plans, there is significant
 judgment involved in determining the cash flows attributable to our other intangible
 assets.

Restructuring and Related Impairment Costs

We have recorded restructuring and
 impairment costs in light of customer demand declines
 and economic downturns. These restructuring and impairment charges include employee
 severance and benefit costs, costs related to leased facilities that will be abandoned
 and subleased and owned facilities no longer used by us which will be disposed of,
 costs related to leased equipment that will be abandoned and impairment of owned
 equipment that will be disposed of. For owned facilities and equipment, the impairment
 loss recognized was based on the fair value less costs to sell, with fair value
 estimated based on existing market prices for similar assets. Severance and benefit
 costs are recorded in compliance with Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
 Costs to Exit an Activity. For leased facilities that will be abandoned and
 subleased, the estimated lease loss is accrued for future lease payments subsequent
 to abandonment less any estimated sublease income. In order to estimate future sublease
 income, we work with an independent broker to determine the length of time until
 we believe we can sublease a facility (generally estimated at 24 months) and the
 amount of rent we expect to receive. As of August 31, 2002, the majority of the
 facilities we plan to sublease have not been and, accordingly, our estimates of
 expected sublease income could change based on factors that affect our ability to
 sublease those facilities such as general economic conditions and the real estate
 market, among others. For owned facilities and equipment held for disposal, the
 impairment losses recognized in accordance with Statement of Financial Accounting
 Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
 and for Long-Lived Assets to Be Disposed Of are based on the fair value estimated
 using existing market prices for similar assets less the costs to sell. See Note
 16 to the consolidated financial statements, Restructuring for further
 discussion of our restructuring activities.

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RESULTS OF OPERATIONS

The electronics industry is subject to rapid
 technological change, product obsolescence and price competition. These and other
 factors affecting the electronics industry, or any of our major customers in particular,
 could materially harm our results of operations. See Risk Factors for
 additional factors relating to possible fluctuations of our operating results.

RESULTS OF OPERATIONS FOR YEARS ENDED
 AUGUST 31, 2002, 2001 AND 2000

The following table summarizes certain items
 in the consolidated statements of operations as a percentage of net sales. The financial
 information and the discussion below should be read in conjunction with the accompanying
 consolidated financial statements and notes thereto.



|                                    | Years Ended August 31,
|----------------------------------- | ----------------------
|                                    |                       
|                                    | 2002                  
|                                    |                       
|Net sales                           |                       
|Cost of sales                       |                       
|                                    |                       
|Gross profit                        |                       
|Operating expenses:                 |                       
|Selling, general and administrative |                       
|Research and development            |                       
|Goodwill amortization expense       |                       
|Acquisition costs                   |                       
|Restructuring and impairment costs  |                       
|                                    |                       
|Operating income (loss)             |                       
|Net interest income (expense)       |                       
|Gain on retirement of debt          |                       
|                                    |                       
|Income (loss) before income taxes   |                       
|Income tax expense (benefit)        |                       
|                                    |                       
|Net income (loss)                   |                       
|                                    |                       

NET SALES

For the year ended August 31, 2002, net
 sales fell to $12.3 billion, a decrease of 34.3% from fiscal 2001. Net sales of
 $18.7 billion in fiscal 2001 were 32.2% greater than fiscal 2000. The sales decline
 in fiscal 2002 compared with fiscal 2001 was primarily attributable to continued
 weakness in customer demand, particularly in our telecommunications sector, resulting
 from the worldwide economic slowdown. The decrease was partially offset by revenues
 from our recent acquisitions including C-MAC which contributed approximately 7%
 to 9% of our total revenues in fiscal 2002. The sales growth in fiscal 2001 compared
 with fiscal 2000 was primarily attributable to increased demand from our personal
 computer, notebook computer, consumer and automotive business sectors in the first
 half of fiscal 2001, and our acquisitions during fiscal 2001.

We are organized in four business units
 including Global Operations, Technology Solutions, Global Services and the newly
 established MicroSystems created from our acquisition of C-MAC in December 2001.
 Our largest business unit, Global Operations, provided 83.8%, 91.9% and 87.8% of
 net sales, respectively, for fiscal 2002, 2001 and 2000. Our Technology Solutions
 business unit contributed 7.0%, 6.4%, and 10.5% of net sales, respectively, for
 fiscal 2002, 2001 and 2000. Our Global Services business unit contributed 6.7%,
 1.7% and 1.7% of net sales, respectively, in fiscal 2002, 2001 and 2000. Our MicroSystems
 business unit contributed 2.5% of net sales during fiscal 2002.

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Global Operations Business Unit

Fiscal 2002 net sales declined to $10.3
 billion, a decrease of 40.1% from fiscal year 2001. This decrease was due to continued
 weakness in customer demand, particularly in our telecommunications sector. Fiscal
 2001 net sales grew to $17.2 billion, an increase of 38.4% over
fiscal 2000. This
 increase was due to higher demand growth from our customers during the first half
 of fiscal 2001 and the acquisition of NatSteel Electronics Ltd (NEL) and Shinei
 as well as two Sony manufacturing plants during fiscal 2001.

Technology Solutions Business Unit

Net sales for fiscal years 2002, 2001 and
 2000 were $860.3 million, $1.2 billion and $1.5 billion, respectively. The reduction
 in fiscal 2002 of 28.4% from fiscal 2001 and the decrease in fiscal 2001 of 19.2%
 from fiscal 2000 were principally due to sluggish demand and declines in average
 selling prices of memory components.

Global Services Business Unit

Net sales were $822.7 million, $309.6 million
 and $232.5 million in fiscal years 2002, 2001 and 2000, respectively. Net sales
 increased 165.7% in fiscal 2002 compared to fiscal 2001. Our recent acquisitions
 of Stream International and Artesyn Solutions, Inc. were the main contributors to
 the increase as well as higher demand by customers for after-sales support service
 provided by this business unit. The increase of 33.2% in net sales in fiscal 2001
 compared to fiscal 2000 was primarily due to stronger customer demand and acquisitions
 of IBM Netherlands service facilities as well as MCC-Sequel during fiscal 2001.

MicroSystems Business Unit

This new business unit was formed as a result
 of our acquisition of C-MAC. Our MicroSystems business unit is a provider of sensors,
 controllers, actuators and other sophisticated componentry for key sectors of the
 economy such as automotive and aviation. Net sales were $305.8 million in fiscal
 2002.

International Sales

Net sales from our international sites,
 as a percentage of consolidated net sales, have grown over the last three fiscal
 years. International locations contributed 61% of consolidated net sales in fiscal
 2002, compared with 51% in fiscal 2001 and 41% in fiscal 2000. The increase was
 primarily due to project transfers from sites in the United States to Asian sites.
 These transfers are primarily due to lower costs in Asia. As a result of our international
 sales and facilities, our operations are subject to the risks of doing business
 abroad. See Risk Factors for additional factors relating to possible
 fluctuations of our international operating results. While these dynamics have not
 materially harmed our results of operations, we cannot assure that there will not
 be such an impact in the future.

Major Customers

Net sales to major customers as a percentage
 of consolidated net sales were as follows:



|            |  | Years Ended August 31,
|----------- |  | ----------------------
|            |  |                       
|            |  | 2002                  
|            |  |                       
|Nortel      |  |                       
|HP/Compaq** |  |                       
|Cisco       |  |                       
|Ericsson    |  |                       

*less than 10%**percents in all periods
 presented reflect the combined net sales to HP and Compaq due to their merger in
 May 2002.

Our top ten customers accounted for 65%
 of net sales in fiscal 2002, 72% of net sales in fiscal 2001 and 74% of net sales
 in fiscal 2000. We are dependent upon continued revenues from Nortel, Cisco and
 HP/Compaq as well as our other large customers. We cannot guarantee that these
 or any other customers will not increase or decrease as a percentage of consolidated
 net sales either individually or as a group. Consequently, any material decrease
 in sales to these or other customers could materially harm our results of operations.

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We believe that our ability to grow depends
 on increasing sales to existing customers for their current and future product generations
 and on successfully attracting new customers. Customer contracts can be canceled
 and volume levels can be changed or delayed. The timely replacement of delayed,
 canceled or reduced orders with new business cannot be ensured. In addition, we
 cannot assume that any of our current customers will continue to utilize our services.
 Consequently, our results of operations may be materially adversely affected.

GROSS PROFIT

Our gross margin percentages were 5.9%,
 8.0% and 9.0% for fiscal 2002, 2001 and 2000, respectively. During the fourth quarter
 of fiscal 2002, we recorded a charge of approximately $97 million to reduce the
 carrying value of excess and obsolete inventory. This charge recorded in cost of
 sales resulted in reduction of gross margin and included excess and obsolete inventory
 identified in our product-oriented Technology Solutions and other business units.
 In addition, our gross margin was affected by inefficiencies associated with reduced
 workload and restructuring activities. We continue to shift capacity to low-cost
 locations. Those transfer costs were accounted for as operational costs versus restructuring
 costs and, consequently, they affected our gross margins.

For our Global Operations business unit,
 we anticipate a larger percentage of our sales may be derived from systems-build
 projects that generally yield lower profit margins than PCBA. We expect most of
 our Technology Solutions sales may continue to be derived from turn-key projects,
 which typically yield lower profit margins than consignment projects. In addition,
 factors affecting Technology Solutions profit margins include the sales mix of specialty
 memory modules, standard memory modules, communication card products and embedded
 computer systems, as well as changes in average memory densities used in memory
 products.

In the foreseeable future, our overall gross
 margin will depend primarily on several factors, including but not limited to, product
 mix, production efficiencies, utilization of manufacturing capacity, start-up and
 integration costs of new and acquired businesses, percentage of sales derived from
 systems-build and turn-key projects, pricing within the electronics industry, component
 costs and delivery linearity, and the cost structure at individual sites. Over time,
 gross margins at the individual sites and for Solectron as a whole may continue
 to fluctuate. Increases in the systems-build business or turn-key projects, additional
 costs associated with new projects, and price erosion within the electronics industry
 could harm our gross margin.

In addition, we have in the past experienced
 component shortages. While the component availability fluctuates from time to time
 and is subject to lead time and other constraints, this could possibly have a negative
 impact on our sales and gross margins in the foreseeable future. Therefore, we cannot
 assure that our gross margin will not fluctuate or decrease in future periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In absolute dollars, our selling, general
 and administrative (SG&A) expenses remained consistent in fiscal 2002 compared
 to fiscal 2001, and increased 77.2% in fiscal 2001 compared to fiscal 2000. As a
 percentage of net sales, SG&A expenses were 6.7% in fiscal 2002, 4.4% in fiscal
 2001 and 3.3% in fiscal 2000. The increase as a percentage of net sales in fiscal
 2002 as compared to fiscal 2001 resulted from a large reduction in net sales and
 the fact that some portions of these expenses were fixed. The increases in absolute
 dollars and as a percentage of net sales in fiscal 2001 compared to fiscal 2000
 were due to higher human resource costs, information systems costs, and higher SG&A
 resulting from our acquisitions of NEL, Centennial, MCC-Sequel, Shinei and
 two Sony manufacturing facilities.

RESEARCH AND DEVELOPMENT EXPENSES

With the exception of our Technology Solutions
 business unit, our research and development (R&D) activities have been primarily
 developing prototype and engineering design capabilities, developing common tools
 for electrical, mechanical design, standardizing a single functional test platform,
 developing methods for handling, processing and re-flow of high I/O ball grid array,
 high reliability environmental stress technology and the implementation of environmentally
 friendly assembly processes such as lead free and no-clean. Technology Solutions
 R&D efforts are concentrated on new product development and improvement
 of product designs through improvements in functionality and the use of microprocessors
 in embedded applications.

In absolute dollars, R&D expenses increased
 7.0% in fiscal 2002 compared to fiscal 2001 and increased 15.0% in fiscal 2001 compared
 to fiscal 2000. As a percentage of net sales, R&D expense was 0.6%, 0.4% and
 0.4% of net sales for fiscal 2002, 2001 and 2000. The increase in absolute dollars
 in R&D expenses in fiscal 2002 was primarily due to the acquisition of C-MAC.
 The increase in absolute dollars in 2001 was primarily due to our increased R&D
 effort in SMART and Force and new R&D projects at our various sites.

GOODWILL AMORTIZATION EXPENSE

We adopted SFAS No. 142, Goodwill
 and Other Intangible Assets, effective September 1, 2001, and discontinued
 amortization of goodwill in fiscal 2002. The goodwill amortization expense of $139.9
 million in fiscal 2001 primarily resulted from the NEL acquisition. During the second
 quarter of fiscal 2001, we purchased all of the outstanding issued share capital
 and convertible bonds of NEL for approximately $2.3 billion and $122.4 million,
 respectively. The NEL acquisition was accounted for under the purchase accounting
 method and, as a result, we recorded approximately $1.97 billion of goodwill that
 was amortized over ten years prior to our adoption of the new standard in fiscal
 2002.

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ACQUISITION COSTS

During fiscal 2001, we recorded $29.7 million
 in acquisition and integration costs, which were primarily related to the NEL acquisition
 and were not includable in the purchase price. A charge for acquisition costs of
 $26.8 million was incurred in fiscal 2000 as a result of our pooling transactions
 with SMART, AMERICOM and Bluegum during fiscal 2000. Our acquisition costs consisted
 of investment banker fees, legal fees, accounting fees, registration fees and other
 direct costs.

RESTRUCTURING AND IMPAIRMENT COSTS

Restructuring

Beginning in fiscal 2001, we embarked on
 a restructuring plan to review our operations in light of the economic downturn
 and began undertaking several measures to restructure the company. The measures,
 which included reducing the workforce, consolidating certain facilities and changing
 the strategic focus of a number of sites, were largely intended to align our capacity
 and infrastructure to anticipated customer demand as well as rationalize our footprint
 worldwide.

During fiscal 2002, we recorded restructuring
 and impairment costs related to this plan of $615.5 million against earnings. These
 restructuring and impairment charges occurred primarily in the second and third
 quarters, included employee severance and benefit costs of approximately $119.8
 million, costs related to leased facilities that will be abandoned and subleased
 of $80.3 million, costs related to leased equipment that will be abandoned of $23.8
 million, impairment of equipment of $127.8 million, impairment of facilities of
 $81.0 million, impairment of IT software and other assets of $162.1 million and
 other exit costs of $20.7 million.

The employee severance and benefit costs
 included in these restructuring charges relate to the elimination of approximately
 15,000 full-time positions worldwide and all such positions have been eliminated
 under this plan. Approximately 69% of the positions eliminated were in the Americas
 region, 20% were in Europe and 11% were in Asia/Pacific. The employment reductions
 primarily affected employees in manufacturing and back office support functions.
 Facilities and equipment subject to restructuring were primarily located in the
 Americas and Europe within the Global Operations business unit. For leased facilities
 that will be abandoned and subleased, the lease costs represent future lease payments
 subsequent to abandonment less estimated sublease income. For owned facilities and
 equipment, the impairment loss recognized was based on the fair value less cost
 to sell, with fair value based on estimates of existing market prices for similar
 assets.

During fiscal 2001, we recorded total restructuring
 and impairment costs of $517.3 million against earnings. These restructuring and
 impairment charges occurred primarily in the third and fourth quarters, included
 employee severance and benefit costs of $70.0 million, costs related to leased facilities
 that will be abandoned and subleased of $56.4 million, costs related
to leased equipment
 that will be abandoned of approximately $117.5 million, impairment of equipment
 of $188.2 million, impairment of facilities of $37.7 million, impairment of goodwill,
 intangible and other assets related to closed facilities of $42.2 million and other
 exit costs of $5.3 million.

The employee severance and benefit costs
 included in the fiscal 2001 restructuring charges related to the elimination of
 approximately 11,800 full-time positions worldwide and all such positions have been
 eliminated under this plan. Approximately 67% of the positions eliminated were
 in the Americas region, 23% were in Europe and 10% were in Asia/Pacific. The employment
 reductions primarily affected employees in manufacturing and back office support
 functions. Facilities and equipment subject to restructuring were primarily located
 in the Americas and Europe within the Global Operations business unit. For leased
 facilities that were abandoned and subleased, the lease costs represent future lease
 payments subsequent to abandonment less estimated sublease income. For owned facilities
 and equipment, the impairment loss recognized was based on the fair value less cost
 to sell, with fair value based on estimates of existing market prices for similar
 assets.

We recorded restructuring costs of $11.1
 million in fiscal 2000 primarily related to the consolidations of certain facilities
 acquired in the SMART and Sequel mergers.

In furtherance of the implementation of
 the restructuring plan, we expect to incur restructuring-related charges in the
 range of an aggregate of $100 million over the next few quarters, although no certainty
 can be attributed to this amount or the timing of its recognition. We continue to
 evaluate our cost structure relative to our revenue levels and may take additional
 restructuring charges in the future. If we incur additional restructuring-related
 charges, our financial condition and results of operations may suffer.

Goodwill and other intangible asset charges

In July 2001, the Financial Accounting Standard
 Board (FASB) issued SFAS No. 142, Goodwill and Other Intangible Assets.
 SFAS No. 142 requires that goodwill and intangible assets with indefinite useful
 lives no longer be amortized, but instead tested for impairment at least annually.
 SFAS No. 142 also requires that intangible assets with definite useful lives be amortized
 over their respective estimated lives to their estimated residual values, and be
 reviewed for impairment according to SFAS No. 121, Accounting for the Impairment
 of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

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SFAS No. 142 required that we evaluate existing
 intangible assets and goodwill that we acquired in prior purchase business combinations,
 and to make any necessary reclassifications in order to conform to the new criteria
 in SFAS No. 141, Business Combinations, for recognition apart from goodwill.
 Upon adoption of SFAS No. 142, we reassessed the useful lives and residual values
 of all intangible assets acquired in purchase business combinations, and no significant
 changes were deemed necessary. We were also required to test the intangible assets
 for impairment within the first interim period and no impairment loss was deemed
 necessary.

For the transitional goodwill impairment
 evaluation, SFAS No. 142 required us to perform an assessment of whether there was
 an indication that goodwill was impaired as of the date of adoption, or step one
 of the impairment test. To accomplish this, we identified the reporting units to
 be consistent with the business units as defined in Note 12 except for our Technology Solutions and Global Services business
units which were disaggregated further. We then determined
 the carrying value of each reporting unit by allocating the assets and liabilities,
 including the goodwill and intangible assets, to the units as of the date of adoption.
 We had up to six months from the date of adoption to determine the fair value of
 each reporting unit and compare it to the reporting units carrying value.
 If a reporting units carrying amount exceeds its fair value, an indication
 exists that the reporting units goodwill is impaired and we are required to
 perform the second step of the transitional impairment test. During the second quarter
 of fiscal 2002, we performed step one of the transitional test and concluded that
 there was no impairment and no second step was necessary.

During the fourth quarter of fiscal 2002,
 we performed our annual goodwill impairment test in accordance with SFAS No.142
 which included step one as described above for each of our reporting units. Results
 of step one indicated that an impairment existed within our Global Operations business
 unit since the estimated fair value, based on expected future discounted cash flows
 to be generated from the unit, was less than its carrying value. Pursuant to the
 second step of the test, we compared the implied fair value of the units goodwill
 (determined by allocating the units fair value, based on the expected future
 discounted cash flows, to all its assets, recognized and unrecognized, and liabilities
 in a manner similar to a purchase price allocation for an acquired business) to
 its carrying amount. In connection with allocating the fair value of the Global
 Operations business unit, we also obtained independent valuations of certain unrecognized
 intangible assets as well as our fixed assets.

The discounted cash flow models used to
 determine the fair values of the reporting units in the tests were prepared using
 revenue and expense projections based on our current operating plan. The revenue
 projections are our best estimates considering current and expected economic and
 industry conditions. The discounted cash flow model also included a terminal value
 for years six and beyond that assumes future free cash flow growth ranging from
 3% to 4% based on our estimates and standard industry rates used by analysts monitoring
 our industry. The cash flows were discounted using a weighted average cost of capital
 ranging from 12% to 13% which is our best estimate considering the debt and equity
 structure of the Company and external industry data. The discounted cash flows
 related to the terminal value represents approximately 84% of total expected future
 discounted cash flows.

Significant negative industry and economic
 trends affecting our current and future operations as well as a significant decline
 in our stock price contributed to our fourth quarter impairment test resulting in
 an impairment of our goodwill related to our Global Operations business unit of
 approximately $2.5 billion.

In addition, we performed our quarterly
 impairment test of other intangible assets during the fourth quarter of fiscal 2002.
 As a result, we recorded an impairment charge related to a supply agreement with
 a major customer of approximately $191 million. This impairment occurred due to
 reduced expectations of our realized sales under our supply agreement with that
 customer and was measured by comparing the intangible assets carrying amount
 to the fair value as determined using a discounted cash flow model.

The impairments referred to above were recorded
 within Restructuring and Impairment Costs in the accompanying consolidated
 statements of operations for the quarter and year ended August 31, 2002.

The process of evaluating the potential
 impairment is subjective and requires judgment at many points during the test including
 future revenue forecasts, discount rates and various reporting unit allocations.
 We may continue to experience goodwill and other intangible asset impairment charges
 in the future as a result of adverse changes in the electronics industry, customer
 demand and other market conditions, which may have a material adverse effect on
 our financial condition.

NET INTEREST INCOME (EXPENSE)

Net interest expense was $174.0 million
 in fiscal 2002 compared to $59.1 million in fiscal 2001, and net interest income
 of $35.3 million in fiscal 2000. The net interest expense increase in fiscal 2002
 primarily resulted from our issuance of the 7.25% Adjustable Conversion-Rate Equity
 Security units (ACES) and the 9.625% Senior Notes due 2009 during the second quarter
 of fiscal 2002 which bear interest at a higher rate than the Liquid Yield Option
 Notes (LYONs) securities they effectively replaced. The net interest expense in
 fiscal 2001 primarily resulted from our issuances of 4.0%, 2.75% and 3.25% LYONs
 and 7.375% senior notes. The net interest income in fiscal 2000 was attributed primarily
 to interest income earned on cash and investments from the proceeds of the 2.75%
 LYONs which were issued in May 2000.

 Trademark of Merrill Lynch & Co.,
 Inc.

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GAIN ON RETIREMENT OF DEBT

During fiscal 2002, in our continuing effort
 to strengthen our balance sheet, we retired approximately $2.9 billion of accreted
 values of LYONs for cash of approximately $2.8 billion resulting in a gain of $76.4
 million. See footnote (2) to our unaudited quarterly financial information. Due
 to our early adoption of SFAS No. 145, Rescission of FASB Statements Nos.
 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,
 such gains were reclassified from extraordinary to a separate line within non-operating
 income (expense). See Note 1 to the consolidated financial statements, Summary
 of Significant Accounting Policies. Also, there was a loss of $0.7 million
 resulting from retirement of other long-term debt.

INCOME TAXES

We reported income tax benefits of $467.3
 million in fiscal 2002 and $34.2 million in fiscal 2001 arising from the loss incurred
 in those periods. Income tax expense was $238.8 million in fiscal 2000. Our effective
 income tax benefit rates were 13.1% and 21.7% in fiscal 2002 and 2001, respectively.
 Our effective income tax expense rate was 32.3% in fiscal 2000. Our benefit rate
 in fiscal 2002 was less than the fiscal 2001 rate due principally to goodwill impairment
 expense, which for the most part is nondeductible for tax purposes. Our benefit
 rate in fiscal 2001 was lower than our expense rate in preceding years because we
 did not recognize certain income tax benefits in foreign jurisdictions for which
 future realization is uncertain.

In general, the effective income tax rate
 is largely a function of the balance between income from domestic and international
 operations. Our international operations, taken as a whole, have been taxed at
 a lower rate than those in the United States, primarily due to tax holidays granted
 to several of our overseas sites in Malaysia, Singapore, and China. The Malaysian
 tax holiday is effective through July 2011, subject to some conditions, including
 maintaining certain levels of research and development expenditures. The Singapore
 tax holiday is effective through March 2011, subject to some conditions. Seven of
 our China sites have separate tax holiday agreements. Each agreement expires five
 years from the first profitable year for each site. Five of these sites have tax
 holidays expiring from December 2002 through December 2007. Two sites have not
 yet incurred a profitable year, thus the expiration of the tax holiday status for
 those sites has not yet been determined. The net impact of these tax holidays was
 to decrease net loss by approximately $37 million, or $0.05 per diluted share, in
 2002 and approximately $58 million, or $0.08 per diluted share, in 2001.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents decreased to $1.8
 billion at August 31, 2002 from $2.5 billion at August 31, 2001. We also had $135.7
 million in restricted cash and cash equivalents. Our short-term investments decreased
 to $232.5 million at August 31, 2002, from $307.8 million at August 31, 2001. In
 addition, we had $99.7 million of restricted short-term investments at August 31,
 2002. Our restricted cash, cash equivalents and short-term investments are restricted
 primarily related to leasing transactions (see further discussion in Note 8 to the
 consolidated financial statements) and collateral for our obligations under the
 ACES securities in an amount equal to the next five quarterly interest payments.

The decrease in cash and cash equivalents
 was primarily a result of cash used in financing activities of approximately $1.9
 billion. We also used $893.6 million in investing activities primarily for capital
 expenditures, business and asset acquisitions. The decrease was partially offset
 by cash provided by operating activities of approximately $2.1 billion. Through
 our recent offering of ACES due 2006 and the 9.625% Senior Notes due 2009, we raised
 net proceeds of approximately $1.1 billion and $486.8 million, respectively. We
 used approximately $2.8 billion of our available cash towards repurchase of approximately
 $2.9 billion of accreted value of our LYONs during fiscal 2002. We also repaid other
 debt including C-MACs outstanding debt assumed upon acquisition of approximately
 $341 million.

Accounts receivable decreased to approximately
 $1.8 billion at August 31, 2002 from approximately $2.4 billion at August 31, 2001.
 The decrease in accounts receivable was primarily due to our revenue reduction and
 our collection efforts during fiscal 2002. Inventories decreased to $1.9 billion
 at August 31, 2002 from approximately $3.2 billion at August 31, 2001. The inventory
 decrease was primarily due to the sale of excess raw materials inventory back to
 customers and continued efforts on inventory management.

As of August 31, 2002, we had available
 a $250 million revolving line of credit that expires on February 12, 2003, and a
 $250 million revolving line of credit that expires on February 14, 2005. Each of
 our revolving lines of credit is guaranteed by certain of our domestic subsidiaries
 and secured by the pledge of equity interest in certain of our subsidiaries and
 notes evidencing intercompany debt. Borrowings under the credit facilities bear
 interest, at our option, at the London interbank offering rate (LIBOR) plus a margin
 of 1.75% based on our current senior unsecured debt ratings, or the higher of the
 Federal Funds Rate plus 1⁄2 of 1% or Bank of America N.A.s publicly announced
 prime rate. As of August 31, 2002, there were no borrowings outstanding under these
 lines of credit. These credit facilities are subject to compliance with certain
 covenants including capital expenditures, consolidated tangible net worth, cash
 interest coverage, liquidity and other restrictions. As of August 31, 2002, we
 were in compliance with all such covenants.

On December 18, 2001, Moodys Investors
 Service and Standard & Poors downgraded our senior unsecured debt
 rating to Ba1 and BB+, respectively, with a negative outlook. On
 March 22, 2002, Standard and Poors downgraded our senior unsecured debt rating
 to BB with a negative outlook. On May 14, 2002, Moodys Investors
 Services further downgraded our senior unsecured debt rating to

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Ba3 with a stable
 outlook. These rating downgrades will increase our cost of capital should we borrow
 under our revolving lines of credit, and may make it more expensive for us to raise
 additional capital in the future. Such capital raising activities may be on terms
 that may not be acceptable to us or otherwise not available.

In addition, we had $34.9 million in committed
 and $443.6 million in uncommitted foreign lines of credit and other bank facilities
 as of August 31, 2002. A committed line of credit obligates a lender to loan us
 amounts under the credit facility as long as we adhere to the terms of the credit
 agreement. An uncommitted line of credit is extended to us at the sole discretion
 of a lender. The interest rates range from the banks prime lending rate to
 the banks prime rate plus 2.0%. As of August 31, 2002, borrowings and guaranteed
 amounts were $10.9 million and $128.3 million under committed and uncommitted foreign
 lines of credit, respectively. Borrowings were payable on demand. The weighted-average
 interest rate was 5.5% for committed and 2.5% for uncommitted foreign lines of credit
 as of August 31, 2002.

We have purchased in the past and may continue
 to purchase in the future our remaining LYONs on an opportunistic basis. In addition,
 our liquidity could be adversely affected if we require substantial amounts of cash
 in connection with our obligations to purchase our LYONs as they become due. Instead
 of repurchasing the LYONs with cash, we may elect to offer holders our common stock
 or a combination of our cash and common stock. At the time of such election, it
 may be in the best interest of our shareholders to satisfy such obligation in cash,
 however, we may not have sufficient cash available and we may not be able to finance
 the required amount on acceptable terms if at all. As a result, we may be required
 to satisfy such obligations with our common stock, which would be extremely dilutive
 at our current stock prices. See Risk factors - Our Obligations Under LYONs May
 Cause Dilution and Reduction of Earnings Per Share. Based on the aggregate amount
 outstanding on August 31, 2002, holders of our 2.75% LYONs due 2020 have the option
 to require us to repurchase their notes in an amount of $628.57 per $1,000 principal
 amount for a total of $535.9 million on May 8, 2003. These 2.75% LYONs due 2020
 are classified as short-term debt as of August 31, 2002 in the accompanying consolidated
 balance sheet. Based on the aggregate amount outstanding on August 31, 2002, holders
 of our 3.25% LYONs due 2020 have the option to require us to repurchase their notes
 in an amount of $587.46 per $1,000 principal amount for a total of approximately
 $1.5 billion on May 20, 2004.

Our 7.25% subordinated ACES debentures are
 due November 15, 2006. On or about August 15, 2004, the ACES debentures will be
 remarketed and if the remarketing is successful, the interest rate will be reset
 at then current rates as described in the indentures and the proceeds from the remarketing
 will be used to satisfy the holders obligation to purchase our common stock
 in November 2004. If the debentures are not successfully remarketed, the interest
 rate will not be reset and we may use the pledged debentures to satisfy the holders
 obligation to purchase our common stock in November 2004. In addition, our
 $500 million aggregate principal amount of 9.625% senior notes are due February
 15, 2009.

During our fourth fiscal quarter ended August
 31, 2002, we and our subsidiaries restructured our synthetic lease agreements
 relating to five manufacturing sites. The synthetic leases have expiration dates
 in 2007. At the end of the lease term, we have an option, subject to certain conditions,
 to purchase or to cause a third party to purchase the facilities subject to the
 synthetic leases for the Termination Value, which approximates the lessors
 original cost, or may market the property to a third party at a different price.
 We are entitled to any proceeds from a sale of the properties to third parties in
 excess of the Termination Value. In connection with our restructuring of these
 synthetic leases, we and our subsidiaries provided loans to the lessor under each
 synthetic lease, equaling approximately 85% of its initial Termination Value. These
 loans are repayable solely from the sale of the properties to third parties in the
 future, are subordinated to the amounts payable to the lessor at the end of the
 terms of the synthetic leases, and may be credited against the Termination Value
 payable if we or our subsidiaries purchase the properties. The approximate maximum
 Termination Values and loan amounts for each of the synthetic leases are provided
 below (in millions).



| |    |                               |  | Termination Value |   | Loan Amount
| | -- | ----------------------------- |  | ----------------- | - | -----------
| |    |                               |  |                   |   |            
| | A) | Milpitas, CA
 for land        |  |                   | $ | 35.0       
| | B) | Milpitas, CA for improvements |  |                   |   | 18.4       
| | C) | San Jose, CA                  |  |                   |   | 13.6       
| | D) | Columbia, SC                  |  |                   |   | 24.7       
| | E) | Fremont, CA                   |  |                   |   | 23.4       
| | F) | Fremont, CA                   |  |                   |   | 9.6        
| |    |                               |  |                   |   |            
| |    | Total                         |  |                   | $ | 124.7      
| |    |                               |  |                   |   |            

Cash collateral, in an aggregate amount
 of $18.7 million is pledged for the difference between the Termination Values and
 the loan amounts. Each lease agreement contains various affirmative and financial
 covenants. A default under a lease, including violation of these covenants, may
 accelerate the termination date of the arrangement. As of August 31, 2002 we were
 in compliance with all such covenants. Monthly lease payments are generally based
 on the Termination Value and 30-day LIBOR index (1.82% as of August 31, 2002) plus
 an interest-rate margin, which may vary depending upon our Moodys Investors
 Services, and Standard and Poors ratings and are allocated between the
 lessor and us and our subsidiaries based on the proportion of our loan amount
 to the total Termination Value for each synthetic lease.

After the restructuring, we have continued
 to account for these synthetic lease arrangements as operating leases in
 accordance with SFAS No. 13, Accounting for Leases, as amended. Our
 loans to the lessor are included in long-term other assets in our consolidated balance

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sheet as of August 31, 2002. The cash collateral is
 included in restricted cash
 and cash equivalents in the accompanying consolidated balance sheet as of August
 31, 2002. If we should determine that it is probable that the expected fair value
 of the property at the end of the lease term will be less than the Termination Value,
 we will recognize any expected loss on a straight-line basis over the remaining
 lease term.

We believe that our current cash and cash
 equivalents, short-term investments, lines of credit and cash generated from operations
 will satisfy our expected working capital, capital expenditure, debt service and
 investment requirements through at least the next 12 months.

The following is a summary of certain obligations
 and commitments as of August 31, 2002:



|                                                     |  | Payments Due by Period(in millions)
|---------------------------------------------------- |  | -----------------------------------
|                                                     | 
|                                                     |  | Total                              
|                                                     |  |                                    
|Short term debt (1)                                  |  | $                                  
|Long term debt (2)                                   |  |                                    
|Operating lease                                      |  |                                    
|Standby letters of credit and guaranteed amounts (3) |  |                                    



| | (1) | Since the
 holders of our 2.75% LYONs due 2020 have the option to require us to repurchase
 their notes on May 8, 2003 in an amount of $628.57 per $1,000 principal amount at
 maturity, the payment due amount here reflects a total of $535.9 million on such
 commitment date of May 8, 2003 based on the notes outstanding as of August 31, 2002.                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (2) | Since the
 holders of our 3.25% LYONs due 2020 have the option to require us to repurchase
 on May 20, 2004 their notes in an amount of $587.46 per $1,000 principal amount
 at maturity, the payment due amount here reflects a total of approximately $1.5
 billion on such commitment date of May 20, 2004 based on the notes outstanding
 as of August 31, 2002. In addition, the total amount above includes approximately
 $9 million of capital lease commitments.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (3) | We guarantee
 lines of credit, provided by various financial institutions, for our operating subsidiaries
 worldwide. Lines of credit, used and unused, which we guarantee totaled $468.5 million
 as of August 31, 2002. In addition, we guarantee other financial transactions,
 totaling $293.5 million as of August 31, 2002. These transactions include, among
 others, certain real estate and equipment operating leases entered into by our subsidiaries.        

In addition, we guarantee $60 million of
 debt and $88 million of vendor contracts for our minority owned affiliate, Pacific
 City International Holdings (PCI). The guarantee will expire during December 2002.

RECENT ACCOUNTING PRONOUNCEMENTS:

In July 2001, the FASB issued SFAS No. 141,
 Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
 Assets. SFAS No. 141 requires that the purchase method of accounting be used
 for all business combinations initiated or completed after June 30, 2001. SFAS No.
 141 also specifies the criteria intangible assets acquired in a purchase method
 business combination must meet to be recognized and reported apart from goodwill.
 SFAS No. 142 requires that goodwill and intangible assets with indefinite useful
 lives no longer be amortized, but instead tested for impairment at least annually.
 SFAS No. 142 also requires that intangible assets with definite useful lives be
 amortized over their respective estimated lives to their estimated residual values,
 and be reviewed for impairment according to SFAS No. 121, Accounting for the
 Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
 In accordance with SFAS No. 141, we are accounting for all business combinations
 initiated or completed after June 30, 2001 using the purchase method of accounting.
 We adopted the remaining provisions of SFAS No. 141 and SFAS No. 142 effective
 September 1, 2001. See further discussion under Restructuring and Impairment
 Costs - Goodwill and Other Intangible Assets and Note 17 to the consolidated
 financial statements, Goodwill and other Intangible Assets.

In August 2001, the FASB issued SFAS No.
 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires
 that the fair value of an asset retirement obligation be recorded as a liability
 in the period in which it incurs the obligation. SFAS No. 143 is effective for
 fiscal years beginning after June 15, 2002. We will adopt SFAS No.
143 for our
 fiscal year beginning September 1, 2002 and do not expect such adoption will have
 a material impact on our consolidated financial statements.

In October 2001, the FASB issued SFAS No.
 144, Accounting for the Impairment or Disposal of Long-lived Assets,
 which supersedes SFAS No. 121. The primary objectives
 of SFAS No. 144 are to develop one accounting model based on the framework established
 in SFAS No. 121 for long-lived assets to be disposed of by sale, and to address
 significant implementation issues identified after the issuance

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of SFAS No. 121.
 We will adopt SFAS No. 144 for our fiscal year beginning September 1, 2002. The
 adoption is not expected to have a material impact on our consolidated financial
 statements.

In May 2002, the FASB issued SFAS No. 145,
 Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement
 No.13 and Technical Corrections. SFAS No. 145 requires that certain gains
 and losses from extinguishments of debt no longer be classified as an extraordinary
 item. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002 (with
 accounting for certain transactions effective May 15, 2002). We early adopted SFAS
 No. 145 and reclassified our gains on retirement of debt from extraordinary to a
 separate line item within non-operating income (expense).

In July 2002, the FASB issued SFAS No. 146,
 Accounting for Costs Associated with Exit or Disposal Activities. SFAS
 No. 146 requires that a liability for costs associated with an exit or disposal
 activity be recognized and measured initially at fair value only when the liability
 is incurred. SFAS No. 146 is effective for exit or disposal activities that are
 initiated after December 31, 2002. We do not expect adoption of SFAS No. 146
 to have a material impact on our consolidated financial statements.

RECENT DEVELOPMENTS

On June 11, 2002, we completed our acquisition
 of Magnetic Data Technologies (MDT), a global provider of after-sales services for
 the communications, computer and electronic storage markets for $70 million in cash.
 The acquisition was accounted for as a purchase of a business.

On May 31, 2002, we announced the completion
 of a three-year supply agreement to produce optical networking equipment for Lucent.
 As part of the three-year supply agreement, we purchased equipment and inventory
 related to Lucents optical product lines for approximately $99.4 million in
 cash. This acquisition was accounted for as a purchase of assets. Subsequently,
 as a result of significant changes in the marketplace and decreased demand, both
 parties reached a mutual agreement in principle on October 21, 2002 to unwind this
 supply agreement. We have agreed in principle with Lucent to unwind the outsourcing
 and asset purchase transaction involving Lucents optical networking systems
 in Andover, Massachusetts. We expect to enter into with Lucent a definitive agreement
 to unwind the May 31, 2002 transaction in our first quarter of fiscal 2003. Under
 the general terms of the agreement in principle, Lucent will repurchase the equipment
 and unused inventory that we acquired in May 2002. We will continue to produce and
 support a portion of Lucents optical networking products through March of
 2003. We do not anticipate any losses on changes to this supply agreement.

RISK FACTORS

WE ARE EXPOSED TO GENERAL ECONOMIC CONDITIONS,
 WHICH COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS, OPERATING RESULTS AND
 FINANCIAL CONDITION.

As a result of unfavorable general economic
 conditions in the U.S. and internationally, and reduced capital spending as well
 as end-market demand, our sales have continued to decline in recent fiscal quarters.
 We began to see a sales decline in the telecommunications, workstation and server
 equipment manufacturing industry worldwide during the second half of fiscal 2001.
 In particular, we depend on the telecommunications industry for a significant amount
 of our revenues. Continued weakness in this industry or any further deterioration
 in the business or financial condition of our customers in this industry could have
 a material adverse impact on our business, operating results and financial condition.
 In addition, if the economic conditions in the United States and the other markets
 we serve worsen, we may experience a material adverse impact on our business, operating
 results and financial condition.

WE HAVE SIGNIFICANT DEBT LEVERAGE AND
 DEBT SERVICE OBLIGATIONS.

For the fiscal year ended August 31, 2002
 our fixed charges exceeded our earnings by $3.6 billion as compared to our ratio
 of earnings to fixed charges of 0.23x for fiscal year 2001. The fixed charge excess
 is primarily due to our operating losses and interest expense growing at a greater
 rate since the second half of fiscal 2001 and during fiscal year 2002. We have
 computed the ratio of earnings to fixed charges by dividing earnings available for
 fixed charges by fixed charges. The computations include us and our consolidated
 subsidiaries. For these ratios, earnings represents (1) income (loss) before
 taxes and before adjustment for minority interests, plus (2) fixed charges (excluding
 capitalized interest), plus (3) amortization of capitalized interest. Fixed charges
 consist of (1) interest on all indebtedness and amortization of debt discount and
 expense, plus (2) capitalized interest, plus (3) an interest factor attributable
 to rentals under operating leases.

As of August 31, 2002, we had approximately
 $643 million of short-term indebtedness, including $527 million of current portion
 of long-term indebtedness, and $3.2 billion of long-term indebtedness (which in
 the case of all Liquid Yield Option Notes were the accreted values as of that date).
 We will require substantial amounts of cash to fund scheduled payments of principal
 and interest on our outstanding indebtedness, as well as future capital expenditures
 and any increased working capital requirements. In addition, we may require substantial
 amounts of cash in connection with our obligations to repurchase our LYONs. In
 connection with our tender offer for our 2.75% LYONs due 2020, which expired on
 July 19, 2002, we purchased $1.5 billion aggregate principal amount at maturity
 of these

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LYONs and $852 million aggregate principal amount at maturity of these
 LYONs remained outstanding as of August 31, 2002. Based on the aggregate amount
 outstanding on August 31, 2002, on May 8, 2003, holders of our 2.75% LYONs due 2020
 will have the option to require us to repurchase their notes in an amount of $628.57
 per $1,000 principal amount for a total of up to approximately $535.9 million.
 Based on the aggregate amount outstanding on August 31, 2002, on May 20, 2004, holders
 of our 3.25% LYONs due 2020 will have the option to require us to repurchase their
 notes in an amount of $587.46 per $1,000 principal amount for a total of approximately
 $1.5 billion. Instead of repurchasing the LYONs with cash, we may elect to offer
 holders our common stock or a combination of our cash and common stock. At the
 time of such election, it may be in the best interests of our shareholders to satisfy
 such obligation in cash, however, we may not have sufficient cash available and
 we may not be able to finance the required amount on acceptable terms if at all.
 As a result, we may be required to satisfy such obligations with our common stock,
 which would be extremely dilutive at our current stock prices.

OUR ABILITY TO MEET OUR CASH REQUIREMENTS
 DEPENDS ON A NUMBER OF FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL.

Our ability to meet our cash requirements
 (including our debt service obligations) is dependent upon our future performance,
 which will be subject to financial, business and other factors affecting our operations,
 many of which are beyond our control. If we are unable to meet our cash requirements
 from operations we would be required to fund these cash requirements by alternative
 financings. The degree to which we may be leveraged could materially and adversely
 affect our ability to obtain financing for working capital, acquisitions or other
 purposes, could make us more vulnerable to industry downturns and competitive pressures,
 or could limit our flexibility in planning for, or reacting to, changes and opportunities
 in the electronics manufacturing industry, which may place us at a competitive disadvantage
 compared to our competitors. There can be no assurance that we will be able to
 obtain alternative financing, that any such financing would be on acceptable terms,
 or that we will be permitted to do so under the terms of our existing financing
 arrangements. In the absence of such financing, our ability to respond to changing
 business and economic conditions, make future acquisitions, react to adverse operating
 results, meet our debt service obligations or fund required capital expenditures
 or increased working capital requirements may be adversely affected.

WE MAY NOT BE ABLE TO SELL EXCESS OR
 OBSOLETE INVENTORY TO CUSTOMERS OR OTHERWISE WHICH COULD HAVE A MATERIAL ADVERSE
 IMPACT ON OUR FINANCIAL CONDITION.

The majority of our inventory purchases
 and commitments are based upon demand forecasts that our customers provide to us.
 The customer forecast, and any changes to the forecasts, including cancellations,
 may lead to on hand inventory quantities and on order purchase commitments that
 are in excess of the customers revised needs, or that become obsolete.

We execute supply agreements with our most
 significant customers in our Global Operations business unit, which accounts for
 a majority of the inventory we purchase. Under the supply agreements, the responsibility
 for excess or obsolete inventory related to raw materials that were previously purchased
 or ordered to meet a customers demand forecast lies with the customer. If
 our customers do not comply with their contractual obligations to purchase excess
 or obsolete inventory back from us, our financial condition could be materially
 harmed. In addition, enforcement of these supply agreements may result in material
 expenses or delays in payment for inventory.

We are solely responsible for excess and
 obsolete inventory resulting from inventory purchases in excess of inventory needed
 to meet customer demand forecasts at the time the purchase commitments were made,
 as well as inventory purchases generally not covered by our supply agreements or
 for inventory purchased for customers with whom we have no supply agreements (as
 is generally the case for the customers in our Technology Solutions, Global Services
 and MicroSystems business units). In these instances, since we do not have the
 right to sell back excess or obsolete inventory to our customers, we must bear the
 economic loss of any such excess or obsolete inventory which could have a material
 adverse impact on our financial condition. In the fourth quarter of 2002, we recorded
 a charge of $97 million to reduce the carrying value of excess and obsolete inventory.
 This charge resulted in a reduction in our gross margin and included excess and
 obsolete inventory identified in our product-oriented Technology Solutions and other
 business units.

THE AGREEMENTS GOVERNING OUR EXISTING
 AND FUTURE DEBT CONTAIN AND WILL CONTAIN VARIOUS COVENANTS THAT LIMIT OUR DISCRETION
 IN THE OPERATION OF OUR BUSINESS.

The agreements and instruments governing
 our existing and future debt and our secured credit facilities contain and may,
 in the future, contain various restrictive covenants that, among other things, require
 us to comply with or maintain certain financial tests and ratios thereby restricting
 our ability to:



| |  | incur debt;                                  
| | - | ---------------------------------------------
| |   |                                              
| |  | incur or
 maintain liens;                    
| |   |                                              
| |  | redeem
 and/or prepay subordinated debt;     
| |   |                                              
| |  | make acquisitions
 of businesses or entities;

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| |   |                                                               
| | - | --------------------------------------------------------------
| |  | make investments,
 including loans, guarantees and advances;  
| |   |                                                               
| |  | make capital
 expenditures;                                   
| |   |                                                               
| |  | engage
 in mergers, consolidations or certain sales of assets;
| |   |                                                               
| |  | engage
 in transactions with affiliates;                      
| |   |                                                               
| |  | pay dividends
 or engage in stock redemptions; and            
| |   |                                                               
| |  | enter into
 certain restrictive agreements.                   

Our secured credit facilities are secured
 by a pledge of all of the capital stock of our material domestic subsidiaries, 65%
 of the capital stock of our first-tier material foreign subsidiaries and certain
 of our intercompany loans.

Our ability to comply with covenants contained
 in our existing debt and our secured credit facilities and other indebtedness to
 which we are or may become a party may be affected by events beyond our control,
 including prevailing economic, financial and industry conditions. Our failure to
 comply with our debt-related covenants could result in an acceleration of our indebtedness
 and cross-defaults under our other indebtedness, which may have a material adverse
 effect on our financial condition. Even if we are able to comply with all applicable
 covenants, the restrictions on our ability to operate our business could harm our
 business by, among other things, limiting our ability to take advantage of financings,
 mergers, acquisitions and other corporate opportunities.

In light of our recent financial performance,
 we amended our credit facilities on June 18, 2002 in order to make them less restrictive.
 We amended the liens, capital expenditures, consolidated tangible net worth and
 cash interest coverage ratio covenants as well as certain other terms of the credit
 facilities. We also added a liquidity ratio covenant. These amendments were effective
 as of May 31, 2002.

MOST OF OUR NET SALES COME FROM A SMALL
 NUMBER OF CUSTOMERS; IF WE LOSE ANY OF THESE CUSTOMERS, OUR NET SALES COULD DECLINE
 SIGNIFICANTLY.

Most of our annual net sales come from a
 small number of our customers. Our ten largest customers accounted for approximately
 65%, 72%, and 74% of net sales in fiscal 2002, 2001, and 2000 respectively. Some
 of these customers individually account for more than ten percent of our annual
 net sales. Any material delay, cancellation or reduction of orders from these or
 other major customers could cause our net sales to decline significantly, and we
 may not be able to reduce the accompanying expenses at the same time. We cannot
 guarantee that we will be able to retain any of our largest customers or any other
 accounts, or that we will be able to realize the expected revenues under existing
 supply agreements with these customers. Our business, market share, financial condition
 and results of operations will continue to depend significantly on our ability to
 obtain orders from new customers, retain existing customers, realize expected revenues
 under existing supply agreements, as well as on the financial condition and success
 of our customers and their customers. In addition to the above, some industry sources
 have projected that our market share by revenues may decline in the near term.

Net sales may decline in future periods
 due to the continued weakness in customer demand, particularly in our telecommunications
 sector, resulting from the worldwide economic slowdown. In addition, net sales
 may be adversely affected due to our unwinding of the Lucent supply agreement which
 was expected to generate $2 billion in revenues over the next three years.

OUR CUSTOMERS MAY CANCEL THEIR ORDERS,
 CHANGE PRODUCTION QUANTITIES OR LOCATIONS, OR DELAY PRODUCTION.



Electronics manufacturing services (EMS)
 companies must provide increasingly rapid product turnaround for their customers.
 Although we have long-term contracts with a few of our top ten customers, including
 Ericsson and Nortel, under which these customers are obligated to obtain services
 from us, only Nortel is obligated to purchase any minimum amount of services. As
 a result, we cannot guarantee that we will receive any net sales from these contracts
 or any of our other contracts with customers. Customers may cancel their orders,
 change production quantities or delay production for a number of reasons. Many of
 our customers industries are experiencing a significant decrease in demand
 for their products and services. The generally uncertain economic condition of several
 of the industries of our customers has resulted, and may continue to result, in
 some of our customers delaying the purchase orders on 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 would seriously 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 may require that manufacturing of their products
 be transitioned from one facility to another to achieve cost and other objectives.
 Such transfers, if unanticipated, can result in inefficiencies and costs due to
 resulting excess capacity and overhead at one facility and capacity constraints
 and related strains on our resources at the other.

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OUR STRATEGIC RELATIONSHIPS WITH MAJOR
 CUSTOMERS CREATE RISKS.

In the past couple of years, we have completed
 several strategic transactions with OEM customers. Under these arrangements, we
 generally acquire inventory, equipment and other assets from the OEM, and lease
 (or in some cases 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 past revenue growth, and if we fail to complete similar transactions in the
 future, our revenue 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 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;                                                                                                                                                                
|  |                                                                                                                                                                                                                                      
| | we may not
 achieve anticipated cost reductions and efficiencies;                                                                                                                                                                    
|  |                                                                                                                                                                                                                                      
| | 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
 may be unable to achieve anticipated levels of profitability under these arrangements,
 and they may not result in any material revenues or contribute positively to our
 earnings. Additionally, other OEMs may not wish to obtain logistics or operations
 management services from us.

IF WE ARE UNABLE TO MANAGE OUR ACQUISITIONS
 AND COST EFFECTIVELY ASSIMILATE NEW OPERATIONS, OUR PROFITABILITY COULD BE ADVERSELY
 AFFECTED.

We have experienced rapid growth over many
 years. Concurrently, we have established operations in different locations throughout
 the world. During fiscal 2002, we completed acquisitions of C-MAC and MDT, among
 others. We intend to consider making acquisitions of companies and strategic assets
 under our acquisition strategy subject to compliance with any restrictions that
 may exist under certain of our financing instruments. These acquisitions may be
 for cash, capital stock or any combination of cash and capital stock, or other property,
 and may include the incurrence or assumption of indebtedness and a reduction of
 our available cash.

In order to achieve anticipated revenue
 and other financial performance targets, we must manage our assets and operations
 efficiently and integrate our acquisitions. Our acquisitions place a heavy strain
 on our personnel and management, manufacturing and other resources. Our ability
 to manage and integrate our acquisitions, as well as any future acquisitions, will
 require progressive increases in manufacturing infrastructure, as well as enhancements
 or upgrades of accounting and other internal management systems and the implementation
 of a variety of procedures and controls. We cannot assure that significant problems
 in these areas will not occur. Any failure to enhance or expand these systems and
 implement such procedures and controls in an efficient manner and at a pace consistent
 with our business activities could harm our financial condition and results of operations.
 In addition, should we continue to expand geographically, we may experience inefficiencies
 from the management of geographically dispersed facilities. As we manage and continue
 to expand new operations, we may incur substantial infrastructure and working capital
 costs. We incurred $615.5 million of restructuring-related charges in fiscal 2002
 and expect to incur approximately $100 million of such charges over the next few
 quarters. See the risk factor entitled If we incur more restructuring-related
 charges than currently anticipated, our financial condition and results of operations
 may suffer.

POSSIBLE FLUCTUATION OF OPERATING RESULTS
 FROM QUARTER TO QUARTER AND FACTORS OUT OF OUR CONTROL COULD AFFECT THE MARKET PRICE
 OF OUR SECURITIES.

Our quarterly earnings and/or stock price
 may fluctuate in the future due to a number of factors including the following:



| |  | differences
 in the profitability of the types of manufacturing services we provide. For example,
 high velocity and low complexity printed circuit boards and systems assembly services
 have lower gross margins than low volume/complex printed circuit boards and systems
 assembly services;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                  
| |  | our ability
 to maximize the hours of use of our equipment and facilities is dependent on the
 duration of the production run time
 for each job and customer;                                                                                                                                   

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If our operating results in the future are
 below the expectations of securities analysts and investors, the market price of
 our outstanding securities could be harmed.

IF WE INCUR MORE RESTRUCTURING-RELATED
 CHARGES THAN CURRENTLY ANTICIPATED, OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 MAY SUFFER.

In furtherance of the implementation of
 the restructuring plan we announced in fiscal 2001, we expect to incur restructuring-related
 charges in the range of an aggregate of $100 million over the next few quarters,
 although no certainty can be attributed to this amount or the timing of its recognition.
 We continue to evaluate our cost structure relative to our revenue levels and may
 take additional restructuring charges in the future. If we incur additional restructuring-related
 charges, our financial condition and results of operations may suffer.

WE DEPEND ON LIMITED OR SOLE SOURCE SUPPLIERS
 FOR CRITICAL COMPONENTS. THE INABILITY TO OBTAIN SUFFICIENT COMPONENTS AS REQUIRED
 WOULD CAUSE HARM TO OUR BUSINESS.

We are dependent on certain suppliers, including
 limited and sole source suppliers, to provide key components used in our products.
 We have experienced, and may continue to experience, delays in component deliveries,
 which in turn could cause delays in product shipments and require the redesign of
 certain products. Also for our Technology Solutions business unit, we are dependent
 upon certain limited or sole source suppliers for critical components used for our
 memory module, communications card and embedded computer products. The electronics
 industry has experienced in the past, and may experience in the future, shortages
 in semiconductor devices, including application-specific integrated circuits, DRAM,
 SRAM, flash memory, certain passive devices such as tantalum capacitors, and other
 commodities that may be caused by such conditions as overall market demand surges
 or supplier production capacity constraints. The inability to continue to obtain
 sufficient components as required, or to develop alternative sources as required,
 could cause delays, disruptions or reductions in product shipments or require product
 redesigns which could damage relationships with current or prospective customers
 and increase inventory levels, thereby causing harm to our business.

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WE POTENTIALLY BEAR THE RISK OF PRICE
 INCREASES ASSOCIATED WITH SHORTAGES IN THE AVAILABILITY OF ELECTRONICS COMPONENTS.

At various times, there have been shortages
 of components in the electronics industry leading to increased component prices.
 One of the services that we perform for many customers is purchasing electronics
 components used in the manufacturing of the customers products. As a result
 of this service, we potentially bear the risk of price increases for these components
 if we are unable to purchase components at the pricing level anticipated to support
 the margins assumed in our agreements with our customers.

OUR NET SALES COULD DECLINE IF OUR COMPETITORS
 PROVIDE COMPARABLE MANUFACTURING SERVICES AND IMPROVED PRODUCTS AT A LOWER COST.

We compete with different contract manufacturers,
 depending on the type of service we provide or the geographic locale of our operations.
 The memory module, communications card and embedded computer subsystem industries
 are also intensely competitive. These competitors may have greater manufacturing,
 financial, R&D and/or marketing resources than we have. In addition, we may
 not be able to offer prices as low as some of our competitors because those competitors
 may have lower cost structures as a result of their geographic location or the services
 they provide. Our inability to provide comparable or better manufacturing services
 at a lower cost than our competitors could cause our net sales to decline. We also
 expect our competitors to continue to improve the performance of their current products
 or services, to reduce their current products or service sales prices and to introduce
 new products or services that may offer greater value-added performance and improved
 pricing. Any of these could cause a decline in sales, loss of market acceptance
 of our products or services, or profit margin compression.

WE DEPEND ON THE CONTINUING TREND OF
 OEMS TO OUTSOURCE.

A substantial factor in our past revenue
 growth was attributable to the transfer of manufacturing and supply based management
 activities from our OEM customers. Future growth is partially dependent on new outsourcing
 opportunities. To the extent that these opportunities are not available, our future
 growth would be unfavorably impacted.

OUR NON-U.S. LOCATIONS REPRESENT A SIGNIFICANT
 AND GROWING PORTION OF OUR NET SALES; WE ARE INCREASINGLY EXPOSED TO RISKS ASSOCIATED
 WITH OPERATING INTERNATIONALLY.

In fiscal 2002, approximately 61% of net
 sales came from sites outside the United States, while approximately 51% of net
 sales came from sites outside the United States in fiscal 2001. As a result of our
 foreign sales and facilities, our operations are subject to a variety of risks that
 are unique to international operations, including the following:



| |  | adverse
 movement of foreign currencies against the U.S. dollar in which our results are
 reported;                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                          
| |  | import
 and export duties, and value added taxes;                                                                                        
| |   |                                                                                                                                          
| |  | import
 and export regulation changes that could erode our profit margins or restrict exports;                                           
| |   |                                                                                                                                          
| |  | potential
 restrictions on the transfer of funds;                                                                                        
| |   |                                                                                                                                          
| |  | disruption
 of local labor supply;                                                                                                       
| |   |                                                                                                                                          
| |  | inflexible
 employee contracts in the event of business downturns;                                                                       
| |   |                                                                                                                                          
| |  | the burden
 and cost of compliance with foreign laws;                                                                                    
| |   |                                                                                                                                          
| |  | economic
 and political risks in emerging or developing economies; and                                                                   
| |   |                                                                                                                                          
| |  | exposure
 to increased inefficiency as a result of a work stoppage caused by a labor dispute
 between dockworkers and shipping companies.

We have been granted tax holidays, which
 are effective through 2011, subject to some conditions, for our Malaysian and Singapore
 sites. We have also been granted various tax holidays in China. These tax holidays
 are effective for various terms and are subject to some conditions. It is possible
 that the current tax holidays will be terminated or modified or that future tax
 holidays that we may seek will not be granted. If the current tax holidays are terminated
 or modified, if additional tax holidays are not granted in the future or when our
 current tax holidays expire, our effective income tax rate would likely increase.

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WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN
 CURRENCY EXCHANGE RATES.

We enter into foreign exchange forward contracts
 intended to reduce the short-term impact of foreign currency fluctuations on foreign
 currency receivables, investments and payables. The gains and losses on the foreign
 exchange forward contracts offset the transaction gains and losses on the foreign
 currency receivables, investments, and payables recognized in earnings. We do not
 enter into foreign exchange forward contracts for speculative purposes. Our foreign
 exchange forward contracts related to current assets and liabilities are generally
 three months or less in original maturity.

We periodically hedge foreign currency forecasted
 transactions related to certain operating expenses with foreign exchange forward
 contracts. These transactions are treated as cash flow hedges. These foreign exchange
 forward contracts generally have original maturities of 18 months or less.

As of
 August 31, 2002, we had outstanding foreign exchange forward contracts with a total
 notional amount of approximately $580 million. The change in value
of the foreign exchange forward contracts resulting from a hypothetical
10% change in foreign
 exchange rates would be offset by the remeasurement of the related balance
sheet items. The net result would not be significant.

As of August 31, 2002, the majority of our
 foreign currency hedging contracts were scheduled to mature in approximately three
 months and there were no material deferred gains or losses. In addition, our international
 operations in some instances act as a natural hedge because both operating expenses
 and a portion of sales are denominated in local currency. In these instances, although
 an unfavorable change in the exchange rate of a foreign currency against the U.S.
 dollar will result in lower sales when translated to U.S. dollars, operating expenses
 will also be lower in these circumstances. Although approximately 22% of our net
 sales in fiscal 2002 were denominated in currencies other than U.S. dollar, we do
 not believe our total exposure to be significant because of natural hedges.

We have currency exposure arising from both
 sales and purchases denominated in currencies other than the functional currency
 of our sites. Fluctuations in the rate of exchange between the currency of the exposure
 and the functional currency of our sites could seriously harm our business, operating
 results and financial condition. For example, if there is an increase in the rate
 at which a foreign currency is exchanged for U.S. dollars, it will require more
 of the foreign currency to equal a specified amount of U.S. dollars than before
 the rate increase. In such cases, and if we price our products and services in the
 foreign currency, we will receive less in U.S. dollars than we did before the rate
 increase went into effect. If we price our products and services in U.S. dollars
 and competitors price their products in local currency, an increase in the relative
 strength of the U.S. dollar could result in our prices being uncompetitive in markets
 where business is transacted in the local currency.

WE ARE EXPOSED TO INTEREST RATE FLUCTUATIONS.

The primary objective of our investment
 activities is to preserve principal, while at the same time, maximize yields without
 significantly increasing risk. To achieve this objective, we maintain our portfolio
 of cash equivalents and short-term investments in a variety of securities, including
 both government and corporate obligations, certificates of deposit and money market
 funds. As of August 31, 2002, approximately 91% of our total portfolio was scheduled
 to mature in less than six months. In addition, our investments are diversified
 and of relatively short maturity. A hypothetical 10% increase in interest rates
 would not have a material effect on our investment portfolios.

We had $536.8 million of cash equivalents
 and short-term investments that are subject to interest rate risk as of August 31,
 2002. The weighted average interest rate of these balances as of August 31, 2002
 was 2.08%. The fair value of these cash equivalents and short-term investments
 totaled approximately $537 million as of August 31, 2002.

Interest on long-term debt instruments is
 payable at fixed rates. In addition, the amount of principal to be repaid at maturity
 is also fixed. During the quarter ended May 31, 2002, we entered into interest rate
 swap transactions under which we pay variable rates and we receive fixed rates.
 The interest swaps effectively convert $1 billion of our long-term debt with a fixed
 interest rate into debt with a variable rate of interest. Our interest rate swaps
 have a total notional amount of $1 billion as of August 31, 2002. The first $500
 million relates to our 7.25% $1.1 billion ACES and expires on November 15, 2004.
 The second $500 million relates to the 9.625% $500 million senior notes and expires
 on February 15, 2009. Under each of these swap transactions, we pay an interest
 rate equal to the 3-month LIBOR rate plus a fixed spread. As of August 31, 2002,
 the interest rates we paid were 5.0% for the first $500 million and 6.1% for the
 second $500 million. In exchange, we receive fixed interest rates of 7.25% on the
 first $500 million and 9.625% on the second $500 million. Since our investment
 portfolio earns variable interest rates, the interest rate swaps allow us to partially
 offset the variable rate risk from the investment portfolio. We may increase our
 variable-rate exposure if there were to be material borrowings under our revolving
 lines of credit.

WE MAY NOT BE ABLE TO ADEQUATELY PROTECT
 OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS.

Our ability to effectively compete may be
 affected by our ability to protect our proprietary information. We hold a number
 of patents and other license rights. These patents and license rights may not provide
 meaningful protection for our manufacturing processes and equipment
innovations, which could result in litigation.
 Any resulting litigation could be lengthy and costly and could harm our
 financial condition.

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WE COULD BECOME INVOLVED IN INTELLECTUAL
 PROPERTY DISPUTES.

In the past we have been and may from time
 to time continue to be notified of claims that we may be infringing patents, copyrights
 or other intellectual property rights owned by other parties. In the event of an
 infringement claim, we may be required to spend a significant amount of money to
 develop a non-infringing alternative or to obtain licenses. Solectron may not be
 successful in developing such an alternative or obtaining a license on reasonable
 terms, if at all. Any litigation, even without merit, could result in substantial
 costs and diversion of resources and could have a material adverse effect on Solectrons
 business, financial condition and results of operations.

FAILURE TO COMPLY WITH ENVIRONMENTAL
 REGULATIONS COULD HARM OUR BUSINESS.

As a company in the electronics manufacturing
 services industry, we are subject to a variety of environmental regulations relating
 to the use, storage, discharge and disposal of hazardous chemicals used during our
 manufacturing process. Although we have never sustained any significant loss as
 a result of non-compliance with such regulations, any failure by us to comply with
 environmental laws and regulations could result in liabilities or the suspension
 of production. In addition, these laws and regulations could restrict our ability
 to expand our facilities or require us to acquire costly equipment or incur other
 significant costs to comply with regulations. The addition of numerous production
 and manufacturing service facilities as a result of our recent combination with
 C-MAC could generate additional risks that we have yet been unable to evaluate fully.

The investigations of the C-MAC facilities
 to date indicate that there are some contaminated sites for which C-MAC has been
 indemnified by third parties for any required remediation, sites for which there
 is a risk of the presence of contamination, and sites with some levels of contamination
 for which C-MAC may be liable and which may or may not ultimately require any remediation.
 We have obtained environmental insurance to mitigate certain environmental liabilities
 posed by C-MACs operations and facilities. We believe, based on our current
 knowledge, that the cost of any groundwater or soil clean-up that may be required
 at C-MAC facilities would not materially harm our business, financial condition
 and results of operations. Nevertheless, the process of remediating contamination
 in soil and groundwater at the facilities is costly and cannot be estimated with
 high levels of confidence, and there can be no assurance that the costs of such
 activities would not harm our business, financial condition and results of operations
 in the future.

OUR RATING DOWNGRADES MAKES IT MORE EXPENSIVE
 FOR US TO BORROW MONEY.

On December 18, 2001 Moodys Investors
 Service and Standard & Poors downgraded our senior unsecured debt
 rating to Ba1 and BB+, respectively, both with negative outlooks.
 On March 22, 2002, Standard and Poors downgraded our senior unsecured debt
 rating to BB with a negative outlook. On May 14, 2002, Moodys
 Investor Services further downgraded our senior unsecured debt
rating to Ba3 with
 a stable outlook. These rating downgrades will increase our cost of capital should
 we borrow under our revolving lines of credit, and may make it more expensive for
 us to raise additional capital in the future on terms that are acceptable to us
 or at all. In addition, any further ratings downgrades may further negatively impact
 the price of our common stock and may have other negative implications on our business,
 many of which are beyond our control.

OUR OBLIGATIONS UNDER LYONS MAY CAUSE
 DILUTION AND REDUCTION OF EARNINGS PER SHARE.

On May 8, 2003, we may become obligated
 to purchase, at the option of the holders, all or a portion of the outstanding 2.75%
 LYONs at a price of $628.57 per note. On May 20, 2004 we may become obligated
 to purchase, at the option of the holders, all or a portion of the outstanding 3.25%
 LYONs at a price of $587.46 per note. We have the option to pay the purchase price
 of LYONs in cash or common stock or any combination thereof. At the time of such
 election, it may be in the best interests of our shareholders to satisfy such obligation
 in cash, however, we may not have sufficient cash available and we may not be able
 to finance the required amounts on acceptable terms, if at all. As a result, we
 may be required to satisfy such obligations with our common stock. If we elect
 to pay the purchase price, in whole or part, in shares of our common stock, the
 number of shares of common stock to be delivered shall equal the purchase price
 divided by the average of the sale prices of the common stock for the five trading
 day period ending on the third business day prior to May 8, 2003 or May 20, 2004,
 as the case may be. On each respective repurchase date the 2.75% LYONs or the 3.25%
 LYONs are convertible into common stock at a price of $50.98 per share or 12.3309
 shares per LYON in the case of the 2.75% LYONs or at a price of $49.84 per share
 or 11.7862 shares per LYON, in the case of the 3.25% LYONs. In the event that our
 stock price remains below $50.98 per share at May 8, 2003 or below $49.84 per share
 at May 20, 2004, as the case may be, we may have to issue a significant amount of
 additional shares to such holders. Accordingly, our existing stockholders could
 experience significant dilution and our earnings per share may be significantly
 reduced.

FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL
 AND SKILLED ASSOCIATES COULD HURT OUR OPERATIONS.

Our continued success depends to a large
 extent upon the efforts and abilities of key managerial and technical associates.
 Losing the services of key personnel could harm us. Our business also depends upon
 our ability to continue to attract and retain senior managers and skilled associates.
 Failure to do so could harm our operations.

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OUR ANTI-TAKEOVER DEFENSE PROVISIONS
 MAY DETER POTENTIAL ACQUIRORS AND MAY DEPRESS OUR STOCK PRICE.

Our certificate of incorporation, bylaws
 and stockholder rights plan contain provisions that could have the effect of making
 it more difficult for a third party to acquire, or of discouraging a third party
 from attempting to acquire, control of Solectron. These provisions allow us to
 issue preferred stock with rights senior to those of our common stock and impose
 various procedural and other requirements that could make it more difficult for
 our stockholders to effect certain corporate actions.




ITEM 7A: QUANTITATIVE AND QUALITATIVE
 DISCLOSURES ABOUT MARKET RISK

See Managements Discussion and Analysis
 of Financial Condition and Results of Operations for factors related to fluctuations
 in the exchange rates of foreign currency and fluctuations in interest rates under
 Risk Factors  We are exposed to fluctuations
in foreign currency exchange rates, and We are
exposed to interest rate fluctuations.




ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY
 DATA

The information required by item 8 of Form
 10-K is presented here in the following order:



|                                                                    |  | Page
|------------------------------------------------------------------- |  | ----
|Unaudited Quarterly Financial Information                           |  |     
|Consolidated Balance Sheets                                         |  |     
|Consolidated Statement of Operations                                |  |     
|Consolidated Statements of Stockholders Equity                     |  |     
|Consolidated Statements of Comprehensive Income
(Loss)              |  |     
|Consolidated Statements of Cash Flows                               |  |     
|Notes to the Consolidated Financial Statements                      |  |     
|Independent Auditors Report                                        |  |     
|Financial Statement Schedule
II  Valuation and Qualifying Accounts |  |     

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Unaudited Quarterly Financial Information

For each fiscal quarter during the two fiscal
 years ended August 31, 2002 (in millions, except percentages and per-share data):



|Fiscal 2002                         |  | First Quarter (1) |         | Second Quarter |  | Third Quarter |   | Fourth Quarter (2)
|----------------------------------- |  | ----------------- | ------- | -------------- |  | ------------- | - | ------------------
|                                    |  |                   |         |                |  |               |   |                   
|Net sales                           |  | $                 | 3,152.2 |                |  |               | $ | 2,974.6           
|Gross profit                        |  | $                 | 225.1   |                |  |               | $ | 200.7             
|Gross margin                        |  |                   | 7.1     | %              |  |               |   | 6.7               
|Operating loss                      |  | $                 | (48.5   | )              |  |               | $ | (208.7            
|Operating margin                    |  |                   | (1.5    | )%             |  |               |   | (7.0              
|Net loss                            |  | $                 | (52.5   | )              |  |               | $ | (126.0            
|Basic net loss per share            |  | $                 | (0.08   | )              |  |               | $ | (0.15             
|Diluted net loss per share          |  | $                 | (0.08   | )              |  |               | $ | (0.15             
|Fiscal 2001                         |  |                   |         |                |  |               |   |                   
|                                    |  |                   |         |                |  |               |   |                   
|Net sales                           |  | $                 | 5,695.5 |                |  |               | $ | 5,418.5           
|Gross profit                        |  | $                 | 484.7   |                |  |               | $ | 488.2             
|Gross margin                        |  |                   | 8.5     | %              |  |               |   | 9.0               
|Operating income (loss)             |  | $                 | 276.4   |                |  |               | $ | 192.5             
|Operating margin                    |  |                   | 4.9     | %              |  |               |   | 3.6               
|Net income (loss)                   |  | $                 | 190.6   |                |  |               | $ | 121.9             
|Basic net income (loss) per share   |  | $                 | 0.31    |                |  |               | $ | 0.19              
|Diluted net income (loss) per share |  | $                 | 0.29    |                |  |               | $ | 0.18              



|    |  |                                                                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Gross profit
 and gross margin for the first quarter of fiscal 2002 reflects a reclassification
 from cost of sales to selling, general and administrative expenses of $24 million.                                                                            
|   
|(2) |  | Subsequent
 to our earnings release dated September 26, 2002, a $25.1 million gain on retirement
 of debt has been reclassified from operating loss to non-operating loss thereby
 increasing the operating loss to $2,874.3 million. Net loss does not change.

36



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS(in millions)



|                                                                                                                         |  | August 31, |          | August 31,
|------------------------------------------------------------------------------------------------------------------------ |  | ---------- | -------- | ----------
|                                                                                                                         |  | 2002       |          | 2001      
|                                                                                                                         |  |            |          |           
|ASSETS                                                                                                                   |  |            |          |           
|Current assets:                                                                                                          |  |            |          |           
|Cash and cash equivalents                                                                                                |  | $          | 1,781.9  |           
|Restricted cash and cash equivalents                                                                                     |  |            | 135.7    |           
|Short-term investments                                                                                                   |  |            | 232.5    |           
|Restricted short-term investments                                                                                        |  |            | 99.7     |           
|Accounts receivable, less allowance for doubtful accounts
 of $86.7 and $40.8, respectively                              |  |            | 1,788.2  |           
|Inventories                                                                                                              |  |            | 1,870.0  |           
|Prepaid expenses and other current assets                                                                                |  |            | 752.0    |           
|                                                                                                                         |  |            |          |           
|Total current assets                                                                                                     |  |            | 6,660.0  |           
|Net property and equipment                                                                                               |  |            | 1,173.0  |           
|Goodwill                                                                                                                 |  |            | 2,163.9  |           
|Other assets                                                                                                             |  |            | 1,017.1  |           
|                                                                                                                         |  |            |          |           
|Total assets                                                                                                             |  | $          | 11,014.0 |           
|                                                                                                                         |  |            |          |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                     |  |            |          |           
|Current liabilities:                                                                                                     |  |            |          |           
|Short-term debt                                                                                                          |  | $          | 643.0    |           
|Accounts payable                                                                                                         |  |            | 1,509.5  |           
|Accrued employee compensation                                                                                            |  |            | 218.5    |           
|Accrued expenses                                                                                                         |  |            | 527.3    |           
|Other current liabilities                                                                                                |  |            | 106.9    |           
|                                                                                                                         |  |            |          |           
|Total current liabilities                                                                                                |  |            | 3,005.2  |           
|Long-term debt                                                                                                           |  |            | 3,183.9  |           
|Other long-term liabilities                                                                                              |  |            | 52.2     |           
|                                                                                                                         |  |            |          |           
|Total liabilities                                                                                                        |  | $          | 6,241.3  |           
|                                                                                                                         |  |            |          |           
|Stockholders equity:                                                                                                    |  |            |          |           
|Preferred stock, $0.001 par value; 1.2 shares authorized; one share issued                                               |  | $          |         |           
|Common stock, $ 0.001 par value; 1,600.0
 shares authorized; 824.8 and 658.2 shares issued and outstanding, respectively |  |            | 0.8      |           
|Additional paid-in capital                                                                                               |  |            | 6,635.9  |           
|Retained earnings (accumulated deficit)                                                                                  |  |            | (1,578.6 | )         
|Accumulated other comprehensive losses                                                                                   |  |            | (285.4   | )         
|                                                                                                                         |  |            |          |           
|Total stockholders equity                                                                                               |  |            | 4,772.7  |           
|                                                                                                                         |  |            |          |           
|Total liabilities and stockholders equity                                                                               |  | $          | 11,014.0 |           
|                                                                                                                         |  |            |          |           

See accompanying notes to consolidated financial
 statements.

37



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(in millions, except per-share data)



|                                                                                                        |  | Years Ended August 31,
|------------------------------------------------------------------------------------------------------- |  | ----------------------
|                                                                                                        |  |                       
|                                                                                                        |  | 2002                  
|                                                                                                        |  |                       
|Net sales                                                                                               |  | $                     
|Cost of sales                                                                                           |  |                       
|                                                                                                        |  |                       
|Gross profit                                                                                            |  |                       
|Operating expenses:                                                                                     |  |                       
|Selling, general and administrative                                                                     |  |                       
|Research and development                                                                                |  |                       
|Goodwill amortization expense                                                                           |  |                       
|Acquisition costs                                                                                       |  |                       
|Restructuring and impairment costs                                                                      |  |                       
|                                                                                                        |  |                       
|Operating income (loss)                                                                                 |  |                       
|Interest income                                                                                         |  |                       
|Interest expense                                                                                        |  |                       
|Gain on retirement of debt                                                                              |  |                       
|                                                                                                        |  |                       
|Income (loss) before income taxes and cumulative effect of change in accounting principle               |  |                       
|Income tax expense (benefit)                                                                            |  |                       
|                                                                                                        |  |                       
|Income (loss) before cumulative effect of change in accounting principle                                |  |                       
|Cumulative effect of change in accounting principle
 for start-up costs, net of $1.6 income tax benefit |  |                       
|                                                                                                        |  |                       
|Net income (loss)                                                                                       |  | $                     
|                                                                                                        |  |                       
|Basic net income (loss) per share:                                                                      |  |                       
|Income (loss) before cumulative effect of change in accounting principle                                |  | $                     
|Cumulative effect of change in accounting principle                                                     |  |                       
|                                                                                                        |  |                       
|                                                                                                        |  | $                     
|                                                                                                        |  |                       
|Diluted net income (loss) per share:                                                                    |  |                       
|Income (loss) before cumulative effect of change in accounting principle                                |  | $                     
|Cumulative effect of change in accounting principle                                                     |  |                       
|                                                                                                        |  |                       
|                                                                                                        |  | $                     
|                                                                                                        |  |                       
|Shares used to compute net income (loss) per share:                                                     |  |                       
|Basic                                                                                                   |  |                       
|Diluted                                                                                                 |  |                       

See accompanying notes to consolidated financial
 statements.

38



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in millions)



|                                                              |              |       |            |  |              |     |               |  |               |         |        |  | Retained |          | Accumulated |  |  
|------------------------------------------------------------- | ------------ | ----- | ---------- |  | ------------ | --- | ------------- |  | ------------- | ------- | ------ |  | -------- | -------- | ----------- |  | -
|                                                              | Common Stock |       | Additional |  | Earnings     |     | Other         |  | Total        
|                                                              |              |       | Paid-In    |  | (Accumulated |     | Comprehensive |  | Stockholders
|                                                              | Shares       |       | Amount     |  | Capital      |     | Deficit)      |  | Losses        |         | Equity
|                                                              |              |       |            |  |              |     |               |  |               |         |       
|Balances as of August 31, 1999                                |              | 594.1 |            |  | $            | 0.6 |               |  | $             | 2,081.4 |        |  | $        | 1,172.8  |             |  | $
|Net income                                                    |              |       |            |  |              |     |               |  |               |         |        |  |          | 497.2    |             |  |  
|Adjustment to conform fiscal year ends of pooled acquisitions |              |       |            |  |              |     |               |  |               |         |        |  |          | (11.8    | )           |  |  
|Foreign currency translation                                  |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Unrealized gain on investments                                |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Stock issued under stock option and employee purchase plans   |              | 10.3  |            |  |              |     |               |  |               | 109.0   |        |  |          |          |             |  |  
|Stock issued in business combinations                         |              | 0.2   |            |  |              |     |               |  |               | 6.4     |        |  |          |          |             |  |  
|Cancellation of shares                                        |              |       |            |  |              |     |               |  |               | (9.0    | )      |  |          |          |             |  |  
|Issuance of common stock                                      |              | 0.4   |            |  |              |     |               |  |               | 11.2    |        |  |          |          |             |  |  
|Dividends                                                     |              |       |            |  |              |     |               |  |               |         |        |  |          | (1.4     | )           |  |  
|Tax benefit associated with exercise of stock options         |              |       |            |  |              |     |               |  |               | 60.1    |        |  |          |          |             |  |  
|                                                              |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Balances as of August 31, 2000                                |              | 605.0 |            |  |              | 0.6 |               |  |               | 2,259.1 |        |  |          | 1,656.8  |             |  |  
|Net loss                                                      |              |       |            |  |              |     |               |  |               |         |        |  |          | (123.5   | )           |  |  
|Adjustment to conform Texas site year end                     |              |       |            |  |              |     |               |  |               |         |        |  |          | (1.7     | )           |  |  
|Foreign currency translation                                  |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Unrealized loss on investments                                |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Stock issued under stock option and employee purchase plans   |              | 8.6   |            |  |              |     |               |  |               | 97.7    |        |  |          |          |             |  |  
|Stock and stock options issued in business combinations       |              | 2.5   |            |  |              |     |               |  |               | 69.8    |        |  |          |          |             |  |  
|Issuance of common stock                                      |              | 42.1  |            |  |              | 0.1 |               |  |               | 1,410.5 |        |  |          |          |             |  |  
|Tax benefit associated with exercise of stock options         |              |       |            |  |              |     |               |  |               | 40.5    |        |  |          |          |             |  |  
|                                                              |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Balances as of August 31, 2001                                |              | 658.2 |            |  | $            | 0.7 |               |  | $             | 3,877.6 |        |  | $        | 1,531.6  |             |  | $
|Net loss                                                      |              |       |            |  |              |     |               |  |               |         |        |  |          | (3,110.2 | )           |  |  
|Foreign currency translation                                  |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Unrealized gain on investments                                |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Stock issued under stock option and employee purchase plans   |              | 6.7   |            |  |              |     |               |  |               | 38.8    |        |  |          |          |             |  |  
|Stock and stock options issued in business combinations       |              | 160.4 |            |  |              | 0.1 |               |  |               | 2,676.1 |        |  |          |          |             |  |  
|Repurchase of common stock                                    |              | (0.5  | )          |  |              |     |               |  |               | (4.5    | )      |  |          |          |             |  |  
|ACES stock purchase contracts                                 |              |       |            |  |              |     |               |  |               | 46.9    |        |  |          |          |             |  |  
|Deferred stock-based compensation from business combination   |              |       |            |  |              |     |               |  |               | (7.2    | )      |  |          |          |             |  |  
|Amortization of stock-based deferred compensation             |              |       |            |  |              |     |               |  |               | 4.6     |        |  |          |          |             |  |  
|Tax benefit associated with exercise of stock options         |              |       |            |  |              |     |               |  |               | 3.6     |        |  |          |          |             |  |  
|                                                              |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  
|Balances as of August 31, 2002                                |              | 824.8 |            |  | $            | 0.8 |               |  | $             | 6,635.9 |        |  | $        | (1,578.6 | )           |  | $
|                                                              |              |       |            |  |              |     |               |  |               |         |        |  |          |          |             |  |  

See accompanying notes to
 consolidated financial statements.

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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)



|                                                                                                                                                                     | Years Ended August 31,
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------
|                                                                                                                                                                     |                       
|                                                                                                                                                                     | 2002                  
|                                                                                                                                                                     |                       
|Net income (loss)                                                                                                                                                    | $                     
|Other comprehensive income (loss):                                                                                                                                   |                       
|Foreign currency translation adjustments net of
 income tax benefit of $6.3 in 2002, tax expense of $13.5 in 2001, income tax benefit of $15.9 in 2000.              |                       
|Unrealized gain (loss) on investments net of
 income tax expense of $0.1 in 2002, net of income tax benefit of $3.1 in 2001, and
 income tax expense of $3.8 in 2000 |                       
|                                                                                                                                                                     |                       
|Comprehensive income (loss)                                                                                                                                          | $                     
|                                                                                                                                                                     |                       

Accumulated foreign currency translation losses were $295.7 million at August 31, 2002, $259.4 million
 at August 31, 2001 and $119.6 million at August 31, 2000. For fiscal year 2001, the foreign currency
 transaction loss primarily resulted from unrealized losses on dollar-denominated long-term intercompany
debt held by the Companys Brazilian subsidiary. Most of Solectrons remaining foreign
currency translation
 adjustments relate to translation of foreign subsidiaries financial statements that use
 the local currency as the functional currency.

See accompanying notes to consolidated financial statements.

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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)



|                                                                                                    | Years Ended
|--------------------------------------------------------------------------------------------------- | -----------
|                                                                                                    | August 31, 
|                                                                                                    |            
|                                                                                                    | 2002       
|                                                                                                    |            
|Cash flows from operating activities:                                                               |            
|Net income (loss)                                                                                   | $          
|Adjustments to reconcile net income (loss) to net cash provided by
 (used in) operating activities: |            
|Depreciation and amortization                                                                       |            
|Amortization of debt issuance costs and accretion of
 discount on notes payable                     |            
|Tax benefit associated with exercise of stock options                                               |            
|Gain on retirement of debt                                                                          |            
|Cumulative effect of change in accounting
 principle for start-up costs                             |            
|Adjustment to conform fiscal year ends                                                              |            
|Gain on disposal of property and equipment                                                          |            
|Impairment of property, equipment, goodwill and
 other long-term assets                             |            
|Other                                                                                               |            
|Changes in operating assets and liabilities:                                                        |            
|Accounts receivable, net of allowance                                                               |            
|Inventories                                                                                         |            
|Prepaid expenses and other current assets                                                           |            
|Accounts payable                                                                                    |            
|Accrued expenses and other current liabilities                                                      |            
|                                                                                                    |            
|Net cash provided by (used in) operating activities                                                 |            
|                                                                                                    |            
|Cash flows from investing activities:                                                               |            
|Change in restricted cash, cash equivalents and
 short-term investments                             |            
|Sales and maturities of short-term investments                                                      |            
|Purchases of short-term investments                                                                 |            
|Acquisition of businesses, net of cash acquired                                                     |            
|Acquisition of manufacturing assets and locations                                                   |            
|Capital expenditures                                                                                |            
|Purchase of facilities previously under synthetic leases                                            |            
|Proceeds from sale of property and equipment                                                        |            
|Other                                                                                               |            
|                                                                                                    |            
|Net cash used in investing activities                                                               |            
|                                                                                                    |            

See accompanying notes to consolidated financial statements.

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SOLECTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in millions)



|                                                                         | Years Ended
|------------------------------------------------------------------------ | -----------
|                                                                         | August 31, 
|                                                                         |            
|                                                                         | 2002       
|                                                                         |            
|Cash flows from financing activities:                                    |            
|Net proceeds from (repayment of) bank lines of credit                    |            
|Proceeds from issuance of ACES and Senior Notes                          |            
|Net proceeds from long-term debt                                         |            
|Repurchase of LYONS                                                      |            
|Principal payments on long-term debt                                     |            
|Common stock repurchase                                                  |            
|Net proceeds from stock issued under option
 and employee purchase plans |            
|Net proceeds from issuance of common stock                               |            
|Dividends                                                                |            
|Other                                                                    |            
|                                                                         |            
|Net cash provided by (used in) financing activities                      |            
|                                                                         |            
|Effect of exchange rate changes on cash and cash equivalents             |            
|                                                                         |            
|Net increase (decrease) in cash and cash equivalents                     |            
|Cash and cash equivalents at beginning of period                         |            
|                                                                         |            
|Cash and cash equivalents at end of period                               | $          
|                                                                         |            
|SUPPLEMENTAL DISCLOSURES                                                 |            
|Cash paid (received) during the period:                                  |            
|Income taxes                                                             | $          
|Interest                                                                 | $          
|Non-cash investing and financing activities:                             |            
|Issuance of common stock for business combination, net of cash acquired  | $          

See accompanying notes to consolidated financial statements.

42



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##### Table of Contents



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The accompanying consolidated financial statements include the accounts of Solectron
 Corporation and its subsidiaries after elimination of intercompany accounts and transactions.

Year End: Solectrons financial reporting year ends on the last Friday in August. Fiscal years 2002 and 2000
 contained 52 weeks. Fiscal year 2001 contained 53 weeks. For purposes of presentation in the accompanying
 financial statements and notes, Solectron has indicated its accounting years as ending on August 31.

Solectrons subsidiaries, Solectron Brasil Ltda. and C-MAC de Brazil Ltda. report their results one month in
 arrears. Solectrons consolidated financial position as of August 31, 2002 and 2001, include the financial
 position of both Brazil operations as of July 31, 2002 and Solectron
Brasil Ltda. as of July 31, 2001. Similarly, Solectrons consolidated results
 of operations and cash flows for the year ended August 31, 2002
includes the results of operations and cash flows of Solectron Brasil
Ltda. for the year ended July 31, 2002 and C-MAC de Brazil Ltda.
for the period from acquisition through July 31, 2002.
Solectron's consolidated results of operations and cash flows for the
years ended August 31, 2001 and 2000 include the results of
 operations and cash flows of Solectron Brasil Ltda. for the years ended July 31, 2001 and 2000.

Solectrons subsidiary in Austin, Texas reported its results one month in arrears during fiscal 2000. Solectrons
 consolidated results of operations and cash flows for the year ended August 31, 2000 include the results of operations
 and cash flows of the Austin subsidiary for the year ended July 31, 2000. The Austin subsidiary changed its fiscal year
 end to conform to the consolidated company beginning in 2001. Retained earnings were adjusted to reflect this change.

Pooling of Interests: On November 30, 1999, Solectron completed its acquisition of SMART Modular Technologies
 (SMART). Under the terms of the agreement, each share of SMART common stock was exchanged for 0.51 of a share
 of Solectron common stock. Solectron issued approximately 47.6 million shares of Solectron common stock for the
 outstanding common stock of SMART and assumed all stock options held by SMART employees. The acquisition was
 accounted for as a pooling of interests. Accordingly, Solectrons historical financial statements have been
 restated retroactively to include the financial results of SMART. Due to different year ends, the results of
operations for the two-month period ended October 31, 1999 for SMART have been included in the fiscal 1999 and
 fiscal 2000 consolidated statements of operations, and such results have been adjusted for in retained earnings.
 SMART changed its fiscal year end to coincide with Solectrons beginning in fiscal 2000.

On April 28, 2000, Solectron completed its acquisition of AMERICOM Wireless Services (AMERICOM), a privately
held corporation. Solectron issued approximately 1.8 million shares of its common stock in exchange for all
outstanding common stock of AMERICOM and to extinguish obligations under the stock appreciation rights plan
of AMERICOM. On July 14, 2000, Solectron completed the acquisition of Bluegum Group (Bluegum), an electronics
contract manufacturer in Australia. Solectron issued approximately 2.3 million shares of its common stock in
exchange for all outstanding common shares and stock options of Bluegum. Both transactions were accounted for
as a pooling of interests. Accordingly, Solectrons historical financial statements have been restated
retroactively to include the financial results of AMERICOM and Bluegum. Both AMERICOM and Bluegum had fiscal
years different than Solectrons. AMERICOMs fiscal year was from January 1 to December 31 and Bluegums was
from July 1 to June 30. Both AMERICOM and Bluegum changed their fiscal year ends to coincide with Solectrons
beginning in fiscal 2000. Retained earnings have been adjusted to conform their year ends with Solectrons.

Restated financial information includes certain adjustments for the elimination of net sales and cost of
sales related to shipments by Solectron to Bluegum, shipments by SMART to Solectron, as well as for certain
reclassifications made to SMARTs, AMERICOMs and Bluegums financial statements to conform with Solectrons
financial statement presentation. There were no adjustments necessary to conform the accounting policies of
the combining companies.

The results of operations previously reported by the separate enterprises and the combined amounts presented
in the accompanying consolidated financial statements are summarized below for the fiscal year ended August
31, 2000 (in millions):



| | Net Sales    |   |          |  
| | ------------ | - | -------- | -
| | Solectron    | $ | 13,786.5 |  
| | SMART *      |   | 280.4    |  
| | AMERICOM *   |   | 53.5     |  
| | Bluegum *    |   | 156.1    |  
| | Eliminations |   | (139.0   | )
| |              |   |          |  
| |              | $ | 14,137.5 |  
| |              |   |          |  
| | Net income   |   |          |  
| | Solectron    | $ | 497.0    |  
| | SMART *      |   | 12.2     |  
| | AMERICOM *   |   | (2.8     | )
| | Bluegum *    |   | (8.4     | )
| | Eliminations |   | (0.8     | )
| |              |   |          |  
| |              | $ | 497.2    |  
| |              |   |          |  

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##### Table of Contents





|* | represents the net
 sales and net income (loss) for each of the separate companies prior to the
 consummation of the acquisitions. The acquisitions were consummated as follows: SMART
 on November 30, 1999, AMERICOM on April 28, 2000 and Bluegum on July 14, 2000. Results
 subsequent to the acquisition were included with Solectron.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Use of Estimates: The preparation
 of financial statements in conformity with accounting principles generally accepted
 in the United States of America 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 reported amounts of revenues and expenses during the reporting
 period. Actual results could differ from those estimates.

Cash Equivalents and
 Short-Term Investments: Cash equivalents are highly liquid investments purchased
 with an original maturity at the date of purchase of less than three months.
 Short-term investments are investment grade short-term debt instruments with
 original maturities greater than three months. These debt securities are classified
 as available-for-sale securities. Such investments are recorded at fair value as
 determined from quoted market prices, and the cost of securities sold is determined
 based on the specific identification method. Unrealized gains or losses are reported
 as a component of comprehensive income or loss, net of related tax effect.

Restricted Cash, Cash Equivalents
 and Short-Term Investments: These assets are carried at fair values and are
 restricted as collateral for specified obligations under certain lease agreements
 and certain interest payments on the 7.25% subordinated ACES debentures due November
 15, 2006.

Allowance for Doubtful
 Accounts: Solectron evaluates the collectibility of accounts receivable based on a
 combination of factors. In cases where Solectron is aware of circumstances that may
 impair a specific customers ability to meet its financial obligations,
 Solectron records a specific allowance against amounts due, and thereby reduces the
 net recognized receivable to the amount management reasonably believes will be
 collected. For all other customers, Solectron recognizes allowances for doubtful
 accounts based on the length of time the receivables are outstanding, industry and
 geographic concentrations, the current business environment and historical
 experience.

Inventories: Inventories are
 stated at the lower of weighted-average cost or market.

The majority of Solectrons
 inventory purchase commitments are based upon demand forecasts that customers
 provide to the Company. Customers frequently make changes to their forecasts,
 thereby often requiring that Solectron make changes to inventory purchases,
 commitments, and production scheduling and may require Solectron to cancel open
 purchase commitments with vendors. This process may lead to on-hand inventory
 quantities and on-order purchase commitments that are in excess of the
 customers revised needs, or parts that become obsolete before use in
 production.

Solectron executes supply
 agreements with their most significant customers in the Global Operations business
 unit. Under these supply agreements, the responsibility for excess or obsolete
 inventory related to raw materials that were purchased or ordered to meet
 customers demand forecasts lies with the customers. However, Solectron is
 responsible for excess and obsolete inventory resulting from inventory purchases in
 excess of inventory needed to meet customer demand forecasts at the time the
 purchase commitments are made, as well as inventory purchases generally not covered
 by the supply agreements with customers or for inventory purchases for customers
 with whom no supply agreement exists (as is generally the case in the business units
 other than Global Operations).

Each supply agreement specifies
 the agreed upon definition of excess and obsolete inventory and the procedures for
 disposition including Solectrons right to sell the inventory back to the
 customer. The supply agreements generally allow a period of time during which
 Solectron and their customers work together to reduce or eliminate the amount of
 potentially excess and obsolete inventory. After the expiration of the specified
 time periods, Solectron may exercise their contractual right to sell the remaining
 excess and obsolete inventory back to the customer.

Solectron does not provide
 inventory reserves for excess and obsolete inventory when (i) the supply agreement
 provides the Company with the contractual right to sell inventory that is considered
 excess or obsolete back to its customers, and (ii) Solectron believes the customer
 is capable of honoring its contractual obligation to purchase the inventory. In
 fiscal 2002, several customers, including customers who accounted for 10% or more of
 fiscal 2002 revenue, were in the telecommunications industry, an industry that has
 experienced declining revenue, large losses, negative cash flows, and several
 bankruptcies or defaults on borrowing arrangements. During fiscal 2002, no material
 customer informed Solectron that it would be unable to honor its contractual
 obligation to purchase excess or obsolete inventory from Solectron.

For Solectrons Global
 Operations business unit, inventory reserves are recorded for excess and obsolete
 inventory which Solectron has determined that customers are not responsible for or
 for which Solectron believes they are unable to live up to their obligation to
 purchase such inventory from Solectron. For the other business units, Solectron
 makes judgments with respect to recording inventory reserves based on various
 factors such as the aging and anticipated future demand of the inventory as
 Solectron generally does not have the right to require customers to purchase excess
 or obsolete inventory.

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Property and Equipment: Property
 and equipment are recorded at cost. Depreciation and amortization are computed
 based on the shorter of the estimated useful lives or the related lease terms, using
 the straight-line method. Estimated useful lives are presented below.



|Machinery, equipment and computer software | 2 - 7 years                  
|------------------------------------------ | -----------------------------
|Furniture and fixtures                     | 3 - 5 years                  
|Leasehold improvements                     | estimated
 life or lease term
|Buildings                                  | 15-50 years                  

Certain depreciation lives were
 changed from four to five years beginning March 2, 2001. Consequently, the pre-tax
 depreciation charges on these assets were lower by $19.8 million in fiscal 2001 than
 it would have been using a four-year life.

Other Assets: Other assets consist
 primarily of intangible assets other than goodwill including supply agreements and
 intellectual property obtained in asset purchase transactions. Intangible assets are
 amortized using the straight-line method over the expected life of the asset.

Impairment of Long-Lived
 Assets: Solectron reviews property and equipment for impairment whenever events or
 changes in circumstances indicate that the carrying amount of an asset may not be
 recoverable. Solectron performs quarterly impairment tests for intangible assets
 other than goodwill. An asset is considered impaired if its carrying amount exceeds
 the future net undiscounted cash flows that the asset is expected to generate. If
 such asset is considered to be impaired, the impairment to be recognized is the
 amount by which the carrying amount of the asset, if any, exceeds its fair value
 determined using a discounted cash flow model.

Income Taxes: Solectron uses
 the asset and liability method of accounting for income taxes. Deferred tax assets
 and liabilities are recognized for the future consequences attributable to
 differences between the financial statement carrying amounts of existing assets and
 liabilities and their respective tax bases. When necessary, a valuation allowance is
 recorded to reduce tax assets to an amount for which realization is more likely than
 not. The effect of changes in tax rates is recognized in the period in which the
 rate change occurs.

Net Income (Loss) Per
 Share: Basic net income (loss) per share is calculated using the weighted-average
 number of common shares outstanding during the period. Diluted net income (loss) per
 share is calculated using the weighted-average number of common shares plus dilutive
 potential common shares outstanding during the period. Anti-dilutive potential
 common shares are excluded. Potential common shares consist of stock options that
 are computed using the treasury stock method and shares issuable upon conversion of
 Solectrons outstanding convertible debt computed using the as-if-converted
 method. Share and per-share data presented reflect all stock splits.

Revenue Recognition: Solectrons
 net sales are primarily derived from full product manufacturing services including,
 but not limited to, printed circuit board, sub-system and complete system assembly,
 and manufacturing of memory products and embedded systems. Solectron also offers
 services consisting of repair, warranty and end-customer technical support services
 including call centers. Revenue from manufacturing services is recognized upon
 shipment of the manufactured product. Revenue from other services is recognized as
 the services are performed.

Employee Stock Plans: Compensation
 costs attributable to Solectrons stock option plans and its employee stock
 purchase plan are recognized based on any excess of the quoted market price of the
 stock on the date of grant over the amount the employee is required to pay to
 acquire the stock, in accordance with the intrinsic-value method under Accounting
 Principles Board Opinion No. 25. Such amount, if any, is accrued over the related
 time-based vesting period, as appropriate. In accordance with SFAS
No. 123, Accounting for Stock-Based-Compensation, the Company makes pro forma
 disclosures of net income (loss) as if the fair-value based method of accounting has
 been applied.

Foreign Currency: For foreign
 subsidiaries using the local currency as their functional currency, assets and
 liabilities are translated at exchange rates in effect at the balance sheet date and
 income and expenses are translated at average exchange rates. In addition, Solectron
 records adjustments to remeasure dollar denominated loans to subsidiaries that are
 permanent in nature. The effects of these adjustments are reported in other
 comprehensive income (loss) (OCI). Exchange gains and losses arising
 from transactions denominated in a currency other than the functional currency of
 the entity involved and remeasurement adjustments for foreign operations where the
 U.S. dollar is the functional currency are included in income (loss). To date, the
 effects of such transaction gains and losses and remeasurement adjustments on
 Solectrons operations have not been material.

Cost of Start-up
 Activities: Solectron adopted American Institute of Certified Public
 Accountants Statement of Position No. 98-5, Reporting on the Costs of
 Start-up Activities, on September 1, 1999. This statement required that costs
 of start-up activities and organizational costs be expensed as incurred. The
 cumulative effect of this accounting change on years prior to fiscal 2000 was a
 charge of $3.5 million (net of $1.6 million income tax effect), or $0.01 per common
 share, that was reflected in the first quarter of fiscal 2000.

Derivative Instruments: In
 September 2000, Solectron adopted SFAS No. 133, Accounting for Derivative
 Instruments and Hedging Activities, as amended by SFAS No. 137 and No. 138.
 All derivative instruments are recorded on the balance sheet at fair value. If the
 derivative is designated as a cash flow hedge, the effective portion of changes in
 the fair value of the derivative is recorded in OCI and is recognized in the
 statement of operations when the hedged item affects earnings. Ineffective portions
 of changes in the fair value of cash flow hedges are immediately recognized in
 earnings. If the derivative is designated as a fair value hedge, the changes in the
 fair value of the

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derivative and of the hedged
 item attributable to the hedged risk are recognized in earnings in the current
 period. For derivative instruments not designated as hedging instruments under SFAS
 No. 133, changes in fair values are recognized in earnings in the current period.
 Such instruments are typically forward contracts used to hedge foreign currency
 balance sheet exposures.

Goodwill: Solectron performs
 goodwill impairment tests annually during the fourth quarter of its fiscal year and
 more frequently if an event or circumstance indicates that an impairment loss has
 been incurred. Such events or circumstances may include significant adverse changes
 in the general business climate, among others. Solectron performs the impairment
 tests at the reporting unit level which has been determined to be consistent with
 the business units as defined in Note 12 except for the
 Technology Solutions and Global Services business units which were
disaggregated further. The tests are performed by
 determining the fair values of Solectrons reporting units using a discounted
 future cash flow model and comparing those fair values to the carrying values of the
 reporting units, including goodwill. If the fair value of a reporting unit is less
 than its carrying value, Solectron then allocates the fair value of the unit to all
 the assets and liabilities of that unit (including any unrecognized intangible
 assets) as if the reporting units fair value was the price to acquire the
 reporting unit. The excess of the fair value of the reporting unit over the amounts
 assigned to its assets and liabilities is the implied fair value of the goodwill. If
 the carrying amount of the reporting units goodwill exceeds the implied fair
 value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

Recent Accounting Pronouncements: In
 July 2001, the FASB issued SFAS No. 141, Business Combinations, and
 SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141
 requires that the purchase method of accounting be used for all business
 combinations initiated or completed after June 30, 2001. SFAS No. 141 also specifies
 the criteria intangible assets acquired in a purchase method business combination
 must meet to be recognized and reported apart from goodwill. SFAS No. 142 requires
 that goodwill and intangible assets with indefinite useful lives no longer be
 amortized, but instead tested for impairment at least annually. SFAS No. 142 also
 requires that intangible assets with definite useful lives be amortized over their
 respective estimated lives to their estimated residual values, and be reviewed for
 impairment according to SFAS No. 121, Accounting for the Impairment of
 Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. In accordance
 with SFAS No. 141, Solectron is accounting for all business combinations initiated
 or completed after June 30, 2001 using the purchase method of accounting. Solectron
 adopted the remaining provisions of SFAS No. 141 and SFAS No. 142 effective
 September 1, 2001. See Note 17, Goodwill and Other Intangible Assets
 for additional discussion of the Companys implementation of SFAS No.142.

In August 2001, the FASB issued
 SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143
 requires that the fair value of an asset retirement obligation be recorded as a
 liability in the period in which it incurs the obligation. SFAS No. 143 is effective
 for fiscal years beginning after June 15, 2002. Solectron will adopt SFAS No. 143
 for its fiscal year beginning September 1, 2002 and does not expect such adoption
 will have a material impact on its consolidated financial statements.

In October 2001, the FASB issued
 SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived
 Assets, which supersedes SFAS No. 121. The primary
 objectives of SFAS No. 144 are to develop one accounting model based on the
 framework established in SFAS No. 121 for long-lived assets to be disposed of by
 sale, and to address significant implementation issues identified after the issuance
 of SFAS No. 121. Solectron will adopt SFAS No. 144 for its fiscal year beginning
 September 1, 2002. The adoption is not expected to have a material impact on
 Solectrons consolidated financial statements.

In May 2002, the FASB issued
 SFAS No. 145, Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of
 FASB Statement No.13 and Technical Corrections. SFAS No. 145 requires that
 certain gains and losses from extinguishments of debt no longer be classified as an
 extraordinary item. SFAS No. 145 is effective for fiscal years beginning after May
 15, 2002 (with accounting for certain transactions effective May 15, 2002).
 Solectron early adopted SFAS No. 145 and reclassified gains from retirements of debt
 from extraordinary to a separate line item within non-operating income (expense).

In July 2002, the FASB issued
 SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
 Activities. SFAS No. 146 requires that a liability for costs associated with
 an exit or disposal activity be recognized and measured initially at fair value only
 when the liability is incurred. SFAS No. 146 is effective for exit or disposal
 activities that are initiated after December 31, 2002. Solectron does not expect
 adoption of SFAS No. 146 to have a material impact on the consolidated financial
 statements.

Reclassifications: Certain
 prior-year amounts have been reclassified to conform with the current-year
 presentation. The reclassifications had no impact on the Companys net income (loss).

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NOTE 2. CASH, CASH EQUIVALENTS
 AND SHORT-TERM INVESTMENTS (INCLUDING RESTRICTED AMOUNTS)

Cash, cash equivalents and
 short-term investments (including restricted amounts) as of August 31, 2002
 and 2001, consisted of the following:



|                           |  | Cash and      |         |             |  |  
|-------------------------- |  | ------------- | ------- | ----------- |  | -
|                           |  | Cash          |         | Short-Term 
|                           |  | Equivalents   |         | Investments
|                           |  |               |         |            
|                           |  | (in millions)
|Fiscal 2002                |  |               |         |             |  |  
|Cash                       |  | $             | 969.9   |             |  | $
|Money market funds         |  |               | 692.8   |             |  |  
|Certificates of deposit    |  |               | 24.8    |             |  |  
|Market auction securities  |  |               | 157.8   |             |  |  
|U.S. government securities |  |               | 30.6    |             |  |  
|Corporate obligations      |  |               |        |             |  |  
|Other                      |  |               | 41.7    |             |  |  
|                           |  |               |         |             |  |  
|Total                      |  | $             | 1,917.6 |             |  | $
|                           |  |               |         |             |  |  
|Fiscal 2001                |  |               |         |             |  |  
|Cash                       |  | $             | 2,244.7 |             |  | $
|Money market funds         |  |               | 174.4   |             |  |  
|Certificates of deposit    |  |               | 63.2    |             |  |  
|Market auction securities  |  |               |        |             |  |  
|U.S. government securities |  |               |        |             |  |  
|Corporate obligations      |  |               |        |             |  |  
|Other                      |  |               |        |             |  |  
|                           |  |               |         |             |  |  
|Total                      |  | $             | 2,482.3 |             |  | $
|                           |  |               |         |             |  |  

Solectron had $135.7 million of
 restricted cash and cash equivalents and $99.7 million of restricted short-term
 investments as of August 31, 2002. Restricted cash, cash equivalents and short-term
 investments are restricted as collateral for specified obligations under certain
 lease agreements and certain interest payments on the 7.25% subordinated ACES
 debentures due November 15, 2006. Short-term investments are carried at fair market
 value, which approximates cost. Realized and unrealized gains and losses for the
 fiscal years ended August 31, 2002 and 2001 were not material.

NOTE 3. INVENTORIES

Inventories as of August
 31, 2002 and 2001, consisted of:



|                |  | 2002          |         | 2001
|--------------- |  | ------------- | ------- | ----
|                |  |               |         |     
|                |  | (in millions)
|Raw materials   |  | $             | 1,308.5 |     
|Work-in-process |  |               | 236.5   |     
|Finished goods  |  |               | 325.0   |     
|                |  |               |         |     
|Total           |  | $             | 1,870.0 |     
|                |  |               |         |     

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NOTE 4. PROPERTY AND
 EQUIPMENT

Property and equipment as of
 August 31, 2002 and 2001, consisted of:



|                                               |  | 2002          |         | 2001
|---------------------------------------------- |  | ------------- | ------- | ----
|                                               |  |               |         |     
|                                               |  | (in millions)
|Land                                           |  | $             | 51.4    |     
|Building and improvements                      |  |               | 338.1   |     
|Leasehold improvements                         |  |               | 192.9   |     
|Factory equipment                              |  |               | 1,287.8 |     
|Computer equipment and software                |  |               | 440.0   |     
|Furniture, fixtures, and other                 |  |               | 119.5   |     
|Construction-in-process                        |  |               | 40.4    |     
|                                               |  |               |         |     
|                                               |  |               | 2,470.1 |     
|Less accumulated depreciation and amortization |  |               | 1,297.1 |     
|                                               |  |               |         |     
|Net property and equipment                     |  | $             | 1,173.0 |     
|                                               |  |               |         |     

NOTE 5. LINES OF CREDIT

As of August 31, 2002, Solectron
 had available a $250 million revolving line of credit that expires on February 12,
 2003, and a $250 million revolving line of credit that expires on February 14, 2005.
 Each of the revolving lines of credit is guaranteed by certain of Solectrons
 domestic subsidiaries and secured by the pledge of equity interest in certain
 subsidiaries and notes evidencing intercompany debt. Borrowings under the credit
 facilities bear interest, at the option of Solectron, at the London interbank
 offering rate (LIBOR) plus a margin of 1.75% based on Solectrons current
 senior unsecured debt rating, or the higher of the Federal Funds Rate plus 1⁄2 of 1%
 or Bank of America N.A.s publicly announced prime rate. As of August 31, 2002,
 there were no borrowings outstanding under these lines of credit. These credit
 facilities are subject to compliance with certain covenants including capital
 expenditures, consolidated tangible net worth, cash interest coverage, liquidity and
 other restrictions. As of August 31, 2002, Solectron was in compliance with all such
 covenants.

On December 18, 2001, Moodys
 Investors Service and Standard & Poors downgraded Solectrons
 senior unsecured debt rating to Ba1 and BB+, respectively,
 with a negative outlook. On March 22, 2002, Standard and Poors downgraded
 Solectrons senior unsecured debt rating to BB with a negative
 outlook. On May 14, 2002, Moodys Investors Services further downgraded
 Solectrons senior unsecured debt rating to Ba3 with a stable outlook. These
 rating downgrades will increase Solectrons cost of capital should Solectron
 borrow under its revolving lines of credit.

In addition, Solectron had
 $34.9 million in committed and $443.6 million in uncommitted foreign lines of
 credit and other bank facilities as of August 31, 2002. A committed line of credit
 obligates a lender to loan the Company amounts under the credit facility as long as
 the Company adheres to the terms of the credit agreement. An uncommitted line of
 credit is extended to Solectron at the sole discretion of a lender. The interest
 rates range from the banks prime lending rate to the banks prime rate
 plus 2.0%. As of August 31, 2002, borrowings and guaranteed amounts were $81.6
 million and $57.6 million, respectively, under these foreign lines of credit.
 Borrowings were payable on demand. The weighted-average interest rate was 5.5% for
 committed and 2.5% for uncommitted foreign lines of credit.

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NOTE 6. LONG-TERM DEBT

Long-term debt at August
 31, 2002 and 2001, consisted of:



|                                                                                                                                   |  | 2002          |         | 2001
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ----
|                                                                                                                                   |  |               |         |     
|                                                                                                                                   |  | (in millions)
|Zero-coupon convertible senior
 notes, 3.25% face values of $2,557.1 and $2,900.0, fair values
 of $1,118.8 and $1,212.8, due 2020 |  | $             | 1,419.7 |     
|7.25% adjustable conversion-rate equity
 securities, 44,000,000 units, fair value of $545.6, due 2006                              |  |               | 1,072.3 |     
|9.625% senior notes, face value
 of $500.0, fair value of $465.0, due 2009                                                         |  |               | 497.1   |     
|7.375% senior notes, face values
 of $150.0 and $150.0, fair values of $150.0 and $150.3, due 2006                                 |  |               | 149.9   |     
|Zero-coupon convertible senior
 notes, 4% face values of $1.2 and $1,656.0, fair values
 of $0.6 and $817.9, due 2019              |  |               | 0.6     |     
|Zero-coupon convertible senior
 notes, 2.75% face values of $852.5 and $4,025.0, fair value
 of $2,047.5 in 2001, due 2020         |  |               |        | *   
|Other, fair values of $44.3 and $69.8                                                                                              |  |               | 44.3    |     
|                                                                                                                                   |  |               |         |     
|Total long-term debt                                                                                                               |  | $             | 3,183.9 |     
|                                                                                                                                   |  |               |         |     



|* | remaining carrying
 amount of $527.2 million was classified in short-term debt as the holders of these
 notes have the right to require Solectron to repurchase them on May 8, 2003 and its
 fair value was $496.1 million at August 31, 2002.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Zero-Coupon Convertible
 Senior Notes (LYONs)

In November 2000, Solectron
 issued 2.9 million LYONs at an issue price of $524.78 per note, which resulted in
 gross proceeds to Solectron of approximately $1.5 billion. These notes are unsecured
 and unsubordinated indebtedness of Solectron. Solectron will pay no interest prior
 to maturity. Each note has a yield of 3.25% with a maturity value of $1,000 on
 November 20, 2020. Each note is convertible at any time by the holder at a
 conversion rate of 11.7862 shares per note. Holders may require Solectron to
 purchase all or a portion of their notes on May 20, 2004, November 20, 2005 and
 November 20, 2010, at a price of $587.46, $616.57 and $724.42 per note,
 respectively, payable in cash or common stock at the option of Solectron. Also, each
 holder may require Solectron to repurchase all or a portion of such holders
 notes if a change in control of the Company occurs on or before May 20, 2004.
 Solectron, at its option, may redeem all or a portion of the notes at any time on or
 after May 20, 2004. Solectron is amortizing the issue discount using the effective
 interest method through May 20, 2004. During fiscal 2002, Solectron repurchased a
 portion of the LYONs with a carrying amount totaling approximately $183.2 million
 for approximately $155.9 million in cash which resulted in a gain of $27.3 million.

In May 2000, Solectron issued
 4,025,000 LYONs at an issue price of $579.12 per note, which resulted in gross
 proceeds to Solectron of approximately $2.3 billion. These notes are unsecured and
 unsubordinated indebtedness of Solectron. There will be no interest payment by
 Solectron prior to maturity. Each note has a yield of 2.75% with a maturity value of
 $1,000 on May 8, 2020. Each note is convertible at any time by the holder at a
 conversion rate of 12.3309 shares per note. Holders may require Solectron to
 purchase all or a portion of their notes

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on May 8, 2003 and May 8, 2010, at
 a price of $628.57 and $761.00 per note, respectively. Also, each holder may
 require Solectron to repurchase all or a portion of such holders notes upon a
 change in control of the Company occurring on or before May 8, 2003. Solectron, at
 its option, may redeem all or a portion of the notes at any time on or after May 8,
 2003. Solectron is amortizing the issue discount using the effective interest method
 through May 8, 2003. During June 2002, Solectron repurchased a portion of these
 LYONs with a carrying amount totaling approximately $1,903.0 million for
 approximately $1,839.9 million in cash which resulted in a gain of $63.1 million.

In January 1999, Solectron
 issued 1,656,000 LYONs at an issue price of $452.89 per note which resulted in
 gross proceeds of approximately $750 million. These notes were unsecured and
 unsubordinated indebtedness. Each note had a yield of 4% with a maturity value of
 $1,000 on January 27, 2019. Each note was convertible at any time by the holder at a
 conversion rate of 14.944 shares per note. Holders were able to require Solectron
 to purchase all or a portion of their notes on January 27, 2002 and January 27,
 2009, at a price of $510.03 and $672.97 per note, respectively. During fiscal 2002,
 Solectron repurchased substantially all of these LYONs with a carrying amount
 totaling approximately $825.5 million for approximately $839.5 million in cash which
 resulted in a loss of $14.0 million.

Adjustable Conversion-Rate Equity
 Securities (ACES)

During the second quarter of
 fiscal 2002, Solectron closed its public offering of $1.1 billion or 44 million
 units of 7.25% ACES. Each ACES unit has a stated amount of $25.00 and consists of
 (a) a contract requiring the holder to purchase, for $25.00, a number of shares of
 Solectron common stock to be determined on November 15, 2004, based on the average
 trading price of Solectrons common stock at that time and certain specified
 settlement rates ranging from 2.1597 shares of Solectrons common stock per
 purchase contract to 2.5484 shares of Solectrons common stock per purchase
 contract (subject to certain anti-dilution adjustments), and (b) a $25 principal
 amount of 7.25% subordinated debenture due 2006. Solectron received gross proceeds
 of approximately $1.1 billion from the transaction. Solectron allocated $46.9
 million to the fair value of the purchase contracts and recorded this amount in
 additional paid-in capital. The debentures initially will be held and pledged for
 Solectrons benefit to secure the holders obligation to purchase
 Solectrons common stock on November 15, 2004. On or about August 15, 2004, the
 ACES debentures will be remarketed and if the remarketing is successful, the
 interest rate will be reset at then current rates as described in the indentures and
 the proceeds from the remarketing will be used to satisfy the holders
 obligation to purchase Solectrons common stock in November 2004. If the
 debentures are not successfully remarketed, the interest rate will not be reset and
 Solectron may use the pledged debentures to satisfy the holders obligation to
 purchase the Companys common stock in November 2004. Approximately $100
 million of restricted cash, cash equivalents and short-term investments as of August
 31, 2002 represented Solectrons collateral related to the Companys
 obligations for the next five quarterly interest payments.

9.625% Senior Notes

On February 8, 2002, Solectron
 issued an aggregate principal amount of $500 million of 9.625% senior notes due
 2009. Solectron is required to
 pay interest on the notes in cash on February 15 and August 15 of each year. The
 indenture governing the terms of these notes contains restrictive covenants that
 limit Solectron and its subsidiaries from making distributions on their capital
 stock, investments, incurring debt, issuing preferred stock, engaging in assets
 sales and other important covenants and restrictions.

7.375% Senior Notes

In March 1996, Solectron
 issued $150 million aggregate principal amount of senior notes. These notes are in
 denominations of and have a maturity value of $1,000 each and are due on March 1,
 2006. Interest is payable semiannually at a rate of 7.375% per annum. The notes may
 not be redeemed prior to maturity.

The aggregate annual maturities
 of long-term debt during each of the five fiscal years subsequent to August 31,
 2002, are as follows (in millions):



|Years
 Ending August 31, |  |   |        
|------------------------ |  | - | -------
|                         |  |   |        
|2003                     |  | $ | 535.9  
|2004                     |  |   | 1,518.8
|2005                     |  |   | 19.6   
|2006                     |  |   | 150.6  
|2007                     |  |   | 1,073.0
|Thereafter               |  |   | 504.4  
|                         |  |   |        
|Total                    |  | $ | 3,802.3
|                         |  |   |        

Amounts presented as maturities
 of LYONs are the cash amounts due on the first date in which holders can require
 Solectron to repurchase the notes. These amounts exceed the accreted values reported
 on the balance sheet as of August 31, 2002.

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NOTE 7. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The fair value of Solectrons
 cash, cash equivalents, accounts receivable, accounts payable and borrowings under
 lines of credit approximates the carrying amount due to the relatively short
 maturity of these items. The fair value of Solectrons short-term investments
 (see Note 2) is determined based on quoted market prices. The fair value of
 Solectrons long-term debt (see Note 6) is determined based on broker trading
 prices.

Derivatives

Solectron enters into foreign
 exchange forward contracts intended to reduce the short-term impact of foreign
 currency fluctuations on foreign currency receivables, investments and payables. The
 gains and losses on the foreign exchange forward contracts offset the transaction
 gains and losses on the foreign currency receivables, investments, and payables
 recognized in earnings. The Company does not enter into foreign exchange forward
 contracts for speculative purposes. Solectrons foreign exchange forward
 contracts related to current assets and liabilities are generally three months or
 less in original maturity.

Solectron periodically hedges
 foreign currency forecasted transactions related to certain operating expenses with
 foreign exchange forward contracts. These transactions are treated as cash flow
 hedges in accordance with SFAS No. 133. These foreign exchange forward contracts
 have original maturities of up to 18 months.

Solectron also uses interest
 rate swaps to hedge its mix of short-term and long-term interest rate exposures
 resulting from Solectrons debt obligations. During the third quarter of fiscal
 2002, Solectron entered into interest rate swap transactions under which it pays
 variable rates and receives fixed rates. The interest rate swaps have a total
 notional amount of $1 billion. $500 million relates to the Companys $1.1
 billion ACES and expires on November 15, 2004 and $500 million relates to the 9.625%
 $500 million senior notes expiring on February 15, 2009. Under each of these swap
 transactions, Solectron pays an interest rate equal to the 3-month LIBOR rate plus a
 fixed spread. In exchange, Solectron receives fixed interest rates of 7.25% on the
 first $500 million and 9.625% on the second $500 million. These swap transactions
 effectively replace the fixed interest rates that the Company must pay on a portion
 of its ACES and all its 9.625% senior notes with variable interest rates. These
 swaps are designated as fair value hedges under SFAS No. 133.

As of August 31, 2002, Solectron
 had outstanding foreign exchange forward contracts with a total notional amount of
 approximately $580 million. The interest rate swaps had aggregate notional amounts
 of $1 billion.

The fair values of the derivatives
 referred to above were not significant.

For all derivative transactions,
 Solectron is exposed to counterparty credit risk to the extent that the counter
 parties may not be able to meet their obligations towards Solectron. To manage the
 counterparty risk, Solectron limits its derivative transactions to those with major
 financial institutions. Solectron does not expect to experience any material adverse
 financial consequences as a result of default by Solectrons counter parties.

Business and
 Credit Concentrations

Financial instruments that
 potentially subject Solectron to concentrations of credit risk consist of cash,
 cash equivalents, short-term investments and trade accounts receivable.
 Solectrons short-term investments are managed by recognized financial
 institutions which follow the Companys investment policy. Such investment
 policy limits the amount of credit exposure in any one issue and requires the
 investment securities to be investment grade short-term debt instruments.
 Concentrations of credit risk in accounts receivable resulting from sales to major
 customers are discussed in Note 13. Solectron generally does not require collateral
 for sales on credit. However, for customers that have limited financial resources,
 Solectron may require coverage for this risk including standby letters of credit,
 prepayments and consignment of inventories. The Company also monitors extensions of
 credit and the financial condition of its major customers.

NOTE 8. COMMITMENTS
 AND CONTINGENCIES

Synthetic Leases

During the fourth fiscal
 quarter ended August 31, 2002, Solectron and its subsidiaries restructured its
 synthetic lease agreements relating to five manufacturing sites. The synthetic
 leases have expiration dates in 2007. At the end of the lease term, Solectron has an
 option, subject to certain conditions, to purchase or to cause a third party to
 purchase the facilities subject to the synthetic leases for the Termination
 Value, which approximates the lessors original cost, or may market the
 property to a third party at a different price. Solectron is entitled to any
 proceeds from a sale of the properties to third parties in excess of the Termination
 Value. In connection with its restructuring of these synthetic leases, Solectron
 provided loans to the lessor equaling approximately 85% of its initial Termination
 Value. These loans are

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repayable solely from the sale of the properties to third
 parties in the future, are subordinated to the amounts payable to the lessor at the
 end of the terms of the synthetic leases, and may be credited against the
 Termination Value payable if Solectron or its subsidiaries purchases the properties.
 The approximate maximum Termination Values and loan amounts for each of the
 synthetic leases are provided below (in millions):



|   |                               |  | Termination Value |   | Loan Amount
|-- | ----------------------------- |  | ----------------- | - | -----------
|   |                               |  |                   |   |            
|A) | Milpitas, CA for land         |  |                   | $ | 35.0       
|B) | Milpitas, CA for improvements |  |                   |   | 18.4       
|C) | San Jose, CA                  |  |                   |   | 13.6       
|D) | Columbia, SC                  |  |                   |   | 24.7       
|E) | Fremont, CA                   |  |                   |   | 23.4       
|F) | Fremont, CA                   |  |                   |   | 9.6        
|   |                               |  |                   |   |            
|   | Total                         |  |                   | $ | 124.7      
|   |                               |  |                   |   |            

In addition, cash collateral in
 an aggregate amount of $18.7 million is pledged for the difference between the
 Termination Values and the loan amounts. The cash collateral is included in
 restricted cash and cash equivalents in the accompanying consolidated balance sheet
 as of August 31, 2002 and is restricted for the duration of the lease term. Each
 lease agreement contains various affirmative and financial covenants. A default
 under a lease, including violation of these covenants, may accelerate the
 termination date of the arrangement. Solectron was in compliance with these
 covenants as of August 31, 2002. Monthly lease payments are generally based on the
 Termination Value and 30-day LIBOR index (1.82% as of August 31, 2002) plus an
 interest-rate margin, which may vary depending upon the Companys Moodys
 Investors Services, and Standard and Poors ratings and are allocated
 between the lessor and Solectron and its subsidiaries based on the
proportion of the loan amount to the total Termination Value for each synthetic lease.

After the restructuring,
 Solectron has continued to account for these synthetic lease arrangements as
 operating leases in accordance with SFAS No. 13, Accounting for Leases,
 as amended. Solectrons loans to the lessor are included in other long-term
 assets in the consolidated balance sheet as of August 31, 2002.

If Solectron should determine
 that it is probable that the expected fair value of the property at the end of the
 lease term will be less than the Termination Value, the Company will recognize any
 expected loss on a straight-line basis over the remaining lease term.

Solectron also purchased
 facilities for $179.3 million previously under synthetic arrangements.

Sale Lease-back Transactions

Solectron periodically enters
 into lease arrangements with third-party leasing companies under which it sells
 fixed assets and leases them back from the leasing companies. Solectron is
 accounting for these leases as operating leases and deferring any related gains over
 the lease term.

Future Minimum Lease Obligations

Future minimum payments related
 to lease obligations, including the synthetic leases
 discussed above, are $112.6 million, $99.7 million, $69.6 million, $43.5 million and
 $34.0 million in each of the years in the five-year period ending August 31, 2007,
 and $108.6 million for periods after that date. Rent expense was $163.3 million,
 $94.5 million, and $98.9 million for the years ended August 31, 2002, 2001 and 2000,
 respectively.

Related Party Guarantees

Solectron guarantees $60 million
 of debt and $88 million of vendor contracts for its minority owned affiliate,
 Pacific City International Holdings (PCI). The guarantees will expire during
 December 2002.

Legal Proceedings

The Company, from time to
 time, is involved in various litigation and legal matters (including those
 discussed below). The Company does not expect that the ultimate outcome of these
 matters will have a material adverse effect on its results of operations or
 financial position. The Company is not a party to legal proceedings that
 individually or in the aggregate are believed to be material to the Companys
 business.

On August 29, 2002, ATEL
 Leasing Corporation, a lessor of manufacturing equipment to the Company, filed suit
 against the Company in the California Superior Court for the City and County of San
 Francisco (ATEL Leasing Corp. v. Solectron Corp., Case No. 412011), alleging that
 ATEL is entitled to recover as liquidated damages and not as a penalty
 amounts equal to the stipulated loss value of all of the equipment
 leased to the Company by ATEL under two equipment lease agreements, even though the
 equipment in question was neither

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lost nor damaged, and even
 though the Company was current on all lease installment payments (and had paid all
 applicable late payment fees) under the leases. ATELs complaint seeks
 liquidated damages of approximately $26 million, plus additional
 interest allegedly accruing thereon, and litigation expenses. The Company believes
 ATELs claims are without merit, and that the Company has meritorious defenses,
 including that the liquidated damages provision upon which ATEL relies
 is an unenforceable penalty under California law. In fact, the United States
 District Court for the Northern District of California ruled in a March 2001 opinion
 (ATEL Financial Corp. v. Quaker Coal Company, 132 F.Supp.2d 1233) that a
 liquidated damages provision which ATEL had attempted to enforce in that
 case was an unenforceable penalty under California law. While ATEL has appealed that
 ruling, the Company believes the U.S. District Courts decision was correct,
 and that the liquidated damages provisions which ATEL is attempting to
 enforce against the Company should similarly be held unenforceable under applicable
 California law. The Company has filed a cross-complaint against ATEL seeking damages
 and other appropriate relief.

On September 19, 2002, one of
 Solectrons former employees filed a complaint in the Superior Court of the
 State of California, Santa Clara County, against the Company asserting two claims
 for wrongful termination. The case is encaptioned Ronald Sorisho v. Solectron
 Corporation, et al., Case No. CV811243. In the complaint, plaintiff alleges that he
 was wrongfully terminated by Solectron in supposed retaliation for his alleged
 efforts to ensure that the Company timely recognized a charge for excess, obsolete
 and slow moving inventory in the Technology Solutions business unit. Plaintiff seeks
 compensatory damages in an amount not less than $2.5 million as well as
 punitive damages. The Company believes Mr. Sorishos claims of wrongful
 termination are without merit and intends to vigorously defend itself.

NOTE 9. RETIREMENT PLANS

Solectron has various retirement
 plans that cover a significant number of its eligible worldwide employees. The
 Company sponsors a
401(k) Plan to provide retirement benefits for its United States
 employees. This Plan provides for tax-deferred salary deductions for eligible
 employees. Employees may contribute between 1% to 15% of their annual compensation
 to this Plan, limited by an annual maximum amount as determined by the Internal
 Revenue Service. The Company also makes discretionary matching contributions, which
 vest immediately, as periodically determined by its Board of Directors. The
 Companys matching contributions to this Plan totaled $9.9 million, $13.2
 million and $10.7 million in fiscal 2002, 2001 and 2000, respectively. In addition,
 certain of the Companys non-United States employees are covered by various
 defined benefit and defined contribution plans. Solectrons expense for these
 plans totaled $2.9 million, $5.7 million and $9.6 million in fiscal 2002, 2001 and
 2000, respectively.

NOTE 10. INCOME TAXES

The components of income tax
 expense (benefit) for the fiscal years ended August 31, 2002, 2001 and 2000, were
 as follows (in millions):



|          |  | 2002 |        | 2001 |  | 2000
|--------- |  | ---- | ------ | ---- |  | ----
|          |  |      |        |      |  |     
|Current:  |  |      |        |      |  |     
|Federal   |  | $    | (176.9 | )    |  | $   
|State     |  |      | 3.6    |      |  |     
|Foreign   |  |      | 22.1   |      |  |     
|          |  |      |        |      |  |     
|          |  |      | (151.2 | )    |  |     
|          |  |      |        |      |  |     
|Deferred: |  |      |        |      |  |     
|Federal   |  |      | (212.1 | )    |  |     
|State     |  |      | (53.5  | )    |  |     
|Foreign   |  |      | (50.5  | )    |  |     
|          |  |      |        |      |  |     
|          |  |      | (316.1 | )    |  |     
|          |  |      |        |      |  |     
|Total     |  | $    | (467.3 | )    |  | $   
|          |  |      |        |      |  |     

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The overall effective income tax rate (expressed
 as a percentage of financial statement income (loss) before income taxes) varied
 from the United States statutory income tax rate for the fiscal years ended August
 31, 2002, 2001 and 2000, as follows:



|                                                               | 2002  |    | 2001 |       | 2000
|-------------------------------------------------------------- | ----- | -- | ---- | ----- | ----
|                                                               |       |    |      |       |     
|Federal
 tax rate                                              | (35.0 | )% |      | (35.0 | )%  
|State
 income tax, net of federal tax benefit                  | (0.9  | )  |      | (4.8  | )   
|Income
 of international subsidiaries taxed at different rates | 0.8   |    |      | 32.9  |     
|Tax
 holidays                                                  | (1.6  | )  |      | (41.6 | )   
|Tax
 exempt interest income                                    |      |    |      | (2.8  | )   
|Nondeductible goodwill and acquisition costs                   | 18.4  |    |      | 7.9   |     
|Loss
 for which no benefit is currently realized               | 5.5   |    |      | 17.8  |     
|Intercompany interest charges                                  |      |    |      | 3.4   |     
|Other                                                          | (0.3  | )  |      | 0.5   |     
|                                                               |       |    |      |       |     
|Effective income tax rate                                      | (13.1 | )% |      | (21.7 | )%  
|                                                               |       |    |      |       |     

The tax effects of temporary differences
 that gave rise to significant portions of deferred tax assets and liabilities as
 of August 31, 2002 and 2001, were as follows (in millions):



|                                                  | 2002 |        | 2001
|------------------------------------------------- | ---- | ------ | ----
|                                                  |      |        |     
|Deferred
 tax assets:                             |      |        |     
|Accruals
 and allowances                          | $    | 261.7  |     
|State
 income tax                                 |      | 60.6   |     
|Acquired intangible assets                        |      | 320.3  |     
|Depreciation                                      |      | 31.4   |     
|Net
 operating loss carryforwards and tax credits |      | 238.0  |     
|Restructuring accruals                            |      | 73.0   |     
|Other                                             |      | 11.3   |     
|                                                  |      |        |     
|Deferred
 tax assets                              |      | 996.3  |     
|Valuation allowance                               |      | (335.4 | )   
|                                                  |      |        |     
|Total
 deferred tax assets                        |      | 660.9  |     
|                                                  |      |        |     
|Deferred tax liabilities:                         |      |        |     
|Foreign
 inventories expensed for tax purposes    |      | (35.2  | )   
|Depreciation                                      |      |       |     
|Realized translation gains                        |      | (8.0   | )   
|Foreign import incentives                         |      |       |     
|Other                                             |      |       |     
|                                                  |      |        |     
|Total
 deferred tax liabilities                   |      | (43.2  | )   
|                                                  |      |        |     
|Net
 deferred tax assets                          | $    | 617.7  |     
|                                                  |      |        |     

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As of August 31, 2002, $191.1 million of
 the total net deferred tax assets are included in other current assets and $426.6
 million are included in other non-current assets on the consolidated balance sheet.
 As of August 31, 2001, $54.9 million of the total net deferred tax assets are
 included in other current assets and $102.1 million are included in other non-current
 assets on the consolidated balance sheet.

The Company has U.S. federal net operating
 loss carryforwards in its U.S. consolidated group of approximately $44 million.
 The net operating loss carryforwards, if not utilized, will expire in 2021 and
 2022.

The Company also has U.S. federal net operating
 loss carryforwards in its U.S. Robotics subsidiary of approximately $34.8 million.
 These amounts are not currently available to offset U.S. taxable income of the
 Company (other than income generated by U.S. Robotics) under U.S. consolidated tax
 return rules. These net operating loss carryforwards, if not utilized, will expire
 in 2021.

The Company also has acquired U.S. federal
 net operating loss carryforwards from its acquisitions of NEL, Sequel Corporation,
 Centennial Technologies, and C-MAC of approximately $62 million, which will expire
 if not utilized beginning in 2011 through 2022. The annual utilization of these
 net operating loss carryforwards is limited under the ownership change
 provisions of the U.S. Internal Revenue code.

The Company also has North Carolina investment
 tax credit of $7.6 million which if not utilized will expire beginning in 2002 through
 2007.

The Company also has California state net
 operating loss carryforwards in its unitary group of approximately $156.9 million,
 which will expire if not utilized in 2011 and 2012.

The Company has net operating loss carryforwards
 in various foreign jurisdictions. A summary of significant foreign net operating
 loss carryforwards follows (in millions):



|Jurisdiction    |   | Amount |  | Expiration 
|--------------- | - | ------ |  | -----------
|                |   |        |  |            
|Australia       | $ | 30.3   |  | Indefinite 
|Brazil          |   | 54.3   |  | Indefinite 
|Canada          |   | 121.0  |  | 2004 - 2009
|France          |   | 160.3  |  | 2003 - 2007
|Germany         |   | 34.8   |  | Indefinite 
|Indonesia       |   | 12.0   |  | 2006 - 2007
|Ireland         |   | 62.6   |  | Indefinite 
|Japan           |   | 20.5   |  | 2006- 2007 
|Malaysia        |   | 6.0    |  | Indefinite 
|Mexico          |   | 24.2   |  | 2008 - 2012
|Romania         |   | 33.0   |  | 2004 - 2007
|Singapore       |   | 5.9    |  | Indefinite 
|Netherlands     |   | 10.5   |  | Indefinite 
|Turkey          |   | 9.6    |  | 2004 - 2005
|United
 Kingdom |   | 83.4   |  | Indefinite 

The Company has determined that a valuation
 allowance in the amount of $335.4 million is required with respect to deferred tax
 assets as of August 31, 2002. The Company believes that it is more likely than
 not that the remaining deferred tax assets will be realized principally through
 future taxable income, tax planning strategies and, to a lesser extent, carrybacks
 to taxable income in prior years. In the event the tax benefits relating to the
 valuation allowance are realized, $95.2 million of such benefits would reduce goodwill
 and $7.9 million would be credited to other comprehensive income.

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Worldwide income (loss) before income taxes
 for the fiscal years ended August 31, 2002, 2001 and 2000, consisted of the following
 (in millions):



|         | 2002 |          | 2001 |  | 2000
|-------- | ---- | -------- | ---- |  | ----
|         |      |          |      |  |     
|U.S.     | $    | (3,845.2 | )    |  | $   
|Non-U.S. |      | 267.7    |      |  |     
|         |      |          |      |  |     
|Total    | $    | (3,577.5 | )    |  | $   
|         |      |          |      |  |     

Cumulative undistributed earnings of the
 international subsidiaries amounted to $592.8 million as of August 31, 2002, all
 of which is intended to be permanently reinvested. The amount of income tax liability
 that would result had such earnings been repatriated is estimated to be approximately
 $141.7 million.

Solectron has been granted a tax holiday
 for certain of its Malaysian sites which is effective through July 2011, subject
 to certain conditions. In addition, Solectron has been granted a tax holiday for
 certain manufacturing operations in Singapore which is effective through March 2011,
 subject to certain conditions. Seven of Solectrons China sites have separate
 tax holiday agreements. Each agreement expires five years from the first profitable
 year for each site. Five of these sites have tax holidays expiring from December
 2002 through December 2007. Two sites have not yet incurred a profitable year,
 thus the expiration of the tax holiday status for those sites has not yet been determined.
 The net impact of these tax holidays was to decrease net loss by approximately
 $37 million, or $0.05 per diluted share, in 2002 and approximately $58 million,
 or $0.08 per diluted share, in 2001.

NOTE 11. STOCKHOLDERS EQUITY

Issuance of Common Stock

In fiscal 2000, Solectron sold, through
 an underwritten public offering, 38 million shares of common stock which generated
 net proceeds of approximately $1.3 billion.

Stock Repurchase

On September 17, 2001, Solectrons
 board of directors authorized a $200 million stock repurchase program. During the
 first fiscal quarter of 2002, Solectron repurchased 442,200 shares of its common
 stock at an average price of $10.10 for approximately $4.5 million.

Stock Split

Effective March 8, 2000, Solectron completed
 a two-for-one stock split effected as stock dividends. All references to share and
 per-share data have been retroactively adjusted to reflect the stock split.

Pro Forma Fair Value Disclosures

Solectron accounts for its employee stock
 plans, which consist of fixed stock option plans and an employee stock purchase
 plan, using the intrinsic value method under APB Opinion No. 25. No compensation
 expense related to these plans has been recognized in the Companys financial
 statements. The table below sets out the pro forma amounts of net income (loss)
 and net income (loss) per share that would have resulted for the fiscal years ended
 August 31, 2002, 2001 and 2000, if Solectron accounted for its employee stock plans
 under the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based
 Compensation.



|                              |             | 2002                                  |          | 2001 |  | 2000
|----------------------------- | ----------- | ------------------------------------- | -------- | ---- |  | ----
|                              |             |                                       |          |      |  |     
|                              |             | (in millions, except per-share
 data)
|Net income (loss):            |             |                                       |          |      |  |     
|                              | As reported | $                                     | (3,110.2 | )    |  | $   
|                              | Pro forma   | $                                     | (3,198.7 | )    |  | $   
|Net
 income (loss) per share: |             |                                       |          |      |  |     
|Basic                         | As reported | $                                     | (3.98    | )    |  | $   
|Basic                         | Pro forma   | $                                     | (4.10    | )    |  | $   
|Diluted                       | As reported | $                                     | (3.98    | )    |  | $   
|Diluted                       | Pro forma   | $                                     | (4.10    | )    |  | $   

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For purposes of computing pro forma net
 income (loss), the fair value of each option grant and Employee Stock Purchase Plan
 purchase right is estimated on the date of grant using the Black-Scholes option
 pricing model. The assumptions used to value the option grants and purchase rights
 are stated below.



|                                  | 2002           |  | 2001          |  | 2000        
|--------------------------------- | -------------- |  | ------------- |  | ------------
|                                  |                |  |               |  |             
|Expected life of options          | 3 years        |  | 3.5 years     |  | 3.5 years   
|Expected
 life of purchase rights | 6 months       |  | 6 months      |  | 3 months    
|Volatility                        | 70%            |  | 65%           |  | 52%         
|Risk-free interest rate           | 1.64% to 4.14% |  | 3.4% to 6.34% |  | 4.8% to 6.8%
|Dividend yield                    | zero           |  | zero          |  | zero        

Stock Option Plans

Solectrons stock option plans provide
 for grants of options to employees to purchase common stock at the fair market value
 of such shares on the grant date. The options vest over a four-year period beginning
 generally on the grant date. The term of the options is five years for options granted
 prior to January 12, 1994, seven years for options granted prior to September 20,
 2001, and ten years for options granted thereafter. In connection with the acquisitions
 of Force, SMART, Bluegum, Centennial Technologies, C-MAC and Iphotonics, Solectron
 assumed all options outstanding under the related companies option plans.
 Options under these plans generally vest over periods ranging from immediately to
 five years from the original grant date and have terms ranging from two to ten years.
 These options are considered granted in the year the acquisition occurred in the
 tables contained herein. No further options may be granted under these plans.

A summary of stock option activity under
 the plans for the fiscal years ended August 31, 2002, 2001 and 2000, follows (in
 millions, except per-share data):



|                                                               | 2002           |   | 2001 |   | 2000                        
|-------------------------------------------------------------- | -------------- | - | ---- | - | ----------------------------
|                                                               |                |   |      |   |                             
|                                                               | NumberofShares |   |      |   | WeightedAverageExercisePrice
|                                                               |                |   |      |   |                             
|Outstanding, beginning of year                                 | 47.9           |   |      | $ | 22.61                       
|Granted                                                        | 26.1           |   |      | $ | 10.40                       
|Exercised                                                      | (3.1           | ) |      | $ | 6.02                        
|Canceled                                                       | (7.7           | ) |      | $ | 21.92                       
|                                                               |                |   |      |   |                             
|Outstanding, end of year                                       | 63.2           |   |      | $ | 18.50                       
|                                                               |                |   |      |   |                             
|Exercisable, end of year                                       | 36.4           |   |      | $ | 17.64                       
|                                                               |                |   |      |   |                             
|Weighted-average fair value of options granted during the year |                |   |      | $ | 6.97                        

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Information regarding the stock options
 outstanding at August 31, 2002, is summarized in the table below (in millions, except
 number of years and per-share data).



|                       |                 | Outstanding                              |  | Exercisable                  
|---------------------- | --------------- | ---------------------------------------- |  | -----------------------------
|                       |                 |                                          | 
|Range ofExercise Price | Number ofShares | WeightedAverageRemaining
ContractualLife |  | WeightedAverage
ExercisePrice
|                       |                 |                                          |  |                              
|$0.38 - $5.98          |                 | 6.6                                      |  | 2.64 years                   
|$6.13 - $7.48          |                 | 2.7                                      |  | 4.58 years                   
|$7.80 - $10.29         |                 | 16.4                                     |  | 8.71 years                   
|$10.34 - $12.69        |                 | 6.5                                      |  | 3.77 years                   
|$12.99 - $16.43        |                 | 7.3                                      |  | 5.06 years                   
|$16.56 - $22.92        |                 | 6.3                                      |  | 5.47 years                   
|$23.84 - $35.03        |                 | 8.2                                      |  | 4.67 years                   
|$35.27 - $46.13        |                 | 8.2                                      |  | 4.92 years                   
|$46.94 - $51.67        |                 | 1.0                                      |  | 5.14 years                   
|                       |                 |                                          |  |                              
|$0.38 - $51.67         |                 | 63.2                                     |  | 5.57 years                   
|                       |                 |                                          |  |                              

A total of 47.8 million shares of common
 stock remain reserved for grant under the plans as of August 31, 2002.

An initial option is granted to each new
 outside member of Solectrons Board of Directors to purchase 15,000 shares
 of common stock at the fair value on the date of the grant. On December 1, of each
 year, each outside member is granted an additional option to purchase 8,000 shares
 of common stock at the fair market value on such date. These options vest over one
 year and have a term of seven years.

Employee Stock Purchase Plan

Under Solectrons Employee Stock Purchase
 Plans (the Purchase Plans), employees meeting specific employment qualifications
 are eligible to participate and can purchase shares semi-annually through payroll
 deductions at the lower of 85% of the fair market value of the stock at the commencement
 or end of the offering period. The Purchase Plans permit eligible employees to purchase
 common stock through payroll deductions for up to 10% of qualified compensation.
 As of August 31, 2002, 1.2 million shares remain available for issuance under the
 Purchase Plans.

The weighted average fair value of the purchase
 rights granted by Solectron in fiscal 2002, 2001 and 2000 was $5.13, $12.90 and
 $16.11, respectively.

NOTE 12. SEGMENT AND GEOGRAPHIC INFORMATION

Solectron provides integrated supply-chain
 solutions that span the entire product life cycle, including technology, manufacturing
 and services. The Company has approximately 50 major manufacturing facilities in
 the Americas, Europe and Asia/Pacific to serve these similar customers. Solectron
 is operated and managed by business unit, and the business units are further managed
 geographically. Each industry segment has its own president and support staff. Solectrons
 management uses an internal management reporting system, which provides financial
 data to evaluate performance and allocate Solectrons resources on a business
 unit and geographic basis. Intersegment adjustments are related primarily to intersegment
 sales that are generally recorded at prices that approximate arms length transactions.
 Certain corporate expenses are allocated to these operating segments and are included
 for performance evaluation. Some amortization expenses are also allocated to these
 operating segments, but the related intangible assets are not allocated. The accounting
 policies for the segments are the same as for Solectron taken as a whole. Solectron
 has four reportable operating segments: Global Operations, Technology Solutions,
 Global Services and MicroSystems. Information about the operating segments for
 the fiscal years ended August 31, 2002, 2001 and 2000, was as follows:

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|                                                                                            | 2002          |          | 2001 |  | 2000
|------------------------------------------------------------------------------------------- | ------------- | -------- | ---- |  | ----
|                                                                                            |               |          |      |  |     
|                                                                                            | (in millions)
|Net
 sales:                                                                                 |               |          |      |  |     
|Global Operations                                                                           | $             | 10,287.4 |      |  | $   
|Technology Solutions                                                                        |               | 860.3    |      |  |     
|Global Services                                                                             |               | 822.7    |      |  |     
|MicroSystems                                                                                |               | 305.8    |      |  |     
|                                                                                            |               |          |      |  |     
|                                                                                            | $             | 12,276.2 |      |  | $   
|                                                                                            |               |          |      |  |     
|Depreciation and amortization:                                                              |               |          |      |  |     
|Global
 Operations                                                                          | $             | 270.6    |      |  | $   
|Technology Solutions                                                                        |               | 27.4     |      |  |     
|Global
 Services                                                                            |               | 28.9     |      |  |     
|MicroSystems                                                                                |               | 8.7      |      |  |     
|Corporate                                                                                   |               | 41.2     |      |  |     
|                                                                                            |               |          |      |  |     
|                                                                                            | $             | 376.8    |      |  | $   
|                                                                                            |               |          |      |  |     
|Interest
 income:                                                                           |               |          |      |  |     
|Global Operations                                                                           | $             | 25.3     |      |  | $   
|Technology Solutions                                                                        |               | 1.7      |      |  |     
|Global
 Services                                                                            |               | 0.6      |      |  |     
|MicroSystems                                                                                |               | 0.3      |      |  |     
|Corporate                                                                                   |               | 42.2     |      |  |     
|                                                                                            |               |          |      |  |     
|                                                                                            | $             | 70.1     |      |  | $   
|                                                                                            |               |          |      |  |     
|Interest
 expense:                                                                          |               |          |      |  |     
|Global
 Operations                                                                          | $             | 20.0     |      |  | $   
|Technology Solutions                                                                        |               | 1.2      |      |  |     
|Global Services                                                                             |               | 1.6      |      |  |     
|MicroSystems                                                                                |               | 1.2      |      |  |     
|Corporate                                                                                   |               | 220.1    |      |  |     
|                                                                                            |               |          |      |  |     
|                                                                                            | $             | 244.1    |      |  | $   
|                                                                                            |               |          |      |  |     
|Income
 (loss) before income taxes and cumulative effect of change in accounting principle: |               |          |      |  |     
|Global Operations                                                                           | $             | (3,348.1 | )    |  | $   
|Technology Solutions                                                                        |               | (84.3    | )    |  |     
|Global Services                                                                             |               | 12.4     |      |  |     
|MicroSystems                                                                                |               | (3.9     | )    |  |     
|Corporate                                                                                   |               | (153.6   | )    |  |     
|                                                                                            |               |          |      |  |     
|                                                                                            | $             | (3,577.5 | )    |  | $   
|                                                                                            |               |          |      |  |     
|Capital expenditures:                                                                       |               |          |      |  |     
|Global Operations                                                                           | $             | 318.5    |      |  | $   
|Technology Solutions                                                                        |               | 14.9     |      |  |     
|Global
 Services                                                                            |               | 48.0     |      |  |     
|MicroSystems                                                                                |               | 5.4      |      |  |     
|Corporate                                                                                   |               | 34.3     |      |  |     
|                                                                                            |               |          |      |  |     
|                                                                                            | $             | 421.1    |      |  | $   
|                                                                                            |               |          |      |  |     
|Total
 assets:                                                                              |               |          |      |  |     
|Global
 Operations                                                                          | $             | 7,150.2  |      |  | $   
|Technology Solutions                                                                        |               | 499.7    |      |  |     
|Global Services                                                                             |               | 808.2    |      |  |     
|MicroSystems                                                                                |               | 273.5    |      |  |     
|Corporate                                                                                   |               | 2,282.4  |      |  |     
|                                                                                            |               |          |      |  |     
|                                                                                            | $             | 11,014.0 |      |  | $   
|                                                                                            |               |          |      |  |     

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The following enterprise-wide information
 for the fiscal years ended August 31, 2002, 2001 and 2000 is provided in accordance
 with SFAS No. 131. Geographic net sales information reflects the destination of
 the product shipped. Long-lived assets information is based on the physical location
 of the asset. The United States accounted for more than 10% of total sales and total
 assets in the periods presented. Malaysia accounted for more than 10% of total
 sales. For major customers information, the Companys operating segments contributed
 various percentages aggregating up to 10% or more of consolidated net sales for
 such customers identified in Note 13.



|                                      | 2002          |          | 2001 |   | 2000    
|------------------------------------- | ------------- | -------- | ---- | - | --------
|                                      |               |          |      |   |         
|                                      | (in millions)
|Net
 sales derived from:              |               |          |      |   |         
|PCB
 assembly                         | $             | 6,645.7  |      | $ | 13,738.3
|Systems build                         |               | 3,641.7  |      |   | 3,434.6 
|Technology Solutions products         |               | 860.3    |      |   | 1,207.9 
|Global
 Services                      |               | 822.7    |      |   | 311.5   
|MicroSystems                          |               | 305.8    |      |   |        
|                                      |               |          |      |   |         
|                                      | $             | 12,276.2 |      | $ | 18,692.3
|                                      |               |          |      |   |         
|Geographic net sales:                 |               |          |      |   |         
|United
 States                        | $             | 4,757.5  |      | $ | 8,774.4 
|Malaysia                              |               | 1,395.0  |      |   | 1,980.4 
|Latin America and other North America |               | 1,469.4  |      |   | 2,807.7 
|Europe                                |               | 2,036.1  |      |   | 3,398.8 
|Asia/Pacific                          |               | 2,618.2  |      |   | 1,731.0 
|                                      |               |          |      |   |         
|                                      | $             | 12,276.2 |      | $ | 18,692.3
|                                      |               |          |      |   |         
|Long-lived assets:                    |               |          |      |   |         
|United States                         | $             | 1,809.4  |      | $ | 1,592.8 
|Europe                                |               | 337.2    |      |   | 378.1   
|Asia/Pacific and other                |               | 2,207.4  |      |   | 2,255.4 
|                                      |               |          |      |   |         
|                                      | $             | 4,354.0  |      | $ | 4,226.3 
|                                      |               |          |      |   |         

NOTE 13. MAJOR CUSTOMERS

Net sales to major customers as a percentage
 of consolidated net sales were as follows:



|            | Years Ended August 31,
|----------- | ----------------------
|            |                       
|            | 2002                  
|            |                       
|Nortel      | 13.6%                 
|HP/Compaq** | 11.2%                 
|Cisco       | 10.9%                 
|Ericsson    | *                     



|*  | less than
 10%                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------
|** | percents
 in fiscal 2002, 2001 and 2000 reflect the combined net sales to HP and Compaq due
 to their merger in May 2002.

Solectron has concentrations of credit risk
 due to sales to these and other of Solectrons significant customers. In particular,
 Nortel accounts for approximately 15% of total accounts receivable at August 31,
 2002. The concentration of credit risk is intensified because the majority of Solectrons
 customers are in the same industry.

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NOTE 14. PURCHASE OF ASSETS

Fiscal 2002

During the third quarter of fiscal 2002,
 Solectron announced the completion of a three-year supply agreement to produce optical
 networking equipment for Lucent. As part of the three-year supply agreement, Solectron
 purchased equipment and inventory related to Lucents optical product lines
 for approximately $99.4 million in cash. Subsequently, as a result of significant
 changes in the marketplace and decreased demand, both parties reached a mutual agreement
 in principle on October 21, 2002 to unwind this supply agreement. Solectron has
 agreed to unwind their outsourcing and asset purchase transaction involving Lucents
 optical networking systems in Andover, Massachusetts. It is expected to conclude
 with Lucent a definitive agreement to unwind the May 31, 2002 transaction in Solectrons
 first quarter of fiscal 2003. Under the general terms of the agreement in
 principle, Lucent will repurchase the equipment and unused inventory that Solectron
 acquired in May 2002. Solectron will continue to produce and support a portion of
 Lucents optical networking products through March 2003. Solectron does not
 anticipate any losses on changes to this supply agreement.

Fiscal 2001

During the second quarter of fiscal 2001,
 Solectron acquired IBMs European Repair Center in Amsterdam,
the Netherlands for
 approximately $10 million in cash. In addition, Solectron assumed responsibility
 for IBMs European repair, refurbishment and asset recovery services provided
 by the Amsterdam operations.

During the second quarter of fiscal 2001,
 Solectron completed the acquisition of Sonys manufacturing facilities in Nakaniida,
 Japan, and Kaohsiung, Taiwan for approximately $75 million in cash. The new sites
 provide a range of electronics manufacturing services to Sony and other customers.

Fiscal 2000

During the first quarter of fiscal 2000,
 Solectron acquired the manufacturing assets, primarily inventory and equipment,
 of IBMs Netfinity server operations in Greenock, Scotland in several phases
 for approximately $19.2 million. In addition, Solectron acquired certain IBM intellectual
 property rights included in the design and manufacture of PC server motherboards
 for $19.6 million. Solectron provides to IBM for three years fully integrated PCBA
 services including early prototyping, new product launch, assembly and test, volume
 production, end-of-life support and life cycle management.

During the second quarter of fiscal 2000,
 Solectron completed the acquisition of the complex systems manufacturing assets
 of Ericsson Telecom ABs telecommunications infrastructure equipment operations
 in Longuenesse, France, and Östersund, Sweden. The total purchase price for the
 manufacturing assets and intangible assets was approximately $162.2 million. As
 part of the agreement, Solectron provides a complete range of integrated supply-chain
 solutions to Ericsson Telecom AB.

During the third quarter of fiscal 2000,
 Solectron completed the acquisition of the manufacturing assets of Premisys Communications,
 Inc., a wholly owned subsidiary of Zhone Technologies, Inc. The total purchase price
 for the manufacturing assets and intangible assets was approximately $15.5 million.
 Zhone is a communications equipment provider integrating expertise in voice, video
 and data communications. Under the agreement, Solectron became Zhones virtual
 supply chain partner and signed a five-year commitment with Zhone to provide product
 life-cycle management services, including new product introduction process
 through repair and end-of-life services.

During the third quarter of fiscal 2000,
 Solectron acquired the manufacturing assets of several Nortel manufacturing facilities
 including Calgary, Canada; Research Triangle Park, North Carolina; Monterrey, Mexico;
 and Cwmcarn, Wales. Solectron provides prototyping, PCBA, small sub-assembly and
 repair services to Nortel in these locations. Also in the fourth quarter of fiscal
 2000, Solectron completed the purchase of manufacturing assets at two Nortel manufacturing
 and repair facilities located in Pont de Buis and Douarnenez, the Brittany region
 of France, and in Monkstown, Northern Ireland, United Kingdom for which Solectron
 will offer prototyping, PCBA, small sub-assembly and repair services to Nortel.
 The aggregate purchase price of the Nortel assets was approximately $900 million.

The purchase price of the asset purchases
 referred to above was allocated to the assets acquired, primarily inventory, fixed
 assets and identifiable intangibles, based on the estimated fair values at each
 acquisition date.

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NOTE 15. BUSINESS COMBINATIONS

Fiscal 2002

C-MAC Industries, Inc. (C-MAC)

During the second quarter of 2002, Solectron
 completed its acquisition of 100% of the outstanding common stock of C-MAC, which
 provides a comprehensive portfolio of electronic manufacturing services and solutions
 to customers worldwide. The Company attributes the goodwill in this transaction
 to managements belief that the acquisition will enable Solectron to create
 a diversified provider of integrated electronic manufacturing solutions that can
 benefit from complementary high-end technology capabilities, selected vertical integration
 and improved access to growth opportunities and meet the growing demand by customers
 for complete supply-chain management solutions.

The Company issued approximately 98.8 million
 shares of its common stock, 52.5 million exchangeable shares of Solectron Global
 Services Canada Inc., which are exchangeable on a one-to-one basis for Solectron
 Corporations common stock, and 5.2 million options to purchase Solectron Corporations
 common stock in the transaction. The purchase price was $2,566.9 million,
 consisting of stock valued at $2,487.2 million, stock options valued at $63.1 million
 and direct acquisition costs of $22 million reduced by the intrinsic value of unvested
 stock options of $5.4 million. The value of the common stock issued was determined
 based on the average market price of Solectrons common stock over the five-day
 period before and after the terms of the acquisition were agreed to and announced.

The Companys statements of operations
 include C-MACs results from the acquisition date. The following unaudited
 pro forma financial information presents the combined results of operations of Solectron
 and C-MAC as if the acquisition had occurred as of the beginning of fiscal 2002
 and 2001. The pro forma financial information does not necessarily reflect the
 results of operations that would have occurred if Solectron and C-MAC constituted
 a single entity during such periods.



|                        | 2002                                  |          | 2001
|----------------------- | ------------------------------------- | -------- | ----
|                        |                                       |          |     
|                        | (in millions, except per-share
 data)
|Net
 sales              | $                                     | 12,518.7 |     
|Net loss                | $                                     | (3,133.7 | )   
|Basic
 loss per share   | $                                     | (3.82    | )   
|Diluted
 loss per share | $                                     | (3.82    | )   

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The following table summarizes the estimated
 fair values of the assets acquired and liabilities assumed at the date of acquisition
 (in millions):



|Accounts receivable        | $ | 277.4   |  
|-------------------------- | - | ------- | -
|Inventory                  |   | 362.1   |  
|Other
 current assets      |   | 214.5   |  
|Property and equipment     |   | 213.3   |  
|Goodwill                   |   | 2,114.9 |  
|Other intangible assets    |   | 25.6    |  
|Other
assets               |   | 45.7    |  
|                           |   |         |  
|Total
 assets acquired     | $ | 3,253.5 |  
|                           |   |         |  
|Current
 liabilities       | $ | (316.5  | )
|Long-term debt             |   | (337.8  | )
|Other liabilities          |   | (32.3   | )
|                           |   |         |  
|Total
 liabilities assumed | $ | (686.6  | )
|                           |   |         |  

Certain allocations above are based on managements
 preliminary estimate of assets acquired and liabilities assumed. In connection
 with the C-MAC acquisition, Solectron intends to close certain locations and terminate
 employees at those sites. Solectron estimated the impact of these activities and
 has recorded the affected assets at net realizable value and accrued approximately
 $30 million in employee severance liabilities upon acquisition. The Company is
 presently awaiting a final appraisal of the C-MAC assets acquired and certain of
 the recorded amounts may change based on the results of the appraisals. It is expected
 that the final appraisal will be completed during the first quarter of fiscal 2003.





The intangible assets acquired had a fair
 value of approximately $26 million based on an independent valuation. All the intangible
 assets resulting from the acquisition are classified under the other
 category of the table of intangible assets presented in Note 17. The weighted-average
 useful life of these intangible assets is approximately six years. Solectron does
 not expect these assets to have a residual value upon full amortization.

The $2.1 billion of goodwill resulting from
 the C-MAC transaction was assigned to the Global Operations, Technology Solutions
 and MicroSystems business units in the amounts of $2.0 billion, $25 million and
 $68 million, respectively. Approximately $300 million of these amounts is expected
 to be deductible for tax purposes.

Other acquisitions

During the first quarter of 2002, Solectron
 completed its acquisition of Iphotonics, Inc., an optical products manufacturer,
 for approximately 10.2 million shares of Solectron common stock and 428,000 options
 to purchase Solectrons common stock. The purchase price was $125.2 million,
 consisting of stock valued at $121.6 million, stock options valued at $3.1 million
 and direct acquisition costs of $0.5 million. This transaction resulted in goodwill
 of approximately $105 million within the Global Operations business unit. The value
 of the common stock issued was determined based on the average market price of Solectrons
 common stock over the five-day period before and after the terms
 of the acquisition were agreed to and announced.

During the first quarter of 2002, Solectron
 completed its acquisition of Stream International, Inc., a global customer relationship
 management provider, for approximately $366.6 million in cash. This transaction
 resulted in goodwill of approximately $271 million within the Global Services business
 unit.

During the second quarter of fiscal 2002,
 Solectron completed its acquisition of Artesyn Solutions, Inc. for approximately
 $36.4 million in cash. Artesyn Solutions, Inc. is a provider of extensive repair,
 refurbishment, logistics and supply-chain management and end-of-life planning services
 for customers in the computer, printer, storage, server, wireless and consumer electronics
 sector. This transaction resulted in goodwill of approximately $32.9 million within
 the Global Services business unit.

During the third quarter of 2002, Solectron
 announced the completion of its acquisition of NEC Ibaraki, a provider of manufacturing,
 fulfillment and demand forecasting services. The purchase price of the acquisition
 was approximately $16.6 million in cash. No goodwill resulted from this transaction.

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During the fourth quarter of 2002, Solectron
 completed its acquisition of MDT, a global provider of after-sales services for
 the communications, computer and electronic storage markets for approximately $70
 million in cash. This transaction resulted in goodwill of approximately $85.9 million
 within the Global Services business unit.

Pro forma financial information related
 to Iphotonics, Stream, Artesyn, NEC Ibaraki, and MDT are not provided as their operations
 were not significant individually or in the aggregate to Solectron as a whole.

Fiscal 2001

NatSteel Electronics Ltd (NEL)

During the second quarter of 2001, Solectron
 completed its acquisition of NEL, a competitor. Solectron purchased all of the outstanding
 issued share capital and convertible bonds for $2.3 billion and $122.4 million,
 respectively, in cash. The acquisition was accounted for using the purchase method
 and resulted in goodwill of approximately $2.0 billion within the Global Operations
 business unit. As part of the acquisition, Solectron gained key manufacturing sites
 in China, Hungary, Indonesia, Malaysia, Mexico, Singapore and United States.

The following table summarizes the estimated
 fair values of the assets acquired and liabilities assumed at the date of acquisition
 (in millions):



|Cash                                     | $ | 55.3    |  
|---------------------------------------- | - | ------- | -
|Accounts receivable                      |   | 357.3   |  
|Inventory                                |   | 393.8   |  
|Other current assets                     |   | 48.6    |  
|Property and equipment                   |   | 242.4   |  
|Goodwill                                 |   | 1,974.9 |  
|Other assets                             |   | 75.2    |  
|                                         |   |         |  
|Total
 assets acquired                   | $ | 3,147.5 |  
|                                         |   |         |  
|Short-term debt                          | $ | (251.5  | )
|Accounts payable and accrued liabilities |   | (428.9  | )
|Other liabilities                        |   | (12.4   | )
|                                         |   |         |  
|Total liabilities assumed                | $ | (692.8  | )
|                                         |   |         |  

The following unaudited pro forma financial
 information presents the combined results of operations of Solectron and NEL as
 if the acquisition had occurred as of the beginning of fiscal 2001 and 2000. The
 pro forma financial information does not necessarily reflect the results of operations
 that would have occurred had Solectron and NEL constituted a single entity during
 such periods.



|                                | 2001                                  |          |   | 2000
|------------------------------- | ------------------------------------- | -------- | - | ----
|                                |                                       |          |  
|                                | (in millions,
 except per-share data)
|Net sales                       | $                                     | 19,734.7 |   |     
|Net income (loss)               | $                                     | (210.1   | ) |     
|Basic income (loss) per share   | $                                     | (0.33    | ) |     
|Diluted income (loss) per share | $                                     | (0.33    | ) |     

Other acquisitions

During the third quarter of fiscal year
 2001, Solectron issued approximately 2.2 million shares of common stock to acquire
 all of the outstanding capital stock of Centennial. The acquisition, valued at approximately
 $64.5 million, was accounted for using the purchase method and resulted in goodwill
 of approximately $45.8 million within the Technology Solutions business unit. As
 a result of the transaction, Solectron gained all of Centennials design, manufacturing
 and marketing capabilities, which include memory module and

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memory card solutions based on SRAM and flash
 technologies for OEMs and end-users in markets such as telecommunications, data communications,
 mobile computing and medical.

During the fourth quarter of fiscal 2001,
 Solectron completed the acquisition of Shinei, a privately held manufacturer and
 designer of enclosures for electronics products. The acquisition, valued at approximately
 $72.9 million, was accounted for using the purchase method and resulted in goodwill
 of approximately $63.3 million within the Global Operations business unit.

Pro forma financial information related
 to Centennial and Shinei is not provided as their operations were not significant
 individually or in the aggregate to Solectron as a whole.

Fiscal 2000

During the first quarter of fiscal 2000,
 Solectron acquired NULOGIX Technical Services, Inc. (NULOGIX), a wholly owned subsidiary
 of IBM Canada, in its entirety. NULOGIX is located in Vaughan, Ontario, Canada,
 and specializes in repair, manufacturing and refurbishment. The purchase price was
 approximately $4.0 million. The acquisition was accounted for as a purchase of a
 business resulting in goodwill of approximately $1.4 million within the Global Services
 business unit.

During the third quarter of fiscal 2000,
 Solectron completed the acquisition of Alcatels manufacturing business in
 Aguadilla, Puerto Rico (Alcatel). The purchase price was approximately $47.2 million.
 The acquisition was accounted for as a purchase of a business resulting in goodwill
 of approximately $13.3 million within the Global Operations business unit. Alcatel
 is a world leader in building next-generation networks and end-to-end data voice
 solutions. As part of the acquisition of Alcatels manufacturing business in
 Aguadilla, Solectron assumed full manufacturing responsibility for Alcatels
 PCBA products focused on the networking and telecommunication industries. Additionally,
 Solectron provides a full range of manufacturing services to Alcatel for three years
 including prototyping and high-volume PCBA.

Pro forma financial information related
 to NULOGIX and Alcatel is not provided as their operations were not significant
 individually or in the aggregate to Solectron as a whole.

NOTE 16 - RESTRUCTURING

Beginning in the second quarter of fiscal
 2001, Solectron initiated a restructuring of its operations in light of the current
 economic downturn. The measures, which included reducing the workforce, consolidating
 facilities and changing the strategic focus of a number of sites, was largely intended
 to align Solectrons capacity and infrastructure to anticipated customer demand
 as well as to rationalize its footprint worldwide.

Fiscal 2002

The employee severance and benefit costs
 included in these restructuring charges relate to the elimination of approximately
 15,000 full-time positions worldwide and all such positions have been eliminated
 under this plan. Approximately 69% of the positions eliminated were in the Americas
 region, 20% were in Europe and 11% were in Asia/Pacific. The employment reductions
 primarily affected employees in manufacturing and back office support functions
 within the Global Operations business unit. Facilities and equipment subject to
 restructuring were primarily located in the Americas and Europe within the Global
 Operations business unit. For leased facilities that will be abandoned and subleased,
 the lease costs represent future lease payments subsequent to abandonment less estimated
 sublease income. For owned facilities and equipment, the impairment loss recognized
 was based on the fair value less costs to sell, with fair value based on estimated
 of existing market prices for similar assets.

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During fiscal 2002, we recorded restructuring
 and impairment costs related to this plan of $615.5 million against earnings. These
 restructuring and impairment charges occurred primarily in the second and third
 quarters. The following table summarizes restructuring charges in fiscal 2002 (in
 millions):



|                                               |  | 2002 |       | Nature
|---------------------------------------------- |  | ---- | ----- | ------
|                                               |  |      |       |       
|Impairment of equipment                        |  | $    | 127.8 |       
|Impairment of facilities                       |  |      | 81.0  |       
|Impairment of IT software and other assets     |  |      | 162.1 |       
|                                               |  |      |       |       
|Impairment of equipment, facilities and others |  | $    | 370.9 |       
|Severance and benefit costs                    |  |      | 119.8 |       
|Loss on leased equipment                       |  |      | 23.8  |       
|Loss on leased facilities                      |  |      | 80.3  |       
|Other exit costs                               |  |      | 20.7  |       
|                                               |  |      |       |       
|Total                                          |  | $    | 615.5 |       
|                                               |  |      |       |       

Fiscal 2001

The employee severance and benefit costs
 included in these restructuring charges relate to the elimination of approximately
 11,800 full-time positions worldwide and all such positions have been eliminated
 under this plan. Approximately 67% of the positions eliminated were in the Americas
 region, 23% were in Europe and 10% were in Asia/Pacific. The employment reductions
 primarily affected employees in manufacturing and back office support functions
 within the Global Operations business unit. Facilities and equipment subject to
 restructuring were primarily located in the Americas and Europe within the Global
 Operations business unit. For leased facilities that will be abandoned and subleased,
 the lease costs represent future lease payments subsequent to abandonment less estimated
 sublease income. For owned facilities and equipment, the impairment loss recognized
 was based on the fair value less costs to sell, with fair value based on estimates
 of existing market prices for similar assets.

During fiscal 2001, we recorded restructuring
 and impairment costs related to this plan of $517.3 million against earnings. These
 restructuring and impairment charges occurred primarily in the third and fourth
 quarters. The following table summarizes restructuring charges in fiscal 2001 (in
 millions):



|                                                    |  | 2002 |       | Nature
|--------------------------------------------------- |  | ---- | ----- | ------
|                                                    |  |      |       |       
|Impairment of equipment                             |  | $    | 188.2 |       
|Impairment of facilities                            |  |      | 37.7  |       
|Impairment of goodwill, intangible and other assets |  |      | 42.2  |       
|                                                    |  |      |       |       
|Impairment of equipment, facilities and others      |  | $    | 268.1 |       
|Severance and benefit costs                         |  |      | 70.0  |       
|Loss on leased equipment                            |  |      | 117.5 |       
|Loss on leased facilities                           |  |      | 56.4  |       
|Other exit costs                                    |  |      | 5.3   |       
|                                                    |  |      |       |       
|Total                                               |  | $    | 517.3 |       
|                                                    |  |      |       |       

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The following table summarizes the restructuring
 accrual activity in fiscal 2001 and fiscal 2002 (in millions):



|                                        |  | Severanceand Benefits |        | Lease Paymentson Facilities |  | Lease Paymentson Equipment |       | Other |  | Total
|--------------------------------------- |  | --------------------- | ------ | --------------------------- |  | -------------------------- | ----- | ----- |  | -----
|                                        |  |                       |        |                             |  |                            |       |       |  |      
|Balance of accrual at September 1, 2000 |  | $                     |       |                             |  | $                          |      |       |  | $    
|Provision                               |  |                       | 70.0   |                             |  |                            | 56.4  |       |  |      
|Cash payment                            |  |                       | (70.0  | )                           |  |                            | (5.5  | )     |  |      
|                                        |  |                       |        |                             |  |                            |       |       |  |      
|Balance of accrual at August 31, 2001   |  |                       |       |                             |  |                            | 50.9  |       |  |      
|Provision                               |  |                       | 119.8  |                             |  |                            | 84.2  |       |  |      
|Provision adjustments                   |  |                       |       |                             |  |                            | (3.9  | )     |  |      
|Cash payment                            |  |                       | (113.7 | )                           |  |                            | (67.1 | )     |  |      
|                                        |  |                       |        |                             |  |                            |       |       |  |      
|Balance of accrual at August 31, 2002   |  | $                     | 6.1    |                             |  | $                          | 64.1  |       |  | $    
|                                        |  |                       |        |                             |  |                            |       |       |  |      

Accruals related to restructuring activities
 were recorded in accrued expenses in the accompanying consolidated balance sheet.

NOTE 17. GOODWILL AND OTHER INTANGIBLE
 ASSETS

In July 2001, the FASB issued SFAS No. 142,
 Goodwill and Other Intangible Assets. SFAS No. 142 requires that goodwill
 and intangible assets with indefinite useful lives no longer be amortized, but instead
 tested for impairment at least annually. SFAS No.142 also requires that intangible
 assets with definite useful lives be amortized over their respective estimated lives
 to their estimated residual values, and be reviewed for impairment according to
 SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
 Assets to Be Disposed Of.

SFAS No. 142 required that Solectron evaluate
 existing intangible assets and goodwill acquired in prior purchase business combinations,
 and to make any necessary reclassifications in order to conform to the new criteria
 in SFAS No. 141, Business Combinations, for recognition apart from goodwill.
 Upon adoption of SFAS No. 142, Solectron reassessed the useful lives and residual
 values of all intangible assets acquired in purchase business combinations, and
 no significant changes were deemed necessary. Solectron was also required to test
 the intangible assets for impairment within the first interim period and no impairment
 loss was deemed necessary.

For the transitional goodwill impairment
 evaluation, SFAS No. 142 required Solectron to perform an assessment of whether
 there was an indication that goodwill was impaired as of the date of adoption, or
 step one of the impairment test. To accomplish this, Solectron identified the reporting
 units to be consistent with the business units as defined in Note 12 except for
 the Technology Solutions and Global Services business units which
were disaggregated further.
 Solectron then determined the carrying value of each reporting unit by allocating
 the assets and liabilities, including the goodwill and intangible assets, to the
 units as of the date of adoption. Solectron had up to six months from the date
 of adoption to determine the fair value of each reporting unit and compare it to
 the reporting units carrying value. If a reporting units carrying amount
 exceeds its fair value, an indication exists that the reporting units goodwill
 is impaired and Solectron was required to perform the second step of the transitional
 impairment test. During the second quarter of fiscal 2002, Solectron performed step
 one of the transitional test and concluded that there was no impairment and no second
 step was necessary.

During the fourth quarter of fiscal 2002,
 Solectron performed its annual goodwill impairment test in accordance with SFAS
 No. 142 which included step one as described above for each of the reporting units.
 Results of step one indicated that an impairment existed within the Global Operations
 business unit since the estimated fair value, based on expected future discounted
 cash flows to be generated from the unit, was less than its carrying value. Pursuant
 to the second step of the test, Solectron compared the implied fair value of the
 units goodwill (determined by allocating the units fair value based
 on expected future discounted cash flows, to all its assets, recognized and unrecognized,
 and liabilities in a manner similar to a purchase price allocation for an acquired
 business) to its carrying amount. In connection with allocating the fair value
 of the Global Operations business unit, Solectron also obtained independent valuations
 of certain unrecognized intangible assets as well as fixed assets.

The discounted cash flow models used to
 determine the fair values of reporting units in the tests were prepared using revenue
 and expense projections based on Solectrons current operating plan. The revenue
 projections are managements best estimates considering current and expected
 economic and industry conditions. The discounted cash flow model also included a
 terminal value for years six and beyond that assumes future free cash flow growth
 ranging from 3% to 4% based on managements estimates and standard industry
 rates used by analysts monitoring Solectrons industry. The cash flows were
 discounted using a weighted average cost of capital ranging from 12% to 13% which
 is managements best estimate considering the debt and equity structure of
 the Company and external industry data. The discounted cash flows related to the
 terminal value represents approximately 84% of total expected future discounted
 cash flows.

67



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Significant negative industry and economic
 trends affecting Solectrons current and future operations as well as a significant
 decline in Solectrons stock price contributed to the fourth quarter impairment
 test resulting in an impairment of goodwill related to the Global Operations business
 unit of approximately $2.5 billion.

In addition, Solectron performed its quarterly
 impairment test of other intangible assets during the fourth quarter fiscal 2002.
 As a result, Solectron recorded an impairment charge related to a supply agreement
 with a major customer of approximately $191 million. This impairment occurred due
 to reduced expectations of sales to be realized under the Companys supply
 agreement with that customer and was measured by comparing the intangible assets
 carrying amount to the fair value as determined using a discounted cash
 flow model.

The impairments referred to above were recorded
 within Restructuring and Impairment Costs in the accompanying consolidated
 statements of operations for the year ended August 31, 2002.

Goodwill

The following table presents the impact
 of adopting SFAS No.142 on net income (loss) and net income (loss) per share had
 the standard been in effect for the fiscal years ended August 31, 2002, 2001 and
 2000.



|                                                |  | 2002                                 |          | 2001 |  | 2000
|----------------------------------------------- |  | ------------------------------------ | -------- | ---- |  | ----
|                                                |  |                                      |          |      |  |     
|                                                |  | (in millions, except per-share data)
|Net income (loss) as reported                   |  | $                                    | (3,110.2 | )    |  | $   
|Adjustments:                                    |  |                                      |          |      |  |     
|Amortization of goodwill, net of tax            |  |                                      |         |      |  |     
|                                                |  |                                      |          |      |  |     
|Adjusted net income (loss)                      |  | $                                    | (3,110.2 | )    |  | $   
|Basic net income (loss) per share as reported   |  | $                                    | (3.98    | )    |  | $   
|Basic net income (loss) per share adjusted      |  | $                                    | (3.98    | )    |  | $   
|Diluted net income (loss) per share as reported |  | $                                    | (3.98    | )    |  | $   
|Diluted net income (loss) per share adjusted    |  | $                                    | (3.98    | )    |  | $   
|Shares used to compute, as reported             |  |                                      |          |      |  |     
|Basic                                           |  |                                      | 780.9    |      |  |     
|Diluted                                         |  |                                      | 780.9    |      |  |     
|Shares used to compute, adjusted                |  |                                      |          |      |  |     
|Basic                                           |  |                                      | 780.9    |      |  |     
|Diluted                                         |  |                                      | 780.9    |      |  |     

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Goodwill information for each reportable
 segment is as follows (in millions):

Fiscal 2002

|                     |  | August 31,2001 |         | GoodwillAdditions |  | GoodwillImpairment   |         | August 31,2002
|-------------------- |  | -------------- | ------- | ----------------- |  | -------------------- | ------- | --------------
|                     |  |                |         |                   |  |                      |         |               
|Global Operations    |  | $              | 1,927.8 |                   |  | $                    | 2,181.1 |               
|Technology Solutions |  |                | 50.7    |                   |  |                      | 28.8    |               
|Global Services      |  |                | 8.7     |                   |  |                      | 398.9   |               
|MicroSystems         |  |                |        |                   |  |                      | 67.9    |               
|                     |  |                |         |                   |  |                      |         |               
|                     |  | $              | 1,987.2 |                   |  | $                    | 2,676.7 |               
|                     |  |                |         |                   |  |                      |         |               
|                     |  |                |         |                   |  |                      |         |               
|Fiscal 2001          |  |                |         |                   |  |                      |         |               
|                     |  | August 31,2000 |         | GoodwillAdditions |  | GoodwillAmortization |         | August 31,2001
|                     |  |                |         |                   |  |                      |         |               
|Global Operations    |  | $              | 18.4    |                   |  | $                    | 2,045.5 |               
|Technology Solutions |  |                | 12.5    |                   |  |                      | 41.0    |               
|Global Services      |  |                | 8.7     |                   |  |                      | 1.0     |               
|                     |  |                |         |                   |  |                      |         |               
|                     |  | $              | 39.6    |                   |  | $                    | 2,087.5 |               
|                     |  |                |         |                   |  |                      |         |               

Other Intangible Assets

The Companys intangible assets are
 categorized into three main classes; supply agreements, intellectual property agreements
 and other. The supply agreements primarily resulted from the Companys acquisitions
 of several Nortel manufacturing facilities during the third quarter of fiscal 2000.
 The second class primarily consists of intellectual property agreements resulting
 from Solectrons acquisitions of various IBM facilities in fiscal 1999 and
 2000. The third class, other, consists of miscellaneous acquisition related costs
 from the Companys various asset purchases. The following tables summarize
 the gross amounts and accumulated amortization for each major class as of August
 31, 2002 and 2001 (in millions):

Fiscal
 2002

|                         |  | SupplyAgreement |        | Intellectual Property
Agreement |  | Other |       | Total
|------------------------ |  | --------------- | ------ | ------------------------------- |  | ----- | ----- | -----
|                         |  |                 |        |                                 |  |       |       |      
|Gross amount             |  | $               | 445.1  |                                 |  |       | 106.4 |      
|Accumulated amortization |  |                 | (80.7  | )                               |  |       | (34.6 | )    
|Impairment               |  |                 | (191.2 | )                               |  |       |      |      
|                         |  |                 |        |                                 |  |       |       |      
|Carrying value           |  | $               | 173.2  |                                 |  | $     | 71.8  |      
|                         |  |                 |        |                                 |  |       |       |      

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Fiscal
 2001

|
|
|
|
|
|
|
|
|
|

Amortization expense was $61.5 million and
 $82.2 million, respectively, in fiscal 2002 and 2001. The Company expects that its
 annual amortization expense reportable as required by SFAS No. 142 for these intangibles
 for each of the next five fiscal years would be approximately $57 million each year
 based on existing balances.

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NOTE 18. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation
 of basic and diluted net income (loss) per share:



|                                                                                                   | Years Ended August 31,              
|-------------------------------------------------------------------------------------------------- | ------------------------------------
|                                                                                                   |                                     
|                                                                                                   | 2002                                
|                                                                                                   |                                     
|                                                                                                   | (in millions, except per-share data)
|Net income (loss) before
 cumulative effect of change in accounting principle, net of income taxes | $                                   
|Cumulative effect of change in accounting principle, net of income taxes                           |                                     
|                                                                                                   |                                     
|Net income (loss) - basic                                                                          | $                                   
|                                                                                                   |                                     
|Weighted average shares - basic                                                                    |                                     
|Common shares issuable upon exercise of stock options                                              |                                     
|                                                                                                   |                                     
|Weighted average shares-diluted                                                                    |                                     
|                                                                                                   |                                     
|Basic net income (loss) per share:                                                                 |                                     
|Income (loss) before cumulative effect of change in accounting principle                           | $                                   
|Cumulative effect of change in accounting principle                                                |                                     
|                                                                                                   |                                     
|Net income (loss) per share                                                                        | $                                   
|                                                                                                   |                                     
|Diluted net income (loss) per share:                                                               |                                     
|Income (loss) before cumulative effect of change in accounting principle                           | $                                   
|Cumulative effect of change in accounting principle                                                |                                     
|                                                                                                   |                                     
|Net income (loss) per share                                                                        | $                                   
|                                                                                                   |                                     

In fiscal 2002 and 2001, common shares issuable
 upon exercise of stock options were excluded from the diluted calculation because
 the effect was anti-dilutive. Stock options with exercise prices greater than the
 average fair market price for a period, which are defined as anti-dilutive, are
 not included in the diluted earnings per share calculations because of their anti-dilutive
 effect. As a result, 3.1 million options were excluded from the diluted calculation
 in fiscal 2000.

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In addition, the calculations for the years
 ended August 31, 2002, 2001 and 2000 did not include 57.6, 100.5 and 39.7 million
 common shares, respectively, issuable upon conversion of the LYONs as they would
 have been anti-dilutive. The calculation for the year ended August 31, 2002 also
 did not include 78.0 million common shares issuable upon conversion of the Companys
 ACES, as the effect would have been anti-dilutive.

72



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INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders
Solectron Corporation:

We have audited the accompanying consolidated
 balance sheets of Solectron Corporation and subsidiaries as of August 31, 2002 and
 2001, and the related consolidated statements of operations, stockholders
 equity, comprehensive income (loss), and cash flows for each of the years in the
 three-year period ended August 31, 2002. In connection with our audits of the consolidated
 financial statements, we also have audited the financial statement schedule. These
 consolidated financial statements and financial statement schedule are the responsibility
 of the Companys management. Our responsibility is to express an opinion on
 these consolidated financial statements and financial statement schedule based on
 our audits.

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 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 audits provide a reasonable
 basis for our opinion.

In our opinion, the consolidated financial
 statements referred to above present fairly in all material respects, the financial
 position of Solectron Corporation and subsidiaries as of August 31, 2002 and 2001,
 and the results of their operations and their cash flows for each of the years in
 the three-year period ended August 31, 2002, in conformity with accounting principles
 generally accepted in the United States of America. Also in our opinion, the related
 financial statement schedule, when considered in relation to the basic consolidated
 financial statements taken as a whole, presents fairly, in all material respects,
 the information set forth therein.

As discussed in Note 1 to the consolidated
 financial statements, the Company adopted the provisions of Statement of Financial
 Accounting Standards No. 142, Goodwill and Other Intangible Assets
on September 1, 2001.

/s/ KPMG LLPMountain View, CaliforniaOctober 31,
 2002

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ITEM 9. CHANGES IN AND DISAGREEMENTS
 WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



Not applicable.


74



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##### Table of Contents






PART III

SARBANES-OXLEY ACT OF 2002

Sections 201 and 202 of the Sarbanes-Oxley
 Act of 2002 (the Act), signed into law on July 30, 2002, requires that
 all audit services and non-audit services by the independent auditors (KPMG) must
 be pre-approved by the Companys Audit Committee. Furthermore, the Act prohibits
 an auditor from performing certain non-audit services for an audit client regardless
 of the Audit Committees approval, subject to exceptions issued by the Public
 Company Accounting Oversight Board.

On August 21, 2002, the Audit Committee
 of the Company approved certain non-audit services to be performed by KPMG. The
 approved non-audit services included tax services, employee benefit plan audits,
 statutory filings, import and export reviews, foreign exchange control audits, custom
 audits, and certain acquisitions and divestitures.




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
 OF THE REGISTRANT

The information required by Item 10 regarding
 our directors is incorporated by reference from the information under the caption
 Election of Directors in Solectrons definitive Proxy Statement
 (Notice of Annual Meeting of Stockholders) for the fiscal year ended
August 30,
 2002 to be held on January 15, 2003 which we will file with the Securities and Exchange
 Commission within 120 days after the end of the fiscal year covered
by this Report. The information
 required by Item 10 regarding our executive officers appears immediately following
 Item 4 under Part I of this Report.




ITEM 11: EXECUTIVE COMPENSATION

The information required by item 11 of Form
 10-K is incorporated by reference to the information contained in the section captioned
 Executive Officer Compensation of Solectrons
definitive Proxy Statement.




ITEM 12: SECURITY OWNERSHIP OF CERTAIN
 BENEFICIAL OWNERS AND MANAGEMENT

Information regarding this item is incorporated
 herein by reference from the section entitled Security Ownership of Certain Beneficial
 Owners and Management, Securities Authorized for Issuance
under Equity Compensation Plans, and Change-in-Control
Agreements in Solectrons definitive Proxy Statement.




ITEM 13: CERTAIN RELATIONSHIPS AND RELATED
 TRANSACTIONS

Information with respect to this item is
 incorporated herein by reference from the section entitled Certain Relationships
 and Related Transactions in Solectrons definitive Proxy Statement.




ITEM 14: CONTROLS AND PROCEDURES



|(a) | Evaluation
 of disclosure controls and procedures. Based on their evaluation as of a date within
 90 days of the filing date of this Annual Report on Form 10-K, the Companys
 principal executive officer and principal financial officer have concluded that
 the Companys disclosure controls and procedures (as defined in Rules 13a-14(c)
 and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange Act) are
 effective to ensure that information required to be disclosed by the Company in
 reports that it files or submits under the Exchange Act is recorded, processed,
 summarized and reported within the time periods specified in Securities and Exchange
 Commission rules and forms.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | Changes
 in internal controls. There were no significant changes in the Companys internal
 controls or in other factors that could significantly affect these controls subsequent
 to the date of their evaluation. There were no significant deficiencies or material
 weaknesses, and therefore there were no corrective actions taken.                                                                                                                                                                                                                                                                                                                                                                                         

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PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 AND REPORTS ON FORM 8-K



|(a)(1) | Financial
 Statements. The financial statements listed in Item 8: Financial Statements
 and Supplementary Data, above are filed as part of this Annual Report on Form
 10-K, beginning on page 35.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                     
|(a)(2) | Financial
 Statement Schedule. See Schedule II on page 78                                                                                                                                           
|       |                                                                                                                                                                                                     
|(a)(3) | Exhibits.
 The exhibits listed in the accompanying Index to Exhibits are filed
 as part of this Annual Report on Form 10-K.                                                                       
|       |                                                                                                                                                                                                     
|(b)    | Reports on
 Form 8-K. Not applicable.                                                                                                                                                               

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SIGNATURES

Pursuant to the requirements of Section
 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused
 this report to be signed on its behalf by the undersigned, thereunto duly authorized,
 in the City of Milpitas, State of California on November
 13, 2002.



| | SOLECTRON
 CORPORATION   
| | -------------------------
| |                          
| | By: /S/ Koichi
 Nishimura
| |                          
| |                          
| |                          
| |                          

Pursuant to the requirements of the Exchange
 Act of 1934, this report has been signed by the following persons in the capacities
 and on the dates indicated:



|Signature |                            | Title                   |                                              | Date
|--------- | -------------------------- | ----------------------- | -------------------------------------------- | ----
|          |                            |                         |                                              |     
|/S/       | Koichi Nishimura           |                         | President, Chief Executive Officer and       |     
|          |                            | Chairman of the Board   |                                              |     
|          | Koichi Nishimura, Ph.D.    |                         | (Principal Executive Officer)                |     
|          |                            |                         |                                              |     
|/S/       | Kiran Patel                |                         | Executive Vice President and                 |     
|          |                            | Chief Financial Officer |                                              |     
|          | Kiran Patel                |                         | (Principal Financial and Accounting Officer) |     
|          |                            |                         |                                              |     
|/S/       | Richard A. DAmore         |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Richard A. DAmore         |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | Charles A. Dickinson       |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Charles A. Dickinson       |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | Heinz Fridrich             |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Heinz Fridrich             |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | William A. Hasler          |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | William A. Hasler          |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | Kenneth E. Haughton        |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Kenneth E. Haughton, Ph.D. |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | Paul R. Low                |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Paul R. Low, Ph.D.         |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | C. Wesley M. Scott         |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | C. Wesley M. Scott         |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | Ajay B. Shah               |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Ajay B. Shah               |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | Dennis Wood                |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Dennis Wood                |                         |                                              |     
|          |                            |                         |                                              |     
|/S/       | Osamu Yamada               |                         | Director                                     |     
|          |                            |                         |                                              |     
|          | Osamu Yamada               |                         |                                              |     

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FINANCIAL STATEMENT SCHEDULE

The financial statement Schedule II-VALUATION
 AND QUALIFYING ACCOUNTS is filed as part of this Form 10-K.

SOLECTRON CORPORATION AND
 SUBSIDIARIES

SCHEDULE II  VALUATION
 AND QUALIFYING ACCOUNTS

(in millions)



|                                           |  |   |                              |  |  | Additions |                     |  |  |   |              |  |  |   |             
|------------------------------------------ |  | - | ---------------------------- |  |  | --------- | ------------------- |  |  | - | ------------ |  |  | - | ------------
|                                           |  |   |                              |  |  |           |                     |  |  |   |              |  |  |   |             
|                                           |  |   | Balance atBeginningof Period |  |  |           | ChargedToOperations |  |  |   | Acquisitions |  |  |   | (Deductions)
|                                           |  |   |                              |  |  |           |                     |  |  |  
|Year ended August 31, 2002:                |  |   |                              |  |  |           |                     |  |  |   |              |  |  |   |             
|Allowance for doubtful accounts receivable |  | $ | 40.8                         |  |  | $         | 9.2                 |  |  | $ | 47.6         |  |  | $ | (10.9       
|Year ended August 31, 2001:                |  |   |                              |  |  |           |                     |  |  |   |              |  |  |   |             
|Allowance for doubtful accounts receivable |  | $ | 8.6                          |  |  | $         | 33.6                |  |  | $ | 44.1         |  |  | $ | (45.5       
|Year ended August 31, 2000:                |  |   |                              |  |  |           |                     |  |  |   |              |  |  |   |             
|Allowance for doubtful accounts receivable |  | $ | 6.4                          |  |  | $         | 5.1                 |  |  | $ |             |  |  | $ | (2.9        

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CERTIFICATION OF CHIEF EXECUTIVE
 OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302(a) OF THE SARBANESOXLEY
 ACT OF 2002



| | I, Koichi Nishimura, certify that:
| | ----------------------------------
| |                                   
| | 1.                                
| |                                   
| | 2.                                
| |                                   
| | 3.                                
| |                                   
| | 4.                                
| |                                   
| |                                   
| |                                   
| |                                   
| |                                   
| |                                   
| |                                   
| | 5.                                
| |                                   
| |                                   
| |                                   
| |                                   
| |                                   
| | 6.                                

Date: November 13, 2002



| | /S/
 Koichi Nishimura                 
| | --------------------------------------
| |                                       
| | Koichi Nishimura,
 Ph.D.              
| | President
 and Chief Executive Officer

79



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##### Table of Contents





| | I, Kiran Patel, certify that:
| | -----------------------------
| |                              
| | 1.                           
| |                              
| | 2.                           
| |                              
| | 3.                           
| |                              
| | 4.                           
| |                              
| |                              
| |                              
| |                              
| |                              
| |                              
| |                              
| | 5.                           
| |                              
| |                              
| |                              
| |                              
| |                              
| | 6.                           



Date: November 13, 2002



| | /S/ Kiran Patel                                      
| | -----------------------------------------------------
| |                                                      
| | Kiran Patel                                          
| | Executive
 Vice President and Chief Financial Officer

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INDEX TO EXHIBITS



|ExhibitNumber |  | Exhibit Title                                                                                                                                                                                                                                                       
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                     
|2.1 [A]       |  | Combination
 Agreement, dated as of August 8, 2001, by and among Registrant, 3924548 Canada Inc.
 and C-MAC Industries.                                                                                                                                             
|              |  |                                                                                                                                                                                                                                                                     
|2.2 [A]       |  | Amendment
 No. 1 to the Combination Agreement, dated as of September 7, 2001, by and among
 the Registrant, 3924548 Canada Inc., C-MAC Industries Inc. and Solectron Global
 Services Canada, Inc.                                                                  
|              |  |                                                                                                                                                                                                                                                                     
|3.1 [B]       |  | Certificate
 of Incorporation of the Registrant, as amended.                                                                                                                                                                                                        
|              |  |                                                                                                                                                                                                                                                                     
|3.2 [C]       |  | Bylaws of
 the Registrant, as amended.                                                                                                                                                                                                                              
|              |  |                                                                                                                                                                                                                                                                     
|3.3 [D]       |  | Certificate
 of Designation Rights, Preferences and Privileges of Series A Participating Preferred
 Stock of the Registrant.                                                                                                                                        
|              |  |                                                                                                                                                                                                                                                                     
|4.1 [E]       |  | Supplemental
 Indenture, dated as of May 8, 2000, by and between the Registrant and State Street
 Bank and Trust Company of California N.A., as Trustee.                                                                                                            
|              |  |                                                                                                                                                                                                                                                                     
|4.2 [F]       |  | Supplemental
 Indenture, dated as of November 20, 2000, by and between the Registrant and State
 Street Bank and Trust Company of California N.A., as Trustee.                                                                                                      
|              |  |                                                                                                                                                                                                                                                                     
|4.3 [G]       |  | Preferred
 Stock Rights Agreement, dated as of June 29, 2001, as amended December 3, 2001,
 by and between the Registrant and EquiServe Trust Company, N.A., as Rights Agent.                                                                                       
|              |  |                                                                                                                                                                                                                                                                     
|4.4 [H]       |  | Senior Debt
 Securities Indenture, dated as of February 6, 2002, by and between the Registrant
 and State Street and Trust Company of California, N.A., as Trustee.                                                                                                 
|              |  |                                                                                                                                                                                                                                                                     
|4.5 [I]       |  | Subordinated
 Debt Securities Indenture, dated as of December 27, 2001, by and between the Registrant
 and State Street Bank and Trust Company of California, N.A., as Trustee.                                                                                     
|              |  |                                                                                                                                                                                                                                                                     
|4.6 [H]       |  | First Supplemental
 Indenture, dated as of February 6, 2002, by and between the Registrant and State
 Street Bank and Trust Company of California, N.A., as Trustee.                                                                                                
|              |  |                                                                                                                                                                                                                                                                     
|4.7 [I]       |  | First Supplemental
 Indenture, dated as of December 27, 2001, by and between the Registrant and State
 Street Bank and Trust Company of California, N.A., as Trustee.                                                                                               
|              |  |                                                                                                                                                                                                                                                                     
|4.8 [H]       |  | Purchase Contract
 Agreement, dated as of December 27, 2001, by and between the Registrant and State
 Street Bank and Trust Company of California, N.A., as purchase contract agent.                                                                                
|              |  |                                                                                                                                                                                                                                                                     
|4.9 [H]       |  | Pledge Agreement,
 dated as of December 27, 2001, among the Registrant, U.S. Bank Trust, N.A., as collateral
 agent, custodial agent, and securities intermediary, and State Street Bank and Trust
 Company of California, N.A., as purchase contract agent.        
|              |  |                                                                                                                                                                                                                                                                     
|4.10 [H]      |  | Pledge Agreement,
 dated as of December 27, 2001, between the Registrant and State Street Bank and
 Trust Company of California, N.A., as the Trustee for the holders of the Debentures.                                                                            
|              |  |                                                                                                                                                                                                                                                                     
|4.11 [J]      |  | Amendment
 No. 1 made and entered into as of January 8, 2002 to Pledge Agreement dated as of
 December 27, 2001 between the Registrant and State Street Bank and Trust Company
 of California, N.A., as the Trustee for the holders of the Debentures.              
|              |  |                                                                                                                                                                                                                                                                     
|4.12 [H]      |  | Control Agreement,
 dated as of December 27, 2001, by and between the Registrant and State Street Bank
 and Trust Company of California, N.A., as Trustee and as securities intermediary
 and depository bank.                                                      
|              |  |                                                                                                                                                                                                                                                                     
|4.13 [J]      |  | Amendment
 No. 1 made and entered into as of January 8, 2002 to Control Agreement dated as
 of December 27, 2001 between the Registrant and State Street Bank and Trust Company
 of California, N.A., as Trustee and as securities intermediary and depository bank.
|              |  |                                                                                                                                                                                                                                                                     
|10.1 [K]      |  | Form of Indemnification
 Agreement by and between the Registrant and its officers, directors and certain
 other employees.                                                                                                                                          
|              |  |                                                                                                                                                                                                                                                                     



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##### Table of Contents





|ExhibitNumber |  | Exhibit Title                                                                                                                                                                                                                                                                                                                
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                              
|10.2 [L]      |  | 1988 Employee
 Stock Purchase Plan, as amended October 1992.                                                                                                                                                                                                                                                                 
|              |  |                                                                                                                                                                                                                                                                                                                              
|10.3 [M]      |  | Amended and
 Restated 1992 Stock Option Plan.                                                                                                                                                                                                                                                                                
|              |  |                                                                                                                                                                                                                                                                                                                              
|10.4 [M]      |  | 2002 Stock
 Option Plan.                                                                                                                                                                                                                                                                                                     
|              |  |                                                                                                                                                                                                                                                                                                                              
|10.5 [N]      |  | Three-Year
 facility Credit Agreement, dated as of February 14, 2002, as amended June 18, 2002,
 among the Registrant and Goldman, Sachs Credit Partners, L.P., Bank of America,
 N.A., JP Morgan Chase Bank and The Bank of Nova Scotia.                                                                                    
|              |  |                                                                                                                                                                                                                                                                                                                              
|10.6 [N]      |  | 364-Day Facility
 Credit Agreement, dated as of February 14, 2002, as amended June 18, 2002, among
 the Registrant and Goldman, Sachs Credit Partners, L.P., Bank of America, N.A.,
 JP Morgan Chase Bank and The Bank of Nova Scotia.                                                                                       
|              |  |                                                                                                                                                                                                                                                                                                                              
|12.1          |  | Computation
 of ratios of earnings to fixed charges.                                                                                                                                                                                                                                                                         
|              |  |                                                                                                                                                                                                                                                                                                                              
|21.1          |  | Subsidiaries
 of the Registrant.                                                                                                                                                                                                                                                                                             
|              |  |                                                                                                                                                                                                                                                                                                                              
|23.1          |  | Consent of
 KPMG LLP, Independent Auditors.                                                                                                                                                                                                                                                                                  
|              |  |                                                                                                                                                                                                                                                                                                                              
|99.1          |  | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
 to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                         
|              |  |                                                                                                                                                                                                                                                                                                                              
|99.2          |  | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
 to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                         
|              |  |                                                                                                                                                                                                                                                                                                                              
|Footnotes:    |  |                                                                                                                                                                                                                                                                                                                              
|              |  |                                                                                                                                                                                                                                                                                                                              
|[A]           |  | Incorporated
 by reference from the Registrants Registration Statement on Form S-4 filed
 with the Securities and Exchange Commission (the Commission) on September
 10, 2001 (File No. 333-69182) (included as Annex A-1 and A-2 to the C-MAC Management
 Information Circular and Solectron Proxy Statement/Prospectus).
|              |  |                                                                                                                                                                                                                                                                                                                              
|[B]           |  | Incorporated
 by reference from Exhibit 3.1 filed with the Registrants Form 10-Q for the
 quarter ended February 28, 2001, Exhibit 3.1 filed with the Registrants Form
 10-Q for the quarter ended February 25, 2000, and Exhibit 3.1 filed with the Registrants
 Form 10-Q for the quarter ended February 26, 1999.      
|              |  |                                                                                                                                                                                                                                                                                                                              
|[C]           |  | Incorporated
 by reference from Exhibit 3.2 of Registrants Annual Report on Form 10-K for
 fiscal year ended August 31, 1997, Exhibit 3.2 filed with the Registrants
 Form 10-Q for the quarter ended February 26, 1999 and Exhibit 3.2 filed with the
 Registrants Form 10-Q for the quarter ended November 30, 2001.    
|              |  |                                                                                                                                                                                                                                                                                                                              
|[D]           |  | Incorporated
 by reference from Exhibit 3.3 filed with the Registrants Annual Report on
 Form 10-K for the fiscal year ended August 31, 2001.                                                                                                                                                                               
|              |  |                                                                                                                                                                                                                                                                                                                              
|[E]           |  | Incorporated
 by reference from Exhibit 1.1 of Registrants Form 8-K, filed with the Commission
 on May 16, 2000 (File No. 001-11098).                                                                                                                                                                                       
|              |  |                                                                                                                                                                                                                                                                                                                              
|[F]           |  | Incorporated
 by reference from Exhibits of Registrants Form 8-K, filed with the Commission
 on November 21, 2000 (File No. 001-11098).                                                                                                                                                                                     
|              |  |                                                                                                                                                                                                                                                                                                                              
|[G]           |  | Incorporated
 by reference from Exhibit 4.1 of Registrants Registration Statement on Form
 8-A filed with the Commission on July 13, 2001 (File No. 001-11098), and Exhibit
 4.2 to Amendment No. 1 of Form 8-A filed with the Commission on December 4, 2001
 (File No. 001-11098).                                        
|              |  |                                                                                                                                                                                                                                                                                                                              
|[H]           |  | Incorporated
 by reference from Exhibits of Registrants Form 8-K, filed with the Commission
 on February 8, 2002 (File No. 001-11098).                                                                                                                                                                                      
|              |  |                                                                                                                                                                                                                                                                                                                              
|[I]           |  | Incorporated
 by reference from Exhibits of Registrants Form 8-K, filed with the Commission
 on January 7, 2002 (File No. 001-11098).                                                                                                                                                                                       
|              |  |                                                                                                                                                                                                                                                                                                                              



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##### Table of Contents





|ExhibitNumber |  | Exhibit Title                                                                                                                                                                  
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                
|[J]           |  | Incorporated
 by reference from Exhibits of Registrants Amendment No. 1 to Form 8-K, filed
 with the Commission on January 10, 2002 (File No. 001-11098).                     
|              |  |                                                                                                                                                                                
|[K]           |  | Incorporated
 by reference from Exhibits of Registrants Form 10-K for the year ended August
 31, 1997.                                                                        
|              |  |                                                                                                                                                                                
|[L]           |  | Incorporated
 by reference from Exhibit of Registrants Form 10-K for the year ended August
 31, 1992.                                                                         
|              |  |                                                                                                                                                                                
|[M]           |  | Incorporated
 by reference from the Exhibit 4.2 of the Registrants Registration Statement
 on Form S8, filed with the Commission March 8, 2002 (File No. 333-84076).         
|              |  |                                                                                                                                                                                
|[N]           |  | Incorporated
 by reference from Exhibits of Registrants Form 10-Q for the quarter ended
 February 28, 2002 and the Registrants Form 10-Q for the quarter ended May
 31, 2002.
|              |  |