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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 20-F

o  Registration statement pursuant to Section 12(b) or (g)
of the Securities Exchange Act of 1934
orý  Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2008
oro  Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
oro  Shell company report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of event requiring this shell company report:

Commission file number: 1-14832



CELESTICA INC.(Exact name of registrant as specified in its charter)

Ontario, Canada(Jurisdiction of incorporation or organization)

12 Concorde Place, 5th Floor
Toronto, Ontario, Canada M3C 3R8(Address of principal executive offices)



SECURITIES REGISTERED OR TO BE REGISTERED
PURSUANT TO SECTION 12(b) OF THE ACT:

Subordinate Voting Shares (Title of Class)

The Toronto Stock Exchange
New York Stock Exchange (Name of each Exchange on which Registered)




SECURITIES REGISTERED OR TO BE REGISTERED
PURSUANT TO SECTION 12(g) OF THE ACT:N/A



SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION
PURSUANT TO SECTION 15(d) OF THE ACT:N/A



Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

199,580,858Subordinate Voting Shares

0 Preference Shares29,637,316 Multiple Voting Shares


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ý  No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. Yes o No ý

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 o  No ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer
and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

ý Large
accelerated filer                        o Accelerated filer
                         o Non-accelerated filer

Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o Item 18 ý

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No ý



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Table of Contents



TABLE OF CONTENTS



PagePart I

1Item 1.

Identity of Directors, Senior Management and Advisers

2Item 2.

Offer Statistics and Expected Timetable

2Item 3.

Key Information

2A.

Selected Financial Data

2B.

Capitalization and Indebtedness

4C.

Reasons for Offer and Use of Proceeds

4D.

Risk Factors

4Item 4.

Information on the Company

17A.

History and Development of the Company

17B.

Business Overview

18C.

Organizational Structure

27D.

Description of Property

27Item 4A.

Unresolved Staff Comments

28Item 5.

Operating and Financial Review and Prospects

29Item 6.

Directors, Senior Management and Employees

55A.

Directors and Senior Management

55B.

Compensation

59C.

Board Practices

85D.

Employees

87E.

Share Ownership

87Item 7.

Major Shareholders and Related Party Transactions

90A.

Major Shareholders

90B.

Related Party Transactions

91C.

Interests of Experts and Counsel

91Item 8.

Financial Information

92A.

Consolidated Statements and Other Financial Information

92B.

Significant Changes

92Item 9.

The Offer and Listing

92A.

Offer and Listing Details

92B.

Plan of Distribution

94C.

Markets

94D.

Selling Shareholders

94E.

Dilution

94F.

Expense of the Issue

94Item 10.

Additional Information

94A.

Share Capital

94B.

Memorandum and Articles of Incorporation

94C.

Material Contracts

95D.

Exchange Controls

95


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Table of Contents

PageE.

Taxation

95F.

Dividends and Paying Agents

100G.

Statement by Experts

100H.

Documents on Display

100I.

Subsidiary Information

101Item 11.

Quantitative and Qualitative Disclosures about Market Risk

101Item 12.

Description of Securities Other than Equity Securities

103Part II

103Item 1.

Defaults, Dividend Arrearages and Delinquencies

103Item 2.

Material Modifications to the Rights of Security Holders and Use of Proceeds

103Item 3.

Controls and Procedures

103Item 4.

[Reserved.]

103Item 16A.

Audit Committee Financial Expert

103Item 16B.

Code of Ethics

103Item 16C.

Principal Accountant Fees and Services

103Item 16D.

Exemptions from the Listing Standards for Audit Committees

104Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

104Item 16G.

Corporate Governance

104Part III

106Item 1.

Financial Statements

106Item 2.

Financial Statements

106Item 3.

Exhibits

107


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Table of Contents

Part I

In this Annual Report, "Celestica," the "Company," "we," "us" and "our" refer to Celestica Inc. and its
subsidiaries.

In this Annual Report, all dollar amounts are expressed in United States dollars, except where we state otherwise. All references to "U.S.$" or "$" are to
U.S. dollars and all references to "C$" are to Canadian dollars. Unless we indicate otherwise, any reference in this Annual Report to a conversion between U.S.$ and C$ is a conversion at the
average of the exchange rates in effect for the year ended December 31, 2008. During that period, based on the relevant noon buying rates in New York City for cable transfers in Canadian
dollars, as certified for customs purposes by the Federal Reserve Bank of New York, the average daily exchange rate was U.S.$1.00 = C$1.066.

Unless we indicate otherwise, all information in this Annual Report is stated as of February 23, 2009, the date as of which we prepared information for our
annual report to shareholders and management information circular and proxy statement.

Forward-Looking Statements

Item 4, "Information on the Company," "Management's Discussion and Analysis of Financial Condition and Results of Operations"
included in Item 5 and other sections of this Annual Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the
U.S. Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the U.S. Exchange Act, including, without limitation, statements related to our future
growth, trends in our industry, our financial or operational results and our financial or operational performance. Such forward-looking statements are predictive in nature, and may be based on current
expectations, forecasts or assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially from the forward-looking statements themselves. Such
forward-looking statements may, without limitation, be preceded by, followed by, or include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," or similar expressions,
or may employ such future or conditional verbs as "may," "will," "should" or "would" or may otherwise be indicated as forward-looking statements by grammatical construction, phrasing or context. For
those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995, and in applicable Canadian
securities legislation.

Forward-looking
statements are not guarantees of future performance. You should understand that the following important factors, in addition to those discussed in Item 3, "Key
Information  Risk Factors," and elsewhere in this Annual Report, could affect our future results and could cause those results to differ materially from those
expressed in such forward-looking statements: the challenges of effectively managing our operations during uncertain economic conditions, including significant changes in demand from our customers as
a result of the impact of the global economic crisis and capital markets weakness; the risk of potential non-performance by counterparties, including but not limited to financial
institutions, customers and suppliers, during uncertain economic conditions; the effects of price competition and other business and competitive factors generally affecting the electronics
manufacturing services (EMS) industry, including the trend for outsourcing; variability of operating results among periods; our dependence on a limited number of customers; the challenge of responding
to lower-than-expected customer demand; our dependence on industries affected by rapid technological change; our ability to successfully manage our international operations;
our inability to retain or grow our business due to execution problems resulting from significant headcount reductions, plant closures and product transfers associated with restructuring activities;
the challenge of managing our financial exposures to foreign currency fluctuations; and the delays in the delivery and/or general availability of various components used in our manufacturing process.
Our forward-looking statements are also based on various assumptions which management believes are reasonable under the current circumstances, but may prove to be inaccurate and many of which may
involve factors that are beyond the control of the Company. The material assumptions may include assumptions regarding the following: forecasts from our customers, which range from 30 days to
90 days; timing and investments associated with ramping new business; general economic and market conditions; currency exchange rates; pricing and competition; anticipated customer demand;
supplier performance and pricing; commodity, labor, energy and transportation costs; operational and financial matters; technological developments; and the timing and execution of our restructuring
plan. These assumptions are based on management's current views with respect to current plans and events, and are and will be subject to the risks and uncertainties discussed above. Forward-looking
statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be
appropriate for other purposes.

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Except
as required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise. You should read this Annual Report and the documents, if any, that we incorporate by reference with the understanding that the actual future results may be materially different from what we
expect. We may not update these forward-looking statements, even if our situation changes in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary
statements.

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A.    Selected Financial Data

You should read the following selected financial data together with Item 5, "Operating and Financial Review and Prospects," the Consolidated
Financial Statements in Item 18, and the other information in this Annual Report. The selected financial data is derived from the consolidated financial statements for the years
we present.

The
Consolidated Financial Statements have been prepared in accordance with Canadian GAAP. These principles conform in all material respects with U.S. GAAP except as described in
note 20 to the Consolidated Financial Statements in Item 18. For all the years presented, the selected financial data is prepared in accordance with Canadian GAAP unless otherwise
indicated.

Year ended December 312004(1)

2005(1)

2006(1)

2007(1)

2008(1)(in millions, except per share amounts)Consolidated Statements of Operations Data (Canadian GAAP):Revenue

$
8,839.8

$
8,471.0

$
8,811.7

$
8,070.4

$
7,678.2Cost of sales


8,431.9


7,989.9


8,359.9


7,648.0


7,147.1Gross profit


407.9


481.1


451.8


422.4


531.1Selling, general and administrative expenses(2)


331.6


296.9


285.6


295.1


303.8Amortization of intangible assets


34.6


28.4


27.0


21.3


15.1Integration costs related to acquisitions(3)


3.1


0.6


0.9


0.1


Other charges(4)


603.2


130.9


211.8


47.6


885.2Accretion of convertible debt (LYONs)


17.6


7.6








Interest expense (income), net(5)


19.7


42.2


62.6


51.2


42.5Earnings (loss) before income taxes


(601.9
)

(25.5
)

(136.1
)

7.1


(715.5
)Income tax expense(6)


252.2


21.3


14.5


20.8


5.0Net loss

$
(854.1
)
$
(46.8
)
$
(150.6
)
$
(13.7
)
$
(720.5
)Other Financial Data:Basic loss per share

$
(3.85
)
$
(0.21
)
$
(0.66
)
$
(0.06
)
$
(3.14
)Diluted loss per share

$
(3.85
)
$
(0.21
)
$
(0.66
)
$
(0.06
)
$
(3.14
)Property, plant and equipment expenditures

$
142.2

$
158.5

$
189.1

$
63.7

$
88.8Consolidated Statements of Operations Data (U.S. GAAP)(7):Net loss

$
(867.5
)
$
(42.8
)
$
(149.3
)
$
(16.1
)
$
(725.8
)Shares used in computing per share amounts (in millions):Basic


222.1


226.2


227.2


228.9


229.3Diluted


222.1


226.2


227.2


228.9


229.3


2

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Table of Contents



As at December 312004(1)

2005(1)

2006(1)

2007(1)

2008(1)(in millions)Consolidated Balance Sheet Data (Canadian GAAP):Cash and cash equivalents

$
968.8

$
969.0

$
803.7

$
1,116.7

$
1,201.0Working capital(8)


1,458.3


1,488.1


1,394.9


1,553.0


1,603.4Property, plant and equipment


555.4


531.1


553.6


466.0


467.5Total assets


4,939.8


4,857.8


4,686.3


4,470.5


3,786.2Total long-term debt, including current portion(9)


627.5


751.4


750.8


758.5


733.1Shareholders' equity


2,488.8


2,214.4


2,094.6


2,118.2


1,365.5Consolidated Balance Sheet Data (U.S. GAAP)(7):Total assets

$
4,988.7

$
4,876.2

$
4,708.1

$
4,485.8

$
3,786.2Total long-term debt, including current portion


846.1


751.4


750.8


757.2


723.4Shareholders' equity


2,257.6


2,176.9


1,960.4


1,996.5


1,254.8


---



Increase (decrease)(in millions)Prepaid and other assets

$
5.5Other long-term assets


(10.3
)Accrued liabilities


5.8Long-term debt  embedded option and debt obligation


1.9Long-term debt  unamortized debt issue costs


(11.5
)Other long-term liabilities


8.1Long-term deferred income tax liability


(2.2
)Opening deficit


6.4Accumulated other comprehensive loss  cash flow hedges


0.5




3

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Table of Contents





B.    Capitalization and Indebtedness

Not applicable.

C.    Reasons for Offer and Use of Proceeds

Not applicable.

D.    Risk Factors

Our shareholders and prospective investors should carefully consider each of the following risks and all of the other information set forth in this
Annual Report.



Businesses in virtually all industries are dealing with an economic environment that may be unprecedented in terms of the rate and pace
of change in end-market demand and global economic uncertainty. In this environment, visibility of end-market demand is more uncertain, there could be an increased risk of
business failures among competitors, suppliers and customers. If these failures were to occur, this could negatively impact many aspects of our business including revenue and our operating
profitability, asset utilization, increased accelerated pricing pressure, additional restructuring activities, market share shifts of existing programs, write-down of inventories and the
failure to collect accounts receivables. Additionally, the weaker economic environment could result in significant volatility in currency fluctuation, which could also impact our operating
profitability and increase other expenses related to running a global operation. While we have significant cash invested in short-term, high-quality financial instruments
including money market funds and certificates of deposits with global banking leaders, we cannot guarantee that these deposits can be protected if the global economy and capital markets continue to
experience significant and prolonged weakness.

4

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The
global economic conditions and credit crisis may well accelerate or exacerbate the effect of the various risk factors described in this Annual Report as well as result in other
unforeseen events that will affect our business and financial condition.



We are in a highly competitive industry. We compete on a global basis to provide electronics manufacturing services and solutions to
original equipment manufacturers (OEMs) in the communications, enterprise computing, consumer, industrial, aerospace and defense, alternative energy and healthcare markets. Our competitors include
major domestic and foreign companies such as Benchmark Electronics Inc., Flextronics International Ltd., Hon Hai Precision Industry Co., Ltd., Jabil Circuit, Inc.
and Sanmina-SCI Corporation, as well as smaller EMS companies that often have a regional, product, service or industry specific focus. In addition, original design manufacturers (ODMs),
companies that provide internally designed products and manufacturing services to OEMs, continue to increase their share of outsourced manufacturing services across several markets and product groups,
including personal computer motherboards, notebook and desktop computers, and cell phones. While we do not generally participate in these segments, and we have not, to date, encountered significant
direct competition from ODMs in the end-markets in which we participate, such competition may increase if our business in these markets grows, or if ODMs expand further into,
or beyond, these markets. We also face indirect competition from the manufacturing operations of our current and prospective customers, as these companies could choose to manufacture products
internally rather than to outsource to EMS providers.

Some
of our competitors have a greater production presence in lower-cost geographies, as well as greater manufacturing, financial, procurement, research and development and
marketing resources than we have. While we have increased the amount of capacity we have in lower-cost regions over the past several years, lower-cost regions may not provide
the same operational benefits they have in the past as these regions are also being impacted by the global economic crisis. As a result, we may experience increased pricing pressure and other
competitive pressures as the competitive landscape in lower-cost regions adjusts to the current economic environment. Additionally, our current or potential competitors may also increase
or shift their presence in lower-cost regions to try to offset current end-market weakness or develop or acquire services comparable or superior to those we develop, combine or
merge to form larger competitors, or adapt more quickly than we will to new technologies, evolving industry trends and changing customer requirements. Competition has caused and may continue to cause
excessive pricing pressures, increased working capital requirements, reduced profit or loss of market share (from both program and customer disengagements), any of which could materially and adversely
affect us. The current global economic crisis may also increase the competitive environment in all these areas which could impact our profitability. In addition, the EMS industry has excess
manufacturing capacity and has seen increased competition from Asian competitors, which may begin to expand into new end-markets. These factors have exerted and will continue to exert
additional pressures on pricing for components and services, thereby increasing the competitive pressures in the EMS industry. We
may not be able to compete successfully against our current and future competitors, and the competitive pressures we face may have a material adverse effect on us.



A decline in revenue from these customers or a loss of a large customer could have a material adverse affect on our financial condition
and results of operations. During 2008, we had no individual customer that represented more than 10% of our total 2008 revenue. Our top 10 customers in 2008 represented 63% of our total 2008
revenue. Our two largest customers in 2007 were Cisco Systems and Sun Microsystems, each of which represented more than 10% of our total 2007 revenue and in aggregate represented 21% of our total 2007
revenue. Our top 10 customers in 2007 represented 61% of our total 2007 revenue. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our
revenue. To reduce this reliance, we have been targeting new customers and new business opportunities in our traditional segments, as well as newer markets such as industrial, aerospace and defense,
alternative energy and healthcare markets.

5

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Although
we generally enter into master supply agreements with our customers, the level of business to be transacted under those agreements is not guaranteed. Instead, we bid on a
project by project basis and typically have supply contracts or purchase orders in place for a specific project. We are dependent on customers to fulfill the terms associated with these orders and/or
contracts.

In
addition, some of our customers routinely reduce or delay the volume of manufacturing services ordered from us. There is no assurance that present or future large customers will not
terminate their manufacturing arrangements with us or significantly change, reduce, or delay the volume of manufacturing services they order from us, any of which would adversely affect our operating
results. Significant reductions in, or the loss of, revenue from any of our large customers could have a material adverse effect on us. Additionally, the ramping of new program wins from new or
existing customers can take from several months to more than a year before production starts. During this start-up period, these programs are subject to significant change or outright
cancellation, in contrast to the initial expectations at the time of winning the new business, due to changes in end-market demand or changes in product viability in the marketplace.



The end markets we serve can experience major swings in demand which, in turn, can significantly impact our operations. Our financial
performance depends on our customers' ability to compete and succeed in their markets, which could be affected directly by the current global economic conditions. The majority of our customers'
products are characterized by rapid changes in technologies, increased standardization of technologies and shortening of product lifecycles. In many instances, our customers have experienced severe
revenue erosion, pricing and margin pressures, and excess inventories during the past few years.

We
have recently increased the amount of our business in the consumer segment, which is characterized by shorter product lifecycles, significant increases and decreases of program
volumes based on strength in end-market demand, rapid changes in consumer preferences for these products and devices, and greater ease in shifting these products among EMS competitors. The
increased exposure to this segment may make revenue more volatile.

During
the latter part of 2006 and in 2007, we experienced unexpected reductions in demand from our customers in the telecommunications segment, driven primarily by the weaker demand in
North America, and from recent consolidations in the industry.



Our customers are increasingly dependent on EMS providers for new product introductions and rapid response times to meet changes in
volume requirements. Most of our customers typically do not commit to firm production schedules for more than 30 to 90 days in advance and we often experience volatility in customers' orders.
Additionally, a significant portion of our revenue can occur in the last month of the quarter and could be subject to change or cancellation that will affect our
quarter-to-quarter results. Accordingly, we cannot always forecast the level of customer orders with certainty. This can make it difficult to order appropriate levels of
materials and to schedule production and maximize utilization of our manufacturing capacity.

In
addition, customers may cancel their orders, change production quantities, or delay production for a number of reasons. Furthermore, in order to guarantee continuity of supply for
many of our customers, we are required to manufacture and hold a specified amount of finished goods in our warehouses for our customers. The uncertainty of our customers' end-markets,
intense competition in our customers' industries and general order volume volatility have resulted, and may continue to result, in some of our customers delaying or canceling the delivery of some of
the products we manufacture for them and placing purchase orders for lower volumes of products than previously anticipated.

Changes
in customers' orders could also cause a delay in the repayment to us for inventory expenditures we incurred in preparation for the customer's orders or, in certain circumstances,
require us to return the inventory to our suppliers, re-sell the inventory or continue to hold the inventory, any of which may result in our taking

6

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additional
reserves for the inventory should it become excess or obsolete. Order cancellations and delays could also lower our asset utilization, resulting in higher levels of unproductive assets and
lower margins. In some cases, changes in circumstances for a customer could also negatively impact the collectability of receivables or carrying value of our inventory for that customer. On other
occasions, customers have required rapid and sudden increases in production, which have placed an excessive burden on our manufacturing capacity. Rapid changes in product ramps and/or the weakening
financial condition or deterioration of any single customer's financial condition could prevent us from collecting receivables or realizing the value of inventory on hand. Any of these factors or a
combination of these factors could have a material adverse effect on our results of operations.



We procure all of our components from third party suppliers. In addition to traditional EMS services, some of our competitors also
manufacture some of the components used in the products they assemble. This can include metal or plastic enclosures, connectors, semiconductors, cabling and other components used in the manufacturing
of electronics. Those capabilities may provide additional incentives for some customers to do business with those EMS or ODM companies as there may be additional opportunity to reduce the total costs
of their products by using more components and services from one company. If this were to occur, we may experience reduced revenue from certain customers and lower utilization rates.



Future mergers and acquisitions could result in a decrease in demand from our customers or a loss of business to our competitors as
customers rationalize their business and consolidate their suppliers. In a weaker economic environment, there may be a higher risk of increased consolidation among our customers or competitors.

Mergers
among our customers or their customers could increase concentration and/or reduce total demand as the combined entities may rationalize their businesses and consolidate their
suppliers.



As we expand our business, enter into new market segments and products, or transfer our business from one region to another, we may
encounter difficulties that result in higher than expected costs associated with our growth and customer dissatisfaction with performance. Potential difficulties related to our growth and/or
operational restructuring could include:



Any
of these factors could prevent us from realizing the anticipated benefits of growth in new markets or the benefits we expected to realize from our restructuring actions and could
adversely affect our business and operating results.

7

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The principal currency in which we conduct our operations is the U.S. dollar. However, some of our subsidiaries transact
business in other currencies, such as the Canadian dollar, Thai baht, Malaysian ringgit, Mexican peso, Czech koruna, Singapore dollar, Japanese yen, Chinese renminbi, Brazilian real, Philippine peso,
Romanian lei, Indian rupee and the Euro. The current economic credit crisis has resulted in significant fluctuations of currency rates which has and will continue to affect profitability on a quarter
to quarter basis. We often enter into hedging transactions to minimize our exposure to foreign currency risks. We may also enter into forward exchange contracts to hedge our balance sheet exposures.
Our current hedging activity is designed to reduce the variability of our foreign currency costs and consists of contracts to purchase or sell foreign currencies at future dates. These contracts
generally extend for periods ranging from one to 15 months. Our hedging transactions may not successfully minimize foreign currency risk, which could have a material adverse effect on our
results of operations.



We generally provide payment terms ranging from 30 to 60 days. As a result, we generate significant accounts receivable from
sales to our customers, historically representing 22% to 39% of current assets. Accounts receivable from sales to customers at December 31, 2008 were $1,074.0 million
(December 31, 2007  $941.2 million; and December 31, 2006  $973.2 million). At
December 31, 2008, two customers each represented more than 10% of total accounts receivable (December 31, 2007  no customer represented more than
10% of total accounts receivable; and December 31, 2006  no customer represented more than 10% of total accounts receivable). If any of our customers has
insufficient liquidity, we could encounter significant delays or defaults in payments owed to us by customers, and may extend our payment terms or restructure the debt, which could have a significant
adverse impact on our financial condition and results of operations. Any deterioration in the financial condition of our customers will increase the risk of collecting receivables. The current global
economic crisis could also impact our customers' ability to pay receivables or put customers into bankruptcy or reorganization which could also impact our ability to collect our receivables. We
regularly review our accounts receivable valuations and make adjustments when necessary. Our allowance for doubtful accounts at December 31, 2008 was $13.7 million (December 31,
2007  $21.5 million; and December 31, 2006  $21.4 million), which represented 1% of the gross
accounts receivable balance
(December 31, 2007  2%; and December 31, 2006  2%). In addition, payment terms could change which may
adversely affect our financial results.



The potential occurrence of default by a counterparty on its contractual obligations may result in a financial loss to us. To mitigate
the risk of financial loss from defaults, we deal with counterparties we believe are creditworthy. We also expect the current global economic conditions and credit crisis to impact the financial
condition of some of our customers and suppliers. The current economy could impact certain customers' ability to pay, or it could render them insolvent, which would impact the collectibility of their
accounts. Similarly, an interruption in supply from a raw materials supplier, especially for single sourced components, could have a significant impact on our operations and on our customers if we are
unable to deliver finished product in a timely manner. We continue to closely monitor our customers' ability to pay their receivables and to monitor our suppliers in an effort to ensure consistency
of supply.



We maintain multiple defined benefit plans as well as supplemental pension plans. Some employees in Canada, Japan, the
United Kingdom and the Philippines participate in our defined benefit pension plans. We also have defined contribution plans for our other employees, primarily in Canada and the U.S.

8

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Our
pension funding policy is to contribute amounts sufficient to meet minimum local statutory funding requirements that are based on actuarial calculations. Our obligations are based on
certain assumptions relating to expected plan performance, including employee turnover and retirement rates, the performance of the financial markets and discount rates. If future trends differ from
these assumptions, the amounts we are obligated to contribute to the pension plans may increase. If the financial markets result in returns lower than our assumptions, we may be required to make
larger contributions in the future and our pension expense may also increase.



Many of our customers compete in markets that are characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services. These conditions frequently result in short product lifecycles. Our success will depend largely on the success achieved by our customers in developing
and marketing their products. If technologies or standards supported by our customers' products become obsolete or fail to gain widespread commercial acceptance or are cancelled, our business could be
materially adversely affected. In addition, an accelerating decline in end-market demand for customer-specific proprietary systems in favor of open systems with standardized technologies
could have a material adverse impact on our business. Additionally, the ramping of new program wins from new or existing customers can take from several months to more than a year before production
starts. During this start-up period, these programs are subject to significant change or outright cancellation, in contrast to the initial expectations at the time of winning the new
business, due to changes in end-market demand or changes in product viability in the marketplace.



Some of our growth may occur through acquisitions. These transactions may involve acquisitions of entire companies and/or acquisitions
of selected assets from OEMs. Potential difficulties related to our acquisitions include:



Any
of these factors could prevent us from realizing the anticipated benefits of an acquisition, including operational synergies and economies of scale. Our failure to realize the
anticipated benefits of acquisitions could adversely affect our business and operating results. Previous acquisitions have resulted in the recording of a significant amount of goodwill and intangible
assets at the time of acquisition. Our failure to support the carrying value of goodwill and intangible assets in periods subsequent to the acquisitions could require write-downs that adversely affect
our operating results. All goodwill from previous acquisitions has been written off.



We have a history of recording losses resulting primarily from restructuring charges and the write-down of goodwill and
long-lived assets. These amounts have varied from period to period. In 2004, we also recorded a write-down of accounts receivable for one specific customer which subsequently
went bankrupt. We have undertaken numerous initiatives to restructure and reduce our capacity and cost structures in response to

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changes
in the EMS industry and end-market demand, with the intention of improving utilization and realizing cost savings in the future. We will continue to evaluate our operations and may
propose additional restructuring actions in the future. Any failure to successfully execute these initiatives, including any delay in effecting these initiatives, can have a material adverse impact on
our results. Furthermore, we may not be profitable in future periods.



We have operations in multiple regions around the world. As a result, we are subject to different regulatory requirements and labor
laws governing how quickly we are able to reduce manufacturing capacity and terminate related employees. These requirements are particularly stringent in Europe. Restrictions on our ability to close
under-utilized facilities have resulted in higher expenses associated with carrying excess capacity and infrastructure while conducting restructuring activities. While it has typically been easier to
restructure our operations in certain lower-cost regions, the current global economic conditions may change how governments in all regions regulate restructuring as the weaker demand
environment impacts local economies. The speed of our restructuring can also be impeded by delays from our customers related to the timing of their product transfers, which can prevent us from
transferring products to our other facilities in a timely and cost-effective manner. Since the restructuring of our plants requires some of our customers to move their production from one
of our facilities to another, customers have, and may in the future, use this opportunity to shift their production to competitors' facilities.



We have facilities in numerous countries, including Brazil, China, the Czech Republic, India, Ireland, Japan, Malaysia, Mexico, the
Philippines, Romania, Singapore, Spain and Thailand. During 2008, approximately two-thirds of our revenue was produced from locations outside of North America. We also purchase material
from international suppliers for much of our business, including our North American business. We believe that our future growth depends largely on our ability to increase our business and penetration
with global OEMs and selective markets, in both higher-cost and lower-cost regions.

Our
international expansion has had and will continue to require significant management attention and financial resources. International operations are subject to inherent risks which
may adversely affect us, including:



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Each of the regions we operate in has a history of promoting foreign investment but could experience economic and political turmoil and fluctuations in the value
of its currencies that could adversely affect us.



A significant portion of our costs is for the purchase of electronic components. All of the products we manufacture or assemble require
one or more components that we order from component suppliers. In many cases, there may be only one supplier of a particular component. Supply shortages for a particular component can delay production
and thus delay the revenue of all products that use that component or can cause price increases in the products and services we provide. In the past, we have secured sufficient allocations of
constrained components so that revenue was not materially impacted. In addition, at various times there have been industry-wide shortages of electronic components. Such shortages, or
future fluctuations in the cost of components, may have a material adverse effect on our business or cause our results of operations to fluctuate from period to period. Changes in forecasted volumes
by our customers, which require additional components that may not be readily available, could also impact our results. The financial condition of suppliers could affect their ability to supply us
with components which could negatively impact our revenue. Additionally, quality or reliability issues at any of our component or materials providers, or financial difficulties that affect their
production, could halt or delay production of a customer's product which could adversely impact our results.



We rely on a variety of common carriers for the transportation of materials and products and for their ability to route these materials
and products through various international ports. A work stoppage, strike or shutdown of any important supplier's facility or operations, or at any major port or airport, could result in manufacturing
and shipping delays or expediting charges, which could have a material adverse effect on our results of operations. Increased political activism and worsening local economic conditions could impact
receipt of materials and product shipments. Natural disasters such as tsunamis and earthquakes, and the severe and dramatic change to historical weather patterns in the regions where our facilities or
our suppliers' facilities are located, could have an adverse impact on our ability to deliver products to our customers. Such events could disrupt supply to us, and from us to our customers, and
adversely affect our operations.



In certain of our sales contracts, we provide warranties against defects or deficiencies in our products, services or designs. A
successful claim for damages arising as a result of such defects or deficiencies, for which we are not insured or where the damages exceed our insurance coverage, or any material claim for which
insurance coverage is denied or limited and for which indemnification is not available, could have a material adverse effect on our business, results of operations and financial condition. As we
pursue new end-markets, warranty requirements will vary and we may be less effective in pricing our products to appropriately capture the warranty costs.



We
conduct business operations in a number of countries, including countries where tax incentives have been extended to encourage foreign investment or income tax rates are low.

We
develop our tax position based upon the anticipated nature and structure of our business and the tax laws, administrative practices and judicial decisions now in effect in the
jurisdictions in which we have assets
or conduct business, all of which are subject to change or differing interpretations, possibly with retroactive effect. We are subject to audits of historical information by local tax authorities
which could result in additional tax expense in future periods relating to prior results. Any such increase in our income tax expense and related interest and penalties could have a significant impact
on our future earnings and future cash flows.

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Certain
of our subsidiaries provide financing, products and services to, and may from time to time undertake certain significant transactions with other subsidiaries in different
jurisdictions. In general, related party transactions and, in particular, related party financing transactions, are subjected to close review by tax authorities. Moreover, several jurisdictions in
which we operate have tax laws with detailed transfer pricing rules which require that all transactions with non-resident related parties be priced using arm's length pricing principles,
and that contemporaneous documentation must exist to support such pricing.

Taxation
authorities could challenge the validity of our related party financing and related party transfer pricing policies. Such a challenge generally involves a subjective area of
taxation and generally involves a significant degree of judgment. If any of these taxation authorities is successful in challenging our financing or transfer pricing policies, our income tax expense
may be adversely affected and we could also be subjected to interest and penalty charges. In connection with tax audits in the United States, tax authorities had asserted that our
United States subsidiaries owed significant amounts of tax, interest and penalties arising from related party transactions. These asserted deficiencies were subsequently resolved in our favor.
In connection with ongoing tax audits in Canada, tax authorities have taken the position that income reported by one of our Canadian subsidiaries in 2001 and 2002 should have been materially higher as
a result of certain related party transactions. The successful pursuit of that assertion could result in that subsidiary owing significant amounts of tax, interest and possibly penalties. We believe
that we have substantial defenses to the asserted position and have adequately accrued for any probable potential adverse tax impact. However, there can be no assurance as to the final resolution of
this claim and any resulting proceedings, and if this claim and any ensuing proceedings are determined adversely against us, the amounts we may be required to pay could be material.



Our consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (GAAP) and are
reconciled to U.S. GAAP. These accounting standards are revised periodically and/or expanded upon by the standard-setting bodies. Accordingly, we are required to adopt new or revised accounting
standards or comply with revised interpretations issued from time to time by these authoritative bodies, which include the Canadian Accounting Standards Board, the Financial Accounting Standards Board
and the U.S. Securities and Exchange Commission. Most recently, the Canadian Accounting Standards Board has decided to adopt the International Financial Reporting Standards effective 2011. The
adoption of these changes could adversely
affect our reported revenue, profitability or financial condition. Compliance with these changes could also increase our financial and accounting costs.



We have outsourced certain IT systems support which includes database management, as well as application development support for our
production control and inventory management systems. If these third-party providers are unable to fulfill their obligations on a timely and reliable basis, we may experience disruptions to our
operations. Any inefficiencies or production down times resulting from these disruptions could have a negative impact on our ability to meet customers' orders, resulting in a delay or decrease to our
revenue and our operating margins.



We continue to evaluate the advantages and feasibility of new manufacturing processes. Our future success will depend, in part, upon
our ability to continually develop and market electronics manufacturing services that meet our customers' evolving needs. This could entail investing in new processes or equipment to support new
technologies used in our customers' current or future products, and to support their supply chain processes. Additionally, as we enter new end-markets where our experience is limited, we
may be less effective in adapting to technological change. Our manufacturing and supply chain processes, test development efforts and design capabilities may not be successful.

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In
addition, various industry-specific standards, qualifications and certifications are required to produce certain types of products for our customers. Failure to maintain those
certifications could adversely affect our ability to maintain existing levels of business or win new levels of business.



We believe that certain of our proprietary intellectual property rights and information provide us with a competitive advantage.
Accordingly, we have taken, and intend to continue to take, appropriate steps to protect this proprietary information. These steps include signing non-disclosure agreements with customers,
suppliers, employees, and other parties, and implementing rigid security measures. Our protection measures may not be sufficient to prevent the misappropriation or unauthorized disclosure of our
property or information.

There
is also a risk that infringement claims may be brought against us, our customers or our suppliers in the future. If someone does successfully assert an infringement claim, we may
be required to spend significant time and money to develop a manufacturing process that does not infringe upon the rights of such other person or to obtain licenses for the technology, process or
information from the owner. We may not be successful in such development or any such licenses may not be available on commercially acceptable terms, if at all. In addition, any litigation could be
lengthy and costly and could adversely affect us even if we are successful in such litigation. As we pursue new end markets, we may be less effective in anticipating the intellectual property risk
related to the new manufacturing and design services.



Future growth in our revenue includes a dependence on new outsourcing opportunities in which we assume additional manufacturing and
supply chain management responsibilities from OEMs. Our future growth will be limited to the extent that these opportunities are not available as a result of OEMs deciding to perform
these functions internally or delaying their decision to outsource or our inability to win new contracts. The current economic slowdown may also impact the trend of outsourcing as some customers may
reverse their outsourcing and shift production back to their own facilities to improve their factory utilization. Political pressures or negative sentiment by our customers' customers or local
governments may impede the movement of production from one geography to another. These and other factors could adversely affect the rate of outsourcing generally or, adversely, affect the rate of
outsourcing to EMS providers, such as Celestica, who have shifted substantial capacity to these lower-cost geographies.



We currently use multiple Enterprise Resource Planning systems in support of our manufacturing sites and we may reduce the number and
variety of these systems in the future. Our inability to effectively consolidate our information systems could have a material adverse impact on our results.



The recruitment of personnel in the EMS industry is highly competitive. We believe that our future success will depend, in part, on our
ability to continue to attract and retain highly skilled executive, technical and management personnel. We generally do not have employment or non-competition agreements with our
employees. To date, we have been successful in recruiting and retaining executive, managerial and technical personnel; however, the loss of services of certain of these employees could have a material
adverse effect on our operations.



We are continually investing in training, business process and information technology tools to eliminate waste, increase quality and
reduce defects in the manufacturing process. This investment is critical in our industry, as our customers require us to continually produce cost savings through the elimination of waste and improved
efficiencies. Failure to deliver these cost savings could affect our relationships with our customers in a manner which would adversely affect our volumes and operating results. The deployment of Lean
and Six Sigma

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initiatives
is part of the roadmap we are using to improve our own operating margins. Failure to achieve the anticipated benefits could have a negative impact on our margin improvement.



Due to the highly competitive nature of the electronics industry, our customers have required lower-cost solutions from
their EMS providers. Over time, this has resulted in the movement of our production from higher-cost regions such as North America and Western Europe to lower-cost regions such
as Asia, Latin America and Eastern Europe. This move has had, and could continue to have, a negative impact on current and future results by increasing the risks associated with, among other things,
transferring production to new regions where skills or experience may be more limited than in higher-cost regions, incurring higher operating expenses during the transition, incurring
additional restructuring costs associated with the decrease in production levels in higher-cost geographies and the risks of operating in new foreign jurisdictions. In certain
situations, product transfers have resulted in, and may in the future result in our inability to retain our existing business or grow future revenue due to potential execution problems resulting from
significant headcount reductions, plant closures and product transfers associated with restructuring activities.



We are subject to various federal, state/provincial, local and multi-national environmental laws and regulations. Our environmental
approach and practices have been designed to ensure compliance with these laws and regulations in a manner consistent with local practice. Future developments and increasingly stringent regulations
could require us to incur additional expenditures relating to environmental matters at our facilities. Achieving and maintaining compliance with present, changing and future environmental laws could
restrict our ability to modify or expand our facilities or to continue production. This compliance could also require us to acquire costly equipment or to incur other significant expenses. As well, we
are increasingly expected to incur and satisfy contractual obligations with our customers with respect to environmental matters and such obligations may extend beyond our regulatory obligations.

We
generally obtained environmental assessment reports, or reviewed recent assessment reports initiated by others, for most of the manufacturing facilities that we own or lease at the
time we acquired or leased such facilities. Such assessments may not reveal all environmental liabilities and current assessments were not available for all facilities. Consequently, there may be
material environmental liabilities of which we are not aware and ongoing remediation, mitigation and risk assessment measures may not be adequate for purposes of future laws. In many jurisdictions in
which we operate, environmental laws impose liability for the costs of removal, remediation or risk assessment of hazardous or toxic substances on an owner, occupier or operator of real estate, even
if such person or company was unaware of or not responsible for the presence of such substances. For the most part, our current operations are unlikely to cause significant environmental impacts to
soil or groundwater. Contamination could have occurred as a result of past operations (our own or prior occupants of a site) and the condition of our properties could be affected by
environmental conditions or activities in the vicinity of the properties. From time to time, we investigate, remediate or monitor soil and groundwater contamination at certain of our operating sites
and may incur significant costs to do so. In instances where soil or groundwater contamination existed prior to our ownership or occupation of a site, landlords or former owners may have retained some
contractual responsibility or regulatory liability for the contamination and its remediation. However, where such residual liability of landlords or former owners does not exist or where such
landlords or former owners fail to fulfill their obligations, we may be required to remediate such contamination.

More
stringent environmental legislation continues to be imposed, including laws which place increased responsibility and requirements on the "producers" of electronic equipment
(i.e., the OEMs) and, in turn, their EMS providers and suppliers. A significant investment of time and resources must be made to ensure compliance with
ever-changing environmental legislation and any non-compliance could impact production. These laws include the European Union's Restriction of Hazardous Substances (RoHS),
which restricts the use of lead and certain other specified substances in electronic products in the European Union and China's Administration on the Control of Pollution caused by Electronic
Information Products (often referred to as

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China's
RoHS legislation). Where appropriate, we have transitioned our manufacturing processes and interfaced with suppliers and customers to conform to RoHS requirements. Noncompliance with the RoHS
requirements could potentially result in substantial costs, including fines and penalties, as well as liability to our customers. The electronics industry is also subject to the European Union's
requirements with respect to the collection, recycling and management of waste for electronic products and components. Under the European Union's Waste Electrical and Electronic Equipment (WEEE)
directive, compliance responsibility rests primarily with OEMs rather than with EMS companies. However, OEMs may turn to EMS companies for assistance in meeting their WEEE obligations.
Failure by our customers to meet the RoHS or WEEE requirements or obligations could have a negative impact on their businesses and revenue which would adversely impact our financial results. Similar
restrictions are being proposed or enacted in other jurisdictions. Finally, the European Union regulation concerning the Registration Evaluation Authorisation and Restriction of Chemicals (REACH)
requires manufacturers or importers of substances manufactured or imported into the EU in quantities of one tonne per year or more to register with a central European Chemicals Agency. We have
assessed our obligations under REACH and are interfacing with suppliers and customers in order to conform. Noncompliance with the REACH requirements could potentially result in substantial fines and
penalties as well as an inability to manufacture or supply substances, preparations or articles legally. We continue to monitor other emerging environmental legislation which may impact the industry
going forward. We cannot currently assess the impact of such legislation on our operations.

Our
customers are becoming increasingly concerned about environmental issues, such as waste management (including recycling), climate change (including the reduction of carbon
footprints), and product stewardship, and expect their suppliers to be environmental leaders. Although we strive to meet such customer expectations, such demands may become more onerous and
significant investments of time and resources may be required in order to attract and maintain customers.



Our revolving credit facility for $300.0 million will expire in April 2009. With the current global economic conditions
and credit crisis and the weakening of capital markets, we may not be able to renew our facility, or the financing may not be available on terms acceptable to us. Given our strong cash position at
December 31, 2008, we are assessing whether we will renew all or a portion of this facility. We cannot assure that we and our lenders will agree on mutually acceptable terms if we seek a
renewal. Whether or not we renew the credit facility, we believe we have sufficient resources to satisfy our financial obligations. There were no direct borrowings outstanding under this facility at
December 31, 2008.



Our outstanding credit agreement, the indenture related to our 77/8% Senior Subordinated Notes due 2011 (2011 Notes) and
the indenture related to our 75/8% Senior Subordinated Notes due 2013 (2013 Notes) contain financial and operating covenants that limit our management's discretion with respect to
certain business matters. Among other things, these covenants restrict our ability and our subsidiaries' ability to incur additional debt, create liens or other encumbrances, change the nature of our
business, sell or otherwise dispose of assets, make restricted payments such as dividends, repurchase our stock, and merge or consolidate with other entities. At February 23, 2009, we were in
compliance with these covenants. At December 31, 2008, we had full access to the $300 million of credit available under our credit facility based on the required financial ratios.



In June 2004, we issued our 2011 Notes with an aggregate principal amount of $500.0 million bearing a fixed interest rate
of 7.875%. We also entered into agreements which hedge the fair value of our 2011 Notes by swapping the fixed rate of interest for a variable rate based on LIBOR plus a margin, thereby subjecting us
to interest rate risk due to fluctuations in the LIBOR rate. The average interest rate on our 2011 Notes for 2008 was 6.5% (2007  8.3%; and
2006  8.2%) after reflecting the interest rate swap. A one percentage point increase in the LIBOR rate would increase our interest expense by approximately
$5 million annually. We

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terminated
these interest rate swaps in February 2009. See note 22 to the Consolidated Financial Statements in Item 18.



Onex owns, directly or indirectly, all of the outstanding multiple voting shares and 1% of the outstanding subordinate voting shares.
The number of shares owned by Onex, together with those shares Onex has the right to vote, represents 79% of the voting interest in Celestica and less than 1% of the voting interest in our outstanding
subordinate voting shares. Accordingly, Onex exercises a controlling influence over our business and affairs and has the power to determine all matters submitted to a vote of our shareholders where
our shares vote together as a single class. Onex has the power to elect our directors and its approval is required for significant corporate transactions such as certain amendments to our articles
of incorporation, the sale of all or substantially all of our assets and plans of arrangement. Onex's voting power could have the effect of deterring or preventing a change in control of our company
that might otherwise be beneficial to our other shareholders. Under our revolving credit facility, it is an event of default entitling our lenders to demand repayment if Onex ceases to control
Celestica unless the shares of Celestica become widely held ("widely held" meaning that no one person owns more than 20% of the votes). Gerald W. Schwartz, the Chairman, President and Chief Executive
Officer of Onex and one of our directors, owns multiple voting shares of Onex, carrying the right to elect a majority of the Onex board of directors. Mr. Schwartz, therefore, effectively
controls our affairs. The interests of Onex and Mr. Schwartz may differ from the interests of the remaining holders of subordinate voting shares. For additional information about our principal
shareholders, see Item 7(A), "Major Shareholders." Onex has, from time to time, issued debentures exchangeable and redeemable under certain circumstances for our subordinate voting shares,
entered into forward equity agreements with respect to subordinate voting shares, sold shares (after exchanging multiple voting shares for subordinate voting shares), or redeemed these debentures
through the delivery of subordinate voting shares and could do so in the future. These sales could impact our share price, have consequences on our outstanding debt, and change our ownership
structure.



Celestica has been named as a defendant in a purported class action lawsuit in the United States which asserts claims for
violations of federal securities laws on behalf of persons who acquired our securities between January 27, 2005 and January 30, 2007. Celestica has been named as a defendant in a similar
purported class action brought in Canada under Canadian law. Our former Chief Executive and Chief Financial Officers were also named as defendants in these lawsuits. In a consolidated amended
U.S. complaint, the plaintiffs have added one of our directors and Onex Corporation as defendants. These lawsuits seek unspecified damages. All defendants have filed motions with the
U.S. court to dismiss the amended Complaint. Those motions are pending. Although we believe the allegations in these claims are without merit and we intend to defend these claims vigorously,
these lawsuits could result in substantial costs to us, divert management's attention and resources from our operations and negatively affect our public image and reputation.



We are incorporated under the laws of the Province of Ontario, Canada. A significant number of our directors, controlling persons and
officers are residents of Canada. Also, a substantial portion of our assets and the assets of these persons are located outside of the United States. As a result, it may be difficult to effect
service within the United States upon those directors, controlling persons and officers who are not residents of the United States or to realize in the United States upon a
judgment of courts of the United States predicated upon the civil liability provisions of the U.S. federal securities laws.



Future sales of our subordinate voting shares in the public market, or the issuance of subordinate voting shares upon the exercise of
stock options or otherwise, could adversely affect the market price of the subordinate voting shares.

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At
February 23, 2009, we had 199,580,858 subordinate voting shares and 29,637,316 multiple voting shares outstanding. All of the subordinate voting shares are freely
transferable without restriction or further registration under the U.S. Securities Act, except for shares held by our affiliates (as defined in the U.S. Securities Act). Shares
held by our affiliates include all of the multiple voting shares and 1,996,231 subordinate voting shares held by Onex Corporation (Onex). An affiliate may not sell shares in the
United States unless the sale is registered under the U.S. Securities Act or an exemption from registration is available. Rule 144 adopted under the U.S. Securities Act
permits our affiliates to sell our shares in the United States subject to volume limitations and requirements relating to manner of sale, notice of sale and availability of current public
information with respect to us.

In
addition, as of February 23, 2009 there were approximately 27,000,000 subordinate voting shares reserved for issuance under our employee share purchase and option plans
and for director compensation, including outstanding options to purchase approximately 11,100,000 subordinate voting shares. Moreover, we may, pursuant to our articles of incorporation, issue
an unlimited number of additional subordinate voting shares without further shareholder approval (subject to any required stock exchange approvals). As a result, a substantial number of our
subordinate voting shares will be eligible for sale in the public market at various times in the future. The issuances and/or sale of such shares would dilute the holdings of our shareholders and
could adversely affect the market price of the subordinate voting shares.



Increased international political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national security
measures, conflicts in the Middle East and Asia, security issues at the U.S./Mexico border related to illegal immigration or criminal activities associated with illegal drugs activities, strained
international relations arising from these conflicts and the related decline in consumer confidence may hinder our ability to do business. Any escalation in these events or similar future events may
disrupt our operations or those of our customers and suppliers and could affect the availability of materials needed to manufacture our products or the means to transport those materials to
manufacturing facilities and finished products to customers. These events have had and may continue to have an adverse
impact on the U.S. and world economy in general and customer confidence and spending in particular, which in turn could adversely affect our revenue and results of operations. The impact of these
events on the volatility of the U.S. and world financial markets could increase the volatility of the market price of our securities and may limit the capital resources available to us and our
customers and suppliers.

Item 4. Information on the Company

A.    History and Development of the Company

We were incorporated in Ontario, Canada under the name Celestica International Holdings Inc. on September 27, 1996. Since that date, we have amended
our articles of incorporation on various occasions, principally to modify our corporate name and our share capital. Our legal name and commercial name is Celestica Inc. We are a corporation
domiciled in the Province of Ontario, Canada and operate under the Ontario Business Corporations Act. Our principal executive offices are located at 12 Concorde Place, 5th Floor,
Toronto, Ontario, Canada M3C 3R8 and our telephone number is (416) 448-5800. Our website is http://www.celestica.com. Information on our website
is not incorporated by reference in this Annual Report.

Prior
to our incorporation, we were an IBM manufacturing unit and we provided manufacturing services to IBM for more than 75 years. In 1993, we began providing EMS services to
non-IBM customers. In October 1996, we were purchased from IBM by an investor group, led by Onex, which included our then management.

Celestica
provides a range of electronics manufacturing services and solutions to OEMs across many industries. We operate a global manufacturing and supply chain network.



Certain information concerning property, plant and equipment expenditures, including acquisitions and financing activities, is set
forth in notes 3, 7, 8, 15 and 17 to the Consolidated Financial Statements in Item 18,

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and
Item 5, "Operating and Financial Review and Prospects  Management's Discussion and Analysis of Financial Condition and Results of Operations."

Certain
information concerning our divestiture activities, including our restructurings, is set forth in note 10 to the Consolidated Financial Statements in Item 18,
and Item 5, "Operating and Financial Review and Prospects  Management's Discussion and Analysis of Financial Condition and Results of Operations."

B.    Business Overview

We provide end-to-end product lifecycle solutions to OEMs in the communications, consumer, enterprise computing, industrial,
aerospace and defense, alternative energy and healthcare sectors. We believe our services and solutions will help our customers eliminate waste from their supply chains, resulting in lower product
lifecycle costs and better returns, and positioning them more competitively in their respective business environments.

Our
global operating network spans the Americas, Asia and Europe. In an effort to drive speed and flexibility for our customers, we conduct the majority of our business through eight
full-service mega-sites, strategically located around the world. Through our Ring Strategy, we strive to align a network of suppliers around each of our mega-sites
in order to increase flexibility in our supply chain, deliver shorter overall product lead times and reduce inventory. We operate additional sites around the globe with certain supply chain management
and high-mix/low-volume manufacturing capabilities to meet the specific requirements of customers in markets such as the industrial, aerospace and defense, alternative energy
and healthcare sectors.

Through
our mega-sites and the deployment of our Total Cost of Ownership Strategy, we strive to provide our customers with the lowest total cost throughout the product
lifecycle. This approach enables us to focus our capabilities on broad solutions that address the total cost of production, delivery and after-market support for our customers' products, which can
help drive greater levels of efficiency and improved service levels throughout our customers' supply chain.

The
major end markets we serve include communications, consumer, enterprise computing, industrial, aerospace and defense. Serving these end markets has enabled us to diversify some of
the market risk associated with concentration in a limited number of sectors. We supply products and services to over 100 OEMs. In aggregate, our top 10 customers represented 63%
of revenue in 2008. In 2008, we segmented our end-markets as follows: enterprise communications (25% of revenue); consumer (26% of revenue); servers (16% of revenue); telecommunications
(15% of revenue); storage (10% of revenue); and industrial, aerospace and defense (8% of revenue). The products we manufacture can be found in a wide array of end products, including networking,
wireless, telecommunications and computing equipment; handheld communications devices primarily smartphones; peripherals; storage devices; servers; healthcare products; audio visual equipment,
including flat-panel televisions; printers and related supplies; gaming products; aerospace and defense electronics such as in-flight entertainment and guidance systems; and a
range of industrial and alternative energy electronic equipment.

We
believe we are well-positioned to compete effectively in the EMS industry, given our financial strength and our position as one of the major EMS providers worldwide. Our
focus is to (i) improve our operating margins and increase operating efficiency by driving costs lower and delivering market-specific supply chain solutions that provide value for us and our
customers, (ii) leverage our supply chain practices to lower material costs and improve asset utilization, (iii) develop and enhance profitable and key relationships with leading
OEMs across our strategic target market segments, and (iv) broaden the range of the services we provide to OEMs in areas that can reduce their overall product lifecycle costs. We
believe that success in these areas will allow us to maintain acceptable financial performance and enhance shareholder value.

Our
principal strengths include our advanced capabilities in the areas of technology and quality, our flexible service offerings, our financial strength and our market-specific supply
chain management capabilities. We provide a wide range of advanced manufacturing technologies, test capabilities and processes to support our customers' needs. Our size, geographic reach and expertise
in supply chain management allow us to purchase materials effectively and to deliver products to customers faster, thereby reducing overall product costs and reducing the
time-to-market.

We
believe that our highly skilled workforce differentiates us from our competitors. We have an entrepreneurial, participative and team-based culture, with a focus on
continuous improvement, flexibility and customer service excellence.

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Electronics Manufacturing Services Industry



The EMS industry is comprised of companies that provide a broad range of electronics manufacturing services to OEMs. Since the
1990's, OEMs have become increasingly reliant upon these services to become more efficient and to enhance their competitive positions. Today, the leading EMS companies have global operating
networks delivering worldwide supply chain management solutions. They offer end-to-end services for the entire product lifecycle, including design and engineering,
manufacturing and systems integration, fulfillment and after-market services. By outsourcing their manufacturing and related services, OEMs are able to overcome their most pressing business
challenges related to cost, asset utilization, quality, time-to-market and rapidly changing technologies.

We
believe the adoption of outsourcing by OEMs will continue across a number of industries, because it allows OEMs to:

Reduce Operating Costs and Invested Capital.OEMs are under significant pressure to reduce total product lifecycle costs, and
property, plant
and equipment expenditures. The manufacturing process of electronics products has become increasingly automated, which requires greater levels of investment in property, plant and equipment. EMS
companies enable OEMs to gain access to a global network of manufacturing facilities with supply chain management expertise, advanced engineering capabilities, flexible capacity, and economies
of scale. By working with EMS companies, OEMs can reduce their overall product lifecycle and operating costs, working capital and property, plant and equipment investment requirements.

Focus Resources on Core Competencies.The electronics industry operates in a highly-competitive environment characterized by rapid
technological
change and shortening product lifecycles. In this environment, many OEMs are prioritizing their resources on their core competencies of product development, sales, marketing and customer
service, and to outsource design, manufacturing, supply chain and other product support requirements to their EMS partners.

Improve Time-to-Market.Electronic products experience shorter product lifecycles, requiring OEMs to continually
reduce the time required to bring products to market. OEMs can significantly improve product development cycles and enhance time-to-market by benefiting from the
expertise and infrastructure of EMS providers. This includes capabilities relating to design services, prototyping and the rapid ramp-up of new products to high-volume
production, all with the critical support of global supply chain management and manufacturing networks.

Utilize EMS Companies' Procurement, Inventory Management and Logistics Expertise.Successful manufacturing of electronic products
requires
significant resources to deal with the complexities in planning, procurement and inventory management, frequent design changes, shorter product lifecycles and product demand fluctuations.
OEMs can address these complexities by outsourcing to EMS providers that (i) possess sophisticated global supply chain management capabilities and (ii) can leverage significant
component procurement advantages to lower product costs.

Access Leading Engineering Capabilities and Technologies.Electronic products and the electronics manufacturing technology needed to
support them
have become complex. As a result, OEMs increasingly rely on EMS companies to provide design, engineering support, manufacturing and technological expertise. Through their design and engineering
services, EMS companies can assist OEMs in the development of new
product concepts, or the re-design of existing products, as well as with improvements in the performance, cost and time required to bring products to market. In addition, OEMs gain
access to high-quality manufacturing expertise and capabilities in the areas of advanced process, interconnect and test technologies.

Improve Access to Global Markets.OEMs provide products and support services for a global customer base. EMS companies with global
capabilities provide OEMs with efficient global manufacturing solutions and distribution capabilities.

Access to Broadening Service Offerings.In response to OEMs' continued desire to outsource activities that were traditionally handled
internally, EMS
providers are continually expanding their offerings to include

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services
such as design, fulfillment and after-market support, including repair and recycling services. This enables OEMs to benefit from outsourcing more of their cost of goods sold.

Celestica's Focus

We are dedicated to building solid partnerships and providing flexible product lifecycle solutions in electronics manufacturing
services. To achieve this goal, we work closely with our OEM customers to proactively identify and fulfill their requirements. We strive to exceed our customers' expectations by providing a broad
range of services to lower cost, increase flexibility and predictability and improve quality. We also look at ways to invest in their future by continuing to deepen our knowledge of their businesses
and to develop solutions to meet their needs. We constantly look to advance our technical capabilities to help our customers have a competitive advantage. By succeeding in the following areas, we
believe we will maximize customer satisfaction, achieve superior financial performance and enhance shareholder value:

Steadily Improve Operating Efficiency to Increase Operating Margins.We continue to focus on: (i) improving utilization in regions
or sites
where volumes are below appropriate levels, (ii) completing our restructuring programs to ensure we have the appropriate global manufacturing network and cost structures in place to serve our
customers, (iii) leveraging our best supply chain practices globally to lower material costs, minimize lead times and improve our planning cycle to better meet changes in customers' demand and
improve asset utilization, (iv) compensating our employees based, in part, on the achievement of profitability and return on invested capital targets, and (v) leveraging our IT tools in
order to reduce waste and redundancy and improve
quality. We will continue our intensive focus on maximizing asset utilization, which we believe will, when combined with the margin enhancement measures described above, increase our return on
invested capital.

Leverage Expertise in Technology, Quality and Supply Chain Management.We are committed to meeting our customers' needs in the areas of
technology,
quality and supply chain management. Our expertise in these areas enable us to meet the rigorous demands of our OEM customers, and allow us to produce a variety of electronic products ranging from
high-volume consumer electronics to highly complex technology infrastructure products. Our commitment to quality allows us to deliver consistently reliable products to our customers. The
systems and processes associated with our expertise in supply chain management have generally enabled us to rapidly adjust our operations to meet the lead time requirements of our customers, flexibly
shift capacity in response to product demand fluctuations and quickly and effectively deliver products directly to end customers. We often work closely with suppliers to influence component design for
the benefit of our customers. Based on the successes that we have had in these areas, we have been recognized with numerous customer and industry achievement awards.

Develop and Enhance Profitable, Key Relationships with Leading OEMs.We seek to build and sustain profitable, strategic relationships
with targeted
industry leaders in sectors that can benefit from the delivery of our services and solutions. We conduct ourselves as an extension of our customers' organizations and this enables us to respond to
their needs with speed, flexibility and predictability in delivering results. We have established and maintain strong manufacturing relationships with a diverse mix of leading OEMs across
several market segments. Going forward, we believe that our customer base will be a strong source of growth for us as we seek to strengthen these relationships through the delivery of additional
services.

Expand Range of Service Offerings.We continually look to expand the breadth and depth of the services we provide to OEMs in areas
that can
reduce their overall product lifecycle costs. In recent years, we have significantly expanded our service offerings to facilitate the manufacture of a broader spectrum of products and to support the
full product lines of leading OEMs in a variety of industry segments. During this period, we have also expanded or acquired additional capabilities in prototyping, design, systems assembly,
logistics, fulfillment and after-market services.

Continue to Penetrate Strategic Target End-Markets.As a result of new or continued demand for outsourced electronics manufacturing
services, we have established a diverse customer base with OEM customers in several industries. Our legacy of expertise in technology, quality and supply chain management, in addition to our broad
service offerings, have positioned us as an attractive partner to companies across these market segments. Our

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diversification
across many markets has reduced the risk associated with reliance on only a few sectors. Our revenue diversification is as follows:

2006

2007

2008Consumer


18%


22%


26%Enterprise communications


28%


28%


25%Servers


17%


19%


16%Telecommunications


18%


14%


15%Storage


10%


10%


10%Industrial, aerospace and defense


9%


7%


8%


Selectively Pursue Strategic Acquisitions.We have completed numerous acquisitions and will continue to selectively seek acquisition
opportunities in
order to (i) further develop strategic relationships with OEMs in our target markets, (ii) expand our capacity and capabilities, and (iii) broaden and deepen the scope of
our service offerings.

Celestica's Business



We are a global provider of end-to-end supply chain solutions offering a full spectrum of product design,
manufacturing, order fulfillment, delivery (including reverse logistics), after-market repair and product reclamation services. We capitalize on our global operating network, information technology
and supply chain expertise using a team of highly skilled, customer-focused employees. We believe that our ability to deliver a wide spectrum of flexible solutions to our customers across several
industries provides our customer with a competitive time to market and cost advantage. We also believe our full range of integrated product lifecycle service capabilities provides us with an advantage
in the EMS industry.

Supply Chain Management.We use enterprise resource planning and supply chain management systems to optimize materials management from
suppliers
through to our customers' customers. The effective management of the supply chain is critical to the OEMs' success as it directly impacts the time required to deliver products to market and the
capital requirements associated with carrying inventory. We feel that we have a differentiated supply chain offering compared to our competitors through our Total Cost of Ownership (TCOO)
Strategy and Ring Strategy.

Through
the development of our TCOO Strategy, we strive to provide our customers with the true cost of producing, delivering and supporting their products so that we can exceed their
expectations for time-to-market and quality and provide them with the lowest TCOO. Through our Ring Strategy, we strive to align a network of suppliers around each of our
mega-sites. This strategy strives to align the material supply in close proximity to our mega-sites so we can increase the agility and flexibility of our supply chain and
deliver the shortest overall lead times for any given product.

Design.Our global design services and solutions architects are focused on opportunities that span the entire product lifecycle.
Supported by a
disciplined approach to program management, we provide flexible design solutions and expertise to help customers optimize the supply chain to reduce their overall product costs, improve
time-to-market and introduce competitively differentiated products. A leader in design analysis, we leverage our proprietary CoreSim Technology to minimize design
spins, speed time to market and provide improved manufacturing yields for our customers. Through our collective experience with common technologies across multiple industries and product groups, we
can provide quality and cost-focused solutions for our customers' design needs.

Our
teams work with OEM product designers in the early stages of product development. Our design team uses advanced tools to enable new product ideas to progress from electrical and
application-specific integrated circuit design, to simulation, physical layout, and design for manufacturing. Collaborative links and databases between the customer and our design and manufacturing
groups help to ensure that new designs are released rapidly, smoothly and cohesively into production.

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We
enhance our design services capabilities through strategic relationships with global engineering and research and development organizations, as well as other IT services and business
process outsourcing firms. We believe that by combining our companies' strengths, we can create solutions to help our customers overcome design related challenges. The skills and scalability that we
can access enable us to better manage projects throughout the life of the product, including software development and systems validation, as well as complete product sustainability.

Other
key initiatives aimed at enhancing our design services offering include developing and marketing solutions accelerator platforms for server blades, storage, advanced
telecommunications computing architecture and worldwide interoperability for microwave access (WiMAX). These customizable solution accelerators will help OEMs reach their markets faster by
reducing design cycles without compromising their intellectual property.

Green Services. Since 2004, we have been developing a suite of services to help our customers comply with environmental
legislation, including the European Union's (EU) RoHS and WEEE laws and China's RoHS directives. The EU's RoHS mandated the removal of a number of hazardous substances, including the lead commonly
found in electronic products. Through WEEE, the EU requires that producers or distributors register with the government authorities in each member state and consider recycling costs in the pricing for
any products placed in the EU markets after August 2005. We continue to develop and offer a comprehensive suite of services to help our customers design, prototype, introduce, manufacture,
test, ship, takeback, repair, refurbish, reuse, recycle and properly dispose of end-of-life (EOL) products in compliance with the existing legislation and the evolving
legislation in countries in which we operate.

Prototyping.Prototyping is a critical early-stage process in the development of new products. In prototyping, our engineers
collaborate with OEM
engineers to build early-stage products at our new product introduction centers. These centers are strategically located to enable us to provide a quick response in the early stages of the product
development lifecycle. Upon completion of these prototypes, our new product introduction centers provide a seamless entry into our larger manufacturing facilities.

Systems Assembly and Test.We use sophisticated technologies in the assembly and testing of our products. We have continually made
significant
investments in the development of new assembly and test process techniques to enhance product quality, reduce cost and improve delivery time to customers. We work independently and also collaborate
with customers and suppliers to develop leading assembly and test technologies. Systems assembly and testing require sophisticated logistics capabilities to rapidly procure components, assemble
products, perform complex testing and distribute products to customers around the
world. Our full systems assembly services involve combining and testing a wide range of subassemblies and components before shipping to their final destination. Increasingly, OEMs require
custom build-to-order system solutions with very short lead times and we are focused on using our advanced supply chain management capabilities to exploit this trend.

Product Assurance.We provide product assurance to our OEM customers. Our product assurance teams perform product life testing and full
circuit
characterization to ensure that designs meet or exceed required specifications. We are accredited as a National Testing Laboratory capable of testing to international standards (e.g., Canadian
Standards Association and Underwriters Laboratories). We believe that this service allows our customers to attain product certification significantly faster than is customary in the
EMS industry.

Failure Analysis.Our extensive failure analysis capabilities concentrate on identifying the root cause of product failures and
determining
corrective actions. The root causes of failures typically relate to inherent component defects and/or deficiencies in design robustness. Products are subjected to various environmental extremes,
including temperature, humidity, vibration, voltage and rate of use. Field conditions are simulated in failure analysis laboratories which employ advanced electron microscopes, spectrometers and other
advanced equipment. We are also able to discover failures before products are shipped as our highly qualified engineers are proactive in working in partnership with suppliers and customers to develop
and implement resolutions.

Fulfillment.We leverage our global scale in manufacturing, supply chain management and fulfillment to provide fully integrated
logistics solutions
to our customers. Our logistics offering includes warehouse and

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distribution,
freight management, logistics consulting services, product and materials visibility and reverse logistics. We ship worldwide to our customers or in many cases, directly to OEMs'
customers.

After-Market Services.We help our customers extend the value of their product through our after-market repair, returns and recycling
services,
individualized to meet each customer's requirements. These services include field failure analysis, product upgrades, repair and engineering change management.

Quality Management

One of our strengths is our ability to consistently deliver high-quality services and products. We have an extensive
quality management system that focuses on continual process improvement and achieving high levels of customer satisfaction. We employ a variety of advanced statistical engineering techniques and other
tools to assist in improving product and service quality. All of our principal facilities are ISO certified to ISO 9001 or ISO 9002 standards. Most of our principal facilities are also
certified to ISO 14001 (environmental) standards, as well as to other industry-specific certifications.

In
addition to these standards, we continue to deploy Lean and Six Sigma initiatives throughout our manufacturing network. Implementing Lean throughout the manufacturing process improves
the efficiency and reduces waste in areas such as inventory on hand, set up times, floor space and the number of people required for production. Six Sigma ensures continuous improvement by reducing
process variation. Success in these areas helps our customers lower their costs, positioning them more competitively in their respective business environments.

We
believe that quality management is one of the key services directly linked to meeting and exceeding our customers' expectations and we have a series of key performance indicators
deployed across our operating network that allow our teams to focus on driving continuous improvement and meeting the customers' expectations around quality.



Since 2005, approximately one-half of our revenue was produced in Asia and one-third of our revenue has been
produced in North America. A listing of our principal manufacturing and non-manufacturing locations is included in Item 4, "Information on the
Company  Description of Property." We believe we have a competitive and strategic global manufacturing network with approximately 80% of our employees located in
lower-cost regions. We have deployed many of our significant technical capabilities to a broad number of our global sites in both high-cost and low-cost regions
which we believe differentiates us from our competitors.

Certain
geographic information is set forth in note 17 to the Consolidated Financial Statements in Item 18.



We have adopted a marketing approach focused on creating profitable, strategic relationships with leading OEMs in targeted
end-markets. We have structured our business development teams by market with a focus on providing complete manufacturing and supply chain solutions. Our coordination of efforts with key
global customers has been enhanced by the creation of customer-focused teams, each headed by a group general manager who oversees the global relationship with such customers. These teams work with our
solutions architects to develop specific approaches that meet the unique needs of each customer's product or supply chain requirements. Our global network is comprised of customer-focused teams,
including direct sales representatives, operational and project managers, account executives, supply chain management teams, as well as senior executives. Our global sales organization also leverages
an integrated set of processes designed to provide consistency to customers worldwide.



We supply products and services to approximately 100 OEM customers and target industry leading customers in strategic market
segments focused on key technologies. Our customers include Alcatel Lucent, Cisco Systems, EMC, Hewlett-Packard, Honeywell, IBM, Juniper, Microsoft, NEC, Raytheon, Research in Motion and Sun
Microsystems. We are focused on strengthening our relationships with these strategic customers

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through
the delivery of new and expanding end-to-end solutions, such as design and engineering, systems integration, fulfillment and after-market services, including managing
end-of-life products for our customers.

During
2008, we had no customers that represented over 10% of total revenue. During 2007, our two largest customers, Cisco Systems and Sun Microsystems, each represented more than 10% of
total revenue and in aggregate represented 21% of total revenue. Our top 10 customers represented 63% and 61%, respectively, of total revenue for 2008 and 2007.

We
enter into contractual agreements with our key customers that provide the framework for our overall relationship. The majority of our customer arrangements require the customer to
purchase from us any unused inventory that we have purchased to fulfill that customer's forecasted manufacturing demand.



We use advanced technology in the design, assembly and testing of the products we manufacture. We believe that our processes and skills
are among the most sophisticated in the industry. We believe that this provides us with advantages over many of our smaller competitors and our competitors building less complex products.

Our
customer-focused factories are highly flexible and are reconfigured as needed to meet customer specific product requirements and fluctuations in volumes. We have extensive
capabilities across a broad range of specialized assembly processes. We work with a variety of substrate types based on the wide range of products we build for our customers, from thin, flexible
printed circuit boards to highly complex, dense multi-layer boards as well as with a broad array of advanced component and attach technologies employed in our customers' products. Increasing demand
for full-system assembly solutions continues to drive technical advancement in complex mechanical assembly and configuration.

Our
assembly capabilities are complemented by advanced test capabilities. The technologies we use include high-speed functional testing, burn-in, vibration, radio
frequency, in-circuit and in-situ dynamic thermal cycling stress testing. We believe that our inspection technology, which includes X-ray laminography, advanced
automated optical inspection, three-dimensional laser paste volumetric inspection and scanning electron microscopy, is among the most sophisticated in the EMS industry. We work directly with the
leaders in the equipment industry to optimize their products and solutions or to jointly design a solution to better meet our needs and the needs of our customers. Furthermore, we employ internally
developed automated robotic technology to perform in-process repair.

Our
ongoing research and development activities include the development of processes and test technologies, as well as some focused product development. We are proactive in developing
manufacturing techniques that take advantage of the latest component, product and packaging designs. We work directly with our customers to understand their product roadmaps and to develop the
technology solutions required to optimally solution their future needs. We often work with, and take a leadership role in, industry groups that strive to advance the state of technology in
the industry.



We have strong relationships with suppliers of every commodity we use. We employ electronic data interchange with our key suppliers and
ensure speed of supply through strong relationships with our logistics partners and full-service distribution capabilities. During 2008, we procured and managed over $6 billion in
materials and related services. We view the size and scale of our procurement activities as an important competitive advantage, as it enhances our ability to obtain better pricing, influence component
packaging and design and obtain a supply of components in constrained markets.

We
believe we have a differentiated supply chain offering compared to our competitors through our Total Cost of Ownership Strategy and Ring Strategy. Through our TCOO
Strategy, we strive to provide our customers with the true cost of producing, delivering and supporting their products so that we can exceed their expectations for
time-to-market and quality and provide them with the lowest TCOO. Through our Ring Strategy we strive to align a network of suppliers around our mega-sites. This
strategy places an emphasis on

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dealing
with suppliers in close proximity to our mega-sites so we can increase the agility and flexibility of our supply chain and deliver the shortest overall lead times for any
given product.

We
utilize two enterprise systems which provide comprehensive information on our logistics, financial and engineering support functions. These systems provide management with the data
required to manage the logistical complexities of the business and are augmented by and integrated with other applications, such as shop floor controls, component and product database management and
design tools.

To
minimize the risk associated with inventory, we primarily order materials and components only to the extent necessary to satisfy existing customer orders and forecasts covered by the
contract terms and conditions. We have implemented specific inventory management strategies with certain suppliers, such as "supplier managed inventory" (pulling inventory at the production line on an
as-needed basis) and on-site stocking programs. Our initiatives in Lean and Six Sigma also focus on eliminating excess inventory throughout the supply chain. In providing
electronics manufacturing services to our customers, we are largely protected from the risk of fluctuations in inventory costs, as these costs are generally passed through to customers.

All
of the products we manufacture or assemble require one or more components. In many cases, there may be only one supplier of a particular component. Some of these components could be
rationed in response to supply shortages. We attempt to ensure continuity in the supply of these components. In cases where unanticipated customer demand or supply shortages occur, we attempt to
arrange for alternative sources of supply, where available, or defer planned production in response to the availability of the critical components.

Many
of these suppliers are also involved with our Ring Strategy, whereby the supplier locates its operations in close proximity to our major facilities in order to reduce lead times and
provide greater levels of flexibility to our customers.



We hold licenses to various technologies which we acquired in connection with acquisitions. In addition, we believe that we have
secured access to all required technology that is material to the current conduct of our business.

We
regard our manufacturing processes and certain designs as proprietary trade secrets and confidential information. We rely largely upon a combination of trade secret laws,
non-disclosure agreements with our customers and suppliers and our internal security systems, confidentiality procedures and employee confidentiality agreements to maintain the trade
secrecy of our designs and manufacturing processes. Although we take steps to protect our trade secrets, there can be no assurance that misappropriation will not occur.

We
currently have a limited number of patents and patent applications pending. However, we believe that the rapid pace of technological change makes patent protection less significant
than such factors as the knowledge and experience of management and personnel and our ability to develop, enhance and market electronics manufacturing services.

We
license some technology from third parties which we use in providing electronics manufacturing services to our customers. We believe that such licenses are generally available on
commercial terms from a number of licensors. Generally, the agreements governing such technology grant to us non-exclusive, worldwide licenses with respect to the subject technologies and
terminate upon a material breach by us of the terms of such agreements.



We compete on a global basis to provide electronics manufacturing services and solutions to OEMs across various
end-markets. Our competitors include a large number of domestic and foreign companies, such as Benchmark Electronics, Flextronics International, Hon Hai Precision Industry, Jabil Circuit
and Sanmina-SCI, as well as smaller EMS companies that often have a regional, product, service or industry specific focus. ODMs, companies that provide internally designed products and
manufacturing services to OEMs, continue to increase their share of outsourced manufacturing services provided to OEMs in several markets, such as personal computer motherboards, notebook and
desktop computers, and cell phones. While we have not, to date,

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encountered
significant direct competition from ODMs in our primary markets, such competition may increase if our business in these markets grows, or if ODMs expand further into, or
beyond, these markets.

We
may also face competition from current and prospective customers who evaluate our capabilities against the merits of manufacturing products internally. We compete with different
companies depending on the type of service or geographic area. Some of our competitors may have greater manufacturing, financial, procurement, research and development, and marketing resources than we
do. We believe our competitive advantage in our targeted markets is our track record in manufacturing technology, quality, responsiveness and providing cost-effective, value-added
services. To remain competitive, we believe we must continue to provide technologically advanced manufacturing services and solutions, maintain quality levels, offer flexible delivery schedules,
deliver finished products on time and compete favorably on price.



As of December 31, 2008, we employed over 38,000 permanent and temporary (contract) employees worldwide. Given the
variable nature of our project flow and the quick response time required by our customers, it is critical that we are able to quickly ramp our production up or down to maximize efficiency. To achieve
this, our approach has been to employ a skilled temporary labor force, as required.

We
believe that our employees are our greatest asset. Culturally, we are team-oriented, values-driven and results-oriented, with a focus on customer service and quality at
all levels. This culture is an important element of our strategy, as we need to be able to fully utilize the intellectual capital of our employees to be successful. Some of our employees in Brazil,
China, Japan, Mexico, Singapore and Spain are represented by unions.



We are subject to various federal, state/provincial, local and multi-national environmental, health and safety laws and regulations,
including measures relating to the release, use, storage, treatment, transportation, discharge, disposal and remediation of contaminants, hazardous substances and waste, as well as practices and
procedures applicable to the construction and operation of our plants. We believe that we are currently in compliance in all material respects with applicable environmental laws.

Some
of our operating sites have a history of industrial use. As is typical for such businesses, soil and groundwater contamination could have occurred. From time to time we investigate,
remediate and monitor soil and groundwater contamination at certain of our operating sites.

Except
for the facilities that we acquired in the Omni Industries Limited and MSL transactions, Phase I or similar environmental assessments (which involve general
inspections without soil sampling or groundwater
analysis) were obtained for most of the manufacturing facilities we lease or own in connection with our acquisition or lease of such facilities. Where contamination is suspected, Phase II
intrusive environmental assessments (including soil and/or groundwater testing) are usually performed. We expect to conduct such environmental assessments in respect to future property acquisitions
where consistent with local practice. These environmental assessments have not revealed any environmental liability that we believe, based on current information, will have a material adverse effect
on our results of operations, business, prospects or financial condition, nor are we aware that we have any such material environmental liability, in part because of the contractual retention of
liability for some contamination and its remediation by landlords and former owners at some sites. It is possible that our assessments do not reveal all environmental liabilities, or that there are
material environmental liabilities of which we are not presently aware, or that future changes in law or enforcement standards will cause us to incur significant costs or liabilities in
the future.

Environmental
legislation also operates at the product level. Since 2004, we have developed our Green Services, offering a suite of services that helps our customers comply
with environmental legislation, such as the EU's RoHS and WEEE laws and China's RoHS legislation.



Although we obtain firm purchase orders from our customers, OEM customers typically do not make firm orders for delivery of products
more than 30 to 90 days in advance. We do not believe that the backlog of

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expected
product sales covered by firm purchase orders is a meaningful measure of future sales, since orders may be rescheduled or cancelled.



Seasonality is reflected in the mix and complexity of the products we manufacture. With a significant exposure to consumer, computing
and communications infrastructure products, there will be a level of seasonality in our quarterly revenue patterns for many customers. The consumer electronics business has revenue peaks that are
different than those of our communications and enterprise computing market segments. As a result of this mix, our efforts to diversify our revenue base, and limited visibility in technology
end-markets, it is difficult to predict the extent and impact of seasonality on our business. With the current global economic crisis, it is difficult to assess how seasonality will impact
us going forward.

C.    Organizational Structure

We conduct our business through subsidiaries operating on a worldwide basis. The following companies are considered significant subsidiaries and each of them is
wholly-owned:

Celestica
Cayman Holdings 1 Limited, a Cayman Islands corporation.

Celestica
Cayman Holdings 9 Limited, a Cayman Islands corporation.

Celestica
Corporation, a Delaware corporation.

Celestica
(Gibraltar) Limited, a Gibraltar corporation.

Celestica
Holdings Pte Ltd., a Singapore corporation.

Celestica
Hong Kong Limited, a Hong Kong corporation.

Celestica
International Inc., an Ontario corporation.

Celestica
Liquidity Management Hungary Limited Liability Company, a Hungary corporation.

Celestica
(Luxembourg) S.ÀR.L., a Luxembourg corporation.

Celestica
(Thailand) Limited, a Thailand corporation.

Celestica
(US Holdings) Inc., a Delaware corporation.

IMS
International Manufacturing Services Limited, a Cayman Islands corporation.

1282087
Ontario Inc., an Ontario corporation.

1755630 Ontario Inc.,
an Ontario corporation.

D.    Description of Property

The following table summarizes our principal facilities as of February 23, 2009. Our facilities are used to provide electronics manufacturing services and
solutions, such as the manufacture of printed circuit boards,

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assembly
and configuration of final systems and other related manufacturing and customer support activities, including warehousing, distribution, and fulfillment.

Major manufacturing sites

Square Footage

Owned/Leased(in thousands)Toronto, Ontario


888

OwnedOttawa, Ontario


18

LeasedFontana, California


334

LeasedSan Jose, California(1)


101

LeasedOntario, California(1)


443

LeasedVentura, California


46

LeasedArden Hills, Minnesota


154

LeasedNashville, Tennessee(1)


529

LeasedAustin, Texas


51

LeasedFarmers Branch, Texas


150

LeasedMcAllen, Texas


61

LeasedReynosa, Mexico


153

LeasedMonterrey, Mexico(1)


637

LeasedHortolandia, Brazil


105

LeasedGalway, Ireland


133

LeasedValencia, Spain


418

OwnedRajecko, Czech Republic


170

OwnedKladno, Czech Republic(1)


185

Owned/LeasedOradea, Romania


200

OwnedShanghai, China(1)


43

LeasedDongguan, China(1)


286

LeasedSuzhou, China


388

Owned/LeasedSongshan Lake, China


437

Owned/LeasedJohor Bahru, Malaysia(1)


554

Owned/LeasedKulim, Malaysia


324

OwnedLaem Chabang, Thailand(1)


1,085

Owned/LeasedSingapore(1)


314

LeasedMiyagi, Japan


273

OwnedKawasaki, Japan


42

LeasedCebu, Philippines


125

OwnedHyderabad, India(1)


53

Owned/Leased


---

Our principal executive office is located at 12 Concorde Place, 5th Floor, Toronto, Ontario M3C 3R8. All of our principal
facilities are ISO certified to ISO 9001 or ISO 9002 standards. Most of our principal facilities are also certified to the ISO 14001 (environmental) standards.

Our
land and facility leases expire between 2009 and 2060. We currently expect to be able to extend the terms of expiring leases or to find replacement facilities on reasonable terms.

As
part of our restructuring plans, we have been focused on increasing production in lower-cost geographies. We will continue to evaluate our operating network to ensure that
it meets our customers' requirements. See Item 5, "Operating and Financial Review and Prospects  Management's Discussion and Analysis of Financial
Condition and Results of Operations  Operating Results" for additional information concerning our restructurings.

Item 4A. Unresolved Staff Comments

None.

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Item 5. Operating and Financial Review and Prospects

MANAGEMENT'S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations should be read in conjunction
with the Consolidated Financial Statements, which we prepared in accordance with Canadian GAAP. A reconciliation to United States GAAP is disclosed in note 20 to the Consolidated
Financial Statements. All dollar amounts are expressed in U.S. dollars. The information in this discussion is provided as of February 20, 2009.

Certain statements contained in the following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) constitute
forward-looking statements within the meaning of section 27A of the U.S. Securities Act and section 21E of the U.S. Exchange Act, including, without limitation, statements
related to our future growth, trends in our industry, our financial or operational results, and our financial or operational performance. Such forward-looking statements are predictive in nature, and
may be based on current expectations, forecasts or assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially from the forward-looking statements
themselves. Such forward-looking statements may, without limitation, be preceded by, followed by, or include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," or
similar expressions, or may employ such future or conditional verbs as "may", "will", "should" or "would" or may otherwise be indicated as forward-looking statements by grammatical construction,
phrasing or context. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995, and
in any applicable Canadian securities legislation. Forward-looking statements are not guarantees of future performance. You should understand that the following important factors could affect our
future results and could cause those results to differ materially from those expressed in such forward-looking statements: the challenges of effectively managing our operations during uncertain
economic conditions, including significant changes in demand from our customers as a result of the impact of the global economic crisis and capital markets weakness; the risk of potential
non-performance by counterparties, including but not limited to financial institutions, customers and suppliers, during uncertain economic conditions; the effects of price competition and
other business and competitive factors generally affecting the electronics manufacturing services (EMS) industry, including the trend for outsourcing; variability of operating results among periods;
our dependence on a limited number of customers; the challenge of responding to lower-than-expected customer demand; our dependence on industries affected by rapid
technological change; our ability to successfully manage our international operations; our inability to retain or grow our business due to execution problems resulting from significant headcount
reductions, plant closures and product transfers associated with restructuring activities; the challenge of managing our financial exposures to foreign currency fluctuations; and the delays in the
delivery and/or general availability of various components used in our manufacturing process. These and other risks and uncertainties, as well as other information related to the company, are
discussed in our various public filings at www.sedar.com and www.sec.gov, including our Annual Report on Form 20-F and subsequent reports on Form 6-K filed
with the U.S. Securities and Exchange Commission and our Annual Information Form filed with the Canadian Securities Commissions.

Except as required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. You should read this document with the understanding that our actual future results may be materially different from what we expect. We may not update these
forward-looking statements, even if our situation changes in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary
statements.

Overview

What Celestica does:

We provide end-to-end product lifecycle solutions to original equipment manufacturers (OEMs) in the
communications, consumer, enterprise computing, industrial, aerospace and defense, alternative energy and healthcare markets.

To
support our customers' products throughout their entire lifecycle, we provide end-to-end solutions including design, supply chain management, manufacturing and
systems integration, fulfillment and after-market

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services.
We believe these solutions will help our customers eliminate waste from their supply chains, resulting in lower product lifecycle costs and greater returns.

Our
global operating network spans the Americas, Asia and Europe. In an effort to drive speed and flexibility for our customers, we conduct the majority of our business through eight
full-service mega-sites, strategically located around the world. Through our Ring Strategy, we strive to align a network of suppliers around each of our mega-sites
in order to increase flexibility in our supply chain, deliver shorter overall product lead times and reduce inventory. We operate additional sites around the globe with certain supply chain management
and high-mix/low-volume manufacturing capabilities to meet the specific requirements of customers in markets such as the industrial, aerospace and defense sectors.

Through
our mega-sites and the deployment of our Total Cost of Ownership (TCOO) Strategy, we strive to provide our customers with the lowest total cost
throughout the product lifecycle. This approach enables us to focus our capabilities on broad solutions that address the total cost of production, delivery and after-market support for our customers'
products, which can help drive greater levels of efficiency and improved service levels throughout our customers' supply chain.

We
depend upon a relatively small number of customers for a significant portion of our revenue. The majority of our revenue is derived from customers in the consumer, communications and
enterprise computing markets.

Overview of business environment:

Since the 1990s, OEMs have shifted more of their manufacturing and supply chain activities to EMS providers in an effort to
drive greater manufacturing flexibility and to improve their financial returns. In response to this shift by OEMs, the EMS industry has grown rapidly and its capabilities and services
have evolved.

The
EMS industry is highly competitive with multiple global EMS providers competing for the same customers and programs. Although the industry is characterized by significant revenue
opportunities, operating margins are comparatively low. Asset utilization is an important factor affecting operating margins. The amount of available manufacturing capacity and the location of that
capacity are vital considerations for EMS providers. Volatility in energy prices, which may affect raw materials and transportation costs, and rising labor costs could also impact operating margins
for the EMS industry. The EMS industry is also working capital intensive. As a result, return on invested capital, which encompasses operating margins, inventory management, accounts receivable and
accounts payable, is one of the most important metrics for measuring an EMS provider's financial success.

EMS
companies are exposed to a variety of customers and end markets. Demand visibility is limited which makes revenue in each of our end markets difficult to predict. This is due
primarily to the shorter product lifecycles inherent in technology markets, rapid shifts in technology for our customers' products, and the general economic environment. In the early 2000s, a global
economic downturn led to a decline in demand for many technology products. This negatively impacted the operations of many EMS providers, including us.

Historically,
significant economic uncertainty has had a negative impact on our customers' demand. Recent global economic conditions and uncertainty, including the current global
economic crisis and volatile capital markets, have negatively impacted our financial results and will likely continue to have a negative impact over the next several quarters and beyond.

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Summary of 2008

The following table sets forth, for the periods indicated, certain key operating results and other financial information
(in millions, except per share amounts):

Year ended December 312006

2007

2008Revenue

$
8,811.7

$
8,070.4

$
7,678.2Gross profit


451.8


422.4


531.1Selling, general and administrative expenses (SG&A)


285.6


295.1


303.8Net loss


(150.6
)

(13.7
)

(720.5
)Basic loss per share

$
(0.66
)
$
(0.06
)
$
(3.14
)Diluted loss per share

$
(0.66
)
$
(0.06
)
$
(3.14
)




As at December 312006

2007

2008Cash and cash equivalents

$
803.7

$
1,116.7

$
1,201.0Total assets


4,686.3


4,470.5


3,786.2Total long-term financial liabilities


750.8


758.5


733.1


Revenue
for 2008 of $7.7 billion decreased 5% from $8.1 billion in 2007. The decrease in revenue was due to lower volumes, primarily from our servers, enterprise
communications and storage end markets which more than offset the increase in revenue primarily from customers in our consumer, telecommunications and industrial end markets. The amount of revenue
reduction in 2008 as a result of customer disengagements, primarily in the enterprise communications end market, was approximately 5%.

Gross
profit for 2008 increased approximately 25% from 2007 primarily due to operational improvements in Mexico and Europe. We also continued to benefit from cost reductions,
restructuring actions, the impact of renegotiating or exiting unprofitable accounts and the streamlining and simplifying of processes throughout the company. Gross margin as a percentage of revenue
was 6.9% in 2008 compared to 5.2% for 2007.

SG&A
expenses for 2008 as a percentage of revenue were 4.0% compared to 3.7% of revenue for 2007. The increase in percentage primarily reflects the impact of foreign exchange losses and
higher variable compensation costs, partially offset by lower IT consulting and support costs and capital tax recoveries, as well as lower revenue levels in 2008.

In
January 2008, we announced that we would incur additional restructuring charges of between $50 million and $75 million to complete our planned restructuring
actions. As we finalized our 2009 plan in the fourth quarter of 2008, we estimated that our restructuring costs would reach the high end of our previously announced range of $50 million to
$75 million. In 2008, we recorded restructuring charges of $35.3 million. We expect to complete the remainder of the restructuring actions by the end of 2009.

Our
net loss for 2008 was $720.5 million compared to $13.7 million for 2007. Although operating earnings improved year-over-year, our net loss for
2008 was impacted primarily by a write-off of goodwill of $850.5 million.

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Other performance indicators:

In addition to the key financial, revenue and earnings-related metrics described above, management regularly reviews the following
working capital metrics:

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08Days in accounts receivable


45


42


42


39


44


42


43


50Days in inventory


59


50


44


38


42


42


40


41Days in accounts payable


(80
)

(66
)

(66
)

(64
)

(73
)

(71
)

(72
)

(79
)Cash cycle days


24


26


20


13


13


13


11


12


Days
in accounts receivable (A/R) is calculated as the average A/R for the quarter divided by the average daily revenue. Days in inventory is calculated as the average inventory for the
quarter divided by the average daily cost of sales. Days in accounts payable (A/P) is calculated as the average A/P (including accruals) for the quarter divided by average daily cost of sales. Cash
cycle days is calculated as the sum of days in A/R and inventory, less the days in A/P.

Cash
cycle days for the fourth quarter of 2008 improved one day compared to the fourth quarter of 2007. Although A/R days and inventory days have increased year-over year, we
also increased our A/P days. A/R days worsened 11 days year-over-year, and seven days sequentially, primarily due to management's decision to reduce the amount of A/R
sold under the A/R sales program from $225 million at the end of 2007 to zero at the end of 2008, and the timing of revenue during the period. Inventory days for 2008 reflect our improved
inventory management. The increase in inventory days in the fourth quarter of 2008 compared to the third quarter of 2008 and to the fourth quarter of 2007 reflects the higher inventory levels required
to support certain customer demand and the ramping of new programs. A/P days increased due to timing of payments, as well as extended payment terms offered by suppliers.

Impact of current economic environment:

The global economic crisis and capital market weakness is affecting virtually all companies and industries. Visibility to
end-market demand has become even more uncertain. This economic environment could have a significant negative impact on our revenue and operating profitability, our cash flow and our
liquidity. We may experience increased pricing pressure and other competitive pressures as customers adjust to the current environment. The trend towards outsourcing could also change as some
customers may want to bring their production back in-house to fill capacity. Other customers may want to shift their production between EMS providers based on pricing concessions or their
preference for consolidating their supply chain. This may result in additional restructuring actions and site closures as we respond to our customers' actions. We have experienced significant foreign
currency fluctuations, especially in the second half of 2008, which will likely continue to impact us going forward. The uncertain environment has also impacted the fair value of our financial
instruments, and the returns we earn on our pension assets, among other items. We also expect that the global economic environment will impact the financial condition of some of our customers and
suppliers. We will continue to closely monitor our customers' ability to pay their receivables and monitor our suppliers, in an effort to ensure consistency of supply. The interruption of supply from
a raw materials supplier, especially for single sourced components, could have a significant impact on our operations, and on our customers, if we are unable to deliver finished product in a
timely manner.

During
the fourth quarter of 2008, we experienced a significant decline in expected future demand for all of the end markets we serve. We conducted our goodwill impairment assessment in
the fourth quarter of 2008. The deteriorating macro environment and economic uncertainty, along with the sustained decline in our own market capitalization, resulted in an $850.5 million
goodwill write-down in the fourth quarter of 2008. Other major competitors in our industry have also taken similar write-downs. See note 10(b) to the Consolidated Financial
Statements.

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Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with Canadian GAAP with a reconciliation to United States GAAP, as disclosed
in note 20 to the Consolidated Financial Statements.

The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
related disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant accounting
policies and methods used in the preparation of the financial statements are described in note 2 to the Consolidated Financial Statements. We evaluate our estimates and assumptions on a
regular basis, based on historical experience and other relevant factors. Actual results could differ materially from these estimates and assumptions, especially in light of the current economic
environment and uncertainties. The following critical accounting policies are impacted by judgments, assumptions and estimates used in the preparation of the Consolidated Financial Statements.

Revenue recognition:

We derive most of our revenue from the sale of electronic equipment that we have built to customer specifications. We recognize revenue
from product sales when all of the following criteria have been met: shipment has occurred; title has passed; persuasive evidence of an arrangement exists; performance has occurred; receivables are
reasonably assured of collection; and customer specified test criteria have been met. We have contractual arrangements with the majority of our customers that require the customer to purchase unused
inventory that we have purchased to fulfill that customer's forecasted manufacturing demand. We account for raw material returns as reductions in inventory and do not recognize revenue on these
transactions.

We
provide warehousing services in connection with manufacturing services to certain customers. We assess these contracts to determine whether the manufacturing and warehousing services
can be accounted for as separate units of accounting. If the services do not constitute separate units of accounting, or the manufacturing services do not meet all of the revenue recognition
requirements, we defer recognizing revenue until the products have been shipped to the customer.

Allowance for doubtful accounts:

We record an allowance for doubtful accounts related to accounts receivable that management believes are impaired. The allowance is
based on our knowledge of the financial condition of our customers, the aging of the receivables, the current business environment, customer and industry
concentrations, and historical experience. If any of our customers have insufficient liquidity or their financial condition deteriorates, we may encounter significant delays or defaults in payments
owed to us by our customers. This may result in our restructuring the debt or extending payment terms which may have a significant adverse effect on our financial condition and results of operations.
The current global economic crisis could impact our customers' ability to pay, or it could render them insolvent, which would impact the collectibility of their accounts. A change to these factors
could impact the estimated allowance and the provision for bad debts recorded in SG&A. If actual defaults are higher than expected, additional provisions may be required.

Inventory valuation:

We value our inventory on a first-in, first-out basis at the lower of cost and net realizable value. We
regularly adjust our inventory valuation based on shrinkage and management's estimates of net realizable value, taking into consideration factors such as inventory aging, future demand for the
inventory, and the nature of the contractual agreements with customers and suppliers, including the ability to return inventory to them. A change to these assumptions could impact the valuation of
inventory and have a resulting impact on gross margins. If actual market conditions or our customers' product demands are less favourable than those projected, additional valuation adjustments may
be required.

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Warranty costs:

We have recorded a liability for warranty costs. As part of the normal sale of a product or service, we provide our customers with
product or service warranties that extend for periods generally ranging from one to three years from the date of sale. The liability for the expected cost of warranty-related claims is established
when products are sold and services are rendered. In estimating the warranty liability, historical material replacement costs and the associated labor to correct the defect are considered. Revisions
to these estimates are made when actual experience differs materially from historical experience. Known product or service defects are specifically accrued as we become aware of such defects. Changes
to the estimates could impact the liability and have a resulting impact on gross margins.

Income taxes:

We have recorded an income tax expense or recovery based on the income earned or loss incurred in each tax jurisdiction and the
substantively enacted tax rate applicable to that income or loss. In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain. The final tax outcome
of these matters may be different from the estimates originally made by management in determining our income tax provisions. We recognize a tax benefit related to tax uncertainties when it is probable
based on our best estimate of the amount that will ultimately be realized. A change to these estimates could impact the income tax provision.

We
record a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not
be realized. Management considers factors such as the reversal of deferred income tax liabilities, projected future taxable income, the character of the income tax asset, tax planning strategies,
changes in tax laws and other factors. A change to these factors could impact the estimated valuation allowance and income tax expense.

Goodwill:

We perform our annual goodwill impairment test in the fourth quarter of each year (to correspond with our planning cycle), and
more frequently if events or changes in circumstances indicate that an impairment loss may have been incurred. To the extent our market capitalization is less than our book value for a sustained
period of time, it could be an indicator that an impairment loss has occurred. We test impairment, using the two-step method, at the reporting unit level by comparing the reporting unit's
carrying amount to its fair value. We estimate the fair value of the reporting units using a combination of a market capitalization approach, a multiples approach and discounted cash flows. The
process of determining fair values is subjective and requires management to exercise judgment in making assumptions about future results, including revenue and expense projections, and discount rates
and market multiples at the reporting unit level. A significant change to these assumptions could impact the fair value of the reporting units resulting in a change to the impairment charge. During
the fourth quarter of 2008, we conducted our annual goodwill assessment, and determined that the entire remaining goodwill balance was impaired. See note 5(d) to the Consolidated
Financial Statements.

Long-lived assets:

We perform our annual impairment tests on long-lived assets in the fourth quarter of each year (to correspond with
our planning cycle), and more frequently if events or changes in circumstances indicate that an impairment loss has incurred. We estimate the useful lives of property, plant and equipment and
intangible assets based on the nature of the asset, historical experience and the terms of any related supply contracts. The valuation of long-lived assets is based on
the amount of future net cash flows that these assets are estimated to generate, as well as appraisals for real property. Revenue and expense projections are based on management's estimates, including
estimates of current and future industry conditions. A significant change to these assumptions and estimates could impact the estimated useful lives or valuation of long-lived assets
resulting in a change to depreciation or amortization expense and the impairment charge. We recorded a long-lived asset impairment loss in 2008. See note 10(c) to the
Consolidated Financial Statements. Future impairment tests may result in further impairment charges.

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Restructuring charges:

We have recorded restructuring charges relating to workforce reductions, facility consolidations and costs associated with exiting
businesses. The restructuring charges include employee severance and benefit costs, costs related to leased facilities that have been abandoned or subleased, owned facilities which are no longer used
and are available-for-sale, costs of leased equipment that have been abandoned, impairment of owned equipment available-for-sale, and impairment of
related intangible assets. The recognition of these charges requires management to make certain judgments and estimates regarding the nature, timing and amounts associated with these plans. For owned
facilities and equipment, the impairment loss recognized is based on the fair value less costs to sell, with fair value estimated based on existing market prices for similar assets. For leased
facilities that have been abandoned or subleased, the liability for lease obligations is calculated on a discounted basis based on future lease payments subsequent to abandonment less estimated
sublease income. To estimate future sublease income, we work with independent brokers to determine the estimated tenant rents we could expect to realize. The estimated liability could change
subsequent to its initial recognition, requiring adjustments to the restructuring expense and liability recorded. At the end of each reporting period, we evaluate the appropriateness of the remaining
accrued balances.

Financial instruments:

We use a variety of methods and assumptions that are based on market conditions and risks existing on each reporting date to determine
the fair value of our financial instruments. We use broker quotes and standard market conventions and techniques, such as discounted cash flow analysis and option pricing models, to determine the fair
value of our financial instruments, including derivatives and hedged debt obligations. We also consider the credit quality of the financial instrument, including our own credit risk and the credit
risk of the counterparty. All methods of fair value measurement result in a general approximation of value and such value may never be realized. A change in the fair value related to fair value hedges
could impact our interest expense on long-term debt and a change in the fair value related to cash flow hedges could impact our other comprehensive income and our operating expenses.

Our
derivative instruments are required to be recorded at fair value on our consolidated balance sheet. Hedge accounting is applied to certain designated hedge relationships when all the
qualifying conditions are met. Hedge ineffectiveness, if significant, is recognized immediately in operations. There is no assurance that all hedge relationships will remain effective throughout their
terms until maturity. Hedge accounting will be discontinued once we assess that a hedge relationship is no longer effective on a retroactive or prospective basis. Subsequent changes in the fair value
of the derivatives, which were previously used as the hedging instruments, will flow through operations directly. There is no assurance that our hedging strategy will be successful in mitigating the
volatility to operations when economic conditions become unstable.

Pension and non-pension post-employment benefits:

We have pension and non-pension post-employment benefit costs and liabilities, which are determined from
actuarial valuations. Actuarial valuations require management to make certain judgments and estimates relating to expected plan investment performance, salary escalation and compensation levels at the
time of retirement, retirement ages, the discount rate used in measuring the liability and expected healthcare costs. Actual future experience will differ from these assumptions, and the differences
may be material. There is no assurance that our future benefit plans will be able to earn the assumed rate of return. Market driven changes may result in changes to our discount rates and other
variables which could lead us to future contributions that differ significantly from our estimates.

The
fair values of our pension assets were based on a measurement date of December 31, 2008. We evaluate these assumptions on a regular basis, taking into consideration current
market conditions and historical data. A change in these factors could impact future pension expense and funding requirements. See notes 2(k) and 13 to the Consolidated Financial
Statements.

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Operating Results

We are required to disclose certain information in our financial statements regarding operating segments, products and services,
geographic areas and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance. Our operating segment is comprised of our electronics manufacturing services business.

Our
annual and quarterly operating results vary from period to period as a result of the level and timing of customer orders, fluctuations in materials and other costs, and the relative
mix of value-add products and services. The level and timing of customer orders will vary due to their attempts to balance their inventory, changes in their supply chain strategies or
suppliers, variation in demand for their products and general economic conditions. Our annual and quarterly operating results are affected by: the mix and seasonality of business in each of our end
markets; price competition; mix of manufacturing value-add; the degree of automation used in the assembly process; capacity utilization; manufacturing effectiveness and efficiency;
shortages of components or labor; costs associated with ramping new programs; customer product delivery requirements; costs and inefficiencies of transferring programs between facilities; the loss of
programs and customer disengagements; the impact of foreign exchange fluctuations; the performance of third-party providers for certain IT systems and production support; the ability to manage
inventory and property, plant and equipment effectively; the ability to manage changing labor, component, energy and transportation costs effectively; the timing of expenditures in anticipation of
forecasted sales levels; the timing of acquisitions and related integration costs; and other factors.

In
the EMS industry, customers award new programs or shift programs to other EMS providers for a variety of reasons including changes in demand for the customers' products, pricing
benefits offered by other EMS providers, execution issues, preference for consolidation or a change in their supplier base, consolidation amongst OEMs, as well as a decision to outsource additional
business. Our operating results for each quarter include the impacts associated with customer disengagements or program losses, as well as new customer or program wins from competitors. Customer or
program transfers between EMS competitors are part of the competitive nature of our industry. Significant quarterly variations can result from the timing of when new programs reach full production and
when existing programs are fully transferred to a competitor.

The
table below sets forth certain operating data expressed as a percentage of revenue for the periods indicated:

Year ended December 312006

2007

2008Revenue


100.0
%

100.0
%

100.0
%Cost of sales


94.9


94.8


93.1Gross profit


5.1


5.2


6.9SG&A


3.2


3.7


4.0Amortization of intangible assets


0.3


0.3


0.2Other charges


2.4


0.6


11.5Interest expense, net of interest income


0.7


0.6


0.5Loss before income taxes


(1.5
)




(9.3
)Income taxes expense


(0.2
)

(0.2
)

(0.1
)Net loss


(1.7
)%

(0.2
)%

(9.4
)%


Revenue:

Revenue for 2008 of $7.7 billion decreased 5% from $8.1 billion for 2007. The decrease in revenue was due to lower
volumes associated with weaker end-market demand, primarily in the servers, enterprise communications and storage end markets which more than offset the increase in revenue primarily from
customers in our consumer, telecommunications and industrial end markets. The amount of revenue reduction

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for
2008 from customer disengagements, primarily in the enterprise communications end market, was approximately 5%.

Revenue
for 2007 of $8.1 billion decreased 8% from $8.8 billion in 2006. Approximately 75% of our decline year-to-year was the result of program and
customer disengagements, primarily in the industrial and communications markets. Further reductions, due to lower volumes primarily in the communications market, were partially offset by higher
revenue from our consumer and server markets, which accounted for a 3% increase in total revenue from 2006. Revenue from our consumer and server markets increased primarily due to ramping volumes from
previous program wins, new customers and stronger end market demand.

The
following table shows the end markets we serve as a percentage of revenue for the periods indicated:

Year ended December 312006

2007

2008Consumer


18%


22%


26%Enterprise communications


28%


28%


25%Servers


17%


19%


16%Telecommunications


18%


14%


15%Storage


10%


10%


10%Industrial, aerospace and defense


9%


7%


8%


Revenue
from our consumer market increased from 2007 primarily as a result of new business wins from existing customers. Revenue from our enterprise communications and servers markets
declined from 2007 due to lower volumes associated with weaker end-market demand. The decline in our enterprise communications revenue also reflects the impact of customer disengagements
beginning in 2007. In 2007, our telecommunications market was negatively impacted by end market weakness and our industrial segment reflected the impact of customer disengagements, initiated in 2006.
Revenue has increased in both of these markets in 2008, reflecting primarily new customer and program wins.

Our
revenue and operating results vary from period to period depending on the level of business and seasonality in each of our end markets, as well as the mix and complexity of the
products being manufactured, among other factors.

Although
we have diversified our end markets over the past several years, we are dependent on a limited number of customers in the consumer, communications (comprised of enterprise
communications and telecommunications) and enterprise computing (comprised of servers and storage) end markets for a substantial portion of our revenue.

For
2008, no customer represented more than 10% of total revenue. For 2007, two customers, Cisco Systems and Sun Microsystems, each represented more than 10% of total revenue. For 2006,
two customers, Cisco Systems and IBM, each represented more than 10% of total revenue.

Whether
any of our customers account for more than 10% of revenue in any period depends on various factors affecting our business with that customer or with other customers, including
seasonality of business, new program wins, program consolidations or losses, the phasing in or out of programs, changes in end-market demand, price competition and changes in our
customers' supplier base or supply chain strategies.

The
following table shows our customer concentration as a percentage of total revenue for the periods indicated:

Year ended December 312006

2007

2008Top 10 customers


61%


61%


63%


We
are dependent upon continued revenue from our largest customers. There can be no assurance that revenue from these or any other customers will not decrease in absolute terms or as a
percentage of total revenue. Any material decrease in revenue from these or other customers could have a material adverse effect

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on
our results of operations. Recent global economic conditions and uncertainty could adversely affect our customers and negatively impact our financial results.

We
believe our growth depends on increasing sales to existing customers for their current and future product generations. We also actively pursue new customers to expand our
end-market penetration and diversify our end-market mix. To achieve this, we are focused on offering end-to-end product lifecycle solutions to include
design, supply chain management, manufacturing and systems integration, fulfillment and after-market services. In our industry, customers may cancel contracts and volume levels can be changed or
delayed. Customers may also shift business to a competitor or bring programs in-house to improve their own utilization. We cannot assure the timely replacement of delayed, cancelled or
reduced orders with new business. In addition, we cannot assure that any of our current customers will continue to utilize our services, which could have a material adverse impact on our results
of operations.

Gross profit:

The following table is a breakdown of gross profit and gross margin as a percentage of revenue for the periods indicated:

Year ended December 312006

2007

2008Gross profit (in millions)

$
451.8

$
422.4

$
531.1Gross margin


5.1
%

5.2
%

6.9
%


Gross
profit for 2008 increased approximately 25% from 2007 primarily due to operational improvements in Mexico and Europe. In addition, we continued to benefit from cost reductions,
restructuring actions, the impact of renegotiating or exiting unprofitable accounts and the streamlining and simplifying of processes throughout the company.

Gross
profit for 2007 decreased 7% compared to 2006 and reflects the impact of lower volumes, underutilization of facilities in Europe and higher costs of disengaging from customers,
primarily in Mexico. These factors more than offset the benefits from our restructuring actions, the exiting of non-profitable business and operational efficiencies. During the second half
of 2006, we recorded net charges, primarily for increased inventory provisions at two of our facilities, which negatively impacted gross margin by 0.4% for 2006.

Multiple
factors cause gross margins to fluctuate including: product volume and mix; production efficiencies; utilization of manufacturing capacity; material and labor costs;
manufacturing and transportation costs; start-up and ramp-up activities; new product introductions; cost structures at individual sites; and other factors, including pricing
pressures from competitors and foreign exchange volatility. We continue to experience pricing pressure from our customers and are frequently asked to re-bid on business previously won,
which could lead to margin pressure in the future. In addition, the availability of components is subject to lead time and other constraints that could affect our revenue and margins.

Selling, general and administrative expenses:

SG&A increased 3% to $303.8 million (4.0% of revenue) in 2008 compared to $295.1 million (3.7% of revenue) in 2007. The
increase in SG&A as a percentage of revenue reflects higher costs as well as the lower revenue levels in 2008. The increase in SG&A for 2008 is due primarily to foreign exchange losses, mainly in the
second half of 2008, and higher variable compensation costs, partially offset by lower IT consulting and support costs and capital tax recoveries.

Each
quarter, we incur unrealized foreign exchange gains or losses on the translation of foreign currency denominated asset and liability balances to U.S. dollars and these
amounts are included in SG&A. The amount of these gains or losses fluctuates from quarter to quarter and is dependent on currency markets and the value of our foreign currency denominated asset or
liability positions in each period. We also incur realized transactional foreign exchange gains or losses in the normal course of business.

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The
foreign exchange losses were $16.4 million for 2008 compared to foreign exchange gains in 2007 of $2.9 million and foreign exchange gains in 2006 of
$9.1 million. During the first half of 2008, we recorded approximately $8 million in foreign exchange gains in Canada and Europe as a result of changes to the Euro, Czech koruna and
Canadian dollar compared to the U.S. dollar. However, during the second half of 2008, we incurred foreign exchange losses of approximately $24 million primarily as a result of the
significant weakening of the Brazilian real and the British pound sterling (GBP) compared to the U.S. dollar. Although we enter into forward exchange contracts to hedge against our cash flow
exposures associated with forecasted transactions in foreign currencies, we have not historically hedged against the translation gains or losses from the foreign currency denominated assets or
liabilities on our balance sheet. The majority of these foreign exchange losses resulted from the translation of foreign currency denominated assets and liabilities to U.S. dollars.
Approximately one-half of these losses resulted from the precipitous devaluation of the Brazilian real compared to the U.S. dollar from September through November 2008 and a
higher net asset position in the Brazilian real. The GBP weakened considerably against the U.S. dollar during the fourth quarter of 2008. Although we no longer have manufacturing operations in
the United Kingdom, we maintain a pension plan for former employees. We have recorded a pension asset on our consolidated balance sheet which is denominated in GBP and translated into
U.S. dollars each period. The significant weakening of the GBP resulted in foreign exchange losses in the fourth quarter of 2008.

At
the end of the fourth quarter of 2008, we entered into forward exchange contracts to hedge our balance sheet exposures in certain currencies to mitigate the foreign exchange
translation volatility that impacted us in the second half of 2008. These balance sheet hedges are based on our forecasts of the future position of net assets or liabilities denominated in foreign
currencies and, therefore, may not mitigate the full impact of any translation impacts in the future. There is no assurance that our hedging transactions will be successful.

SG&A
increased 3% to $295.1 million (3.7% of revenue) in 2007 compared to $285.6 million (3.2% of revenue) in 2006. The increase in SG&A as a percentage of revenue reflects
the lower revenue levels in 2007. On an absolute basis, SG&A increased year-over-year reflecting higher IT consulting and support costs and higher costs due to the weakened
U.S. dollar, partially offset by the benefits from restructuring actions and lower variable compensation expenses.

Other charges:



Year ended December 312006

2007

2008Restructuring

$
178.1

$
37.3

$
35.3


Between
2001 and 2004, we announced global restructuring plans as a result of end market weakness and the shifting of manufacturing capacity from higher-cost regions in North
America and Europe to lower-cost regions in Asia. During 2005 and 2006, we announced further plans to improve capacity utilization and accelerate margin improvements, primarily in our
North America and Europe regions as end-market demand and profitability had not recovered to sustainable levels. In
January 2008, we estimated that an additional restructuring charge of between $50 million to $75 million would be recorded throughout 2008 and 2009. As we finalized our 2009 plan
in the fourth quarter of 2008, we estimated that our restructuring costs would reach the high end of our previously announced range of $50 million to $75 million. We will continue to
evaluate our operations and may propose additional restructuring actions as a result. During 2008, we recorded $35.3 million in restructuring charges. We expect to complete the remainder of our
restructuring actions by the end of 2009. As we complete these restructuring actions, we expect our overall utilization and operating efficiency to improve. As we finalize the detailed plans of these
restructuring actions, we will recognize the related charges. The recognition of these charges requires management to make certain judgments and estimates regarding the amount and timing of
restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to our expense and the liability amounts recorded.

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Our
restructuring actions included consolidating facilities and reducing our workforce. The majority of the employees terminated were manufacturing and plant employees. Approximately
32,900 employees have been terminated since 2001. Approximately 70% of these employee terminations were in the Americas, 25% in Europe and 5% in Asia. For leased facilities that were no longer
used, the lease costs included in the restructuring costs represent future lease payments less estimated sublease recoveries. Adjustments are made to lease and other contractual obligations to reflect
incremental cancellation fees paid for terminating certain facility leases and to reflect higher accruals for other leases due to delays in the timing of sublease recoveries and changes in estimated
sublease rates, relating principally to facilities in the Americas. We expect our long-term lease and other contractual obligations to be paid out over the remaining lease terms through
2015. Our restructuring liability is recorded in accrued liabilities.

As
a result of our restructuring actions to date, we have closed or downsized over 50 facilities, primarily in the Americas and Europe. All cash outlays have been, and currently
foreseeable outlays are expected to be, funded from cash on hand.

We
will continue to evaluate our operations and may propose future restructuring actions as a result of changes in the marketplace and/or our exit from less profitable operations or
services no longer demanded by our customers.



Year ended December 312006

2007

2008Goodwill impairment

$


$


$
850.5Long-lived asset impairment


1.4


15.1


8.8


During
the fourth quarter of 2008, we performed our annual goodwill impairment test. All of our goodwill is allocated to our Asia reporting unit. Our goodwill balance prior to the
impairment charge was $850.5 million and was established primarily as a result of an acquisition in 2001. We completed our step one analysis using a combination of valuation approaches
including a market capitalization approach, a multiples approach and discounted cash flow. The market capitalization approach uses our publicly traded stock price to determine fair value. The
multiples approach uses comparable market multiples to arrive at a fair value and the discounted cash flow method uses revenue and expense projections and risk-adjusted discount rates. The
process of determining fair value is subjective and requires management to exercise a significant amount of judgment in determining future growth rates, discount and tax rates and other factors. The
current economic environment has impacted our ability to forecast future demand and has in turn resulted in our use of higher discount rates, reflecting the risk and uncertainty in current markets.
The results of our step one analysis indicated potential impairment in our Asia reporting unit, which was corroborated by a combination of factors including a significant and sustained decline in our
market capitalization, which is significantly below our book value, and the deteriorating macro environment, which has resulted in a decline in expected future demand. We therefore performed the
second step of the goodwill impairment assessment to quantify the amount of impairment. This involved calculating the implied fair value of goodwill, determined in a manner similar to a purchase price
allocation, and comparing the residual amount to the carrying amount of goodwill. Based on our analysis incorporating the declining market capitalization in 2008, as well as the significant end market
deterioration and economic uncertainties impacting expected future demand, we concluded that the entire goodwill balance of $850.5 million was impaired. The goodwill impairment charge is
non-cash in nature and does not affect our liquidity, cash flows from operating activities, or our compliance with debt covenants. The goodwill impairment charge is not deductible for
income tax purposes and, therefore, we have not recorded a corresponding tax benefit in 2008.

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During the fourth quarters of 2006 and 2007, we performed our annual goodwill assessment and determined there was no impairment.

During
the fourth quarter of each year, we conduct our annual recoverability review of long-lived assets. Impairment was measured as the excess of the carrying amount over
the fair value of the assets determined on a discounted cash flow basis. We recorded an impairment charge of $8.8 million in 2008
(2007  $15.1 million; 2006  $1.4 million).

Interest expense on long-term debt and other interest income/expense:

The following table is a breakdown of interest expense or income for the periods indicated (in millions):

Year ended December 312006

2007

2008Interest costs on credit facilities and Senior Subordinated Notes (Notes)

$
67.1

$
67.0

$
56.8Mark-to-market loss (gain)





(0.6
)

1.0Interest expense on long-term debt

$
67.1

$
66.4

$
57.8Interest income, net of other interest expense

$
4.5

$
15.2

$
15.3


Our
interest expense primarily includes the interest costs on the Notes. The average interest rate on the Senior Subordinated Notes due 2011 (2011 Notes), after reflecting the variable
interest rate swaps, was 6.5% for 2008 (2007  8.3%, 2006  8.2%). The interest rate on the Senior Subordinated Notes due
2013 (2013 Notes) is fixed at 7.625%.

In
addition, we have marked-to-market the bifurcated embedded prepayment options in our debt instruments and have applied fair value hedge accounting to our
interest rate swaps and our hedged debt obligation (2011 Notes). The changes in fair values each period are recorded in interest expense on long-term debt. The
mark-to-market adjustment fluctuates each period as it is dependent on market conditions, including future interest rates, implied volatilities and credit spreads.

Although
interest income for 2008 was relatively flat compared to 2007, the interest income earned on cash balances was lower compared to 2007 primarily due to lower rates. This was
offset by the lower costs associated with the accounts receivable sales program. The increase in interest income for 2007 compared to 2006 primarily reflects higher interest earned on larger cash
balances during the second half of 2007.

Income taxes:

Income tax expense for 2008 was $5.0 million on losses before tax of $715.5 million compared to an income tax expense of
$20.8 million in 2007 on earnings before tax of $7.1 million and income tax expense of $14.5 million in 2006 on a loss before tax of $136.1 million. Current income taxes
for 2008 consisted primarily of the tax expense in jurisdictions with current taxes payable and additional tax expense related to a Canadian tax audit. Deferred income taxes for 2008 were comprised
primarily of the deferred tax recoveries for losses and future deductible temporary differences in Canada and certain foreign taxable jurisdictions. Current income taxes for 2007 consisted of tax
expense in jurisdictions with current taxes payable and additional tax expense related to a Canadian tax audit, offset by the current tax recovery resulting from the resolution of a U.S. tax
audit. Deferred income taxes for 2007 were comprised primarily of the deferred tax expense on unrealized foreign exchange gains in Canada, offset partially by a deferred tax recovery related to
restructured European operations. In December 2007, we reorganized our inter-company loans to reduce our future exposure in Canada to taxable foreign exchange fluctuations and our exposure on
our future deferred income taxes. Current income taxes for 2006 consisted primarily of the
tax expense in certain jurisdictions with current taxes payable and a recovery related to income tax audits in the United States. In addition, net deferred income tax liabilities in 2006
reflected net unrealized foreign exchange gains.

We
conduct business operations in a number of countries, including countries where tax incentives have been extended to encourage foreign investment or where income tax rates are low.
Our effective tax rate can

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vary
significantly quarter to quarter due to the mix and volume of business in lower tax jurisdictions within Europe and Asia, tax holidays and tax incentives that have been negotiated with the
respective tax authorities (which expire between 2009 and 2015), restructuring charges, operating losses, certain tax exposures, the time period in which losses may be used under tax laws and the
valuation allowances recorded on deferred income tax assets. We expect to continue to comply with the conditions governing the tax holidays.

In
certain jurisdictions, we currently have significant net operating losses and other deductible temporary differences, which will reduce taxable income in these jurisdictions in future
periods. We have determined that a valuation allowance of $591.9 million is required in respect of our deferred income tax assets as at December 31, 2008 (December 31,
2007  $588.8 million).

As
at December 31, 2008, the net deferred income tax liability balance was $31.2 million (December 31,
2007  $57.3 million).

We
develop our tax filing positions based upon the anticipated nature and structure of our business and the tax laws, administrative practices and judicial decisions currently in effect
in the jurisdictions in which we have assets or conduct business, all of which are subject to change or differing interpretations, possibly with retroactive effect. We are subject to tax audits by
local tax authorities of historical information which could result in additional tax expense in future periods relating to prior results. Any such increase in our income tax expense and related
interest and penalties could have a significant impact on our future earnings and future cash flows.

Certain
of our subsidiaries provide financing, products and services to, and may from time to time undertake certain significant transactions with other subsidiaries in different
jurisdictions. In general, inter-company transactions, and in particular inter-company financing and transfer pricing policies, are subjected to close review by tax authorities. Moreover, several
jurisdictions in which we operate have tax laws with detailed transfer pricing rules which require that all transactions with non-resident related parties be priced using arm's length
pricing principles, and that contemporaneous documentation must exist to support such pricing.

We
are subject to tax audits by local tax authorities. Tax authorities could challenge the validity of our inter-company transactions, including financing and transfer pricing policies
which generally involve subjective areas of taxation and a significant degree of judgment. If any of these tax authorities are successful in
challenging our inter-company transactions, our income tax expense may be adversely affected and we could also be subject to interest and penalty charges.

In
connection with ongoing tax audits in Canada, tax authorities have taken the position that income reported by one of our Canadian subsidiaries in 2001 and 2002 should have been
materially higher as a result of certain inter-company transactions. The successful pursuit of that assertion could result in that subsidiary owing significant amounts of tax, interest and possibly
penalties. We believe we have substantial defenses to the asserted position and have adequately accrued for any probable potential adverse tax impact. However, there can be no assurance as to the
final resolution of this claim and any resulting proceedings, and if this claim and any ensuing proceedings are determined adversely to us, the amounts we may be required to pay could
be material.

In
connection with tax audits in the United States, tax authorities asserted that our U.S. subsidiaries owed significant amounts of tax, interest and penalties arising from
inter-company transactions. A significant portion of these asserted deficiencies were resolved in our favour in 2006 which resulted in a reduction to our current income tax liabilities in 2006. In the
third quarter of 2007, we resolved the remaining deficiencies in our favour which resulted in a reduction to current income tax liabilities for 2007. The tax audit resolution also resulted in a small
reduction in the amount of our U.S. tax loss carryforwards for years 1998 to 2004.

Recent acquisitions and divestitures:

In March 2006, we acquired certain assets located in the Philippines which strengthened our relationship with an existing
customer. We may, at any time, be engaged in ongoing discussions with respect to possible acquisitions that we expect would enhance our global manufacturing network, expand our service offerings,
increase our penetration in various industries and establish strategic relationships with new or existing customers. There can be no assurance that any of these discussions will result in a definitive
purchase agreement and, if they do, what the terms or timing of any such agreement would be.

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In
June 2006, we sold our plastics business which we operated primarily in Asia. In September 2006, we sold one of our European facilities to a third party as part of our
restructuring program. We will continue to evaluate our operations and may propose future divestitures as a result of changes in the market place, and/or our exit from less profitable or
non-strategic operations.

Liquidity and Capital Resources

Liquidity

The following table shows key liquidity metrics for the periods indicated (in millions):

As at December 312006

2007

2008Cash and cash equivalents

$
803.7

$
1,116.7

$
1,201.0


Year ended December 312006

2007

2008Cash provided by operations

$
39.2

$
351.4

$
208.2Cash used in investing activities


(207.9
)

(36.9
)

(80.8
)Cash provided by (used in) financing activities


3.4


(1.5
)

(43.1
)


Cash provided by operations:

We generated $208.2 million in cash from operations in 2008 primarily from earnings after adding back non-cash
charges, partially offset by higher working capital requirements. Higher working capital was driven primarily by an increase in A/R, partially offset by higher A/P. The
year-over-year increase in A/R reflects a lower amount of A/R sold under our A/R sales program, partially offset by cash collections. Although we did not sell any A/R at the
end of 2008, we maintained a cash balance of $1.2 billion at December 31, 2008.

In
2007, we generated $351.4 million in cash primarily from earnings after adding back non-cash charges and lower working capital requirements. Lower working capital
was driven primarily by lower inventory levels, partially offset by lower A/P balances. The decrease in inventory reflects improved inventory management. The decrease in A/P is due primarily to the
timing of payments. For 2006, we generated $39.2 million in cash from earnings after adding back non-cash charges, partially offset by higher working capital requirements. The
higher working capital requirements in 2006 were to support inventory for new customers, partially offset by the timing of payments.

This
represents our fourth consecutive year in which we have generated positive cash from operations.

Cash used in investing activities:

During 2008, our capital expenditures were incurred primarily to expand manufacturing capabilities in China, Mexico and Europe to
support new customer programs. During 2007, the cash used to purchase equipment and expand facilities was partially offset by cash proceeds from the sale of facilities and assets. During 2006, we
invested in capital expenditures primarily to support growth in our lower-cost geographies.

Our
capital spending for 2008 totaled approximately 1.2% of revenue for the year. We anticipate similar spending levels for 2009.

Cash used in financing activities:

In December 2008, we repurchased Notes for an aggregate purchase price of $30.4 million in cash. We also used
$11.9 million (2007  $3.2 million) in cash to purchase subordinate voting shares in the open market. We reissue these shares to employees as their
share unit awards vest.

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Cash requirements:

As at December 31, 2008, we have contractual obligations that require future payments as follows (in millions):

Total

2009

2010

2011

2012

2013

ThereafterLong-term debt(i)

$
713.5

$
1.0

$


$
489.4

$


$
223.1

$
Interest on long-term debt(ii)


172.9


55.6


55.6


36.2


17.0


8.5


Operating leases


151.5


47.2


33.4


22.0


8.8


7.7


32.4Pension plan contributions (see (a) below)


31.9


31.9














Non-pension post-employment plan payments


36.7


3.1


3.0


3.2


3.3


3.5


20.6


---

In June 2004, we issued Notes that are due July 2011 with an aggregate principal amount of $500.0 million and a fixed
interest rate of 7.875%. In June 2005, we issued Notes that are due July 2013 with an aggregate principal amount of $250.0 million and a fixed interest rate of 7.625%. We entered
into agreements to swap the fixed interest on the 2011 Notes with a variable interest rate based on LIBOR plus a margin. Interest on the Notes is payable in January and July of each year until
maturity. These Notes are unsecured and are subordinated in right of payment to all our senior debt. We are entitled to redeem the 2011 Notes and will be entitled to redeem the 2013 Notes on or after
July 1, 2009, in each case at various premiums above face value. The Notes have restrictive covenants that limit our ability to pay dividends, repurchase our own stock or repay debt that is
subordinated to these Notes. These covenants also place limitations on debt incurrence, the sale of assets and our ability to incur additional debt. We were in compliance with all covenants at
December 31, 2008.

In
December 2008, we repurchased a portion of our Notes. We paid $30.4 million to repurchase Notes with a principal amount at maturity of $37.5 million. We may, from
time to time, repurchase additional Notes in the open market, at our discretion. See "Capital Resources  Subsequent Event."

(a)
Our pension funding policy is to contribute amounts sufficient to meet minimum local statutory funding requirements that are based on actuarial calculations. We may make additional
discretionary contributions based on actuarial assessments and, from time to time, make voluntary contributions to the pension plans. Based on our most recent actuarial valuations, we estimate our
minimum funding requirements for 2009 to be $31.9 million. We also expect to contribute $3.1 million to the non-pension post-employment benefit plans to fund the
estimated benefit payments in 2009.

The
following outlines our pension contributions and pension expense for the periods indicated (in millions):

Year ended December 312007

2008

2009(estimated)Contributions:Defined benefit plans

$
21.0

$
22.0

$
20.1Defined contribution plans


11.5


11.8


11.8$
32.5

$
33.8

$
31.9Expense:Defined benefit plans

$
10.0

$
6.2

$
10.2Defined contribution plans


11.5


11.8


11.8$
21.5

$
18.0

$
22.0


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We
maintain multiple defined benefit plans. Approximately one-half of our contribution amount for 2009 is pre-determined for the next two years based on recent
actuarial valuations, and the other half is determined annually based on actuarial valuations. Accordingly, our minimum contribution requirements for future years cannot be quantified at this time.
The current economic crisis impacted our asset returns, primarily in the second half of 2008. Continued volatility in the capital markets will impact future asset values in our pension plans. A
significant deterioration in the asset values could lead to higher than expected future contributions. We fund our pension contributions from cash on hand. Although we have defined benefit plans that
are currently in a net unfunded position, we do not expect our pension obligations will have a material adverse impact on our results of operations, cash flows or liquidity.

As
at December 31, 2008, we have commitments that expire as follows (in millions):

Total

2009

2010

2011

2012

2013

ThereafterForeign currency contracts

$
587.1

$
570.4

$
16.7

$


$


$


$
Letters of credit, letters of guarantee and surety and performance bonds


55.4


46.2


5.6











3.6Capital expenditures


12.0


12.0

















The
contractual obligations chart above does not include our agreement with a third party for the outsourcing of our IT support. Our costs under this IT support agreement will fluctuate
based on our usage. We are permitted to terminate this agreement at any time for a declining fee.

Cash
outlays for our contractual obligations and commitments identified above are expected to be funded by cash on hand. We also have outstanding purchase orders with certain suppliers
for the purchase of inventory. These purchase orders are generally short-term. Orders for standard items can typically be cancelled with little or no financial penalty. Our policy
regarding non-standard or customized orders dictates that such items are generally ordered specifically for customers who have contractually assumed liability for the inventory. In
addition, a substantial portion of the standard items covered by our purchase orders were procured for specific customers based on their purchase orders or forecasts under which the customers have
contractually assumed liability for such material. Accordingly, the amount of liability from purchase obligations under these purchase orders cannot be quantified with a reasonable degree
of accuracy.

As
of December 31, 2008, we had committed approximately $12 million in capital expenditures, principally for machinery and equipment and facilities in our
lower-cost geographies to support new customer programs. Based on our current operating plans, we anticipate capital spending for 2009 to be approximately 1% of revenue, and expect to fund
this spending from cash on hand. In addition, we regularly review acquisition opportunities and, as a result, could require additional debt or equity financing to fund these transactions.

We
have provided routine indemnifications, the terms of which range in duration and often are not explicitly defined. These include indemnifications against adverse impacts due to
changes in tax laws and patent infringements by third parties. We have also provided indemnifications in connection with the sale of certain businesses and real property. The maximum potential
liability from these indemnifications cannot reasonably be estimated. In some cases, we have recourse against other parties to mitigate our risk of loss from these indemnifications. Historically, we
have not made significant payments relating to these indemnifications.

In
2007, securities class action lawsuits were commenced against the Company and our former Chief Executive and Chief Financial Officers, in the United States District Court of
the Southern District of New York by certain individuals, on behalf of themselves and other unnamed purchasers of our stock, claiming that they were purchasers of our stock during the period
January 27, 2005 through January 30, 2007. The plaintiffs allege violations of United States federal securities laws and seek unspecified damages. They allege that during the
purported class period we made statements concerning our actual and anticipated future financial results that failed to disclose certain purportedly material adverse information with respect to demand
and inventory in our Mexican operations and our information technology and communications divisions. In an amended complaint, the plaintiffs have added one of our directors and Onex Corporation as
defendants. All defendants have filed motions to dismiss the amended complaint. These motions are pending. A parallel class proceeding has also been issued against the Company and our former Chief
Executive and Chief Financial Officers, in the Ontario

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Superior
Court of Justice, but neither leave nor certification of the action has been granted by that court. We believe that the allegations in these claims are without merit and we intend to defend
against them vigorously. However, there can be no assurance that the outcome of the litigation will be favorable to us or will not have a material adverse impact on our financial position or
liquidity. In addition, we may incur substantial litigation expenses in defending these claims. We have liability insurance coverage that may cover some of our litigation expenses, potential judgments
or settlement costs.

Capital Resources

Our main objectives in managing our capital resources are to ensure liquidity and to have funds available for working capital or other
investments required to grow our business. Our capital resources consist of cash, short-term investments, access to credit facilities, senior subordinated notes and share capital.

At
December 31, 2008, we had total cash of $1.2 billion, comprised of cash (approximately 35%) and short-term investments (approximately 65%). Our current
portfolio consists of certificates of deposits and certain money market funds that are secured exclusively by U.S. government securities. Our short-term investments have maturities
of less than three months. The majority of our cash and short-term investments are held with financial institutions each of which had at December 31, 2008 a Standard and Poor's
rating of A-2 or above.

We
manage our capitalization levels and make adjustments, as available, for changes in economic conditions. We have full access to a $300.0 million credit facility and we can sell
up to $250.0 million, on a committed basis, under an accounts receivable sales program to provide short-term liquidity. Our credit facility has restrictive covenants relating to
debt incurrence and the sale of assets. The facility also contains financial covenants that may limit the amount of debt that can be incurred under the facility. We closely monitor our business
performance to evaluate compliance with our covenants. Our Notes also have restrictions on financing activities. We continue to monitor and review the most cost-effective methods for
raising capital, taking into account these restrictions and covenants. Our access to capital markets may be restricted at this time because of the global economic crisis and capital market weakness.

There
were no significant changes to our capital structure during 2008. We repurchased 5% of our Notes in December 2008; future repurchases will depend on the price of the Notes
in the open market. We have not distributed, nor do we have any current plan to distribute, any dividends to our shareholders.

Our
strategy on capital risk management has not changed since 2007. Other than the restrictive covenants associated with our debt obligations noted above, we are not subject to any
contractual or regulatorily imposed capital requirements. While some of our international operations are subject to government restrictions on the flow of capital into and out of their jurisdictions,
these restrictions have not had a material impact on our operations.

We
have access to a revolving credit facility for $300.0 million. We have pledged certain assets, including the shares of certain North American subsidiaries, as security. The
facility includes a $25.0 million swing-line facility that provides for short-term borrowings up to a maximum of seven days. Borrowings under the facility bear interest
at LIBOR plus a margin except that borrowings under the swing-line facility bear interest at a base rate plus a margin. There were no borrowings outstanding under this facility at
December 31, 2008. Commitment fees for 2008 were $1.9 million. The facility has restrictive covenants relating to debt incurrence and sale of assets and also contains financial covenants
that require us to maintain certain financial ratios. We were in compliance with all covenants at December 31, 2008. This facility expires in April 2009. Given the current state of the
credit markets and our strong liquidity position, we are assessing whether this facility is necessary in our capital structure. There is no assurance that we and our lenders will agree on mutually
acceptable terms if we seek a renewal.

We
have additional uncommitted bank overdraft facilities available for operating requirements which total $68.0 million at December 31, 2008. There were no borrowings
outstanding under these facilities at December 31, 2008.

In
November 2005, we entered into an agreement to sell certain accounts receivable to a third-party bank (which had at December 31, 2008 a Standard and Poor's rating of
A+), and other qualified purchasers. We can

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sell
up to $250.0 million in accounts receivable, on a committed basis, to provide short-term liquidity. The program also provides for the sale of certain accounts receivable in
excess of the committed amount at the discretion of the purchasers. We sold approximately $75 million in accounts receivable as of September 30, 2008, and we reduced this to zero dollars
sold at December 31, 2008 (December 31, 2007  $225 million). Based on the level of our cash balances, we had steadily reduced the amount of
the accounts receivable sold under this arrangement. This program remains available to us until November 2009.

We
believe that cash flow from operating activities, together with cash on hand and borrowings available under our credit facilities, will be sufficient to fund currently anticipated
working capital, planned restructuring and capital spending, and debt service requirements for the next 12 months. Historically, we
have funded our operations from the proceeds of public offerings of equity and debt securities, cash generated from operations, bank debt, sales of accounts receivable and equipment lease financings.
We expect to continue to enter into debt and equity financings, sales of accounts receivable and lease transactions to fund anticipated growth and acquisitions. The issuance and timing of additional
equity or convertible debt securities could dilute current shareholders' positions. Further, we may issue debt securities that have rights and privileges senior to equity holders, and the terms of
this debt could impose restrictions on our operations. With the current global economic crisis and capital market weakness, such financings and other transactions may not be available on terms
acceptable to us or at all. At December 31, 2008, we had cash balances in excess of our debt obligations.

Both
Standard and Poor's and Moody's Investors Service provide ratings on our Notes and a corporate rating on Celestica. These credit ratings reflect the agencies' current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations or a specific financial program. The agencies take many factors into
consideration when providing a rating including, but not limited to, an industry's operating environment, financial performance of the debtor, creditworthiness of guarantors, insurers, or other forms
of credit enhancement on the obligation and the currency in which the obligation is denominated. A security rating is not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the rating organization. A rating does not comment as to market price or suitability for a particular investor.

At
February 20, 2009, our Standard and Poor's corporate rating is B+ and our Notes rating is B, with a stable outlook. The Notes rating, which is 15th out of 20 on
the rating scale, means that the obligor currently has the capacity to meet its financial commitment on the obligation but adverse business, financial or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment on the obligation. At February 20, 2009, our Moody's Investor Service corporate rating is B1 and our Notes rating is B3, with
a stable outlook. The Notes rating is 16th out of 21 on the rating scale. Obligations rated B3 are considered to be in the lower-range of obligations that are judged to be
speculative and subject to high credit risk. A reduction in our credit ratings could adversely impact our future cost of borrowing.

Subsequent event:

On February 26, 2009, we announced a cash tender offer to purchase up to $150 million aggregate principal amount of the
2011 Notes at a price of up to one thousand and ten dollars for each one thousand dollars principal amount. This offer to purchase will expire on March 26, 2009. We also terminated our interest
rate swap agreements in the amount of $500 million related to the 2011 Notes. In connection with the termination of the swap agreements, we discontinued fair value hedge accounting on the 2011
Notes and will amortize the prior fair value adjustment on the 2011 Notes as a reduction to interest expense on long-term debt, over the remaining term of the 2011 Notes, using the
effective interest rate method. As a result of discontinuing fair value hedge accounting, we will write down the carrying value of our embedded prepayment options on the 2011 Notes to reflect the
change in the fair value after hedge de-designation. We will record the gain or loss on the purchase of the 2011 Notes, as well as the write-down of the embedded prepayment
options, through other charges during the first quarter of 2009.

Financial instruments:

Our short-term investment objectives are to preserve principal and to maximize yields without significantly increasing
risk, while at the same time not materially restricting our short-term access to cash. To achieve these

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objectives,
we maintain a portfolio consisting of a variety of securities, including certificates of deposit and money market funds that are secured exclusively by U.S. government securities.

The
majority of our cash balances are held in U.S. dollars. We price the majority of our products in U.S. dollars and the majority of our material costs are also
denominated in U.S. dollars. However, a significant portion of our non-material costs (including payroll, facility costs and costs of locally sourced supplies and inventory) are
denominated in various other currencies. As a result, we may experience foreign exchange gains or losses on translation or transactions due to currency fluctuations.

We
have a foreign exchange risk management policy in place to control our hedging activities and we do not enter into speculative trades. Our current hedging activity is designed to
reduce the variability of our foreign currency costs where we have local manufacturing operations and generally involves entering into contracts to trade U.S. dollars for various currencies at
future dates. We traditionally enter into forward exchange contracts to hedge against our cash flows in foreign currencies. At the end of the fourth quarter of 2008, we entered into forward exchange
contracts to hedge our balance sheet exposures in certain currencies in order to mitigate foreign exchange translation volatility. These balance sheet hedges are based on our forecasts of the future
position of net assets or liabilities denominated in foreign currencies and, therefore, may not mitigate the full impact of any translation impacts in the future. There is no assurance that our
hedging transactions will be successful.

At
December 31, 2008, we had forward exchange contracts to trade U.S. dollars in exchange for the following currencies (in millions):

Currency

Amount of U.S. dollars

Weighted average exchange rate of U.S. dollars

Maximum period in months

Fair value gain/(loss)Canadian dollar

$
230.3

$
0.91


15

$
(22.0
)Mexican peso


88.6


0.08


12


(9.2
)Thai baht


77.7


0.03


12


(2.6
)Malaysian ringgit


60.6


0.30


12


(2.7
)British pound sterling


48.1


1.49


4


1.7Singapore dollar


31.0


0.71


12


(0.7
)Czech koruna


26.7


0.06


7


(3.8
)Euro


19.4


1.45


12


0.4Brazilian real


4.7


0.41


2


Total

$
587.1







$
(38.9
)


Our
contracts generally extend for periods of up to 15 months and expire by March 2010. The counterparties to these contracts are financial institutions each of which had
at December 31, 2008 a Standard and Poor's rating of A or above. The fair value of these contracts at December 31, 2008 was a net unrealized loss of $38.9 million
(December 31, 2007  net unrealized gain of $20.0 million). During the first half of 2008, we settled most of the foreign currency forwards that had
foreign currency gains at December 31, 2007. The unrealized loss on our forward exchange contracts at December 31, 2008 was due primarily to fluctuations in foreign exchange rates
between the time the forward contracts were entered into and the valuation at period end, in particular the strengthening of the U.S. dollar in the fourth quarter of 2008.

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In 2004, we entered into agreements to swap the fixed rate of interest on our 2011 Notes for a variable rate based on LIBOR plus a margin. The notional amount of
the agreements, which mature July 2011, is $500.0 million. The fair value of the interest rate swap agreements at 2008 was an unrealized gain of $17.3 million. The average
interest rate on the 2011 Notes for 2008 was 6.5% (2007  8.3%; 2006  8.2%), after reflecting the interest rate swaps. The
recent global economic crisis could introduce significant volatility to short-term interest rates. We are exposed to interest rate risks due to fluctuations in the LIBOR rate. A
one-percentage point increase in the LIBOR rate would increase interest expense on the 2011 Notes by approximately $5.0 million annually. The counterparties to these interest rate
swap agreements are financial institutions each of which had at December 31, 2008 a Standard and Poor's rating of A or above.

Financial risks:

We are exposed to a variety of financial risks associated with financial instruments as part of our normal operations. We have
exposures to the following financial risks arising from financial instruments: market risk, credit risk and liquidity risk.

Market
risk: This is the risk that results in changes to market prices, such as foreign exchange rates and interest rates, which could affect our operations or the value of our financial
instruments. To manage this risk, we enter into various derivative hedging transactions.

Currency
risk: Due to the nature of our international operations, we are exposed to exchange rate fluctuations on our cash receipts and cash payments denominated in various foreign
currencies. The majority of our currency risk is driven by the operational costs incurred in local currencies by our foreign subsidiaries. We currently manage this risk through our cash flow hedging
program.

Interest
rate risk: We entered into interest rate swaps to hedge the fair value of our 2011 Notes by swapping the fixed rate of interest for a variable interest rate based on LIBOR plus
a margin. We are exposed to interest rate risks due to fluctuations in the LIBOR rate. A one-percentage point increase in the LIBOR rate would increase interest expense by approximately
$5.0 million annually. See "Capital Resources  Subsequent Event."

Credit
risk: Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss to us. To mitigate the risk of financial loss
from defaults, we only deal with counterparties that we believe are creditworthy. The counterparties to our foreign currency forward contracts and our interest rate swap agreements are financial
institutions each of which had at December 31, 2008 a Standard and Poor's rating of A or above. Therefore, we believe this credit risk of counterparty non-performance is low.

We
also provide credit to our customers in the normal course of business. We mitigate this credit risk by monitoring our customers' financial condition and performing ongoing credit
evaluations, as well as frequent communications with them, enabling us to monitor current changes in their business operations. We review concentration of credit risk in establishing our allowance for
doubtful accounts and we believe our allowances are adequate. As at December 31, 2008, less than 1% of our gross accounts receivable were over 90 days past due and our allowance for
doubtful accounts balance was $13.7 million.

Liquidity
risk: Liquidity risk is the risk that we may not have cash available to satisfy our financial obligations as they come due. The majority of our financial liabilities recorded
in accounts payable and accrued liabilities are due within 90 days. The repayment of our Senior Subordinated Notes is due July 2011 and July 2013. Management believes that cash
flow from operations, together with cash on hand and borrowings available under our credit facilities will be sufficient to support our financial obligations. Our $300.0 million credit facility
expires in April 2009. Given our current cash position and the state of the credit markets, we are currently assessing whether we will renew all or a portion of this facility. Regardless of our
decision or ability to renew this facility, we believe we have sufficient resources to satisfy our financial obligations.

Related Party Transactions

We had entered into a management services agreement with our parent company (Onex) whereby Onex would provide certain strategic
planning, financial and support services to us upon request. Our fee includes a

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base
fee and a performance incentive fee. This agreement expired December 31, 2008. In 2008, we expensed management fees of approximately $2.7 million
(2007  $1.2 million) payable to Onex.

In
2008, we entered into a manufacturing agreement with a company under the control of our parent company. During 2008, we recorded revenue of $19.3 million from this related
party. All transactions with this related party were in the normal course of operations.

All
amounts were recorded at the exchange amount, being the amount agreed to by the parties.

Outstanding Share Data

As of February 23, 2009, we had 199.6 million outstanding subordinate voting shares and 29.6 million outstanding
multiple voting shares. We also had 11.1 million outstanding stock options, 7.6 million outstanding restricted share units and 7.2 million outstanding performance share units,
each such option or unit entitling the holder to receive one subordinate voting share pursuant to the terms thereof (subject to time or performance-based vesting).

Controls and Procedures

Evaluation of disclosure controls and procedures:

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in
Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the Exchange Act)) designed to ensure that information we are required to
disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that
it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or
officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Under
the supervision of and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design
and operation of our disclosure controls and procedures as of the end of the year. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure
controls and procedures are effective to meet the requirements of Rules 13a-15 and 15d-15 under the Exchange Act.

A
control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that its objectives are met. Due to inherent limitations in all such
systems, no evaluation of controls can provide absolute assurance that all control issues within a company have been detected. Accordingly, our disclosure controls and procedures are designed to
provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

Changes in internal controls over financial reporting:

During 2008, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.

Management's report on internal control over financial reporting:

Reference is made to our Management's report on page F-1 of our Annual Report. Our auditors, KPMG LLP, an
independent registered public accounting firm, have issued an audit report on our internal controls over financial reporting for the year ended December 31, 2008. This report appears on
page F-2.

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Table of Contents

Unaudited Quarterly Financial Highlights(in millions, except per share amounts)

2007

2008First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

First
Quarter

Second
Quarter

Third
Quarter

Fourth
QuarterRevenue

$
1,842.3

$
1,937.0

$
2,080.6

$
2,210.5

$
1,835.7

$
1,876.3

$
2,030.8

$
1,935.4Gross profit %


4.3%


4.7%


5.8%


6.0%


6.3%


6.7%


7.4%


7.3%Net earnings (loss)

$
(34.3
)
$
(19.2
)
$
51.5

$
(11.7
)
$
29.8

$
39.8

$
32.1

$
(822.2
)# of basic shares


228.4


229.0


229.1


229.1


229.1


229.2


229.4


229.4# of diluted shares


228.4


229.0


229.1


229.1


229.2


230.4


230.3


229.4Net earnings (loss):per share  basic

$
(0.15
)
$
(0.08
)
$
0.22

$
(0.05
)
$
0.13

$
0.17

$
0.14

$
(3.58
)per share  diluted

$
(0.15
)
$
(0.08
)
$
0.22

$
(0.05
)
$
0.13

$
0.17

$
0.14

$
(3.58
)


Comparability quarter-to-quarter:

The quarterly data reflects the following:



Fourth quarter 2008 compared to fourth quarter 2007:

Revenue for the fourth quarter of 2008 decreased 12% to $1.9 billion from $2.2 billion for the same period in 2007. Lower
revenue primarily from our servers, enterprise communications and storage segments accounted for a 16% decrease in total revenue from the prior period. This was offset partially by our
telecommunications and industrial segments which grew primarily due to new customer and program wins. Revenue from our consumer segment was flat year-over-year, reflecting new
business wins from existing customers which offset the decrease in revenue as there was significant ramping in the fourth quarter of 2007. Gross margin increased to 7.3% of revenue for the fourth
quarter of 2008 from 6.0% for the same period in 2007, primarily due to improved operational results for Mexico and Europe. The net loss in the fourth quarter of 2008 included a goodwill impairment
charge of $850.5 million. We conduct our annual impairment assessment in the fourth quarter of each year and we determined that there was no impairment in 2007.

Fourth quarter 2008 compared to third quarter 2008:

Sequentially, revenue for the fourth quarter of 2008 decreased 5% to $1.9 billion from $2.0 billion for the third quarter
of 2008 primarily due to declines from our servers, enterprise communication and storage segments. This was offset partially by increases in revenue from our consumer, telecommunications and
industrial customers. The net loss of $822.2 million in the fourth quarter of 2008 included a goodwill impairment charge for $850.5 million, which resulted from the conduct of our annual
impairment assessment in the fourth quarter of each year.

Fourth quarter 2008 actual compared to guidance:

On October 23, 2008, we provided the following guidance for the fourth quarter of 2008:

Q4 08Guidance

ActualRevenue (in billions)

$1.75 to $2.0

$1.94Adjusted net earnings per share

$0.16 to $0.24

$0.26


Our
guidance is provided on an adjusted net earnings (defined below) basis only as it is difficult to forecast the various items impacting GAAP net earnings, such as the amount and
timing of our restructuring activities.

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Management
uses adjusted net earnings as a measure of enterprise-wide performance. As a result of restructuring activities, acquisitions made by the company, fair value
accounting for stock options and securities repurchases, management believes adjusted net earnings are a useful measure for the company as well as its investors to facilitate
period-to-period operating comparisons and to allow the comparison of operating results with its competitors in the U.S. and Asia. Excluded from adjusted net earnings are the
effects of other charges, most significantly the write-down of goodwill and long-lived assets, gains or losses on the repurchase of shares or debt, the related income tax
effect of these adjustments, and any significant deferred tax write-offs or recovery. We also exclude some recurring charges such as restructuring costs, option expense, amortization of
intangible assets, and the related income tax effect of these adjustments. The term adjusted net earnings does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be
comparable to similar measures presented by other companies. Adjusted net earnings are not a measure of performance under Canadian or U.S. GAAP and should not be considered in isolation or as a
substitute for net earnings (loss) prepared in accordance with Canadian or U.S. GAAP. See reconciliation below.

Revenue
of $1.9 billion for the fourth quarter of 2008 was within our published guidance. Our adjusted net earnings per share of $0.26, includes a $0.07 per share benefit
associated with the reduction in the income tax rate for adjusted net earnings. Excluding the tax benefit, adjusted net earnings per share was $0.19 and was within our published guidance for the
fourth quarter of 2008.

The
following table is a reconciliation of adjusted net earnings to Canadian GAAP net earnings (loss) for the indicated periods (in millions, except per share amounts):

2007

2008Three months ended December 31

GAAP

Adjustments

Adjusted

GAAP

Adjustments

AdjustedRevenue

$
2,210.5

$


$
2,210.5

$
1,935.4

$


$
1,935.4Cost of sales(1)


2,078.5


(1.7
)

2,076.8


1,794.8


(0.6
)

1,794.2Gross profit


132.0


1.7


133.7


140.6


0.6


141.2SG&A(1)


75.6


(1.0
)

74.6


80.0


(1.0
)

79.0Amortization of intangible assets


5.1


(5.1
)




3.3


(3.3
)

Other charges


39.2


(39.2
)




861.9


(861.9
)

Operating earnings (loss)  EBIAT


12.1


47.0


59.1


(804.6
)

866.8


62.2Interest expense, net


9.5





9.5


13.7





13.7Net earnings (loss) before tax


2.6


47.0


49.6


(818.3
)

866.8


48.5Income tax expense (recovery)


14.3


(1.9
)

12.4


3.9


(14.5
)

(10.6
)Net earnings (loss)

$
(11.7
)
$
48.9

$
37.2

$
(822.2
)
$
881.3

$
59.1W.A. # of shares (in millions)  diluted


229.1





229.2


229.4





229.4Earnings (loss) per share  diluted

$
(0.05
)



$
0.16

$
(3.58
)



$
0.26Year ended December 31Revenue

$
8,070.4

$


$
8,070.4

$
7,678.2

$


$
7,678.2Cost of sales(1)


7,648.0


(4.6
)

7,643.4


7,147.1


(2.9
)

7,144.2Gross profit


422.4


4.6


427.0


531.1


2.9


534.0SG&A(1)


295.1


(2.4
)

292.7


303.8


(3.7
)

300.1Amortization of intangible assets


21.3


(21.3
)




15.1


(15.1
)

Integration costs relating to acquisitions


0.1


(0.1
)










Other charges


47.6


(47.6
)




885.2


(885.2
)

Operating earnings (loss)  EBIAT


58.3


76.0


134.3


(673.0
)

906.9


233.9Interest expense, net


51.2





51.2


42.5





42.5Net earnings (loss) before tax


7.1


76.0


83.1


(715.5
)

906.9


191.4Income tax expense


20.8





20.8


5.0


(1.3
)

3.7Net earnings (loss)

$
(13.7
)
$
76.0

$
62.3

$
(720.5
)
$
908.2

$
187.7W.A. # of shares (in millions)  diluted


228.9





229.0


229.3





229.6Earnings (loss) per share  diluted

$
(0.06
)



$
0.27

$
(3.14
)



$
0.82


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Table of Contents

First quarter 2009 guidance:

On January 28, 2009, we provided the following guidance for the first quarter of 2009:

Q1 09  GuidanceRevenue (in billions)

$1.4 to $1.6Adjusted net earnings per share

$0.07 to $0.13


At
the midpoint, our revenue guidance for the first quarter of 2009 represents a 22% sequential decrease from our fourth quarter of 2008. We expect revenue in all our end markets to
decline in the first quarter, reflecting seasonality and the slower economic environment. With the lower revenue guidance, we expect adjusted net earnings to decrease. However, we believe we have made
sustainable improvements in our cost structure, thus limiting some of the negative impact from the lower revenue levels.

Our
guidance for the first quarter of 2009 is based on various assumptions which management believes are reasonable under the current circumstances, but may prove to be inaccurate, and
many of which involve factors that are beyond the control of the company. The material assumptions may include assumptions regarding the following: forecasts from our customers, which range from
30 days to 90 days; timing and investments associated with ramping new business; general economic and market conditions; currency exchange rates; pricing and competition; anticipated
customer demand; supplier performance and pricing; commodity, labor, energy and transportation costs; operational and financial matters; technological
developments; and the timing and execution of our restructuring plan. These assumptions are based on management's current views with respect to current plans and events, and are and will be subject to
the risks and uncertainties discussed above. Our guidance for the first quarter of 2009 is given for the purpose of providing information about management's current expectations and plans relating to
the first quarter of 2009. Readers are cautioned that such information may not be appropriate for other purposes.

Recent Accounting Developments

On
January 1, 2009, we adopted CICA Handbook Section 3064, "Goodwill and intangible assets." This revised standard establishes guidance for the recognition,
measurement and disclosure of goodwill and intangible assets, including internally generated intangible assets. This standard, which is effective for our first quarter of 2009, requires us to
retroactively reclassify our computer software assets on our consolidated balance sheet from property, plant and equipment to intangible assets. In addition, the amortization of computer software will
be reclassified from depreciation expense, included in SG&A, to amortization of intangible assets.

In
February 2008, the Canadian Accounting Standards Board announced the adoption of International Financial Reporting Standards for publicly accountable enterprises in Canada.
Effective January 1, 2011, companies must convert from Canadian GAAP to IFRS. IFRS is effective for our first quarter of 2011.

We
have initiated an IFRS transition project with a formal and detailed project plan and a dedicated project manager. A multi-functional project team consisting of management from
finance, taxation, treasury, legal, human resources, IT and operations has been assigned to the project. We have also engaged an external IFRS consulting partner. We have established a formal
governance structure that includes both a steering committee and an accounting technical review committee, and regular reporting is provided to our senior executive management and to our Board of
Directors on the project's progress.

At
this time, we cannot reasonably estimate the impact of adopting IFRS on our consolidated financial statements.

In
January 2009, the CICA issued Handbook Section 1582, "Business combinations," which replaces the existing standards. This section establishes the standards for the
accounting of business combinations, and states

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Table of Contents

that
all assets and liabilities of an acquired business will be recorded at fair value. Obligations for contingent considerations and contingencies will also be recorded at fair value at the
acquisition date. The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. This
standard is equivalent to IFRS on business combinations. This standard is applied prospectively to business combinations with acquisition dates on or after January 1, 2011. Earlier adoption is
permitted. We are currently evaluating the impact of adopting this standard on our consolidated financial statements.

In
January 2009, the CICA issued Handbook Section 1601, "Consolidated financial statements," which replaces the existing standards. This section establishes the standards
for preparing consolidated financial statements and is effective for 2011. Earlier adoption is permitted. We are currently evaluating the impact of adopting this standard on our consolidated financial
statements.

In
January 2009, the CICA issued EIC-173, "Credit risk and the fair value of financial assets and financial liabilities," which requires us to consider our own credit
risk as well as the credit risk of our counterparty when determining the fair value of financial assets and liabilities, including derivative instruments. This standard is effective for our first
quarter of 2009 and should be applied retrospectively without restatement of prior periods to all financial assets and liabilities measured at fair value on the date this abstract was issued. Early
adoption is encouraged. We adopted this abstract as of December 31, 2008. The adoption of this abstract did not have a material impact on our consolidated financial statements.

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Table of Contents

Item 6. Directors, Senior Management and Employees

A.    Directors and Senior Management

Each director of Celestica is elected by the shareholders to serve until the next annual meeting or until a successor is elected or appointed. The following table
sets forth certain information regarding the current directors and senior management of Celestica.

Name

Age

Position with Celestica

ResidenceRobert L. Crandall


73

Chairman of the Board and Director

Florida, USWilliam A. Etherington


67

Director

Ontario, CanadaRichard S. Love


71

Director

California, USEamon J. Ryan


63

Director

Ontario, CanadaGerald W. Schwartz


67

Director

Ontario, CanadaDon Tapscott


61

Director

Ontario, CanadaCraig H. Muhlhauser


60

Director, President and Chief Executive Officer

New Jersey, USPaul Nicoletti


41

Executive Vice President and Chief Financial Officer

Ontario, CanadaJohn J. Boucher


49

Executive Vice President, Supply Chain Management Solutions and Chief Procurement Officer

New Hampshire, USElizabeth L. DelBianco


49

Executive Vice President, Chief Legal and Administrative Officer and Corporate Secretary

Ontario, CanadaJohn Peri


47

Executive Vice President, Global Operations

Ontario, CanadaMichael L. Andrade


45

Senior Vice President, and General Manager, North America

Ontario, CanadaPeter J. Bar


51

Senior Vice President, Finance

Ontario, CanadaMary Gendron


43

Senior Vice President and Chief Information Officer

Illinois, USPeter A. Lindgren


46

Senior Vice President and General Manager, Growth and Emerging Markets Segment

Colorado, USMichael P. McCaughey


47

Senior Vice President and General Manager, Communications Market Segment

Quebec, CanadaDarren Myers


35

Senior Vice President and Corporate Controller

Ontario, CanadaRobert J. Sellers


42

Senior Vice President and General Manager, Enterprise and Consumer Market Segments, Asia Business Development

Hong Kong, China


The
following is a brief biography of each of Celestica's directors and senior management:

Robert L. Crandallhas been a director of Celestica since 1998 and Chairman of the Board of Directors of Celestica since
January 2004. He is the retired Chairman of the Board and Chief Executive Officer of AMR Corporation/American Airlines Inc. Mr. Crandall currently serves on the board of Anixter
International Inc., which is a public corporation. He is also Chairman and CEO of Pogo, Inc. and a director of Air Cell, Inc., both of which are privately held companies.
Mr. Crandall is a member of the Federal Aviation Administration Management Advisory Committee. He holds a Bachelor of Science degree from the University of Rhode Island and a Master of Business
Administration degree from the Wharton School of the University of Pennsylvania.

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Table of Contents

William A. Etheringtonhas been a director of Celestica since 2001. He was a director and the Non-Executive Chairman of the
Board of the Canadian Imperial Bank of Commerce until February 26, 2009 and is a director of MDS Inc. and Onex Corporation, each of which is a public corporation. Mr. Etherington
is also a director of SS&C Technologies Inc., a private firm. He is the former Senior Vice President and Group Executive, Sales and Distribution, IBM Corporation, and Chairman, President and
Chief Executive Officer of IBM World Trade Corporation. He retired from IBM in 2001 with over 37 years of service. Mr. Etherington is a member of the President's Council, The University
of Western Ontario and
director of St. Michael's Hospital. He holds a Bachelor of Science degree in Electrical Engineering and a Doctor of Laws (Hon.) from the University of Western Ontario.

Richard S. Loveis a former Vice President of Hewlett-Packard and a former General Manager of the Computer Order Fulfillment and
Manufacturing Group for Hewlett-Packard's Computer Systems Organization. Mr. Love has been a director of Celestica since 1998. From 1962 until 1997, he held positions of increasing
responsibility with Hewlett-Packard, becoming Vice President in 1992. He is a former director of HMT Technology Corporation (electronics manufacturing) and the Information Technology Industry Council.
Mr. Love holds a Bachelor of Science degree in Business Administration and Technology from Oregon State University and a Master of Business Administration degree from Fairleigh Dickinson
University.

Eamon J. Ryanhas been a director of Celestica since 2008. He is the former Vice President and General Manager, Europe, Middle East and
Africa for Lexmark International Inc. Prior to that, he was the Vice President and General Manager, Printing Services and Solutions Manager, Europe, Middle East and Africa. Mr. Ryan
joined Lexmark in 1991 as the President of Lexmark Canada. Before Lexmark, he spent 22 years at IBM Canada, where he held a number of sales and marketing roles in their Office Products and
Large Systems divisions. Mr. Ryan's last role at IBM Canada was Director of Operations for their Public Sector, a role he held from 1986 to 1990. He holds a Bachelor of Arts degree from the
University of Western Ontario.

Gerald W. Schwartzis the Chairman of the Board, President and Chief Executive Officer of Onex. Mr. Schwartz has been a director of
Celestica since 1998. Prior to founding Onex in 1983, Mr. Schwartz was a co-founder and President (in 1977) of what is now CanWest Global Communications Corp.
Mr. Schwartz was inducted into the Canadian Business Hall of Fame in 2004 and was appointed as an Officer of the Order of Canada in 2006. He is also an honorary director of the Bank of Nova
Scotia and is a director of Indigo Books & Music Inc., a public corporation. Mr. Schwartz is Vice Chairman of Mount Sinai Hospital and is a director, governor or trustee of a
number of other organizations, including Junior Achievement of Toronto, the Canadian Council of Christians and Jews, and The Simon Wiesenthal Center. He holds a Bachelor of Commerce degree and a
Bachelor of Laws degree from the University of Manitoba, a Master of Business Administration degree from the Harvard University Graduate School of Business Administration, a Doctor of Laws (Hon.) from
St. Francis Xavier University, and a Doctor of Philosophy (Hon.) from Tel Aviv University.

Don Tapscottis Chairman of the thinktank, nGenera Insight and an adjunct Professor of Management at the University of Toronto's Joseph L.
Rotman School of Management. Mr. Tapscott is also an internationally respected authority, consultant and speaker on business strategy and organizational transformation and the author of
thirteen widely-read books on the application of technology in business. Mr. Tapscott is a founding member of the Business and Economic Roundtable on Addiction and Mental Health,
and a fellow of the World Economic Forum. He has been a director of Celestica since 1998. Mr. Tapscott holds a Bachelor of Science degree in Psychology and Statistics, and a Master of Education
degree, specializing in Research Methodology, as well as Doctor of Laws (Hon.) degrees from the University of Alberta and Trent University.

Craig H. Muhlhauseris President and Chief Executive Officer and a member of the Board of Directors. Prior to holding his current
position, Mr. Muhlhauser was President and Executive Vice President of Worldwide Sales and Business Development. Before joining Celestica in May 2005, Mr. Muhlhauser was the
President and Chief Executive Officer of Exide Technologies. Mr. Muhlhauser was serving as President of Exide Technologies when that entity filed for bankruptcy in 2002, was named Chief
Executive Officer of Exide Technologies shortly thereafter and successfully led the company out of bankruptcy protection in 2004. Prior to that, he held the role of Vice President, Ford Motor Company
and President, Visteon Automotive Systems. Mr. Muhlhauser also serves on the board of directors of Intermet Corporation, a manufacturer of cast metal components for the automotive,
commercial-vehicle and industrial markets, which filed for bankruptcy in the US in August 2008 and

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is
currently operating under bankruptcy protection. Throughout his career, he has worked in a range of industries spanning the consumer, industrial, communications, utility, automotive and aerospace
and defense sectors. Mr. Muhlhauser holds a Master of Science degree in Mechanical Engineering and a Bachelor of Science degree in Aerospace Engineering from the University
of Cincinnati.

Paul Nicolettihas been Celestica's Executive Vice President and Chief Financial Officer since June 2007. He is responsible for
overseeing Celestica's accounting, financial and investor relations functions in order to protect and enhance Celestica's shareholder value. Previously, he was Senior Vice President, Finance and held
the role of Corporate Treasurer, with responsibility for Celestica's global financial operations, segment financial reporting, strategic pricing, corporate tax and all corporate finance and
treasury-related matters. Prior to that, Mr. Nicoletti was Vice President, Global Financial Operations, responsible for all financial aspects of Celestica's Canadian and Latin American
operations. He was also previously the Controller of Celestica's Canadian EMS operations. Mr. Nicoletti joined IBM in 1989 and was part of the founding management team of Celestica. Throughout
his career, he has held a number of senior financial roles in mergers and acquisitions, planning, accounting, pricing and financial strategies. Mr. Nicoletti holds a Bachelor of Arts degree
from the University of Western Ontario and a Master of Business Administration degree from York University.

John J. Boucheris Executive Vice President, Supply Chain Management Solutions and Chief Procurement Officer. He has led the company's
Supply Chain Management Organization since November 2004. In 2008, this organization expanded into a complete Supply Chain Solutions Organization encompassing Solutions Development and
integrated services offerings spanning design, fulfillment, after-market and automated manufacturing services. Previously, Mr. Boucher held the position of President, Americas, and was
responsible for manufacturing operations in Canada, the U.S., Mexico and Brazil. Before joining Celestica through the company's acquisition of Manufacturers' Services Limited (MSL) in
March 2004, he was MSL's Corporate Vice President of Global Supply Chain Management. Prior to joining MSL as part of the company's founding team, Mr. Boucher guided the
start-up of after-market operations at Circuit Test Inc. He also spent over 17 years with Digital Equipment Corporation, where he held a number of senior roles, including
managing supply chain strategies for the company's Personal Computer Division.

Elizabeth L. DelBiancois Executive Vice President, Chief Legal and Administrative Officer and Corporate Secretary. In this role she
oversees human resources, global branding, legal, contracts and communications. Ms. DelBianco joined Celestica in 1998 and since that time has been responsible for managing legal, governance,
and compliance matters for Celestica on a global basis. In March of 2007, Ms. DelBianco assumed the leadership of the Global Human Resources function. In this role, she oversees all human
resources policies and practices and leads Celestica's efforts to attract, develop and retain key talent. In
2008, her role expanded to include responsibility for overseeing the Global Branding Organization. Ms. DelBianco came to Celestica following a 13-year career as a senior corporate
legal advisor in the telecommunications industry. She holds a Bachelor of Arts degree from the University of Toronto, a Bachelor of Laws degree from Queen's University, and a Master of Business
Administration degree from the University of Western Ontario. She is admitted to practice in Ontario and New York.

John Periis Executive Vice President, Global Operations. He is responsible for overseeing Celestica's manufacturing and supply chain
operations in Asia, Europe and the Americas. Mr. Peri previously held the role of President, Asia Operations, with responsibility for Celestica's manufacturing footprint in China, Hong Kong,
India, Japan, Malaysia, Philippines, Singapore and Thailand. Prior to that, he held senior level positions in the areas of quality, manufacturing excellence, services and regional leadership.
Mr. Peri joined IBM Canada in 1984 and was part of the founding management team of Celestica. Over the course of his career, he has held a number of leadership positions in operations,
engineering and account management. He holds a Bachelor of Applied Science degree in Industrial Engineering from the University of Toronto.

Michael L. Andradeis Senior Vice President and General Manager, North America. In this role, he is responsible for ensuring Celestica's
operating model and business strategies are aligned to drive growth and accelerate customers' success. His primary focus is helping customers overcome obstacles associated with the more sophisticated
use of electronics in North America. Mr. Andrade joined Celestica from IBM in 1994 as part of the company's original management team, and has since held positions of increasing responsibility
with the company. Prior to his current role, he was the Senior Vice President, Strategic Business Development. His diverse experience spans engineering, finance, operations management, mergers and
acquisitions and commodity management. He holds a Bachelor of Engineering Science degree from the University of Western Ontario, a Master of Business Administration degree from York University in
Ontario, and is a member of the Professional Engineers of Ontario.

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Peter J. Baris Senior Vice President, Finance. He is responsible for providing financial leadership for the
Americas region. Previously, he was Senior Vice President and Corporate Controller, with responsibility for Celestica's external reporting, financial planning, strategic pricing and corporate tax. He
joined Celestica in March 1998, as Vice President, Finance, Power Systems. Prior to joining Celestica, Mr. Bar was the Controller for the Personal Systems Group of IBM Canada. During his
14-year career in the information technology industry, he has served in several senior management positions for both IBM Canada and IBM's headquarters in Armonk, New York.
Mr. Bar holds a Bachelor of Commerce degree from the University of Toronto and a Chartered Accountant designation.

Mary Gendronis Senior Vice President and Chief Information Officer. She is responsible for aligning Celestica's information technology
strategy with its business goals by ensuring that the company's strategic investments in IT tools and processes drive its customers' success. Ms. Gendron recently joined Celestica following a
five-year career at The Nielsen Company, one of the largest global information measurement and media companies. Most recently, she was the Senior Vice President, IT Infrastructure Shared
Services. Prior to that, she was the Chief Information Officer at ACNielsen US. Over the course of her career, Ms. Gendron has held management positions of increasing seniority in information
technology and supply chain management at Motorola and Bell Canada. Ms. Gendron holds a Bachelor of Engineering degree from McGill University in Montreal, Quebec.

Peter A. Lindgrenis Senior Vice President and General Manager, Growth and Emerging Markets Segment. He leads a focused business unit that
drives the strategic direction and growth of Celestica's business within
key customer accounts in emerging markets. Previously, Mr. Lindgren held the role of Senior Vice President, Industry Market Segment and prior to that, was Senior Vice President, Business
Development, overseeing Celestica's regional marketing and business development teams on a global basis. Prior to that, Mr. Lindgren was Vice President and General Manager, Cisco Global
Customer Business Unit. He joined Celestica in February 1998, as Director of Operations in Corporate Development. Mr. Lindgren has worked in the electronics manufacturing services
industry since 1985, and held a number of management positions in international operations, sales and marketing, program management and materials with SCI Systems and MTI International. He holds a
Bachelor of Arts degree in Business Economics from Colorado College.

Michael P. McCaugheyis Senior Vice President and General Manager, Communications Market Segment. He is responsible for the strategic
direction of the company's communications business and all key activities associated with Celestica's customer accounts in this sector. Prior to joining Celestica in June 2005,
Mr. McCaughey held the role of Senior Vice President, Wireline Network Systems, at Sanmina-SCI. Before joining Sanmina-SCI, Mr. McCaughey held senior roles at
Hyperchip Inc. and SCI Systems (prior to that company's merger with Sanmina). He holds a DEC in Electrotechnology from Vanier College, Quebec and studied Electrical Engineering at McGill
University in Montreal, Quebec.

Darren Myersis Senior Vice President and Corporate Controller. He is responsible for Celestica's corporate external reporting, financial
planning and budgeting related matters. Mr. Myers rejoined Celestica in 2008 following two years as the Vice President, Finance, Small Medium Business for Bell Canada. Prior to that,
Mr. Myers was the Vice President, Finance, Global Services at Celestica. He originally joined Celestica in 2000 where he was a key member of the Corporate Development team. Over the course of
his career, Mr. Myers has held a number of leadership positions in the areas of operational finance, mergers and acquisitions and controls compliance and disclosure. He holds an Honours
Bachelor of Commerce degree from McMaster University in Ontario. He is also a Chartered Accountant.

Robert J. Sellersis Senior Vice President and General Manager, Enterprise and Consumer Market Segments, Asia Business Development. In
this role, he is responsible for the strategic direction and growth of Celestica's customers in the global enterprise and consumer markets as well as Asian regional customers. Previously,
Mr. Sellers was Senior Vice President, Global Sales, and prior to that, led the sales organization for Celestica's Americas and Asia regions. He joined Celestica in 2003 in the role of Vice
President, Market Development in the area of Consumer Electronics. Mr. Sellers has had a 14-year career in the EMS industry with various leadership positions at
Sanmina-SCI, SCI, Solectron and Avex. Prior to entering the EMS industry, Mr. Sellers was a highly decorated United States Army officer. He holds a Bachelor of Science degree
in Industrial and Operations Engineering from the University of Michigan.

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There
are no family relationships among any of the foregoing persons, and there are no arrangements or understandings with any person pursuant to which any of our directors or members of
senior management were selected.

B.    Compensation

Compensation of Directors

Director compensation is set by the Board of Directors on the recommendation of the Compensation Committee and in accordance with
director compensation guidelines established by the Nominating and Corporate Governance Committee (Governance Committee). Under these guidelines, the Board of Directors seeks to maintain director
compensation at a level that is competitive with director compensation at comparable companies. The Compensation Committee engaged Towers Perrin Inc. (Towers Perrin) to provide benchmarking
information in this regard. See " Compensation Process" and " Comparator Companies" for a discussion regarding the role of Towers Perrin. The
guidelines also contemplate that at least half of each director's annual retainer and meeting fees be paid in deferred share units (DSUs). Each DSU represents the right to receive one subordinate
voting share or an equivalent value in cash of the Company when the director ceases to be a director.

2008 Fees

Table 1 sets out the annual retainers and meeting fees paid in 2008 to the Company's directors (other than
Messrs. Schwartz and Muhlhauser who, as officers of Onex and the Company, respectively, did not receive such compensation).

Table 1: Retainers and Meeting Fees for 2008

Annual Board Retainer

$
65,000Annual Retainer for non-executive Chairman(1)

$
130,000Annual Retainer for Audit Committee Chair

$
20,000Annual Retainer for Compensation Committee Chair

$
10,000Annual Retainer for Executive Committee Chair

$
10,000Board and Committee Per Day Meeting Fee(2)

$
2,500Travel Fee(3)

$
2,500Annual DSU Grant (for directors other than the Chairman)

$
65,000Annual DSU Grant  Chairman

$
130,000


---

DSUs

Directors receive half of their annual retainer and meeting fees (or all such fees, if they so elect) in DSUs. The number of
DSUs granted in lieu of cash meeting fees is calculated by dividing the cash fee that would otherwise be payable by the closing price of subordinate voting shares on the New York Stock Exchange
(NYSE) on the last business day of the quarter in which the applicable meeting occurred. In the case of annual retainer fees, the number of DSUs granted is calculated by dividing the cash amount that
would otherwise be payable quarterly by the closing price of subordinate voting shares on the NYSE on the last business day of the quarter.

Directors
also receive annual grants of DSUs. In 2008, each director received $65,000 worth of DSUs, except for the Chairman, who received $130,000. The number of DSUs granted is
calculated by dividing the cash amount that would otherwise be payable quarterly by the closing price of subordinate voting shares on the NYSE on the last business day of the quarter.

59

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Eligible
directors also receive an initial grant of DSUs when they are appointed to the Board of Directors. For individuals who become eligible directors after December 31, 2008,
the initial grant is equal to the amount of the annual board retainer multiplied by 150% and divided by the closing price of subordinate voting shares on the NYSE on the last business day of the
fiscal quarter immediately preceding the date when the individual becomes an eligible director. The DSUs comprising the initial grant vest upon the retirement of the eligible director. However, if an
eligible director retires within a year of becoming an eligible director, all of the DSUs comprising the initial grant are forfeited and cancelled. If an eligible director retires less than two years
but more than one year after becoming an eligible director, then two-thirds of the DSUs comprising the initial grant are forfeited and cancelled. If an eligible director retires within
three years but more than two years after becoming an eligible director, then one-third of the DSUs comprising the initial grant are forfeited and cancelled. Forfeiture does not apply if a
director ceases to be a director due to a change of control.

The
compensation paid in 2008 by the Company to its directors is set out in Table 2. None of the directors received any fee or payment from the Company except as set out below.
Mr. Schwartz is an officer of Onex and did not receive any compensation in his capacity as a director of the Company in 2008. Mr. Muhlhauser, as President and Chief Executive Officer of
the Company, also did not receive any director's fees from the Company in 2008.

Table 2: Director Fees Earned in 2008

Name

Board
Annual
Retainer
(a)

Chairman
Annual
Retainer
(b)

Committee
Chair
Annual
Retainer
(c)

Total
Meeting
Attendance
Fees
(d)

Total Annual
Retainer and
Meeting Fees
Payable
((a)+(b)+(c)+(d))
(e)

Portion of Fees
Taken in Cash
or Applied to
DSUs and
Value of DSUs
(f)

Annual
DSU Grant (#)
and Value of
DSUs(1)
(g)

Initial
DSU
Grant (#)
and Value of
DSUs
(h)

Total
((e)+(g)+(h))Robert L. Crandall




$
130,000

$
30,000

$
70,000

$
230,000

100% DSUs/
$230,000


20,788/$130,000




$
360,000William A. Etherington

$
65,000




$
10,000

$
50,000

$
125,000

100% DSUs/
$125,000


10,394/$65,000




$
190,000Richard S. Love

$
65,000







$
55,000

$
120,000

50% Cash &
50% DSUs/
$60,000


10,394/$65,000




$
185,000Anthony R. Melman(2)

$
20,357







$
7,500

$
27,857

100% DSUs/
$27,857


3,029/$20,357




$
48,214Eamon J. Ryan(3)

$
16,250







$
7,500

$
23,750

100% DSUs/
$23,750


3,525/$16,250

$
27,950/
180,000

$
220,000Charles W. Szuluk(4)

$
32,500







$
12,500

$
45,000

100% DSUs/
$45,000


4,346/$32,500




$
77,500Don Tapscott

$
65,000







$
25,000

$
90,000

100% DSUs/
$90,000


10,394/$65,000




$
155,000


---

The total fees earned by the Board of Directors in 2008 were $661,607. In addition, a total annual grant of DSUs worth $394,107 and an initial
grant of DSUs worth $180,000 were issued.

Outstanding Option-Based and Share-Based Awards

In 2005, the Company amended its Long Term Incentive Plan (LTIP) to prohibit the granting of options to acquire subordinate voting
shares to directors. Table 3 sets out information relating to option grants to directors which were made between 1998 and 2004 and which remain outstanding. All option grants were made with
exercise prices set at the closing market price on the business day prior to the date of grant. Exercise prices range from $10.62 to C$72.60. Options vest over three or four years and expire after ten
years. The final grant of

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options
occurred on May 10, 2004; those options will expire on May 10, 2014. Mr. Schwartz, as an employee of Onex during that period, was not granted options. Mr. Ryan
became a director on October 24, 2008 and was not granted any options under the LTIP.

DSUs
that were granted prior to January 1, 2007 will be paid out in the form of subordinate voting shares issued from treasury. DSUs granted after January 1, 2007 will be
paid out in the form of subordinate voting shares purchased in the open market or an equivalent value in cash. The date used in valuing the DSUs shall be a date within 90 days of the date on
which the individual in question ceases to be a director. The DSUs shall be redeemed and payable on or prior to the 90th day following the date on which the individual ceases to
be a director. The total number of DSUs outstanding is included in Table 3.

The
following table sets out for each director information concerning all option-based and share-based awards outstanding as of December 31, 2008 (this includes awards granted
before the most recently completed financial year).

Table 3: Outstanding Option-Based and Share-Based Awards

Option-Based Awards(1)

Share-Based Awards(2)Name

Number of
Securities
Underlying
Unexercised
Options
(#)

Option
Exercise Price
($)

Option
Expiration
Date

Value of
Unexercised
In-the-Money
Options
($)

Number of
Outstanding
Units
(#)

Market Payout
Value of
Outstanding
Units
($)Robert L. CrandallJul. 7, 1999
Jul. 7, 2000
Jul. 7, 2001
Apr. 18, 2003
May 10, 2004



20,000
20,000
20,000
10,000
10,000


$$$$$
23.41
48.69
44.23
10.62
18.25



Jul. 7, 2009
Jul. 7, 2010
Jul. 7, 2011
Apr. 18, 2013
May 10, 2014
















248,621

$





1,146,143William A. EtheringtonOct. 22, 2001
Apr. 21, 2002
Apr. 18, 2003
May 10, 2004



20,000
5,000
5,000
5,000


$$$$
35.95
32.40
10.62
18.25



Oct. 22, 2011
Apr. 21, 2012
Apr. 18, 2013
May 10, 2014














97,111

$




447,682Richard S. LoveJul. 7, 1999
Jul. 7, 2000
Jul. 7, 2001
Apr. 18, 2003
May 10, 2004



10,000
10,000
10,000
2,500
2,500


$$$$$
23.41
48.69
44.23
10.62
18.25



Jul. 7, 2009
Jul. 7, 2010
Jul. 7, 2011
Apr. 18, 2013
May 10, 2014
















52,114

$





240,246Eamon J. Ryan














36,627

$
168,850Don TapscottJul. 7, 1999
Jul. 7, 2000
Jul. 7, 2001
Apr. 18, 2003
May 10, 2004



20,000
20,000
20,000
5,000
5,000


C$C$C$$$
34.50
72.60
66.78
10.62
18.25



Jul. 7, 2009
Jul. 7, 2010
Jul. 7, 2011
Apr. 18, 2013
May 10, 2014
















98,632

$




454,694


---

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Table of Contents

Directors' Equity Interest

The following table sets out each director's direct or indirect beneficial ownership of, or control or direction over, equity in the
Company, and any changes therein since February 25, 2008.

Table 4: Equity Interest Other than Options and  Outstanding Share-Based Awards(1)

Name

Date

SVS(2)
#

Market Value*Robert L. Crandall


Feb. 25, 2008
Feb. 23, 2009
Change


20,000
70,000
50,000

$
219,100William A. Etherington


Feb. 25, 2008
Feb. 23, 2009
Change


10,000
10,000


$
31,300Richard S. Love


Feb. 25, 2008
Feb. 23, 2009
Change


5,000
5,000


$
15,650Eamon J. Ryan


Feb. 25, 2008
Feb. 23, 2009
Change






$
Gerald W. Schwartz(3)


Feb. 25, 2008
Feb. 23, 2009
Change


2,236,713
2,184,975
(51,738
)
$
6,838,972Don Tapscott


Feb. 25, 2008
Feb. 23, 2009
Change


5,700
5,700


$
17,841


---

Shareholding Requirements

The Company has minimum shareholding requirements for independent directors (the "Guideline"). The Guideline provides that an
independent director who has been on the Board of Directors:



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Although
directors will not be deemed to have breached the Guideline by reason of a decrease in the market value of the Company's securities, the directors may be required to purchase
further securities within a reasonable period of time to comply with the Guideline. The Guideline came into effect on April 22, 2004 and each director's holdings of securities which for the
purposes of the Guideline include all subordinate voting shares, DSUs and RSUs are reviewed annually each year on December 31. Given the recent downturn in the performance of financial markets
as a result of uncertainty in the global economy, the Company has extended the targeted compliance date by one year to April 22, 2010. As of December 31, 2008 all of the directors of the
Company were, or were on track to be, in compliance with the Guideline as set out in the following table.

Table 5: Shareholding Requirements

Shareholding RequirementsDirector

Target Value (5x annual retainer)

Date by which Target to be Met

Value as of December 31, 2008(3)

On Track as of December 31, 2008(4)Robert L. Crandall

$
800,000


Apr. 22, 2010

$
1,468,843

YesWilliam A. Etherington

$
375,000


Apr. 22, 2010

$
493,782

YesRichard S. Love

$
325,000


Apr. 22, 2010

$
263,296

YesEamon J. Ryan(1)










Gerald W. Schwartz(2)










Don Tapscott

$
325,000


Apr. 22, 2010

$
480,971

Yes


---

Attendance of Directors at Board of Directors and Committee Meetings

The following table sets forth the attendance of directors at Board of Directors and Committee meetings in 2008.

Table 6: Directors' Attendance at Board of Directors and Committee Meetings

Meetings Attended %Director

Board

Audit

Compensation

Governance

Executive

Board

CommitteeRobert L. Crandall(1)


6 of 6


6 of 6


5 of 5


5 of 5


14 of 14


100%


100%William A. Etherington(2)


6 of 6


6 of 6


5 of 5


5 of 5


14 of 14


100%


100%Richard S. Love


6 of 6








5 of 5





100%


100%Anthony R. Melman(3)


1 of 3














33%


Craig H. Muhlhauser


6 of 6














100%


Eamon J. Ryan(4)


2 of 2














100%


Gerald W. Schwartz


5 of 6














83%


Charles W. Szuluk(5)


2 of 3





1 of 2








67%


50%Don Tapscott


6 of 6


3 of 6


4 of 5


3 of 5





100%


63%


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Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (CD&A) sets out the policies of the Company for determining compensation paid to the
Company's Chief Executive Officer (CEO), its Chief Financial Officer (CFO), and the three other most highly compensated executive officers (collectively, the "Named Executive Officers" or "NEOs"). A
description and explanation of the significant elements of compensation awarded to the NEOs during 2008 is set out in the section entitled2008 Compensation
Decisionsof this Annual Report.

Compensation Objectives

The Company's executive compensation philosophies and practices are designed to attract, motivate and retain the leaders who will drive
the success of the Company. The Company benchmarks itself against a comparator group of similarly sized technology companies as set out in Table 7 (the "Comparator Group"), including
four direct competitors of the Company in the electronics manufacturing services industry: Benchmark Electronics, Flextronics International, Jabil Circuit and Sanmina-SCI (collectively,
the "EMS Competitors").

Compensation
for executives is linked to the Company's performance. Target compensation is positioned at the median of the comparator group for median level performance, with the
opportunity for above median compensation for performance that exceeds the median of the Comparator Group and less than median compensation for performance that is below the median of the Comparator
Group.

The
compensation package is designed to:



Independent Advice

The Compensation Committee has engaged Towers Perrin as its independent compensation consultant to assist in identifying appropriate
comparator companies against which to evaluate the Company's compensation levels, to provide data about those companies, and to provide observations and recommendations with respect to the Company's
compensation practices versus the comparator group.

Management
works with Towers Perrin to review and, where appropriate, develop and recommend compensation programs that will ensure the Company's practices are competitive with market
practices. Towers Perrin also provides advice to the Compensation Committee on the policy recommendations prepared by management and keeps the Compensation Committee apprised of market trends in
executive compensation. Towers Perrin attended portions of all Compensation Committee meetings held in 2008, in person or by telephone, as requested by the Chairman of the Compensation Committee. The
Compensation Committee holdsin camerasessions with Towers Perrin at each of its meetings.

Decisions
made by the Compensation Committee, however, are the responsibility of the Compensation Committee and may reflect factors and considerations other than the information and
recommendations provided by Towers Perrin.

Each
year, the Chairman of the Compensation Committee reviews the scope of activities of Towers Perrin and approves the corresponding budget. Any services and fees not related to
executive compensation must be approved by the Chairman. In 2008, the compensation advisor retainer fees paid to Towers Perrin totaled approximately C$200,500. Additional consulting services fees paid
to Towers Perrin regarding US executive

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benefits
totaled approximately C$87,300 for 2008. Towers Perrin did not provide any non-executive compensation services in 2008.

Compensation Process

The Compensation Committee reviews and approves compensation for the CEO and the other NEOs, including base salaries, annual incentive
awards and equity-based incentive grants. Compensation for the other NEOs is reviewed in consultation with the CEO. The Compensation Committee works with Towers Perrin when determining the
compensation of the NEOs, including the CEO. The Compensation Committee's decisions are then reviewed with the Board of Directors.

The
Compensation Committee generally meets five times a year. At the July meeting, the Compensation Committee, based on recommendations from Towers Perrin, approves the comparator group
that will be used for the compensation review. At the October meeting, Towers Perrin presents a competitive analysis of the total compensation for each of the NEOs, including the CEO, based on the
established comparator group. Using this analysis, the Chief Legal and Administrative Officer (CLO), who has responsibility for Human Resources, together with Towers Perrin and the CEO develop base
salary and equity-based incentive recommendations for the NEOs, except that the CEO and CLO do not participate in the preparation of their own compensation recommendations. At the December meeting,
base salary recommendations for the NEOs for the following year and the value of their equity-based incentives are approved. Previous grants of equity-based awards are not taken into consideration
when making this decision. At the January meeting, the Compensation Committee approves the final mix of the equity-based incentives. The CLO is not present at the Compensation Committee meetings when
her compensation is discussed.

The
foregoing process is also followed for determining the CEO's compensation except that the CLO works with Towers Perrin to develop a proposal for base salary and equity-based
incentive grants. The Compensation Committee then reviews the proposal with Towers Perrin in the absence of the CEO. At that time, the Compensation Committee also considers the potential value of the
total compensation package for the CEO at different levels of performance and different stock prices.

In
terms of the Company's annual incentive plan, targets based on a management plan approved by the Board of Directors are approved by the Compensation Committee at the beginning of the
year. The Compensation Committee reviews the Company's performance relative to these targets and the projected payment at the December Compensation Committee meeting. At the January meeting of the
following year, final payments under the plan, as well as the vesting percentages for any previously granted equity-based incentives that have performance vesting criteria, are calculated and approved
by the Compensation Committee based on the Company's year end results as approved by the Audit Committee. These amounts are then paid in February.

Comparator Companies

The Compensation Committee benchmarks salary, target bonus and equity-based incentive awards to the Comparator Group. The revenues of
the Comparator Group companies are generally in the range of half to twice the Company's revenues. In addition, the Committee included in the Comparator Group two of the EMS Competitors whose revenues
were outside this range: Benchmark Electronics and Flextronics International. Each year the Compensation Committee reviews and approves constituent companies of this comparator group.

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The
Company's 2008 Comparator Group consisted of the following companies.

Table 7: Comparator Group

Company Name

2007 Annual
Revenue
(millions)

Company Name

2007 Annual
Revenue
(millions)Advanced Micro Devices Inc.

$
6,013

NVIDIA Corp.

$
4,098Agilent Technologies Inc.

$
5,420

QUALCOMM Inc.

$
8,871Applied Materials Inc.

$
9,735

Sanmina-SCI Corp.*

$
10,384Benchmark Electronics Inc.*

$
2,916

Sun Microsystems Inc.

$
13,873Corning Inc.

$
5,860

Texas Instruments Inc.

$
13,835EMC Corp.

$
13,230

Western Digital Corp.

$
5,468Flextronics International Ltd.*

$
27,558

Xerox Corp.

$
17,228Harris Corp.

$
4,243Jabil Circuit Inc.*

$
12,291

25th Percentile

$
5,308Lexmark International Inc.

$
4,974

50th Percentile

$
7,442Micron Technology Inc.

$
5,738

75th Percentile

$
12,525NCR Corp.

$
4,970Nortel Networks Corp.

$
10,948

Celestica Inc.

$
8,070


---

Financial data as of June 30, 2008. Source: Standard & Poor's Research Insight.

Additionally, broader market compensation data for other similarly sized organizations provided by Towers Perrin is referenced in accordance with
a process approved by the Compensation Committee.

Compensation Elements for the Named Executive Officers

The compensation of the Company's NEOs is comprised of the following elements:



Weighting of Compensation Elements

The variable portion of total compensation has the highest weighting at the most senior levels. Annual and equity-based incentive plan
rewards are contingent upon organizational performance and ensure a strong alignment with shareholder interests. The weighting of compensation elements for 2008 is set out in the following table.

Table 8: Weighting of Compensation Elements

Base Salary

Annual
Incentive

Equity-Based
IncentivesCEO


14.3%


14.3%


71.4%EVPs


20.0%


16.0%


64.0%SVPs


27.1%


16.2%


56.7%


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Base Salary

The objective of base salary is to attract, reward and retain top talent. Executive positions are benchmarked against the Comparator
Group, with base pay targeted at the market median of this group. Base salaries are reviewed annually and adjusted as appropriate, with consideration given to individual performance, relevant
knowledge, experience and an executive's level of responsibility within the organization.

Celestica Team Incentive Plan (CTI)

The objective of the CTI is to reward all employees, including the NEOs, for the achievement of annual corporate, business unit, and
individual goals and objectives. Target awards for each of the NEOs are expressed as a percentage of salary and established based on the median of the Comparator Group. Actual awards are based on
(i) the achievement of pre-determined corporate and individual goals, and (ii) corporate performance relative to that of the EMS Competitors. Actual payouts can vary from 0%
for performance below a threshold up to a maximum of 200% of the target bonus. Awards are derived according to the following formula:

GRAPHIC

For
2008, the business performance goals were comprised of the following elements:



Individual
contribution is recognized through the individual component and individual performance factor (IPF). The IPF is based on a review of each NEO's individual performance relative
to business results, teamwork and the executive's key accomplishments. This factor can adjust the executive's actual award by a factor of between 0x and 1.5x.

The
Compensation Committee also applies a relative performance factor (RPF) based on an evaluation of the Company's performance for the year relative to that of the EMS Competitors. This
evaluation is based on a ROIC based performance metric but is ultimately within the Committee's discretion. This factor can adjust the executive's actual award by a factor of between 0.5x
and 1.5x.

Actual
results relative to the targets, as described above, determine the amount of the annual incentive subject to the following: (i) a minimum corporate profitability threshold
must be achieved to pay the business performance component and (ii) the maximum award is two times the target.

Equity-Based Incentives

The Company's equity-based incentives for the NEOs consist of restricted share units (RSUs), performance share units (PSUs) and stock
options. The objectives of the equity-based incentive plans are to:



At
the December meeting, the Compensation Committee determines the dollar value of the equity-based grants to be awarded to the NEOs based on the comparator data analysis. Prior to the
January meeting, this amount is converted into the number of units that will be granted using an assumed share price that is determined with reference to the then current trading range of the
Company's subordinate voting shares. For the 2008 grants, the assumed share price was $4.50. The actual equity mix to be awarded is then approved at the

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January
meeting of the Compensation Committee. The grants are made immediately following the blackout period that ends 48 hours after the Company's year end results have been released.

Target
equity-based incentives are determined based on the median awards of the Comparator Group; however, consideration is given to individual performance when determining actual
awards. The equity mix varies by employee level and targets a higher percentage of performance elements at the NEO levels where there is a stronger influence on results. The target mix of equity-based
incentives is reviewed by the Compensation Committee each year and for 2008 the targets for the NEOs were as follows:



The
CEO has the discretion to issue equity-based awards throughout the year to attract new hires and to retain current employees within limits set by the Compensation Committee. The
number of units available throughout the year for these grants is pre-approved by the Compensation Committee at the January meeting. Subject to the Company's blackout periods, these grants
typically take place at the beginning of each month. Any grants to senior executives must be reviewed with the Compensation Committee at the next meeting and in practice are reviewed in advance with
the Chairman of the Compensation Committee.

RSUs

NEOs
are granted RSUs under the Celestica Share Unit Plan (CSUP). RSUs granted prior to February 2008 are released on
December 1st two years following the grant (i.e., RSUs granted in February 2007, will be released on
December 1st, 2009). RSUs granted in February 2008 or later, are released one-third on each of the first two anniversaries of the grant date and the final third is released
on December 1st two years following the grant. Each RSU entitles the holder to one subordinate voting share of the Company on the release date. The payout value of the
award is based on the number of RSUs being released and the share price at the time of release.

PSUs

NEOs
are granted PSUs under the CSUP. PSUs vest at the end of a three-year performance period subject to pre-determined performance criteria. The
number of PSUs that actually vests will range from 0% to 200% of target depending on the Company's ranking in the third year of the performance period relative to that of the EMS Competitors based on
an ROIC metric approved by the Compensation Committee. The vesting schedule is outlined in the following table.

Table 9: PSU Vesting Schedule

Celestica's ROIC Metric

Performance MultiplierEqual to/greater than highest performance of EMS Competitors

200% of targetBetween the median and highest performance

Prorated between 100%-200%Equal to median performance of EMS Competitors

100% of targetBetween the median and lowest performance

Prorated between 0%-100%Equal to/lower than lowest performance of EMS Competitors

0% of target


The
payout value of the award is based on the number of PSUs that vests and the share price at the time of release. Each PSU entitles the holder to receive one subordinate voting share
of the Company on the release date.

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Stock Options

Stock
options are awarded under the Long Term Incentive Plan (LTIP). Stock options vest at a rate of 25% annually on the anniversary of the date of grant and
expire after a 10-year term. The payout value of the award is equal to the increase, if any, in share price at the time of exercise over the exercise price, which is the closing market
price on the business day prior to the date of the grant.

The
value of the stock options granted in respect of 2008 was determined at the December meeting of the Compensation Committee using (i) an assumed share price of $4.50, and
(ii) a Black-Scholes factor of 0.40 determined using the same methodology as is used to determine Black-Scholes for stock option expensing purposes. The Black-Scholes factor was
determined using the following variables: (i) volatility of the price of subordinate voting shares, and (ii) the risk-free rate over the expected life of the options.

In
determining the number of options to be granted, the Company keeps within a maximum level for both option "burn rate" and "overhang". "Burn rate" refers to the number of shares issued
under equity plans in
a given year relative to the total number of shares outstanding. "Overhang" refers to the total number of shares reserved for issuance under equity plans at any given time relative to the total number
of shares outstanding. The Company has significantly reduced the number of stock option grants awarded and currently has an "overhang" of 11.7%. In 2005, the Company amended the LTIP to provide that
the number of options awarded under the plan in any given year cannot exceed 1.2% of the total number of shares outstanding.

Other Compensation

Benefits

Executives
participate in the Company's health, dental, pension, life insurance and long-term disability programs. Benefit programs are based on
market median levels, in the local geography.

Perquisites

Executives
are entitled to an annual comprehensive medical at a private health clinic. The Company also pays housing expenses for Mr. Muhlhauser in
Toronto, travel costs between his home in New Jersey and Toronto, and the services of a tax advisor. The Company does not provide any other perquisites.

Celestica Employee Share Ownership Plan (CESOP)

The
CESOP enables eligible employees, including NEOs, to acquire subordinate voting shares, so as to encourage continued employee interest in the Company's
operation, growth and development. Under the CESOP, an eligible participant may elect to contribute an amount representing no more than 10% of his or her salary. The Company will contribute 25% of the
amount that the employee contributes, up to a maximum of 1% of the employee's salary for the relevant payroll period. Contributions are used to purchase subordinate voting shares of the Company on the
open market.

Executive Share Ownership

The Company has share ownership guidelines for the CEO and the other NEOs. The guidelines provide that these individuals are to hold a
multiple of their salary in Celestica subordinate voting shares as shown in Table 10 below. Executives subject to ownership guidelines are expected to achieve the specified ownership within a
period of five years following the latest of: (i) the date of implementation of the guidelines (January 26, 2005); (ii) the date of hire; or (iii) the date of promotion to
a level subject to ownership guidelines. Compliance is reviewed annually as of December 31 of each year.

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Table 10: Share Ownership Guidelines

Name

Ownership Guidelines

Share Ownership
(Value)(1)

Share Ownership
(Multiple of Salary)Craig H. Muhlhauser

$3,000,000 (3 × salary)

$
4,472,548


4.5xPaul Nicoletti

$1,024,000 (2 × salary)

$
1,586,859


3.1xJohn Peri

$1,008,000 (2 × salary)

$
1,418,681


2.8xElizabeth L. DelBianco

$888,000 (2 × salary)

$
1,178,265


2.7xJohn J. Boucher

$860,000 (2 × salary)

$
1,039,716


2.4x


---

Recoupment Provisions

The Company is subject to theSarbanes-Oxley Act of 2002. Accordingly, if the Company
is required to restate financial results due to misconduct or material non-compliance with financial reporting requirements, the CEO and CFO would be required to reimburse the Company for
any bonuses or incentive-based compensation they had received during the 12-month period following the restatement, as well as any profits they had realized from the sale of corporate
securities during that period.

Under
the terms of the stock option grants and the grants made under the CSUP plan, a NEO may be required by the Company to repay an amount equal to the market value of the shares at the
time of release, net of taxes, if, within 12 months of the release date the executive:



Executives
who resign or are terminated for cause also forfeit all unvested stock options, RSUs and PSUs.

2008 Compensation Decisions

Each element of compensation is considered independently of the other elements. However, the total package is reviewed to ensure that
the median total compensation objective for median levels of corporate and individual performance is achieved.

Comparator Companies and Market Positioning

Benchmarking for all elements of NEO compensation was based on the Comparator Group. Salary, target annual incentive and equity-based
incentive grants for the NEOs were benchmarked at the market median of the Comparator Group.

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Base Salary

The base salaries for the NEOs were reviewed taking into account individual performance and experience, level of responsibility and
median competitive data.

In
2008, Mr. Muhlhauser's base salary was increased from $750,000 to $1,000,000 to meet the median of the market. Mr. Boucher received a 24.8% increase in base salary as a
result of his promotion to Executive Vice President. Messrs. Nicoletti and Peri and Ms. DelBianco received increases in the 0%  3% range as their
existing salaries were competitive with the market.

Celestica Team Incentive Plan (CTI)

Target annual incentive awards for the CEO and other NEOs are 100% of salary and 80% of salary, respectively. For 2008, annual
incentive payments to the NEOs were paid at the maximum 200% of target incentive due to above average performance that exceeded the Company's objectives and the performance of the EMS Competitors on
certain metrics.

Business Performance

In 2008, the business performance component payout factor was 119% based on the following results:

Table 11: Business Performance

Measure

Weight

Percentage
Achievement
Relative to TargetEBIAT(1)


40%


112%ROIC, excluding intangibles(2)


40%


136%Customer Loyalty(3)


20%


100%Payout Factor





119%


---

Relative Performance Factor (RPF)

The Company's 2008 performance was ranked relative to that of the EMS Competitors on a ROIC performance metric. The Company ranked
first amongst the EMS Competitors which resulted in a RPF that exceeded the 1.5x cap, resulting in the maximum RPF of 1.5x. For this comparison, the Company used adjusted ROIC, which is calculated as
adjusted net earnings divided by average net invested capital.

Individual Performance Factor (IPF)

Each year, the Board of Directors and the CEO agree on performance goals. Goals for the NEOs that will support the CEO's goals are then
agreed to and established. For 2008, the CEO's goals focused on: financial performance, customer loyalty, operational effectiveness, growing the business, and leadership. Each NEO's

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performance
is then measured on a number of factors including the formal goals established for the year. Specific measures and achievements for each NEO in 2008 were:

Chief Executive Officer



In
addition to the goals listed above, the Committee's assessment of Mr. Muhlhauser's performance in 2008 reflected outstanding results in a number of
non-GAAP areas.

In
2008, the Company achieved:



The
Committee assessed Mr. Muhlhauser's IPF at the maximum of 1.5x reflecting the Company's strong performance in 2008.

Other NEOs

Each
of the NEOs has responsibility for the achievement of the CEO's corporate goals and objectives. The CEO's assessment of each of the NEO's contributions to
the Company's results is largely subjective and based on his judgment of the NEO's contributions as a part of the senior leadership team. The achievement of individual goals is not quantitatively tied
to compensation; however, the CEO's overall assessment of each NEO's contributions is used to determine the IPF.

Other
factors considered in the evaluation of each NEO included the following. Under the leadership of Mr. Nicoletti (who received an IPF of 1.4), the Company's financial
performance on a number of metrics improved significantly. The Company met or exceeded its earnings guidance for each quarter of 2008, generated operating cash flow significantly above expectations
and the Company's credit outlooks with credit agencies were upgraded. Under the leadership of global operations by Mr. Peri (who received an IPF of 1.2), the Company made significant
productivity and quality improvements while meeting or exceeding customer satisfaction targets. Global operations contributed to earnings growth and increased customer satisfaction through

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significant
improvements in the Company's overall operations. Under the leadership of Ms. DelBianco (who received an IPF of 1.2), the functions for which she is responsible made significant
contributions in the areas of human resources and legal strategy, contract training, dispute resolution, customer support, governance and compliance initiatives and leadership development. The
Company's talent management programs were significantly enhanced and the global incentive plan for production employees was redesigned for 2009. Under the leadership of Mr. Boucher
(who received an IPF of 1.3), the supply chain function was reorganized to create a supply chain solutions organization encompassing solutions development and integrated service offerings
spanning design, fulfillment, after-market service and automated manufacturing services. In addition, the sales team, under his leadership, contributed to the revenue growth of some of our largest
customers.

Equity-Based Incentives

Equity grants to NEOs in respect of 2008 performance consisted of RSUs, PSUs and stock options. The number of RSUs, PSUs and options to
be issued to the NEOs was based on an assumed share price of $4.50, which was derived from the trading range of the Company's subordinate voting shares prior to the January Compensation Committee
meeting. The actual mix of the grants was approved by the Compensation Committee at a meeting on January 28, 2009 and the grants were issued on February 3, 2009.

The
Company provided the NEOs the following equity-based compensation in February 2009 in respect of 2008 performance.

Table 12: NEO Equity Awards

Name

RSUs
(#)

PSUs(1)
(#)

Stock Options (#)

Intended
Compensatory
Value of LTI
Award(2)Craig H. Muhlhauser


444,444


388,889


694,444

$
5,000,000Paul Nicoletti


160,000


140,000


250,000

$
1,800,000John Peri


133,333


116,667


208,333

$
1,500,000Elizabeth L. DelBianco


133,333


116,667


208,333

$
1,500,000John J. Boucher


133,333


116,667


208,333

$
1,500,000


---

See "Compensation Discussion and Analysis  Equity-Based Incentives" for the discussion regarding the
calculation, terms and vesting schedules of equity awards.

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Performance Graph

The subordinate voting shares of the Company have been listed and posted for trading under the symbol "CLS" on the NYSE and the TSX
since June 30, 1998 (except for the period commencing on November 8, 2004 and ending on May 15, 2006 during which the symbol on the TSX has been CLS.SV). The following chart
compares the cumulative total shareholder return of C$100 invested in subordinate voting shares of the Company on December 31, 2003 (the Company did not declare or pay any dividends
during this period) with the cumulative total shareholder return of the S&P/TSX Composite Index for the period December 31, 2003 to December 31, 2008.

GRAPHIC

As
can be seen from the performance above, an investment in the Company on January 1, 2004 would have resulted in a 74% loss in value over the five year period ended
December 31, 2008 compared with a 36% increase that would have resulted from an investment in the S&P/TSX Composite Index over the same period.

The
compensation of the Company's NEOs has fluctuated over the same period as the Company dealt with, amongst other things, competitive pressures, operational issues, significant
restructuring and various leadership changes. In 2005, total compensation for NEOs decreased by 46% compared to 2004, from $21.1 million to $11.3 million and, in 2006, by a further 57%
compared to the previous year, to $4.9 million (excluding severance costs). The reduction in total compensation for NEOs was largely attributable to reduced long-term incentive
grants to certain NEOs. In 2006, total annual compensation for NEOs during this five-year period reached its lowest point and was 77% less than that paid in 2004.

After
significant operational challenges were experienced in the second half of 2006, senior management changes were made across the Company. The new management team implemented major
process improvements across all areas of the Company with a specific focus on improving profitability, reducing working capital and strengthening the Company's financial position. As management has
implemented these changes during 2007 and 2008, the Company's operating performance and financial results have shown significant improvements to the point where the Company was the strongest financial
performer amongst the EMS Competitors by the end of 2008. The Company's performance over this two-year period was its best operating performance during the past six years, as well
as its being amongst the best performers in the EMS industry on key operating performance metrics. This strong financial performance also contributed to improved outlooks from the Company's key
financial rating agencies and multi-year highs in customer satisfaction levels. The performance

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Table of Contents

graphs
set out below illustrate the Company's significant improvements on non-GAAP measures of gross margins, operating margins, asset utilization and ROIC.

Gross margins

Operating marginsGRAPHIC

GRAPHICExcluding non-cash option expense.

Excluding non-cash option expense.Asset utilization

Return on invested capitalGRAPHIC

GRAPHICIncluding intangible assets.


During
this period of improved performance, total compensation for the NEOs increased to $15.2 million in 2007 and $19.8 million in 2008. These increases were a result of
implementing competitive compensation packages for the Company's leadership team, as well as maximum annual incentive payouts due to strong corporate performance in 2008. In 2008, total compensation
for NEOs was 6% less than that paid in 2004.

Compensation of Named Executive Officers

The following table sets forth the compensation of the Company's Chief Executive Officer, Chief Financial Officer and the three other
most highly compensated executives of the Company and its subsidiaries (collectively, the "Named Executive Officers" or "NEOs") for the financial year ended December 31, 2008.

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Table of Contents

Table 13: Summary Compensation for 2008

Non-Equity
Incentive Plan
CompensationName & Principle Position

Salary
($)

Share-
Based
Awards
($)(1)(3)

Option-
Based
Awards
($)(2)(3)

Annual
Incentive
Plans
($)(4)

Pension
Value
($)

All Other
Compensation
($)(5)

Total
Compensation
($)Craig H. Muhlhauser President and Chief Executive Officer

$
937,500

$
3,750,000

$
1,250,000

$
2,000,000

$
13,800

$
168,278

$
8,119,578Paul Nicoletti(6) EVP, Chief Financial Officer

$
507,562

$
1,350,000

$
450,000

$
818,056

$
48,180

$
16,982

$
3,190,780John Peri(6) EVP, Global Operations

$
503,977

$
1,125,000

$
375,000

$
806,364

$
41,959

$
298,286

$
3,150,586Elizabeth L. DelBianco(6) EVP, Chief Legal & AdministrativeOfficer and Corporate Secretary

$
439,924

$
1,125,000

$
375,000

$
709,042

$
33,906

$
17,274

$
2,700,146John J. Boucher(7) EVP, Supply Chain ManagementSolutions & CPO

$
422,525

$
1,125,000

$
375,000

$
673,667

$
10,278

$
1,431

$
2,607,901


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The following table provides details of each option grant outstanding and the aggregate number of unvested equity-based awards for each of the
Named Executive Officers as of December 31, 2008.

Table 14: Outstanding Option-Based and Share-Based Awards(1)

Name

Number of
Securities
Underlying
Unexercised
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Value of
Unexercised
In-the-money
Options
($)

Number
of Shares
or Units
that have
not Vested
(#)

Market
Payout Value
of Share
Awards that
have not
Vested at
Minimum
($)(2)

Market
Payout Value
of Share
Awards that
have not
Vested at
Target
($)(2)

Market
Payout Value
of Share
Awards that
have not
Vested at
Maximum
($)(2)Craig H. MuhlhauserJun. 6, 2005


50,000

$
13.00


Jun. 6, 2015














Jan. 31, 2006


74,244
*
$
10.00


Jan. 31, 2016





63,000




$
290,430

$
580,860Feb. 2, 2007


500,000

$
6.05


Feb. 2, 2017





167,000

$
258,160

$
769,870

$
1,281,580Feb. 2, 2007


202,000
*
$
6.05


Feb. 2, 2017














Feb. 5, 2008


450,000

$
6.51


Feb. 5, 2018





592,500

$
1,694,175

$
2,731,425

$
3,768,675Feb. 3, 2009


694,444

$
4.13


Feb. 3, 2019





833,333

$
1,835,554

$
3,441,665

$
5,047,777Paul NicolettiJan. 1, 1999


5,600

C$
20.63


Jan. 1, 2009














Dec. 3, 2002


15,000

C$
29.11


Dec. 3, 2012














Jan. 31, 2004


13,333

C$
22.75


Jan. 31, 2014














May 11, 2004


3,333

C$
24.92


May 11, 2014














Dec. 9, 2004


13,600

C$
18.00


Dec. 9, 2014














Jan. 31, 2006


21,591

C$
11.43


Jan. 31, 2016





19,000




$
87,590

$
175,180Feb. 2, 2007


37,880

C$
7.10


Feb. 2, 2017





48,610

$
160,068

$
224,092

$
288,116May 7, 2007














10,700

$
49,327

$
49,327

$
49,327Jul. 31, 2007


91,500

C$
6.27


Jul. 31, 2017





15,000

$
69,150

$
69,150

$
69,150Feb. 5, 2008


150,000

C$
6.51


Feb. 5, 2018





197,500

$
564,725

$
910,475

$
1,256,225Feb. 3, 2009


250,000

C$
5.13


Feb. 3, 2019





300,000

$
660,800

$
1,239,000

$
1,817,200John PeriJan. 1, 1999


9,000

C$
20.63


Jan. 1, 2009














Dec. 3, 2002


25,000

C$
29.11


Dec. 3, 2012














Jan. 31, 2004


16,667

C$
22.75


Jan. 31, 2014














Dec. 9, 2004


11,300

C$
18.00


Dec. 9, 2014














Jan. 31, 2006


20,455

C$
11.43


Jan. 31, 2016





18,000




$
82,980

$
165,960Feb. 2, 2007


40,404

C$
7.10


Feb. 2, 2017














Feb. 2, 2007


80,808
*
C$
7.10


Feb. 2, 2017





44,444




$
204,887

$
409,774Feb. 5, 2008


130,000

C$
6.51


Feb. 5, 2018





171,167

$
489,430

$
789,080

$
1,088,730Feb. 3, 2009


208,333

C$
5.13


Feb. 3, 2019





250,000

$
550,665

$
1,032,500

$
1,514,335


77

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Table of Contents

Name

Number of
Securities
Underlying
Unexercised
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Value of
Unexercised
In-the-money
Options
($)

Number
of Shares
or Units
that have
not Vested
(#)

Market
Payout Value
of Share
Awards that
have not
Vested at
Minimum
($)(2)

Market
Payout Value
of Share
Awards that
have not
Vested at
Target
($)(2)

Market
Payout Value
of Share
Awards that
have not
Vested at
Maximum
($)(2)Elizabeth L. DelBiancoJan. 1, 1999


9,000

C$
20.63


Jan. 1, 2009














Dec. 3, 2002


12,000

C$
29.11


Dec. 3, 2012














Dec. 18, 2002


3,000

C$
23.29


Dec. 18, 2012














Apr. 18, 2003


8,000

C$
15.35


Apr. 18, 2013














Jan. 31, 2004


16,667

C$
22.75


Jan. 31, 2014














Dec. 9, 2004


11,300

C$
18.00


Dec. 9, 2014














Jan. 31, 2006


21,591

C$
11.43


Jan. 31, 2016





19,000




$
87,590

$
175,180Feb. 2, 2007


36,364

C$
7.10


Feb. 2, 2017





46,666

$
153,665

$
215,130

$
276,595Feb. 5, 2008


120,000

C$
6.51


Feb. 5, 2018





158,000

$
451,780

$
728,380

$
1,004,980Feb. 3, 2009


208,333

C$
5.13


Feb. 3, 2019





250,000

$
550,665

$
1,032,500

$
1,514,335John J. BoucherJan. 1, 1999


1,406

$
12.80


Jan. 1, 2009














Jan. 20, 1999


1,050

$
10.67


Jan. 20, 2009














Oct. 13, 2000


3,750

$
21.83


Oct. 13, 2010














May 22, 2001


6,000

$
19.81


May 22, 2011














Oct. 31, 2001


3,750

$
10.40


Oct. 31, 2011














May 10, 2002


28,125

$
13.52


May 10, 2012














Feb. 11, 2003


5,625

$
12.99


Feb. 11, 2013














Mar. 15, 2004


20,000

$
17.10


Mar. 15, 2014














Mar. 15, 2004


6,667

$
17.10


Mar. 15, 2014














Dec. 9, 2004


25,000

$
14.86


Dec. 9, 2014














Jan. 31, 2006


20,455

$
10.00


Jan. 31, 2016





18,000




$
82,980

$
165,960Feb. 2, 2007


30,304

$
6.05


Feb. 2, 2017





38,888

$
102,443

$
179,274

$
256,104Feb. 5, 2008


110,000

$
6.51


Feb. 5, 2018





144,800

$
413,978

$
667,528

$
921,078Feb. 3, 2009


208,333

$
4.13


Feb. 3, 2019





250,000

$
550,665

$
1,032,500

$
1,514,335


---

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Table of Contents

The following table provides details of the value of option-based and share-based awards that vested during 2008 and the value of annual incentive
awards paid for 2008 performance for each Named Executive Officer.

Table 15: Incentive Plan Awards  Value Vested or Earned in 2008

Name

Option-Based Awards  Value
Vested During the Year(1)
($)

Share-Based Awards  Value
Vested During the Year(2)
($)

Non-Equity Incentive Plan
Compensation  Value Earned
During the Year(3)
($)Craig H. Muhlhauser

$
57,500

$
1,010,160

$
2,000,000Paul Nicoletti

$
39,269

$
103,565

$
818,056John Peri




$
95,298

$
806,364Elizabeth L. DelBianco




$
99,449

$
709,042John J. Boucher

$
3,485

$
108,449

$
673,667


---

Pension Plans

The following table provides details of the amount of the Celestica contributions to the pension plans and the accumulated value as of
December 31, 2008 for each Named Executive Officer.

Table 16: Defined Contribution Pension Plan

Name

Accumulated Value
at Start of Year
($)

Compensatory
($)

Non-compensatory(1)
($)

Accumulated Value
at Year End
($)Craig H. Muhlhauser

$
61,788

$
13,800

$
(2,692
)
$
72,896Paul Nicoletti

$
211,569

$
48,180

$
(77,511
)
$
182,238John Peri

$
477,826

$
41,959

$
(132,563
)
$
387,222Elizabeth L. DelBianco

$
183,265

$
33,906

$
(44,267
)
$
172,904John J. Boucher

$
326,205

$
10,278

$
(129,357
)
$
207,126


---

Messrs. Muhlhauser and Boucher participate in the "US Plan". The US Plan is a defined contribution pension plan and qualifies as a deferred
salary arrangement under section 401(k) of the Internal Revenue Code (United States). Under the US Plan, participating employees may defer 100% of their pre-tax earnings
subject to any statutory limitations. The Company may make contributions for the benefit of eligible employees. The US Plan allows employees to choose how their account balances are invested on their
behalf within a range of investment options provided by third party fund managers. The Company contributes: (i) 3% of eligible compensation for Messrs. Muhlhauser and Boucher, and
(ii) up to an additional 3% of eligible compensation by matching 50% of the first 6% contributed by each of them. The maximum contribution of the Company based on the Internal Revenue Code
rules and the plan formula for 2008 is $13,800. There are no supplemental plans for U.S. employees.

79

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Table of Contents

Messrs. Nicoletti and Peri and Ms. DelBianco participate in the defined contribution portion of the Canadian Pension Plan. The defined contribution
portion of the Canadian Pension Plan allows employees to choose how the Company's contributions are invested on their behalf within a range of investment options provided by third party fund managers.
The Company's contributions to this plan on behalf of an NEO range from 3.6% to 6.75% of salary and paid annual incentive based on the number of years of service. Retirement benefits depend upon the
performance of the investment options chosen. Messrs. Nicoletti and Peri and Ms. DelBianco also participate in an unregistered supplementary pension plan (the "Supplementary
Plan") that is also a defined contribution plan that is designed to provide benefits equal to the difference between the benefits determined in accordance with the formula set out in the Canadian
Pension Plan and Canada Revenue Agency maximum pension benefits. Notional accounts are maintained for each participant in the Supplementary Plan. Participants are entitled to select from among the
investment options available in the registered plan for the purpose of determining the return on their notional accounts.

The
2008 percentage contribution rates are outlined below in Table 17.

Table 17: Celestica Contributions to the Pension Plan

Name

Contribution %Paul Nicoletti


6.25%John Peri


6.30%Elizabeth L. DelBianco


5.33%


Termination of Employment and Change in Control Arrangements with Named Executive Officers

The Company has entered into employment agreements with certain of its NEOs in order to provide for certainty to the Company and such
NEO with respect to such things as obligations of confidentiality, non-solicitation and non-competition after termination of employment, the amount of severance to be paid in
the event the employment of an NEO is terminated, and to provide a retention incentive in the event of a change in control scenario.

Messrs. Muhlhauser and Nicoletti and Ms. DelBianco

The employment agreements of the above noted individuals provide that each of them is entitled to certain severance benefits if, during
a change in control period at the Company (defined in their agreements as the period commencing on the date the Company enters into a binding agreement for a change in control, announces an intention
to effect a change in control or the board adopts a resolution that a change in control has occurred and ending three years after the completion of the change in control or, if a change in control is
not completed, one year following the commencement of the period), they are terminated without cause or resign for reasons specified in their agreements. The amount of the severance payment for
Mr. Muhlhauser is equal to three times his annual base salary and the simple average of his annual incentive for the three prior completed financial years of the Company, together with a
portion of his expected annual incentive for the year prorated to the date of termination. The amount of the severance payment for each of Mr. Nicoletti and Ms. DelBianco is equal to
three times their annual base salary and target annual incentive, together with a portion of their target annual incentive for the year prorated to the date of termination.

In
addition, the agreements provide for a cash settlement to cover benefits that would otherwise be payable during the severance period, and the continuation of contributions to their
pension and retirement plans until the third anniversary following their termination.

Upon
a change in control or upon termination without cause during a change in control period or resignation for reasons specified in their agreements during a change in control period,
(a) the options granted to each of them vest immediately, (b) the PCOs and PSUs granted to each of them vest immediately at target level of performance, unless the terms of a PCO or PSU
grant provide otherwise, or on such other more favorable terms as the Board of Directors in its discretion may provide, and (c) the RSUs granted to each of them shall vest immediately.

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Table of Contents

Outside
a change in control period, upon termination without cause or resignation for reasons specified in their agreements, the amount of the severance payment for Mr. Muhlhauser
is equal to two times his annual base salary and the simple average of his annual incentive for the two prior completed financial years of the Company, together with a portion of his expected annual
incentive for the year prorated to the date of termination. The amount of the severance payment for each of Mr. Nicoletti and Ms. DelBianco is equal to two times their annual base salary
and target annual incentive, together with a portion of their target annual incentive for the year prorated to the date of termination. There is no accelerated vesting of options, PCOs or PSUs and all
unvested options, PCOs and PSUs are cancelled. All RSUs shall vest immediately on a pro rata basis based on the number of full years of employment completed between the date of grant and the
termination of employment. In addition, the Company's obligations provide for a cash settlement to cover benefits and contributions to or continuation of their pension and retirement plans for a
two-year period following termination. In the event of retirement, the number of RSUs and PSUs vest on a prorated basis based on the number of days between the date of grant and the date
of retirement.

The
following tables summarize the payments to which Messrs. Muhlhauser and Nicoletti, and Ms. DelBianco would have been entitled upon a change in control, or if their
employment had been terminated on December 31, 2008 as a result of a change in control, retirement or termination without cause.

Table 18: Mr. Muhlhauser's Benefits

Cash Portion(1)

Value of
Exercisable/
Vested LTIP

Other Benefits(2)

TotalChange in Control  No Termination




$
3,791,725




$
3,791,725Change in Control  Termination

$
5,034,060

$
3,791,725

$
69,408

$
8,895,193Retirement




$
1,921,890




$
1,921,890Termination without Cause

$
3,796,996

$
86,053

$
47,586

$
3,930,635


Table 19: Mr. Nicoletti's Benefits

Cash Portion(1)

Value of
Exercisable/
Vested LTIP

Other Benefits(2)

TotalChange in Control  No Termination




$
1,541,348




$
1,541,348Change in Control  Termination

$
3,169,966

$
1,541,348

$
204,399

$
4,915,713Retirement




$
764,185




$
764,185Termination without Cause

$
2,249,653

$
106,749

$
133,874

$
2,490,276


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Table of Contents

Table 20: Ms. DelBianco's Benefits

Cash Portion(1)

Value of
Exercisable/
Vested LTIP

Other Benefits(2)

TotalChange in Control  No Termination




$
1,185,472




$
1,185,472Change in Control  Termination

$
2,747,538

$
1,185,472

$
160,615

$
4,093,625Retirement




$
622,781




$
622,781Termination without Cause

$
1,949,865

$
58,890

$
104,686

$
2,113,441


Messrs. Peri and Boucher

The terms of employment with the Company for Messrs. Peri and Boucher are governed by the Company's Executive Policy Guidelines
(the "Executive Guidelines"). Upon termination without cause or resignation for reasons specified in the Executive Guidelines within two years following a change in control of the Company,
Messrs. Peri and Boucher are entitled to a severance payment equal to two times annual base salary and the lower of target or actual annual incentive for the previous year, subject to
adjustment for factors including length of service, together with a portion of his annual incentive for the year prorated to the date of termination.

Under
the Executive Guidelines, the pension and group benefits of Messrs. Peri and Boucher discontinue on the date of termination. In addition, upon a change in control or upon
termination without cause or resignation for reasons specified in the Executive Guidelines within two years following a change in control
(a) all options granted to Messrs. Peri and Boucher vest immediately, (b) the RSUs granted to them vest immediately, and (c) the PSUs granted to them vest immediately at
target level of performance.

Outside
of the two-year period following a change in control, upon termination without cause, Messrs. Peri and Boucher are entitled to payments and benefits that are
substantially similar to those provided following a termination within two years of a change in control, except that awards vest according to plan provisions with no accelerated vesting of options and
PSUs. RSUs vest immediately on a pro-rata basis based on the full number of years of employment completed between the date of grant and the date of termination. In the event of retirement,
the number of RSUs and PSUs vest on a prorated basis based on the number of days between the grant date and the date of retirement.

82

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Table of Contents

The
following tables summarize the payments to which Messrs. Peri and Boucher would have been entitled upon a change of control, or if their employment had been terminated on
December 31, 2008 as a result of a change in control, retirement or termination without cause.

Table 21: Mr. Peri's Benefits

Cash Portion(1)

Value of
Exercisable/
Vested LTIP

Other Benefits

TotalChange in Control  No Termination




$
1,238,182




$
1,238,182Change in Control  Termination

$
1,534,523

$
1,238,182




$
2,772,705Retirement




$
620,195




$
620,195Termination without Cause

$
1,534,523







$
1,534,523


Table 22: Mr. Boucher's Benefits

Cash Portion(1)

Value of
Exercisable/
Vested LTIP

Other Benefits

TotalChange in Control  No Termination




$
929,782




$
929,782Change in Control  Termination

$
1,295,698

$
929,782




$
2,225,480Retirement




$
488,833




$
488,833Termination without Cause

$
1,295,698

$
34,148




$
1,329,846


Securities Authorized for Issuance Under Equity Compensation Plans

Table 23: Equity Compensation Plans as at December 31, 2008

Plan Category

Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
(#)

Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
($)

Securities Remaining Available for Future Issuance Under Equity Compensation Plans(1)
(#)Equity Compensation Plans Approved by Securityholders

Manufacturers' Services Limited (MSL) (plan acquired as part of acquisition)


213,735

$
15.46

0LTIP (Options)


8,930,465

$
11.88/C$15.88

18,781,037LTIP (RSUs)


62,500


N/A

1,016,940Total(2):


9,206,700

$
12.23/C$15.88

19,797,977Equity Compensation Plans Not Approved by Securityholders






7,644,577


N/A

N/ATotal:


16,851,277


N/A

19,797,977


83

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Table of Contents

The LTIP is the only securities-based compensation plan providing for the issuance of securities from treasury under which grants have been made
and continue to be made by the Company since the company was listed on the TSX. Under the LTIP, the Board of Directors may in its discretion grant from time to time stock options, performance shares,
performance share units and stock appreciation rights (SARs) to employees and consultants, the eligible participants, of the Company and affiliated entities.

Under
the LTIP, up to 29,000,000 subordinate voting shares may be issued from treasury. The number of subordinate voting shares which may be issued from treasury under the LTIP to
directors is limited to 2,000,000; however, no more option grants under the LTIP will be made to directors. Under the LTIP, as of February 23, 2009, 2,209,058 subordinate voting shares
have been issued from treasury and 10,931,090 subordinate voting shares are issuable under outstanding options. Also as of February 23, 2009, 26,790,942 subordinate voting shares
are reserved for issuance from treasury under the LTIP. In addition, the Company may satisfy obligations under the LTIP by acquiring subordinate voting shares in the market.

The
LTIP limits the number of subordinate voting shares that may be (a) reserved for issuance to insiders (as defined under TSX rules for this purpose), and
(b) issued within a one-year period to insiders pursuant to options or rights granted pursuant to the LTIP, together with subordinate voting shares reserved for issuance under any
other employee-related plan of the Company or options for services granted by the Company, in each case to 10% of the aggregate issued and outstanding subordinate voting shares and MVS of the Company.
The LTIP also limits the number of subordinate voting shares which may be reserved for issuance to any one participant pursuant to options or SARs granted pursuant to the LTIP, together with
subordinate voting shares reserved for issuance under any other employee-related plan of the Company or options for services granted by the Company, to 5% of the aggregate issued and outstanding
subordinate voting shares and MVS of the Company. The number of grants awarded under the LTIP in any given year cannot exceed 1.2% of the total number of subordinating voting shares.

Options
issued under the LTIP may be exercised during a period determined under the LTIP, which may not exceed ten years. The LTIP also provides that, unless otherwise determined by the
Board of Directors, options will terminate within specified time periods following the termination of employment of an eligible participant with the Company or affiliated entities. The exercise price
for options issued under the LTIP is the closing price for Celestica subordinate voting shares on the day prior to the grant. The TSX closing price is used for Canadian employees and the NYSE closing
price is used for all other employees. The exercise of options may be subject to vesting conditions, including specific time schedules for vesting and performance-based conditions such as share price
and financial results. The grant to, or exercise of options by, an eligible participant may also be subject to certain share ownership requirements. The LTIP also provides that the Company may, at its
discretion, make loans or provide guarantees for loans to assist participants to purchase subordinate voting shares upon the exercise of options or to assist the participants to pay any income tax
exigible upon exercise of options provided that in no event shall any such loan be outstanding for more than 10 years from the date of the option grant. The Company has no such loans or
guarantees outstanding.

Under
the LTIP, eligible participants may be granted SARs, a right to receive a cash amount equal to the difference between the market price of the subordinate voting shares at the time
of the grant and the market price of such shares at the time of exercise of the SAR. The market price used for this purpose is the weighted average price for Celestica subordinate voting shares on the
TSX during the period five trading days preceding the exercise date. Such amounts may also be payable by the issuance of subordinate voting shares. The exercise of SARs may also be subject to
conditions similar to those which may be imposed on the exercise of stock options.

Under
the LTIP, eligible participants may be allocated performance units in the form of PSUs or RSUs, which represent the right to receive an equivalent number of subordinate voting
shares at a specified release date. The issuance of such shares may be subject to vesting requirements similar to those described above with respect to the exercisability of options and SARs,
including such time or performance-based conditions as may be determined by the Board of Directors in its discretion. The number of subordinate voting shares which may be issued from the treasury of
the Company under the performance unit program is limited to 2,000,000 and the number of subordinate voting shares which may be issued pursuant to the performance unit program to any one

84

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Table of Contents

person
shall not exceed 1% of the aggregate issued and outstanding subordinate voting shares and MVS of the Company.

The
interests of any participant under the LTIP or in any option, SAR or performance unit are not transferable, subject to limited exceptions.

The
following types of amendments to the LTIP or the entitlements granted under it require the approval of the holders of the voting securities by a majority of votes cast by
shareholders present or represented by proxy at a meeting:



subject
to the application of the anti-dilution or re-organization provisions of the LTIP.

The
Board of Directors, without shareholder approval, may approve amendments, other than those specified above as requiring approval of the shareholders, to the LTIP or the entitlements
granted under it including, without limitation:



The
Celestica Share Unit Plan (CSUP) provides for the issuance of RSUs and PSUs in the same manner as provided in the LTIP, except that the Company may not issue shares from treasury to
satisfy its obligations under the CSUP and there is no limit on the subordinate voting shares that may be issued under the terms of the CSUP. The issuance of RSUs and PSUs may be subject to vesting
requirements, including any time-based conditions established by the Board of Directors at its discretion. The vesting of PSUs also requires the achievement of specified performance-based
conditions as determined by the Compensation Committee and approved by the Board of Directors.

C.    Board Practices

Members of the Board of Directors are elected until the next annual meeting or until their successors are elected or appointed.

85

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Table of Contents

Except
for the right to receive deferred compensation no director is entitled to benefits from Celestica when they cease to serve as a director. See Item 6(B) "Compensation."

Board Committees

The Board of Directors has established four standing committees, each with a specific mandate: the Executive Committee, Audit
Committee, Compensation Committee and Nominating and Corporate Governance Committee. All of these committees are composed of independent directors.



The members of the Executive Committee are Mr. Crandall and Mr. Etherington, both of whom are independent directors. The
purpose of the Executive Committee is to provide a degree of flexibility and ability to respond to time-sensitive matters where it is impractical to call a meeting of the full Board of
Directors. The Committee reviews such matters and makes such recommendations thereon to the Board of Directors as it considers appropriate, including matters designated by the Board of Directors as
requiring Committee review. Members of the Committee also meet approximately once a month on an informal basis to review and stay informed about current business issues. The Board of Directors is
briefed on these issues at their regularly scheduled meetings or, if the matter is material, between regularly scheduled meetings. No decision of the Committee shall be effective until it is approved
or ratified by the Board of Directors.



The Audit Committee consists of Mr. Crandall, Mr. Etherington and Mr. Tapscott, all of whom are independent
directors and all of whom are financially literate. Mr. Crandall and Mr. Etherington have each served as a chief financial officer of a large U.S. and/or Canadian organization.
Mr. Tapscott is the Chairman of a strategic consulting firm and has held other executive officer positions with Canadian companies. The Audit Committee has a well-defined mandate
which, among other things, sets out its relationship with, and expectations of, the external auditors, including the establishment of the independence of the external auditors and approval of any
non-audit mandates of the external auditor; the engagement, evaluation, remuneration and termination of the external auditor; its relationship with, and expectations of, the internal
auditor function and its oversight of internal control; and the disclosure of financial and related information. The Audit Committee has direct communication channels with the internal and external
auditors to discuss and review specific issues and has the authority to retain such independent advisors as it may consider appropriate. The Audit Committee annually reviews and approves the mandate
and plan of the internal audit department. The Audit Committee's duties include the responsibility for reviewing financial statements with management and the auditors, monitoring the integrity of
Celestica's management information systems and internal control procedures, and reviewing the adequacy of Celestica's processes for identifying and managing risk.



The Compensation Committee consists of Mr. Crandall, Mr. Etherington and Mr. Tapscott, all of whom are independent
directors. It is the responsibility of the Compensation Committee to define and communicate compensation policies and principles that reflect and support our strategic direction, business goals and
desired culture. The mandate of the Compensation Committee includes the following: review and recommend to the Board of Directors Celestica's overall reward/compensation policy, including an executive
compensation policy that is consistent with competitive practice and supports
organizational objectives and shareholder interests; review annually, and submit to the Board of Directors for approval, the elements of our incentive compensation plans and equity-based plans,
including plan design, performance targets, administration and total funds/shares reserved for payment; review and recommend to the Board of Directors the compensation of the CEO based on the Board of
Directors' assessment of the annual performance of the CEO; review and recommend to the Board of Directors the compensation of our most senior executives; review our succession plans for key executive
positions; and review and approve material changes to our organizational structure and human resource policies.

86

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Table of Contents



The Nominating and Corporate Governance Committee consists of Mr. Crandall, Mr. Etherington, Mr. Love and
Mr. Tapscott, all of whom are independent directors. The Nominating and Corporate Governance Committee recommends to the Board of Directors the criteria for selecting candidates for nomination
to the Board of Directors and the individuals to be nominated for election by the shareholders. The Committee's mandate includes making recommendations to the Board of Directors relating to the
Company's approach to corporate governance, developing the Company's corporate governance guidelines, assessing the performance of the CEO relative to corporate goals and objectives established by the
Committee, and assessing the effectiveness of the Board of Directors and its committees.

D.    Employees

Celestica has over 38,000 permanent and temporary (contract) employees worldwide as at December 31, 2008. The following table sets forth information
concerning our employees by geographic location:

Number of EmployeesDate

Americas

Europe

AsiaDecember 31, 2006


12,000


5,000


25,000December 31, 2007


10,000


6,000


26,000December 31, 2008


12,000


4,000


22,000


As
at December 31, 2008, approximately 9,000 temporary (contract) employees were engaged by Celestica worldwide. During 2008, approximately 1,300 employees were
terminated as a result of restructuring actions. See note 10 to the Consolidated Financial Statements in Item 18 for further information on the restructurings.

The
number of employees in the Americas at December 31, 2008 has increased from the prior year, primarily in Mexico to support new business. The number of employees in Europe and
Asia at December 31, 2008 has decreased primarily in response to lower volumes in these regions.

Certain
information concerning employees is set forth in Item 4, "Information on the Company  Business
Overview  Human Resources."

E.    Share Ownership

The following table sets forth certain information concerning the direct and beneficial ownership of shares of Celestica at February 23, 2009 by each
director who holds shares and each of the Named Executive Officers and all directors and senior management of Celestica as a group. Unless otherwise noted, the address of each of

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the
shareholders named below is Celestica's principal executive office. In this table, multiple voting shares are referred to as "MVS" and subordinate voting shares are referred to as "SVS."

Name of Beneficial Owner(1)(2)

Voting Shares

Percentage
of Class

Percentage of
all Equity Shares

Percentage of
Voting PowerRobert L. Crandall(3)


150,000 SVS


*


*


*William A. Etherington(4)


45,000 SVS


*


*


*Richard S. Love(5)


40,000 SVS


*


*


*Eamon J. Ryan


0 SVS


*


*


*Gerald W. Schwartz(6)(7)


29,637,316 MVS


100.0%


12.9%


78.8%2,184,975 SVS


1.1%


1.0%


*Don Tapscott(8)


75,700 SVS


*


*


*Craig H. Muhlhauser


1,022,002 SVS


*


*


*Paul Nicoletti


195,294 SVS


*


*


*John Peri


318,969 SVS


*


*


*Elizabeth L. DelBianco


148,374 SVS


*


*


*John J. Boucher


187,459 SVS


*


*


*All directors and senior management as a group (18 persons, including above)(9)


29,637,316 MVS
4,923,369 SVS


100.0%
2.5%


12.9%
2.1%


78.8%
*Total percentage of all equity shares and total percentage of voting power








15.1%


79.3%


---

MVS and SVS have different voting rights. See Item 10, "Additional Information  Memorandum and
Articles of Incorporation."

At
February 23, 2009, approximately 1,500 persons held options to acquire an aggregate of approximately 11,100,000 subordinate voting shares. Most of these options
were issued pursuant to our Long-Term Incentive

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Plan.
See Item 6(B), "Compensation." The following table sets forth information with respect to options outstanding as at February 23, 2009.

Beneficial Holders

Number of subordinate voting shares Under Option

Exercise Price

Year of Issuance

Date of ExpiryExecutive Officers (12 persons in total)


3,750


$21.83


October 13, 2000


October 13, 20109,750


$10.40-$19.81


During 2001


May 22, 2011-October 31, 201138,375


$13.52-C$23.29


During 2002


May 10, 2012-December 18, 2012117,000


$18.66/C$29.11


December 3, 2002


December 3, 201213,625


$12.99-C$15.35


During 2003


February 11, 2013-April 18, 2013112,167


$17.15/C$22.75


January 31, 2004


January 31, 201438,333


$17.10-C$24.92


During 2004


March 15, 2014-June 8, 2014121,000


$14.86/C$18.00


December 9, 2004


December 9, 201465,000


$13.00-C$16.20


During 2005


June 6, 2015-July 5, 2015306,444


$10.00/C$11.43


January 31, 2006


January 31, 20161,316,624


$6.05/C$7.10


February 2, 2007


February 2, 2017141,500


$5.88/C$6.27


July 31, 2007


July 31, 20171,210,000


$6.51/C$6.51


February 5, 2008


February 5, 2018143,679


$5.26-C$8.06


During 2008


September 5, 2018-November 5, 20182,291,664


$4.13/C$5.13


February 3, 2009


February 3, 2019Directors who are not Senior Management


50,000


$23.41/C$34.50


July 7, 1999


July 7, 200950,000


$48.69/C$72.60


July 7, 2000


July 7, 201050,000


$44.23/C$66.78


July 7, 2001


July 7, 201120,000


$35.95


October 22, 2001


October 22, 20115,000


$32.40


April 21, 2002


April 21, 201222,500


$10.62


April 18, 2003


April 18, 201322,500


$18.25


May 10, 2004


May 10, 2014All other Celestica Employees (other than MSL) (approximately 1,400 persons in total)


40,500


$19.66-$23.88


During 1999


May 4, 2009-September 21, 200982,200


$39.03/C$57.85


December 7, 1999


December 7, 200910,300


$48.69-$63.44


During 2000


July 7, 2010-August 1, 201054,710


$56.19/C$86.50


December 5, 2000


December 5, 201013,400


$24.91-$44.23


During 2001


April 9, 2011-July 7, 2011102,490


$41.89/C$66.06


December 4, 2001


December 4, 201160,800


$13.10-C$39.57


During 2002


May 8, 2012-December 10, 2012750,000


$18.66/C$29.11


December 3, 2002


December 3, 2012100,000


$10.62-$19.90


During 2003


January 31, 2013-December 10, 2013861,180


$17.15/C$22.75


January 31, 2004


January 31, 2014118,675


$13.28-C$22.89


During 2004


January 19, 2014-November 5, 2014230,204


$14.86/C$18.00


December 9, 2004


December 9, 201460,920


$9.71-C$16.90


During 2005


January 5, 2015-December 5, 2015359,678


$10.00/C$11.43


January 31, 2006


January 31, 201653,168


$9.23-C$12.54


During 2006


February 6, 2016-December 5, 2016666,624


$6.05/C$7.10


February 2, 2007


February 2, 2017239,883


$5.47-C$7.76


During 2007


February 26, 2017-December 7, 2017748,500


$6.51/C$6.51


February 5, 2008


February 5, 2018231,197


$4.90-C$9.38


During 2008


March 5, 2018-December 5, 201845,000


$4.04/C$4.93


February 5, 2009


February 5, 2019MSL Employees(1)


161,267


$9.73-$58.00


From 1999 to 2003


April 1, 2009-September 8, 2013


---

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Item 7. Major Shareholders and Related Party Transactions

A.    Major Shareholders

The following table sets forth certain information concerning the direct and beneficial ownership of the shares of Celestica at February 23, 2009 by each
person known to Celestica to own beneficially, directly or indirectly, 5% or more of the subordinate voting shares or the multiple voting shares. In this table, multiple voting shares are referred to
as "MVS" and subordinate voting shares are referred to as "SVS." MVS and SVS have different voting rights. See Item 10, "Additional
Information  Memorandum and Articles of Incorporation."

Name of Beneficial Owner(1)

Type of Ownership

Number of Shares

Percentage of Class

Percentage of all Equity Shares

Percentage of Voting PowerOnex Corporation(2)(3)


Direct and Indirect


29,637,316 MVS


100.0%


12.9%


78.8%1,996,231 SVS


1.0%


*


*Gerald W. Schwartz(2)(4)


Direct and Indirect


29,637,316 MVS


100.0%


12.9%


78.8%2,184,975 SVS


1.1%


1.0%


*MacKenzie Financial Corporation(5)(6)


Indirect


31,678,931 SVS


15.9%


13.8%


3.4%Letko, Brosseau & Ass. Inc.(7)(8)


Indirect


13,754,240 SVS


6.9%


6.0%


1.5%Barclays Global Investors(9)(10)


Indirect


12,975,227 SVS


6.5%


5.7%


1.4%Total percentage of all equity shares and total percentage of voting power











39.4%


85.2%


---

The
share provisions provide "coat-tail" protection to the holders of the subordinate voting shares by providing that the multiple voting shares will be converted automatically into
subordinate voting shares upon any transfer thereof, except (i) a transfer to Onex or any affiliate of Onex or (ii) a transfer of 100% of the outstanding multiple voting shares to a
purchaser who also has offered to purchase all of the outstanding subordinate voting shares for a per share consideration identical to, and otherwise on the same terms as, that offered for the
multiple voting shares and the multiple voting shares held by such purchaser thereafter shall be subject to the provisions relating to conversion as if all references to Onex were references to such
purchaser. In addition, if (i) any holder of any multiple voting shares ceases to be an affiliate of Onex or (ii) Onex and its affiliates cease to have the right, in all cases, to
exercise the votes attached to, or to direct the voting of, any of the multiple voting shares held by Onex and its affiliates, such multiple voting shares shall convert automatically into subordinate
voting shares on a one-for-one basis. For these purposes, (i) "Onex" includes any successor corporation resulting from an amalgamation, merger, arrangement, sale of all
or substantially all of its assets, or other business combination or reorganization involving Onex, provided that such successor corporation beneficially owns directly or indirectly all multiple
voting shares beneficially owned directly or indirectly by Onex immediately prior to such transaction and is controlled by the same person or persons as controlled Onex prior to the consummation of
such transaction; (ii) a corporation shall be deemed to be a subsidiary of another corporation if, but only if, (a) it is controlled by that other, or that other and one or more
corporations each of which is controlled by that other, or two or more corporations each of which is controlled by that other, or (b) it is a subsidiary of a corporation that is that other's
subsidiary; (iii) "affiliate" means a subsidiary of Onex or a corporation controlled by the same person or company that controls Onex; and (iv) "control" means beneficial ownership of,
or control or direction over, securities carrying more than 50% of the votes that may be cast to elect directors if those votes, if cast, could elect more than 50% of the directors. For these
purposes, a person is deemed to beneficially own any security which is beneficially owned by a corporation by such person. Onex, which owns all of the outstanding multiple voting shares, has entered
into an agreement with ComputerShare Trust Company of Canada, as trustee for the benefit of the holders of the subordinate voting shares, that has the effect of preventing transactions that otherwise
would deprive the holders of subordinate voting shares of rights under applicable provincial takeover bid

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Onex's ownership percentages have not changed significantly during the past few years. MacKenzie Financial Corporation and Letko,
Brosseau & Ass. Inc. were major shareholders in 2007 and 2008. Phillips, Hager & North Investment Management Ltd., Tetrem Capital Management Ltd. and Brandes
Investment Partners, LP reduced their ownership percentages of SVS below 5% for 2008. Barclays Global Investors became a holder of 5% or more of the SVS during 2008.

Holders

On February 23, 2009, there were approximately 2,000 holders of record of subordinate voting shares, of which
506 holders, holding approximately 52% of the outstanding subordinate voting shares, were resident in the United States and 460 holders, holding approximately 48% of the
outstanding subordinate voting shares, were resident in Canada.

B.    Related Party Transactions

Onex, which, directly or indirectly, owns all of the outstanding multiple voting shares, has entered into an agreement with Celestica and with ComputerShare Trust
Company of Canada, as trustee for the benefit of the holders of the subordinate voting shares, to ensure that the holders of the subordinate voting shares will not be deprived of any rights under
applicable Ontario provincial take-over bid legislation to which they would be entitled in the event of a take-over bid as if the multiple voting shares and subordinate voting
shares were of a single class of shares.

Certain
information concerning other related party transactions is set forth in Item 5, "Operating and Financial Review and
Prospects  Management's Discussion and Analysis of Financial Condition and Result of Operations  Liquidity and Capital
Resources  Related Party Transactions."

Indebtedness of Directors and Senior Officers

As at February 23, 2009, no executive officer or member of the Board of Directors of Celestica was indebted to Celestica in
connection with the purchase of subordinate voting shares or in connection with any other transaction.

C.    Interests of Experts and Counsel

Not applicable.

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Item 8. Financial Information

A.    Consolidated Statements and Other Financial Information

See Item 18, "Financial Statements."

Litigation

We are party to litigation from time to time. We currently are not party to any legal proceedings which management expects will have a
material adverse effect on the results of operations, business, prospects or financial condition of Celestica. We are a party to certain securities class action
lawsuits commenced against Celestica that contain claims against the Company and other persons. These lawsuits allege, among other things, that during the purported class period we made statements
concerning our actual and anticipated future financial results that failed to disclose certain purportedly material adverse information with respect to demand and inventory in our Mexican operations
and our information technology and communications divisions. See Item 5, "Operating and Financial Review and Prospects  Management's Discussion and
Analysis of Financial Condition and Results of Operations." We believe that the allegations in these claims are without merit and we intend to defend against them vigorously. However, there can be no
assurance that the outcome of the litigation will be favorable to us or will not have a material adverse impact on our financial position or liquidity. In addition, we may incur substantial litigation
expenses in defending these claims. We have liability insurance coverage that may cover some of our litigation expenses, potential judgments or settlement costs.

Dividend Policy

We have not declared or paid any dividends to our shareholders. We will retain earnings for general corporate purposes to promote
future growth; as such, our Board of Directors does not anticipate paying any dividends for the foreseeable future. Our Board of Directors will review this policy from time to time, having regard to
our financial condition, financing requirements and other relevant factors.

B.    Significant Changes

None.

Item 9. The Offer and Listing

A.    Offer and Listing Details

Market Information

The subordinate voting shares are listed on the New York Stock Exchange (the "NYSE") and the Toronto Stock Exchange
(the "TSX"). In the following tables, subordinate voting shares are referred to as "SVS."



NYSEHigh

Low

Volume(Price per SVS)Year ended December 31, 2004

$
21.15

$
12.25


334,246,600Year ended December 31, 2005


14.65


9.26


221,567,700Year ended December 31, 2006


12.02


7.68


189,612,500Year ended December 31, 2007


8.01


5.32


327,398,900Year ended December 31, 2008


9.74


3.27


424,530,000


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TSXHigh

Low

Volume(Price per SVS)Year ended December 31, 2004

C$
27.84

C$
15.47


266,103,490Year ended December 31, 2005


14.66


9.29


183,773,547Year ended December 31, 2006


13.93


8.90


183,891,193Year ended December 31, 2007


9.48


5.68


300,052,192Year ended December 31, 2008


9.68


4.31


276,670,000




NYSEHigh

Low

Volume(Price per SVS)Year ended December 31, 2007First quarter

$
8.01

$
5.93


102,440,993Second quarter


7.09


6.25


72,485,248Third quarter


6.43


5.32


79,135,203Fourth quarter


7.22


5.56


73,337,456Year ended December 31, 2008First quarter

$
6.86

$
4.92


107,030,000Second quarter


9.74


6.46


137,190,000Third quarter


8.64


6.44


94,330,000Fourth quarter


6.14


3.27


85,980,000


TSXHigh

Low

Volume(Price per SVS)Year ended December 31, 2007First quarter

C$
9.48

C$
6.90


100,748,656Second quarter


7.87


6.72


58,908,400Third quarter


6.85


5.72


57,432,064Fourth quarter


6.95


5.68


82,963,072Year ended December 31, 2008First quarter

C$
6.96

C$
4.91


65,310,000Second quarter


9.68


6.65


81,230,000Third quarter


9.14


6.51


54,130,000Fourth quarter


6.95


4.31


76,000,000




NYSEHigh

Low

Volume(Price per SVS)August 2008

$
8.63

$
7.65


19,654,327September 2008


8.29


6.44


39,229,775October 2008


6.14


3.66


46,247,157November 2008


5.26


3.27


19,519,974December 2008


5.65


3.97


20,208,641January 2009


4.90


4.30


18,634,254


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TSXHigh

Low

Volume(Price per SVS)August 2008

C$
9.14

C$
8.07


13,927,012September 2008


8.75


6.51


21,532,000October 2008


6.69


4.68


27,138,721November 2008


6.90


4.31


25,662,143December 2008


6.95


4.76


23,196,449January 2009


5.98


5.29


12,505,654


B.    Plan of Distribution

Not applicable.

C.    Markets

The subordinate voting shares are listed on the NYSE and the TSX.

D.    Selling Shareholders

Not applicable.

E.    Dilution

Not applicable.

F.     Expense of the Issue

Not applicable.

Item 10. Additional Information

A.    Share Capital

Not applicable.

B.    Memorandum and Articles of Incorporation

Information regarding Celestica's memorandum and articles of incorporation is hereby incorporated by reference to this Annual Report on
Form 20-F for the fiscal year ended December 31, 2005, as filed with the SEC on March 21, 2006.



The rights and preferences attaching to our subordinate voting shares and multiple voting shares are described in the section entitled
"Description of Capital Stock" of our registration statement on Form F-3 (Reg. No. 333-69278), filed with the SEC on September 12, 2001. The rights and
preferences attaching to our 77/8% Senior Subordinated Notes due 2011 are described in the section entitled "Description of Notes" of our Rule 424(b) prospectus, filed
with the SEC on June 14, 2004. The rights and preferences attaching to our 75/8% Senior Subordinated Notes due 2011 are described in the section entitled "Description of
Notes" of our Rule 424(b) prospectus, filed with the SEC on June 20, 2005. Those sections are hereby incorporated by reference into this Annual Report.

Additional
information concerning the rights and limitations of shareholders found in Celestica's articles of incorporation is hereby incorporated by reference to our registration
statement on Form F-4 (Reg. No. 333-9636).

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C.    Material Contracts

Information about material contracts, other than contracts entered into in the ordinary course of business, to which Celestica or any member of Celestica's group
is a party, for the two years immediately preceding the publication of this Annual Report are described in Item 5, "Operating and Financial Review and
Prospects  Liquidity and Capital Resources  Capital Resources."

D.    Exchange Controls

Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to
non-resident investors. There are no laws of Canada or exchange restrictions affecting the remittance of dividends, interest, royalties or similar payments to non-resident
holders of Celestica's securities, except as described under Item 10(E), "Taxation," below.

E.    Taxation

Material Canadian Federal Income Tax Considerations

The following is a summary of the material Canadian federal income tax considerations generally applicable to a person
(a "U.S. Holder") who acquires subordinate voting shares and who, for purposes of the Income Tax Act (Canada) (the "Canadian Tax Act") and the
Canada-United States Income Tax Convention (1980) (the "Tax Treaty"), at all relevant times is resident in the United States and is neither resident nor deemed to be resident in
Canada, is eligible for benefits under the Tax Treaty, deals at
arm's length and is not affiliated with Celestica, holds such subordinate voting shares as capital property, and does not use or hold, and is not deemed to use or hold, the subordinate voting shares
in carrying on business in Canada. Special rules, which are not discussed in this summary, may apply to a U.S. Holder that is a financial institution (as defined in the Canadian
Tax Act), or is an insurer to whom the subordinate voting shares are designated insurance property (as defined in the Canadian Tax Act).

This
summary is based on the current provisions of the Tax Treaty, the Canadian Tax Act and the regulations thereunder, all specific proposals to amend the Canadian Tax Act
or the regulations publicly announced by the Minister of Finance (Canada) prior to January 27, 2009, and Celestica's understanding of the current published administrative practices of the
Canada Revenue Agency.

This
summary is not exhaustive of all possible Canadian federal income tax considerations and, except as mentioned above, does not take into account or anticipate any changes in law,
whether by legislative, administrative or judicial decision or action, nor does it take into account the tax legislation or considerations of any province or territory of Canada or any jurisdiction
other than Canada, which may differ significantly from the considerations described in this summary.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular holder, and no
representation with respect to the Canadian federal income tax consequences to any particular holder is made. Consequently, U.S. Holders of subordinate voting shares should consult their own
tax advisors with respect to the income tax consequences to them having regard to their particular circumstances.

All
amounts relevant in computing a U.S. Holder's liability under the Canadian Tax Act are to be computed in Canadian dollars.



By virtue of the Canadian Tax Act and the Tax Treaty, dividends (including stock dividends) on subordinate voting shares paid or
credited or deemed to be paid or credited to a U.S. Holder who is the beneficial owner (or is deemed to be the beneficial owner) of such dividends will generally be subject to Canadian
non-resident withholding tax at the rate of 15% of the gross amount of such dividends. Under the Tax Treaty, the rate of withholding tax on dividends is reduced to 5% if that
U.S. Holder is a company that beneficially owns (or is deemed to beneficially own) at least 10% of the voting stock of Celestica. Moreover, under the Tax Treaty, dividends paid to
certain religious, scientific, literary, educational or charitable organizations and certain

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pension
organizations that are resident in, and generally exempt from tax in, the U.S., generally are exempt from Canadian non-resident withholding tax. Provided that certain
administrative procedures
are observed by such an organization, Celestica would not be required to withhold such tax from dividends paid or credited to such organization.



A U.S. Holder will not be subject to tax under the Canadian Tax Act in respect of any capital gain realized on the
disposition or deemed disposition of subordinate voting shares unless the subordinate voting shares constitute or are deemed to constitute "taxable Canadian property" (as defined in the
Canadian Tax Act) (other than treaty-protected property, as defined in the Canadian Tax Act) at the time of such disposition. Shares of a corporation resident in Canada that are listed
on a designated stock exchange for purposes of the Canadian Tax Act will be "taxable Canadian property" under the Canadian Tax Act if, at any time during the five-year period
immediately preceding the disposition or deemed disposition of the share, the U.S. Holder, persons with whom the U.S. Holder did not deal at arm's length, or the U.S. Holder
together with such persons owned 25% or more of the issued shares of any class or series of shares of the corporation that issued the shares. Provided that they are listed on a designated stock
exchange for purposes of the Canadian Tax Act (which includes the TSX and NYSE), subordinate voting shares acquired by a U.S. Holder generally will not be taxable Canadian property to a
U.S. Holder unless the foregoing 25% ownership threshold applies to the U.S. Holder with respect to Celestica or the subordinate voting shares are otherwise deemed by the Canadian
Tax Act to be taxable Canadian property. Even if the subordinate voting shares are taxable Canadian property to a U.S. Holder, they generally will be treaty-protected property if the
value of such shares at the time of disposition is not derived principally from real property situated in Canada. Consequently, any gain realized by the U.S. Holder upon the disposition of the
subordinate voting shares generally will be exempt from tax under the Canadian Tax Act.

Material United States Federal Income Tax Considerations

The following discussion describes the material United States federal income tax consequences to United States Holders
(as defined below) of subordinate voting shares. A United States Holder is a citizen or resident of the United States, a corporation (or other entity taxable as a
corporation), partnership or limited liability company created or organized in or under the laws of the United States or of any political subdivision thereof, an estate, the income of which is
includible in gross income for U.S. federal income tax purposes regardless of its source, or a trust, if either (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) the trust has made an election
under applicable U.S. Treasury regulations to be treated as a United States person. If a partnership (or limited liability company that is treated as a partnership) holds
subordinate voting shares, the tax treatment of a partner generally will depend upon the status of the partner and upon the activities of the partnership. If you are a partner of a partnership holding
subordinate voting shares, we suggest that you consult with your tax advisor. This summary is for general information purposes only. It does not purport to be a comprehensive description of all of the
tax considerations that may be relevant to your decision to purchase, hold or dispose of subordinate voting shares. This summary considers only United States Holders who will own subordinate
voting shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). In this context, the term "capital
assets" means, in general, assets held for investment by a taxpayer. Material aspects of U.S. federal income tax relevant to non-United States Holders are also discussed
below.

This
discussion is based on current provisions of the Internal Revenue Code, current and proposed Treasury regulations promulgated thereunder and administrative and judicial decisions as
of March 4, 2008, all of which are subject to change, possibly on a retroactive basis. This discussion does not address all aspects of U.S. federal income taxation that may be relevant
to any particular United States Holder based on the United States Holder's individual circumstances. In particular, this discussion does not address the potential application of the
alternative minimum tax or U.S. federal income tax consequences to United States Holders who are subject to special treatment, including taxpayers who are broker dealers or insurance
companies, taxpayers who have elected mark-to-market accounting, individual retirement and other tax-deferred accounts, tax-exempt organizations,
financial institutions or "financial services entities," taxpayers who hold subordinate voting shares

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as
part of a "straddle," "hedge" or "conversion transaction" with other investments, taxpayers owning directly, indirectly or by attribution at least 10% of the voting power of our share capital, and
taxpayers whose functional currency (as defined in Section 985 of the Internal Revenue Code) is not the U.S. dollar.

This
discussion does not address any aspect of U.S. federal gift or estate tax or state, local or non-U.S. tax laws. Additionally, the discussion does not
consider the tax treatment of persons who hold subordinate voting shares through a limited liability company or through a partnership or other pass-through entity (such as an
S corporation). For U.S. federal income tax purposes, income earned through a foreign or domestic partnership or similar entity is generally attributed to its owners. You are advised to
consult your own tax advisor with respect to the specific tax consequences to you of purchasing, holding or disposing of the subordinate voting shares.



Subject to the discussion of the passive foreign investment company (PFIC) rules below, in the event that we pay a dividend, a
United States Holder will be required to include in gross income as ordinary income the amount of any distribution paid on subordinate voting shares, including any Canadian taxes withheld from
the amount paid, on the date the distribution is received, to the extent that the distribution is paid out of our current or accumulated earnings and profits as determined for U.S. federal
income tax purposes. In addition, distributions of the Company's current or accumulated earnings and profits will be foreign source "passive category income" for U.S. foreign tax credit
purposes and will not qualify for the dividends received deduction available to corporations. Distributions in excess of such earnings and profits will be applied against and will reduce the
United States Holder's tax basis in the subordinate voting shares and, to the extent in excess of such basis, will be treated as capital gain.

Distributions
of current or accumulated earnings and profits paid in Canadian dollars to a United States Holder will be includible in the income of the United States Holder
in a dollar amount calculated by reference to the exchange rate on the date the distribution is received. A United States Holder who receives a distribution of Canadian dollars and converts the
Canadian dollars into U.S. dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or depreciation in the value of the
Canadian dollar against the U.S. dollar. Such gain or loss will generally be ordinary income and loss and will generally be U.S. source gain or loss for U.S. foreign tax credit
purposes. United States Holders should consult their own tax advisors regarding the treatment of a foreign currency gain or loss.

United States
Holders will generally have the option of claiming the amount of any Canadian income taxes withheld either as a deduction from gross income or as a
dollar-for-dollar credit against their U.S. federal income tax liability, subject to specified conditions and limitations. Individuals who do not claim itemized
deductions, but instead utilize the standard deduction, may not claim a deduction for the amount of the Canadian income taxes withheld, but these individuals generally may still claim a credit against
their U.S. federal income tax liability. The amount of foreign income taxes that may be claimed as a credit in any year is subject to complex limitations and restrictions, which must be
determined on an individual basis by each shareholder. The total amount of allowable foreign tax credits in any year cannot exceed the pre-credit U.S. tax liability for the year
attributable to foreign source taxable income and further limitations may apply under the alternative minimum tax. A United States Holder will be denied a foreign tax credit with respect to
Canadian income tax withheld from dividends received on subordinate voting shares to the extent that he or she has not held the subordinate voting shares for at least 16 days of the
31-day period beginning on the date which is 15 days before the ex-dividend date or to the extent that he or she is under an obligation to make related payments with
respect to substantially similar or related property. Instead, a deduction may be allowed. Any days during which a United States Holder has substantially diminished his or her risk of loss on
his or her subordinate voting shares are not counted toward meeting the 16-day holding period.

Subject
to possible future changes in U.S. tax law, individuals, estates or trusts who receive "qualified dividend income" (excluding dividends from a PFIC) in taxable years
beginning after December 31, 2002 and before January 1, 2011 generally will be taxed at a maximum U.S. federal rate of 15% (rather than the higher tax rates generally applicable
to items of ordinary income) provided certain holding period requirements are met. Subject to the discussion of the PFIC rules below, Celestica believes that dividends paid by it with respect to its

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subordinate
voting shares should constitute "qualified dividend income" for United States federal income tax purposes and that holders who are individuals (as well as certain trusts and
estates) should be entitled to the reduced rates of tax, as applicable. Holders are urged to consult their own tax advisors regarding the impact of the "qualified dividend income" provisions of the
Internal Revenue Code on their particular situations, including related restrictions and special rules.



Subject to the discussion of the PFIC rules below, upon the sale, exchange or other disposition of subordinate voting shares, a
United States Holder will recognize capital gain or loss in an amount equal to the difference between his or her adjusted tax basis in his or her shares and the amount realized on the
disposition. A United States Holder's adjusted tax basis in the subordinate voting shares will generally be the initial cost, but may be adjusted for various reasons including the receipt by
such United States Holder of a distribution that was not made up wholly of earning and profits as described above
under the heading "Taxation of Dividends Paid on subordinate voting shares." A United States Holder that uses the cash method of accounting calculates the dollar value of the proceeds received
on the sale date as of the date that the sale settles, while a United States Holder who uses the accrual method of accounting is required to calculate the value of the proceeds of the sale as
of the "trade date," unless he or she has elected to use the settlement date to determine his or her proceeds of sale. Capital gain from the sale, exchange or other disposition of shares held more
than one year is long-term capital gain and is eligible for a maximum 15% rate of taxation for non-corporate taxpayers. A reduced rate does not apply to capital gains realized
by a United States Holder that is a corporation. Capital losses are generally deductible only against capital gains and not against ordinary income. In the case of an individual, however,
unused capital losses in excess of capital gains may offset up to $3,000 annually of ordinary income. Gain or loss recognized by a United States Holder on a sale, exchange or other disposition
of subordinate voting shares generally will be treated as U.S. source income or loss for U.S. foreign tax credit purposes. A United States Holder who receives foreign currency
upon disposition of subordinate voting shares and converts the foreign currency into U.S. dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or
depreciation in the value of the foreign currency against the U.S. dollar. United States Holders should consult their own tax advisors regarding the treatment of a foreign currency gain
or loss.



A non-U.S. corporation will be a passive foreign investment company, or PFIC, if, in general, either (i) 75%
or more of its gross income in a taxable year, including the pro rata share of the gross income of any U.S. or foreign company in which it is considered to own 25% or more of the shares by
value, is passive income or (ii) 50% or more of its assets in a taxable year, averaged over the year and ordinarily determined based on fair market value and including the pro rata share
of the assets of any company in which it is considered to own 25% or more of the shares by value, are held for the production of, or produce, passive income. If we were a PFIC and a
United States Holder did not make an election to treat the company as a "qualified electing fund" and did not make a mark-to-market election, each as described
below, then:



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The
special PFIC rules will not apply to a United States Holder if the United States Holder makes an election to treat the company as a "qualified electing fund" in the
first taxable year in which he or she owns subordinate voting shares and if we comply with reporting requirements. Instead, a shareholder of a qualified electing fund is required for each taxable year
to include in income a pro rata share of the ordinary earnings of the qualified electing fund as ordinary income and a pro rata share of the net capital gain of the qualified electing
fund as long-term capital gain, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge. We have agreed to supply United States
Holders with the information needed to report income and gain pursuant to this election in the event that we are classified as a PFIC. The election is made on a
shareholder-by-shareholder basis and may be revoked only with the consent of the Internal Revenue Service, or IRS. A shareholder makes the election by attaching a completed IRS
Form 8621, including the PFIC annual information statement, to a timely filed U.S. federal income tax return. Even if an election is not made, a shareholder in a PFIC who is a
United States Holder must file a completed IRS Form 8621 every year.

A
United States Holder who owns PFIC shares that are publicly traded could elect to mark the shares to market annually, recognizing as ordinary income or loss each year an amount
equal to the difference as of the close of the taxable year between the fair market value of the PFIC shares and the United States Holder's adjusted tax basis in the PFIC shares. If the
mark-to-market election were made, then the rules set forth above would not apply for periods covered by the election. The subordinate voting shares would be treated as
publicly traded for purposes of the mark-to-market election and, therefore, such election would be made if Celestica were classified as a PFIC. A
mark-to-market election is, however, subject to complex and specific rules and requirements, and United States Holders are strongly urged to consult their tax advisors
concerning this election if we are classified as a PFIC.

Although
we are engaged in an active business, we may have been a PFIC in 2008. The tests in determining PFIC status include the determination of the value of all assets of the Company
which is highly subjective. Further, the tests for determining PFIC status are applied annually, and it is difficult to make accurate predictions of future income and assets, which are relevant to the
determination as to whether we will be a PFIC in the future. Accordingly, based on our current business plan, we may be a PFIC in 2009 or in a future year. A United States Holder who holds
subordinate voting shares during a period in which we are a
PFIC will be subject to the PFIC rules, even if we cease to be a PFIC, unless he or she has made a qualifying electing fund election. Although we have agreed to supply United States Holders
with the information needed to report income and gain pursuant to this election in the event that we are classified as a PFIC, if we were determined to be a PFIC with respect to a year in which we had
not thought that we would be so treated, the information needed to enable United States Holders to make a qualifying electing fund election would not have been provided. United States
Holders are strongly urged to consult their tax advisors about the PFIC rules, including the consequences to them of making a mark-to-market or qualifying electing fund
elections with respect to subordinate voting shares in the event that we are treated as a PFIC.



Except as described in "Information Reporting and Back-up Withholding" below, a non-United States Holder
of subordinate voting shares will not be subject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, subordinate voting
shares unless:



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Payments made within the United States, or by a U.S. payor or U.S. middleman, of dividends and proceeds arising
from certain sales or other taxable dispositions of subordinate voting shares will be subject to information reporting. Backup withholding tax, at the rate of 28%, will apply if a United States
Holder (a) fails to furnish the United States Holder's correct U.S. taxpayer identification number (generally on Form W-9), (b) is notified by the IRS
that the United States Holder has previously failed to properly report items subject to backup withholding tax, or (c) fails to certify, under penalty of perjury, that the
United States Holder has furnished the United States Holder's correct U.S. taxpayer identification number and that the IRS has not notified the United States Holder that
the United States Holder is subject to backup withholding tax. However, United States Holders that are corporations generally are excluded from these information reporting and backup
withholding tax rules. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a United States Holder's U.S. federal income tax
liability, if any, or will be refunded, if the United States Holder follows the requisite procedures and timely furnishes the required information to the IRS. United States Holders
should consult their own tax advisors regarding the information reporting and backup withholding tax rules.

Non-United States
Holders generally are not subject to information reporting or back-up withholding with respect to dividends paid on or upon the
disposition of shares, provided in some instances that the non-United States Holder provides a taxpayer identification number, certifies to his foreign status or otherwise
establishes an exemption.

IRS
CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT REGULATIONS, YOU ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES
IN THIS DOCUMENT IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS
WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THIS DOCUMENT; AND (C) YOU SHOULD SEEK ADVICE BASED ON YOUR OWN PARTICULAR CIRCUMSTANCES FROM AN
INDEPENDENT TAX ADVISOR.

F.     Dividends and Paying Agents

Not applicable.

G.    Statement by Experts

Not applicable.

H.    Documents on Display

Any statement in this Annual Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit
to this Annual Report or is incorporated by reference, the contract or document is deemed to modify our description. You must review the exhibits themselves for a complete description of the contract
or document.

You
may review a copy of our filings with the SEC, including exhibits and schedules filed with this Annual Report, at the SEC's public reference facilities in Room 1580,
100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of such materials from the Public Reference Section of the SEC, Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC
maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with
the SEC. We began to file electronically with the SEC in November 2000.

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You
may read and copy any reports, statements or other information that we file with the SEC at the addresses indicated above and you may also access some of them electronically at the
website set forth above. These SEC filings are also available to the public from commercial document retrieval services.

We
also file reports, statements and other information with the Canadian Securities Administrators, or the CSA, and these can be accessed electronically at the CSA's System for
Electronic Document Analysis and Retrieval website (http://www.sedar.com).

You
may access other information about Celestica on our website at http://www.celestica.com.

I.     Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Exchange Rate Risk

We have entered into foreign currency contracts to hedge foreign currency risk. These financial instruments include, to varying
degrees, elements of market risk. The table below provides information about our foreign currency contracts. The table presents the notional amounts and weighted average exchange rates by expected
(contractual) maturity dates. These notional amounts generally are used to calculate the contractual payments to

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be
exchanged under the contracts. At December 31, 2008, these contracts had a fair value net unrealized loss of U.S.$38.9 million.

Expected Maturity Date2009

2010

2011

2012

2013

2014 and
thereafter

Total

Fair Value
Gain (Loss)Forward Exchange AgreementsContract amount in millionsReceive C$/Pay U.S.$Contract amount

$
213.6

$
16.7

$


$


$


$


$
230.3

$
(22.0
)Average exchange rate

$
0.92

$
0.82Receive Mexican Peso/Pay U.S.$Contract amount

$
88.6
















$
88.6

$
(9.2
)Average exchange rate

$
0.08Receive Thai Baht/Pay U.S.$Contract amount

$
77.7
















$
77.7

$
(2.6
)Average exchange rate

$
0.03Receive Malaysian Ringgit/Pay U.S.$Contract amount

$
60.6
















$
60.6

$
(2.7
)Average exchange rate

$
0.30Receive British Pound Sterling/Pay U.S.$Contract amount

$
48.1
















$
48.1


1.7Average exchange rate

$
1.49Receive Singapore $/Pay U.S.$Contract amount

$
31.0
















$
31.0

$
(0.7
)Average exchange rate

$
0.71Receive Czech Koruna/Pay U.S.$Contract amount

$
26.7
















$
26.7

$
(3.8
)Average exchange rate

$
0.06Receive U.S.$/Pay EuroContract amount

$
19.4
















$
19.4


0.4Average exchange rate


1.45Receive Brazilian Real/Pay U.S.$Contract amount

$
4.7
















$
4.7


Average exchange rate

$
0.41Total

$
570.4

$
16.7

$


$


$


$


$
587.1

$
(38.9
)


Interest Rate Risk

Our debt includes capital lease commitments amounting to $1.0 million. These capital lease commitments are not sensitive to
changes in interest rates.

In
June 2004, we issued our 2011 Notes with an aggregate principal amount of $500.0 million due 2011, with a fixed interest rate of 7.875%. In connection with the notes
offering, we entered into interest rate swap agreements which hedge the fair value of the 2011 Notes by swapping the fixed rate of interest for a variable rate based on LIBOR plus a margin. The
notional amount of the agreements is $500.0 million. The agreements are effective as of June 2004 and mature July 2011. The average interest rate on the 2011 Notes for 2008 was
6.5% (2007  8.3%; and 2006  8.2%), after reflecting the interest rate swap. As a result of entering into the interest rate
swap agreements, we are exposed to interest rate risks due to fluctuations in the LIBOR rate. A one-percentage point increase in the LIBOR rate would increase interest expense by
approximately $5.0 million annually. We designated the interest rate swap agreements as fair value hedges. At December 31, 2008, we recognized $17.3 million in other
long-term assets to reflect the fair value of the interest rate swap agreements.

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We
terminated the interest rate swaps in February 2009. See note 22 to the Consolidated Financial Statements in Item 18.

At
December 31, 2008, the approximate fair value of our 77/8% Senior Subordinated Notes and 75/8% Senior Subordinated Notes were 93% and 83% of their
face values on December 31, 2008, respectively, based on quoted market rates or prices. See note 22 to the Consolidated Financial Statements in Item 18.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

Part II

Item 1. Defaults, Dividend Arrearages and Delinquencies

None.

Item 2. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 3. Controls and Procedures

Information concerning our controls and procedures is set forth in Item 5, "Operating and Financial Review and
Prospects  Management's Discussion and Analysis of Financial Condition and Results of Operations  Liquidity and Capital
Resources  Controls and Procedures."

The
attestation report from our auditors KPMG LLP is set forth on page F-2 of our financial statements.

Item 4. [Reserved.]

Item 16A. Audit Committee Financial Expert

The Board of Directors has considered the extensive financial experience of Mr. Crandall and Mr. Etherington, including
their respective experiences serving as the Chief Financial Officer of a large U.S. and/or Canadian organization, and has determined that each of them is an audit committee financial expert within the
meaning of the U.S. Sarbanes Oxley Act of 2002.

The
Board of Directors also determined that Messrs. Crandall and Etherington are independent directors, as that term is defined in the NYSE listing standards.

Item 16B. Code of Ethics

The
Board of Directors has adopted a Finance Code of Professional Conduct for Celestica's CEO, our senior finance officers, and all personnel in the finance organization to deter
wrongdoing and promote honest and ethical conduct in the practice of financial management; full, fair, accurate, timely and understandable disclosure; and compliance with all applicable laws and
regulations. These professionals are expected to abide by this code as well as Celestica's Business Conduct Governance policy and all of our other applicable business policies, standards
and guidelines.

The
Finance Code of Professional Conduct and the Business Conduct Governance policy can be accessed electronically at http://www.celestica.com. Celestica
will provide a copy of such policies free of charge to any person who so requests. Requests should be directed to clsir@celestica.com, by mail to Celestica Investor Relations, 12 Concorde
Place, 5th Floor, Toronto, Ontario, M3C 3R8, or by telephone at 416-448-2211.

Item 16C. Principal Accountant Fees and Service

The external auditor is engaged to provide services pursuant to pre-approval policies and procedures established by the
Audit Committee of Celestica's Board of Directors. The Audit Committee approves the

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external
auditor's Audit Plan, the scope of the external auditor's quarterly reviews and all related fees. The Audit Committee must approve any non-audit services provided by the auditor
and does so only if it considers that these services are compatible with the external auditor's independence.

Our
auditors are KPMG LLP. KPMG did not provide any financial information systems design or implementation services to us during 2007 or 2008. The Audit Committee has determined
that the provision of the non-audit services by KPMG does not compromise KPMG's independence.

Audit Fees

KPMG billed $4.2 million in 2008 and $3.9 million in 2007 for audit services.

Audit-Related Fees

KPMG billed $0.1 million in 2008 and $0.2 million in 2007 for audit-related services.

Tax Fees

KPMG billed $0.6 million in 2008 and 2007 for tax compliance, tax advice and tax planning services.

All Other Fees

KPMG did not perform any other services for us.

Pre-approval Policies and Procedures Percentage of Services Approved by Audit Committee

All KPMG services and fees are approved by the Audit Committee.

Percentage of Hours Expended on KPMG's engagement not performed by KPMG's full-time, permanent employees (if greater than 50%)



Item 16D. Exemptions from the Listing Standards for Audit Committees

None.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 16G. Corporate Governance

Corporate Governance

We are subject to a variety of corporate governance guidelines and requirements enacted by the TSX, the Canadian Securities
Administrators, the NYSE and by the U.S. Securities and Exchange Commission under its rules and those mandated by the United States Sarbanes Oxley Act of 2002. Today, we meet and often
exceed not only corporate governance legal requirements in Canada and the United States, but also the best practices recommended by securities regulators. We are listed on the NYSE and,
although we are not required to comply with all of the NYSE corporate governance requirements to which we would be subject if we were a U.S. corporation, our governance practices differ
significantly in only one respect from those required of U.S. domestic issuers. Celestica complies with the TSX rules. The TSX rules require shareholder approval of share compensation
arrangements involving new issuances of shares, and of certain amendments to such arrangements, but do not require such approval if the compensation arrangements involve only shares purchased by the
company in the open market. NYSE rules require approval of all equity compensation plans regardless of whether new issuances or treasury shares are used.

We
submitted a certificate of Craig H. Muhlhauser, our CEO, to the NYSE in 2008 certifying that he was not aware of any violation by Celestica of its corporate governance listing
standards.

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Corporate Social Responsibility

We have a heritage of strong corporate citizenship. We uphold a set of corporate values that places importance on corporate social
responsibility, including environmental protection, the respectful and fair treatment of employees, health and safety, ethics and corporate giving. We also uphold a business conduct governance policy
which details the ethics and practices we consider necessary for a positive working environment, and the high legal and ethical standards to which our employees are held accountable. We also have a
formal corporate giving program  Celestica Giving.

In
2004, along with OEMs including IBM, HP and Dell and several EMS peers, we co-developed the Electronics Industry Citizenship Coalition (EICC) which sets standards
to ensure that: working conditions in the electronics industry supply chain are safe; workers are treated with respect and dignity; and manufacturing processes are environmentally responsible. We are
currently working to implement the EICC globally, both internally and with our first tier suppliers.

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Part III

Item 1. Financial Statements

Not applicable.

Item 2. Financial Statements

The following financial statements have been filed as part of this Annual Report:

PageManagement's Report on Internal Control over Financial Reporting

F-1Reports of Independent Registered Public Accounting Firm

F2, F-3Consolidated Balance Sheets as at December 31, 2007 and 2008

F-4Consolidated Statements of Operations for the years ended December 31, 2006, 2007 and 2008

F-5Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2006, 2007 and 2008

F-6Consolidated Statements of Shareholders' Equity for the years ended December 31, 2006, 2007 and 2008

F-7Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008

F-8Notes to the Consolidated Financial Statements

F-9


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Item 3. Exhibits

The following exhibits have been filed as part of this Annual Report:

Incorporated by ReferenceExhibit Number

Description

Form

File No.

Filing Date

Exhibit No.

Filed Herewith1.

Articles of Incorporation and Bylaws as currently in effect:1.1

Certificate and Articles of Incorporation


F-1


333-8700


April 29, 1998


3.11.2

Certificate and Articles of Amendment effective October 22, 1996


F-1


333-8700


April 29, 1998


3.21.3

Certificate and Articles of Amendment effective January 24, 1997


F-1


333-8700


April 29, 1998


3.31.4

Certificate and Articles of Amendment effective October 8, 1997


F-1


333-8700


April 29, 1998


3.41.5

Certificate and Articles of Amendment effective April 29, 1998


F-1/A


333-8700


June 1, 1998


3.51.6

Articles of Amendment effective June 26, 1998


F-1


333-10030


February 16, 1999


3.61.7

Restated Articles of Incorporation effective June 26, 1998


F-1


333-10030


February 16, 1999


3.71.8

Restated Articles of Incorporation effective November 20, 2001


20-F


001-14832


April 21, 2003


1.81.9

Restated Article of Incorporation effective May 13, 2003


20-F


001-14832


May 19, 2004


1.91.10

Bylaw No. 1


20-F


001-14832


May 22, 2001


1.81.11

Bylaw No. 2


F-1


333-8700


April 29, 1998


3.91.12

Bylaw No. 3


20-F


001-14832


May 19, 2004


1.121.13

Bylaw No. 4


20-F


001-14832


May 19, 2004


1.131.14

Bylaw No. A


20-F


001-14832


May, 2004


1.142.

Instruments defining rights of holders of equity or debt securities:2.1

See Certificate and Articles of Incorporation and amendments thereto identified above2.2

Form of Subordinate Voting Share Certificate


F-1/A


333-8700


June 25, 1998


4.12.3

Indenture, dated as of June 16, 2004, between Celestica Inc. and JPMorgan Chase Bank, N.A., as trustee


6-K


0001-14832


June 17, 2004


4.112.4

First Supplemental Indenture, dated as of June 16, 2004, between Celestica Inc. and JPMorgan Chase Bank, N.A., as trustee, to the Indenture, dated as of June 16, 2004, between Celestica Inc. and the
trustee


6-K


0001-14832


June 17, 2004


4.212.5

Second Supplemental Indenture, dated as of December 30, 2004, between Celestica Inc. and JPMorgan Chase Bank, N.A., as trustee, to the First Supplemental Indenture, dated as of June 16, 2004, between
Celestica Inc. and the trustee, to the Indenture, dated as of June 16, 2004, between Celestica Inc. and the trustee


20-F


0001-14832


March 21, 2005


2.7


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Table of Contents

Incorporated by ReferenceExhibit Number

Description

Form

File No.

Filing Date

Exhibit No.

Filed Herewith2.6

Third Supplemental Indenture, dated as of June 23, 2005, between Celestica Inc. and JPMorgan Chase Bank, N.A., as trustee to the Indenture, dated as of June 16, 2004, between Celestica Inc. and the
trustee


6-K


0001-14832


June 20, 2005


4.222.7

Fourth Amended and Restated Revolving Term Credit Agreement, April 12, 2007, between: Celestica Inc., the Subsidiaries of Celestica Inc. specified therein as Designated Subsidiaries, CIBC World Markets,
 as Joint Lead Arranger, RBC Capital Markets, as Joint Lead Arranger and Co-Syndication Agent, Canadian Imperial Bank of Commerce, a Canadian Chartered Bank, as Administrative Agent, Banc of America Securities LLC, as Co-Syndication Agent and
the financial institutions named in Schedule A, as lenders


20-F


0001-14832


March 25, 2008


2.74.

Certain Contracts:4.1

Amended and Restated Management Services Agreement, dated as of July 1, 2003, among Celestica Inc., Celestica North America Inc. and Onex Corporation


F-4


333-110362


November 10, 2003


10.14.2

Executive Employment Agreement, dated as of July 26, 2007, between Celestica Inc., Celestica International Inc. and Celestica Corporation and Craig H. Muhlhauser


20-F


0001-14832


March 25, 2008


4.44.3

Executive Employment Agreement, dated as of July 26, 2007, between Celestica Inc., Celestica International Inc. and Paul Nicoletti


20-F


0001-14832


March 25, 2008


4.54.4

Executive Employment Agreement, dated as of January 1, 2008, between Celestica Inc., Celestica International Inc. and Elizabeth L. DelBianco


20-F


0001-14832


March 25, 2008


4.64.5

Executive Employment Agreement, dated as of July 22, 2004, between Celestica Inc., Celestica International Inc. and Peter J. Bar


20-F


001-14832


March 21, 2005


4.94.6

Amended and Restated Celestica Inc.  Long-Term Incentive Plan


20-F


001-14832


March 22, 2001


3.17-14.7

Canadian Share Unit Plan


20-F


001-14832


March 21, 2005


4.164.8

Manufacturers' Services Limited
2000 Equity Incentive Plan, as amended














X8.1

Subsidiaries of Registrant














X12.1

Chief Executive Officer Certification














X12.2

Chief Financial Officer Certification














X13.1

Certification required by Rule 13a-14(b)*














X15.1

Celestica Audit Committee Mandate


20-F


001-14832


March 21, 2006


15.115.2

Consent of KPMG LLP, Chartered Accountants














X


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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual report on its behalf.

CELESTICA INC.By:

/s/ ELIZABETH L. DELBIANCO Elizabeth L. DelBianco
Executive Vice President
Chief Legal and Administrative OfficerDate: March 24, 2009


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MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Celestica Inc. (the "Company") is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company's internal control system was designed to provide reasonable assurance to its management and Board of Directors regarding the preparation and fair
presentation of published financial statements in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management
maintains a comprehensive system of controls intended to ensure that transactions are executed in accordance with management's authorization, assets are safeguarded, and
financial records are reliable. Management also takes steps to see that information and communication flows are effective and to monitor performance, including performance of internal control
procedures.

Management
assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2008 based on the criteria set forth in the Internal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has
concluded that, as of December 31, 2008, the Company's internal control over financial reporting is effective. The Company's independent auditors, KPMG LLP, have issued an unqualified
opinion on the effectiveness of the Company's internal control over financial reporting.

February 11,
2009

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors of
Celestica Inc.

We
have audited Celestica Inc.'s (the "Company") internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying "Management's
report on internal control over financial reporting." Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with Canadian and U.S. generally accepted accounting principles. A Company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in
Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We
also have conducted our audits on the consolidated financial statements, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company
Accounting Oversight Board (United States). Our report dated February 11, 2009 (February 26, 2009 as to note 22) expressed an unqualified opinion on those consolidated
financial statements.

Toronto, Canada
February 11, 2009

/s/ KPMG LLP
Chartered Accountants,
Licensed Public Accountants


F-2

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors of
Celestica Inc.

We
have audited the accompanying consolidated balance sheets of Celestica Inc. (the "Company") as of December 31, 2007 and 2008 and the related consolidated
statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). 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 the Company as of December 31, 2007 and
2008 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with Canadian generally accepted
accounting principles.

Canadian
generally accepted accounting principles vary in certain significant respects from accounting principles generally accepted in the United States of America. Information
relating to the nature and effect of such differences is presented in note 20 to the consolidated financial statements.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as
of December 31, 2008, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated February 11, 2009 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Toronto, Canada
February 11, 2009
(February 26, 2009 as to note 22)

/s/ KPMG LLP
Chartered Accountants,
Licensed Public Accountants


F-3

---





CELESTICA INC.    CONSOLIDATED BALANCE SHEETS    (in millions of U.S. dollars)

As at December 312007

2008AssetsCurrent assets:Cash and cash equivalents (note 19)

$
1,116.7

$
1,201.0Accounts receivable (note 2(e))


941.2


1,074.0Inventories (notes 2(f) and (s))


791.9


787.4Prepaid and other assets (note 14(1))


126.2


87.1Income taxes recoverable


19.8


14.1Deferred income taxes (note 11)


3.8


8.22,999.6


3,171.8Property, plant and equipment (note 4)


466.0


467.5Goodwill (note 5)


850.5


Intangible assets (note 5)


35.2


20.1Other long-term assets (note 6)


119.2


126.8$
4,470.5

$
3,786.2Liabilities and Shareholders' EquityCurrent liabilities:Accounts payable

$
1,029.8

$
1,090.6Accrued liabilities (notes 10(a), 14(1), 20(d) and (g))


402.6


463.1Income taxes payable


14.0


13.5Deferred income taxes (note 11)





0.2Current portion of long-term debt (note 7)


0.2


1.01,446.6


1,568.4Long-term debt (note 7)


758.3


732.1Accrued pension and post-employment benefits (notes 13 and 20(c))


70.4


63.2Deferred income taxes (note 11)


63.3


47.2Other long-term liabilities


13.7


9.82,352.3


2,420.7Shareholders' equity:Capital stock (note 8(b))


3,585.2


3,588.5Warrants (note 8(b) and (c))


3.1


Contributed surplus


190.3


204.4Deficit


(1,716.3
)

(2,436.8
)Accumulated other comprehensive income (note 9)


55.9


9.42,118.2


1,365.5$
4,470.5

$
3,786.2Commitments, contingencies and guarantees (note 16).Canadian and United States accounting policy differences (note 20).Subsequent event (note 22).


See accompanying notes to consolidated financial statements.

F-4

---



CELESTICA INC.    CONSOLIDATED STATEMENTS OF OPERATIONS    (in millions of U.S. dollars, except per share amounts)

Year ended December 312006

2007

2008Revenue

$
8,811.7

$
8,070.4

$
7,678.2Cost of sales


8,359.9


7,648.0


7,147.1Gross profit


451.8


422.4


531.1Selling, general and administrative expenses (SG&A) (notes 2(n) and (o))


285.6


295.1


303.8Amortization of intangible assets (note 5)


27.0


21.3


15.1Integration costs related to acquisitions (note 3)


0.9


0.1


Other charges (note 10)


211.8


47.6


885.2Interest on long-term debt (note 7)


67.1


66.4


57.8Interest income, net of interest expense


(4.5
)

(15.2
)

(15.3
)Earnings (loss) before income taxes


(136.1
)

7.1


(715.5
)Income taxes expense (recovery) (note 11):Current


(40.7
)

14.4


18.4Deferred


55.2


6.4


(13.4
)14.5


20.8


5.0Net loss

$
(150.6
)
$
(13.7
)
$
(720.5
)Basic loss per share

$
(0.66
)
$
(0.06
)
$
(3.14
)Diluted loss per share

$
(0.66
)
$
(0.06
)
$
(3.14
)Shares used in computing per share amounts (in millions):Basic


227.2


228.9


229.3Diluted


227.2


228.9


229.3Net loss in accordance with U.S. GAAP (note 20)

$
(149.3
)
$
(16.1
)
$
(725.8
)Basic loss per share, in accordance with U.S. GAAP (note 20)

$
(0.66
)
$
(0.07
)
$
(3.17
)Diluted loss per share, in accordance with U.S. GAAP (note 20)

$
(0.66
)
$
(0.07
)
$
(3.17
)


See accompanying notes to consolidated financial statements.

F-5

---



CELESTICA INC.    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)    (in millions of U.S. dollars)

Year ended December 312006

2007

2008Net loss

$
(150.6
)
$
(13.7
)
$
(720.5
)Other comprehensive income (loss), net of tax (note 9):Foreign currency translation gain


7.1


8.7


11.5Net gain (loss) on derivatives designated as cash flow hedges





37.5


(53.1
)Reclass net gain on derivatives designated as cash flow hedges to operations





(16.3
)

(4.9
)Comprehensive income (loss)

$
(143.5
)
$
16.2

$
(767.0
)


See accompanying notes to consolidated financial statements.

F-6

---





CELESTICA INC.        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY        (in millions of U.S. dollars)

Capital Stock
(note 8)

Warrants
(note 8)

Contributed
Surplus

DeficitBalance  December 31, 2005

$
3,562.3

$
8.4

$
169.9

$
(1,545.6
)Shares issued


14.3








Stock-based compensation costs (note 8)








8.8


Other








0.6


Net loss for the year











(150.6
)Balance  December 31, 2006


3,576.6


8.4


179.3


(1,696.2
)Change in accounting policy (note 2(n))











(6.4
)Shares issued


8.6








Warrants cancelled





(5.3
)

5.3


Stock-based compensation costs (note 8)








5.1


Other








0.6


Net loss for the year











(13.7
)Balance  December 31, 2007


3,585.2


3.1


190.3


(1,716.3
)Shares issued


3.3








Warrants cancelled





(3.1
)

3.1


Stock-based compensation costs (note 8)








10.0


Other








1.0


Net loss for the year











(720.5
)Balance  December 31, 2008

$
3,588.5

$


$
204.4

$
(2,436.8
)


See accompanying notes to consolidated financial statements.

F-7

---



CELESTICA INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (in millions of U.S. dollars)

Year ended December 312006

2007

2008Cash provided by (used in):Operations:Net loss

$
(150.6
)
$
(13.7
)
$
(720.5
)Items not affecting cash:Depreciation and amortization


134.2


130.8


109.2Deferred income taxes (note 11)


55.2


6.4


(13.4
)Non-cash charge for option issuances (note 8(d))


5.1


7.0


6.6Restructuring charges (note 10)


47.9


5.1


1.1Other charges (note 10)


34.6


14.0


850.3Other


1.9


18.0


16.6Changes in non-cash working capital items:Accounts receivable


(24.8
)

32.0


(132.8
)Inventories


(172.0
)

406.0


4.5Prepaid and other assets


2.7


(6.8
)

22.5Income taxes recoverable


72.1


11.4


5.7Accounts payable and accrued liabilities


108.0


(237.6
)

58.9Income taxes payable


(75.1
)

(21.2
)

(0.5
)Non-cash working capital changes


(89.1
)

183.8


(41.7
)Cash provided by operations


39.2


351.4


208.2Investing:Acquisitions (note 3)


(19.1
)




Purchase of property, plant and equipment


(189.1
)

(63.7
)

(88.8
)Proceeds, net of cash divested from sale of operations or assets


1.0


27.0


7.7Other


(0.7
)

(0.2
)

0.3Cash used in investing activities


(207.9
)

(36.9
)

(80.8
)Financing:Repurchase of Senior Subordinated Notes (Notes) (note 7(d))








(30.4
)Repayment of long-term debt


(0.6
)

(0.6
)

(0.4
)Financing costs





(1.4
)

(0.5
)Issuance of share capital


5.3


3.5


2.1Other


(1.3
)

(3.0
)

(13.9
)Cash provided by (used in) financing activities


3.4


(1.5
)

(43.1
)Increase (decrease) in cash


(165.3
)

313.0


84.3Cash and cash equivalents, beginning of year


969.0


803.7


1,116.7Cash and cash equivalents, end of year

$
803.7

$
1,116.7

$
1,201.0Supplemental cash flow information (note 19).


See accompanying notes to consolidated financial statements.

F-8

---





CELESTICA INC.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS        (in millions of U.S. dollars)

1.     BASIS OF PRESENTATION:

We prepare our financial statements in accordance with generally accepted accounting principles in Canada (Canadian GAAP). Except as outlined in note 20,
these financial statements are, in all material respects, in accordance with accounting principles generally accepted in the United States (U.S. GAAP).

2.     SIGNIFICANT ACCOUNTING POLICIES:

(a)   Principles of consolidation:

These
consolidated financial statements include our subsidiaries. Subsidiaries that are acquired during the year are consolidated from their respective dates of acquisition.
Inter-company transactions and balances are eliminated on consolidation.

(b)   Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period. We applied significant estimates and assumptions to our valuations against accounts receivable, inventory and income taxes, to the amount and timing of
restructuring charges or recoveries, to the fair values used in testing goodwill and long-lived assets, and to valuing our financial instruments and pension costs. Actual results could
differ materially from those estimates and assumptions, especially in light of the current economic environment and uncertainties.

(c)   Revenue:

We derive most of our revenue from the sale of electronic equipment that we have built to customer specifications. We recognize revenue from product sales when
all of the following criteria have been met: shipment has occurred; title has passed; persuasive evidence of an arrangement exists; performance has occurred; receivables are reasonably assured of
collection; and customer specified test criteria have been met. We have no further performance obligations after revenue has been recognized, other than our standard manufacturing warranty. We have
contractual arrangements with the majority of our customers that require the customer to purchase unused inventory that we have purchased to fulfill that customer's forecasted manufacturing demand. We
account for raw material returns as reductions in inventory and do not recognize revenue on these transactions.

We
provide warehousing services in connection with manufacturing services to certain customers. We assess the contracts to determine whether the manufacturing and warehousing services
can be accounted for as separate units of accounting. If the services do not constitute separate units of accounting, or the manufacturing services do not meet all of the revenue recognition
requirements, we defer recognizing revenue until we have shipped the products to our customer.

We
also derive revenue from design, engineering, fulfillment and after-market services. We recognize services revenue for short-term contracts as we perform the services and
for long-term contracts on a percentage-of-completion basis.

(d)   Cash and cash equivalents:

Cash and cash equivalents include cash on account and short-term investments with original maturities of less than three months. See note 19.

F-9

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

(e)   Allowance for doubtful accounts:

We record an allowance for doubtful accounts against accounts receivable that management believes are impaired. We record specific allowances against customer
receivables based on our knowledge of the financial condition of our customers. We also consider the aging of the receivables, customer and industry concentrations, the current business environment,
and historical experience. See notes 14(c) and 18.

(f)    Inventories:

We value our inventory on a first-in, first-out basis at the lower of cost and net realizable value. Cost includes direct materials, labor
and overhead. In determining the net realizable value, we consider factors such as shrinkage, the aging of and future demand for the inventory, contractual arrangements with customers, and our ability
to redistribute inventory to other programs or return inventory to suppliers. See note 2(s)(1).

2007

2008Raw materials

$
543.7

$
533.1Work in progress


92.5


106.4Finished goods


155.7


147.9$
791.9

$
787.4


(g)   Property, plant and equipment:

We carry property, plant and equipment at cost and depreciate these assets over their estimated useful lives or lease terms on a straight-line basis.
The estimated useful lives for our principal asset categories are as follows:

Buildings

25 yearsBuilding/leasehold improvements

Up to 25 years or term of leaseOffice equipment

5 yearsMachinery and equipment

3 to 7 yearsComputer software (See note 2(t)(1))

1 to 10 years


We
expense maintenance and repair costs as incurred.

(h)   Goodwill:

We are required to evaluate goodwill annually or whenever events or changes in circumstances indicate that we may not recover the carrying amount. Absent any
triggering events during the year, we conduct our goodwill assessment in the fourth quarter of the year to correspond with our planning cycle. We test impairment, using the two-step
method, at the reporting unit level by comparing the reporting unit's carrying amount to its fair value. We estimate the fair values of the reporting units using a combination of a market
capitalization approach, a multiples approach and discounted cash flows. To the extent a reporting unit's carrying amount exceeds its fair value, we may have an impairment of goodwill. We measure
impairment by comparing the implied fair value of goodwill, determined in a manner similar to a purchase price allocation, to its carrying amount. In the fourth quarter of each year, we perform our
annual goodwill assessment and determined that there was no impairment for 2006 and 2007. In the fourth quarter of 2008, we recorded an impairment charge. See note 5(d). The process of
determining fair values is subjective and requires management to exercise a significant amount of judgment in making assumptions about future results, including revenue and expense projections, and
discount rates and market multiples, at the reporting unit level.

F-10

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

(i)    Intangible assets:

Intangible assets are comprised of intellectual property and other intangible assets. Intellectual property assets consist primarily of certain
non-patented intellectual property and process technology, and we amortize these assets on a straight-line basis over their estimated useful lives, to a maximum of five years.
Other intangible assets consist primarily of customer relationships and contract
intangibles. We amortize other intangible assets on a straight-line basis over their estimated useful lives, to a maximum of 10 years.

(j)    Impairment or disposal of long-lived assets:

We review long-lived assets (comprised of property, plant and equipment and intangible assets) for impairment on an annual basis or whenever events or
changes in circumstances indicate that we may not recover the carrying amount. Absent any triggering events during the year, we conduct our long-lived assets assessment in the fourth
quarter of the year to correspond with our planning cycle. We must classify assets as either held-for-use or available-for-sale. We recognize an
impairment loss on an asset used when the carrying amount exceeds the projected undiscounted future net cash flows we expect from its use and disposal. We measure the loss as the amount by which the
carrying amount exceeds its fair value, which we determine using discounted cash flows when quoted market prices are not available. The process of determining fair values is subjective and requires
management to exercise judgment in making assumptions about future results, including revenue and cash flow projections and discount rates, as well as the valuation and use of appraisals for property.
For assets available-for-sale, we recognize an impairment loss when the carrying amount exceeds the fair value less costs to sell. We have recorded impairment charges in 2006,
2007 and 2008. See note 10(c).

(k)   Pension and non-pension post-employment benefits:

We accrue our obligations under employee benefit plans and the related costs, net of plan assets. The cost of pensions and other post-employment
benefits earned by employees is actuarially determined using the projected benefit method pro-rated on service, and management's best estimate of expected plan investment performance,
salary escalation, compensation levels at time of retirement, retirement ages, the discount rate used in measuring the liability and expected healthcare costs. Actual results could differ materially
from the estimates originally made by management. Changes in these assumptions could impact future pension expense and pension funding. For the purpose of calculating the expected return on plan
assets, we value assets at fair value. We amortize past service costs arising from plan amendments on a straight-line basis over the average remaining service period of employees active at
the date of amendment. We amortize actuarial gains or losses exceeding 10% of a plan's accumulated benefit obligations or the fair market value of the plan assets at the beginning of the year, over
the average remaining service period of active employees, except for plans where all, or almost all, of the employees are no longer active, in which we amortize over the average remaining life of the
former employees. We measure plan assets and the accrued benefit obligations at December 31. The average amortization period of the pension plans is 29 years for 2007 and 27 years
for 2008. The average remaining service period of active employees covered by the other post-employment benefits plans is 19 years for both 2007 and 2008. Curtailment gains or
losses may arise from significant changes to a plan. We offset curtailment gains against unrecognized losses and record any excess gains when the curtailment occurs and all curtailment losses in the
period in which it is probable that a curtailment will occur. We record pension assets as other long-term assets and pension liabilities as accrued pension and post-employment
benefits.

(l)    Deferred financing costs:

We record financing costs as a reduction to the cost of the related debt which we amortize to operations using the effective interest rate method.

F-11

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

(m)  Income taxes:

We use the asset and liability method of accounting for income taxes. We recognize deferred income tax assets and liabilities for future income tax consequences
that are attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We record a valuation allowance against
deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. We recognize the effect of changes in
tax rates in the period of substantive enactment.

We
record an income tax expense or recovery based on the income earned or loss incurred in each tax jurisdiction and the substantively enacted tax rate applicable to that income or loss.
In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain. The final tax outcome of these matters may be different from the estimates originally
made by management in determining our income tax provisions. We recognize a tax benefit related to tax uncertainties when it is probable based on our best estimate of the amount that will ultimately
be realized. A change to these estimates could impact the income tax provision. We recognize accrued interest and penalties relating to tax uncertainties in current income tax expense.

(n)   Foreign currency translation and hedging:

Foreign currency translation:

The majority of our subsidiaries are integrated operations and have a U.S. dollar functional currency. For such subsidiaries, we
translate monetary assets and liabilities denominated in foreign currencies into U.S. dollars at the year-end rate of exchange. We translate non-monetary assets and
liabilities denominated in foreign currencies at historic rates, and we translate revenue and expenses at the average exchange rates prevailing during the month of the transaction. Exchange gains and
losses also arise on the settlement of foreign-currency denominated transactions. We record these exchange gains and losses in our statement of operations.

We
recorded the following foreign exchange gains and losses in SG&A:

Year ended December 312006

2007

2008Foreign exchange loss (gain)

$
(9.1
)
$
(2.9
)
$
16.4


We
translate the accounts of our self-sustaining foreign operations, for which the functional currency is not the U.S. dollar, into U.S. dollars using the
current rate method. We translate assets and liabilities at the year-end rate of exchange, and we translate revenue and expenses at the average exchange rates prevailing during the month
of the transaction. We defer gains and losses arising from the translation of these foreign operations in the foreign currency translation account included in other comprehensive income (loss).

Foreign currency hedging:

We may enter into forward exchange and option contracts to hedge the cash flow risk associated with firm purchase commitments and
forecasted transactions in foreign currencies and foreign-currency denominated balances. We do not enter into derivatives for speculative purposes.

We
have formally documented our relationships between hedging instruments and hedged items, as well as our risk management objectives and strategy for undertaking various hedge
transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We have also formally
assessed, both at the hedge's inception and at the end of each

F-12

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

quarter,
whether the derivatives used in hedged transactions are highly effective in offsetting changes in the cash flows of hedged items.

Effective
January 1, 2007, we adopted the accounting standards for cash flow hedges and fair value hedges. See the financial instruments section below. Our risk management
objectives and hedging activities are described in note 14.

In
certain circumstances, we have not designated forward contracts as hedges and therefore have marked these contracts to market each period, resulting in a gain or loss in our statement
of operations.

Prior
to 2007, we included gains and losses on hedges of firm commitments in the cost of the hedged transaction when they occurred. We recognized gains and losses on hedges of forecasted
transactions in earnings in the same period and on the same financial statement caption as the underlying hedged transaction. We accrued foreign exchange translation gains and losses on forward
contracts used to hedge foreign-currency denominated amounts on the balance sheet as current assets or current liabilities and recognized gains or losses in the statement of operations, offsetting the
respective translation gains or losses on the foreign-currency denominated amounts. We amortized the forward premium or discount over the term of the forward contract. We recognized gains and losses
on hedged forecasted transactions in earnings immediately when the hedge was no longer effective or the forecasted transactions were no longer expected.

Interest rate hedging:

In connection with the issuance of our Senior Subordinated Notes due 2011 (2011 Notes) in June 2004, we entered into agreements
to swap the fixed interest rate for a variable interest rate. We have formally documented the hedging relationship, as well as our risk management objectives and strategy for undertaking this hedge.
We record the payments or receipts under the swap agreements as interest expense on long-term debt. See note 14.

Financial instruments:

Effective January 1, 2007, we adopted CICA Handbook Section 1530, "Comprehensive income," Section 3855, "Financial
instruments  recognition and measurement," Section 3861, "Financial instruments  disclosure and presentation," and
Section 3865, "Hedges." We were not required to restate prior results.

The
accounting standards require that we recognize all financial assets and liabilities on our consolidated balance sheet at fair value, except for loans and receivables,
held-to-maturity investments and non-trading financial liabilities, which are carried at their amortized cost. In accordance with the accounting standards, we have
recorded certain specific elements of our Notes at fair value while keeping the remaining amounts at cost or amortized cost. See notes 7 and 14 for further details.

All
derivatives, including embedded derivatives that must be separately accounted for, are measured at fair value in our consolidated balance sheet. We continue to designate our hedges
as either cash flow hedges or fair value hedges. In a cash flow hedge, changes in the fair value of the hedging derivative, to the extent effective, are recorded in other comprehensive income (loss)
(OCI) until the asset or liability being hedged is
recognized in operations. Any cash flow hedge ineffectiveness is recognized in operations immediately. For hedges that are discontinued before the end of the original hedge term, the unrealized hedge
gain (loss) in OCI is amortized to operations over the remaining term of the original hedge. If the hedged item ceases to exist before the end of the original hedge term, the unrealized hedge gain
(loss) in OCI is recognized in operations immediately. In a fair value hedge, changes in the fair value of hedging derivatives are offset in operations by the changes in the fair value relating to the
hedged risk of the asset, liability or cash flows being hedged. Any fair value hedge ineffectiveness is recognized in operations immediately.

F-13

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Derivatives
may be embedded in financial instruments (the "host instrument"). Embedded derivatives are treated as separate derivatives when their economic characteristics and
risks are not closely related to those of the host instrument, the terms of the embedded derivative are similar to those of a stand-alone derivative, and the combined contract is not held for trading
or designated at fair value. These embedded derivatives are measured at fair value with subsequent changes recognized in operations. We have elected January 1, 2003 as our transition date for
identifying contracts with embedded derivatives. We have prepayment options that are embedded in our Notes which meet the criteria for bifurcation. The impact of the prepayment options on our
consolidated financial statements is described under the transitional adjustments below and in note 7(e).

We
are required to present a "consolidated statement of comprehensive income (loss)" as part of our consolidated financial statements. Comprehensive income (loss) is comprised of net
income (loss), changes in the fair value of derivative instruments designated as cash flow hedges and the net unrealized foreign currency translation gain (loss) arising from
self-sustaining foreign operations, which was previously classified as a separate component of shareholders' equity. Subsequent releases from OCI to operations is dependent on when the
hedged items designated under cash flow hedges are recognized in operations, or upon de-recognition of the net investment in a self-sustaining foreign operation.

In
determining the fair value of our financial instruments, we used a variety of methods and assumptions that are based on market conditions and risks existing on each reporting date.
Broker quotes and standard market conventions and techniques, such as discounted cash flow analysis and option pricing models, are used to determine the fair value of our financial instruments,
including derivatives and hedged debt obligations. In determining the fair value of our financial instruments, we also consider the credit quality of the financial instruments, including our own
credit risk as well as the credit risks of our counterparties. See note 14. All methods of fair value measurement result in a general approximation of value and such value may never
be realized.

The
transitional impact of adopting these standards and recording our derivatives on January 1, 2007 at fair value on our consolidated financial statements is as follows:

Increase (decrease)Prepaid and other assets

$
5.5Other long-term assets


(10.3
)Accrued liabilities


5.8Long-term debt  embedded option and debt obligation


1.9Long-term debt  unamortized debt issue costs


(11.5
)Other long-term liabilities


8.1Long-term deferred income taxes liability


(2.2
)Opening deficit


6.4Accumulated other comprehensive loss  cash flow hedges


0.5


As
required by these standards, we have marked-to-market the bifurcated embedded prepayment options in our debt instruments and have applied the fair value hedge
accounting to our interest rate swaps and our hedged debt obligation (2011 Notes). The changes in fair values each period are recorded in interest expense on long-term debt. The
mark-to-market adjustment fluctuates each period as it is dependent on market conditions,

F-14

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

including
future interest rates, implied volatilities and credit spreads. The impact of these adjustments on our results of operations is as follows:

Year ended December 312007

2008Increase (decrease) in interest expense on long-term debt

$
(0.6
)
$
1.0


Cash flow hedges:

As at January 1, 2007, we recorded derivative assets of $5.8 and derivative liabilities of $6.0 at fair value on our
consolidated balance sheet in relation to our cash flow hedges, with a corresponding balance of $0.2 recorded in the opening accumulated other comprehensive loss. In addition, we reclassified $0.3 of
net deferred foreign exchange losses to opening accumulated other comprehensive loss.

Fair value hedges:

In connection with the issuance of our 2011 Notes in June 2004, we entered into agreements to swap the fixed interest rate for a
variable interest rate. We have designated the swap agreements as fair value hedges. As at January 1, 2007, we recorded a derivative liability of $7.9 (excluding an interest accrual of $2.0)
for the swap agreements in other long-term liabilities. A corresponding fair value adjustment was not recorded against the 2011 Notes because the prior hedge relationship was not a
qualified type under Section 3865, after bifurcation of the embedded prepayment option in accordance with Section 3855. We decreased the deferred income tax liability by $2.6 and
recorded a loss of $5.3 to opening deficit. On January 1, 2007, we redesignated a new hedging relationship which qualified for fair value hedge accounting in accordance with
Section 3865.

Embedded derivatives:

The prepayment options embedded in our Notes qualify as embedded derivatives which must be bifurcated for reporting. As at
January 1, 2007, we bifurcated the fair value of the embedded derivative asset of $9.3 from the Notes. As a result of recording this asset, the amortized cost of long-term debt
increased. We also recorded a cumulative adjustment of $1.9 against the opening deficit. Subsequent changes in the fair value of the embedded derivatives are recorded in operations.

Effective interest rate method:

We incurred underwriting commissions and expenses relating to our Notes offerings. We have reclassified these costs as a reduction of
the cost of the debt and we use the effective interest rate method to amortize the costs to operations.

As
at January 1, 2007, we reclassified $10.3 of unamortized debt issue costs from other long-term assets to long-term debt and recorded an adjustment to
reflect the balance had we used the effective interest rate method from inception. This resulted in a $1.2 increase in unamortized debt issue costs, a decrease of $0.8 in opening deficit and an
increase of $0.4 in deferred income tax liability.

(o)   Research and development:

We incur costs relating to research and development activities. We expense these costs as incurred unless development costs meet certain criteria for
capitalization. Total research and development costs recorded in SG&A for 2008 were $7.6 (2007  $2.5; 2006  $4.7). No
amounts were capitalized.

F-15

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

(p)   Restructuring charges:

We record restructuring charges relating to workforce reductions, facility consolidations and costs associated with exiting businesses. These restructuring
charges, which include employee terminations and contractual lease obligations, are only recorded when we incur the liability and can measure its fair value. The recognition of restructuring charges
requires management to make certain judgments and estimates regarding the nature, timing and amounts associated with the planned restructuring activities, including estimating future sublease income
and the net recoverable amount of property, plant and equipment to be disposed of. The estimated liability may change subsequent to its initial recognition, requiring adjustments to the expense and
liability recorded. At the end of each reporting period, we evaluate the appropriateness of the remaining accrued balances.

(q)   Stock-based compensation and other stock-based payments:

We account for employee stock options using the fair-value method of accounting. We recognize compensation expense over the vesting period, on a
straight-line basis. We recognize the effect of actual forfeitures as they occur. See notes 8(d) and (e) outlining our stock-based compensation plans.

(r)   Loss per share and weighted average shares outstanding:

We follow the treasury stock method for calculating diluted loss per share. The diluted per share calculation includes employee stock options and warrants,
if dilutive.

(s)   Changes in accounting policies:

(1)   Inventories:

Effective January 1, 2008, we adopted CICA Handbook Section 3031, "Inventories," which requires inventory to be measured at the lower of cost and
net realizable value. This standard provides additional guidance on the types of costs that can be capitalized and requires the reversal and disclosure of previous inventory write-downs if economic
circumstances have changed to support higher inventory values. The adoption of this standard did not have a material impact on our consolidated financial statements.

During
2008, we recorded a net inventory provision through cost of sales of $19.6 to write-down the value of our inventory to net realizable value.

(2)   Financial instruments:

Effective January 1, 2008, we adopted CICA Handbook Section 3862, "Financial instruments  disclosures," and
Section 3863, "Financial instruments  presentation." These standards provide additional guidance on disclosing risks related to recognized and
unrecognized financial instruments and how those risks are managed. See note 14. The adoption of these standards did not have a material impact on our consolidated financial statements.

Section 3862
requires us to disclose the classifications of our financial instruments into the following specific categories:

 financial assets held-for-trading

 loans and receivables held-to-maturity investments

 available-for-sale financial assets financial liabilities held-for-trading

 financial liabilities measured at amortized cost


F-16

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

The
classification of our financial instruments is as follows:

Our
cash and cash equivalents are comprised of cash and short-term investments. See note 19. We classify accounts receivable under loans and receivables. Our
derivative assets are included in prepaid and other assets and other long-term assets. Our derivative liabilities are included in accrued liabilities. The majority of our derivative assets
and liabilities arise from foreign currency forward contracts and interest rate swap agreements. Our foreign currency forward contracts are recorded at fair value and the majority of our foreign
currency forward contracts are designated as cash flow hedges. Our interest rate swap agreements related to our 2011 Notes are recorded at fair value and are designated as fair value hedges. See
note 14(2). Accounts payable and the majority of our accrued liabilities, excluding derivative liabilities, are classified as financial liabilities which are recorded at amortized cost. Our
Notes, which are recorded in
long-term debt, are classified as financial liabilities. See note 7. The carrying values of our Notes are comprised of elements recorded at fair value and amortized cost. We do not
currently have any financial assets designated as available-for-sale.

(3)   Capital disclosures:

Effective January 1, 2008, we adopted CICA Handbook Section 1535, "Capital disclosures," which provides guidance for disclosing information about an
entity's capital and how it manages its capital. This standard requires the disclosure of the entity's capital management objectives, policies and processes. See note 15. The adoption of this
standard did not have a material impact on our consolidated financial statements.

(4)   Accounting changes:

In January 2007, we adopted CICA Handbook Section 1506, "Accounting changes," which requires that voluntary changes in accounting policy be made
only if the changes result in financial statements that provide reliable and more relevant information. It also requires that prior period errors be corrected retrospectively. The adoption of this
standard did not impact our consolidated financial statements.

(t)    Recently issued accounting pronouncements:

(1)   Goodwill and intangible assets:

On January 1, 2009, we adopted CICA Handbook Section 3064, "Goodwill and intangible assets." This revised standard establishes guidance for
the recognition, measurement and disclosure of goodwill and intangible assets, including internally generated intangible assets. This standard, which is effective for our first quarter of 2009,
requires us to retroactively reclassify our computer software assets on our consolidated balance sheet from property, plant and equipment to intangible assets. In addition, the amortization of
computer software will be reclassified from depreciation expense, included in SG&A, to amortization of intangible assets.

(2)   International financial reporting standards (IFRS):

In February 2008, the Canadian Accounting Standards Board announced the adoption of International Financial Reporting Standards for publicly accountable
enterprises. IFRS will replace Canadian GAAP effective January 1, 2011. IFRS is effective for our first quarter of 2011 and will require that we restate our 2010 comparative numbers. We have
started an IFRS conversion project to evaluate the impact of implementing the new standards. At this time, we cannot reasonably estimate the impact of adopting IFRS on our consolidated financial
statements.

(3)   Business combinations:

In January 2009, the CICA issued Handbook Section 1582, "Business combinations," which replaces the existing standards. This section establishes the
standards for the accounting of business combinations, and states that all assets and liabilities of an acquired business will be recorded at fair value. Obligations for contingent

F-17

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

considerations
and contingencies will also be recorded at fair value at the acquisition date. The standard also states that acquisition-related costs will be expensed as incurred and that
restructuring charges will be expensed in the periods after the acquisition date. This standard is equivalent to the IFRS on business combinations. This standard is applied prospectively to business
combinations with acquisition dates on or after January 1, 2011. Earlier adoption is permitted. We are currently evaluating the impact of adopting this standard on our consolidated financial
statements.

(4)   Consolidated financial statements:

In January 2009, the CICA issued Handbook Section 1601, "Consolidated financial statements," which replaces the existing standards. This section
establishes the standards for preparing consolidated financial statements and is effective for 2011. Earlier adoption is permitted. We are currently evaluating the impact of adopting this standard on
our consolidated financial statements.

(5)   Credit risk and the fair value of financial assets and financial liabilities:

In January 2009, the CICA issued EIC-173, "Credit risk and the fair value of financial assets and financial liabilities," which requires us to
consider our own credit risk as well as the credit risk of our counterparty when determining the fair value of financial assets and liabilities, including derivative instruments. This standard is
effective for our first quarter of 2009 and should be applied retrospectively without restatement of prior periods to all financial assets and liabilities measured at fair value on the date this
abstract was issued. Early adoption is encouraged. We adopted this abstract as of December 31, 2008. The adoption of this abstract did not have a material impact on our consolidated financial
statements.

3.     ACQUISITIONS AND DIVESTITURES:

In March 2006, we acquired certain assets located in the Philippines for a cash purchase price of $19.1. Amortizable intangible assets arising from this
acquisition were $7.6, primarily for customer relationships and contract intangibles. In June 2006, we sold our plastics business for net cash proceeds of $18.5. Our plastics business was
located primarily in Asia. We reported a loss on sale of $33.2 which we recorded as other charges. See note 10. This loss included $20.0 in goodwill allocated to the plastics business.

We
expense integration costs relating to the establishment of business processes, infrastructure and information systems for acquired operations. None of the integration costs incurred
related to existing operations.

F-18

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

4.     PROPERTY, PLANT AND EQUIPMENT:

2007Cost

Accumulated
Depreciation

Net Book
ValueLand

$
39.7

$


$
39.7Buildings


197.1


42.0


155.1Building/leasehold improvements


84.4


56.1


28.3Office equipment


39.0


32.9


6.1Machinery and equipment


758.5


560.6


197.9Computer software


249.7


210.8


38.9$
1,368.4

$
902.4

$
466.0


2008Cost

Accumulated
Depreciation

Net Book
ValueLand

$
42.5

$


$
42.5Buildings


218.9


50.4


168.5Building/leasehold improvements


83.6


57.5


26.1Office equipment


38.4


32.4


6.0Machinery and equipment


740.1


549.8


190.3Computer software (see note 2(t)(1))


256.2


222.1


34.1$
1,379.7

$
912.2

$
467.5


As
of December 31, 2008, we have $22.0 (2007  $25.4) of assets that are available-for-sale, primarily land and
buildings, as a result of the restructuring actions we implemented. We have programs underway to sell these assets.

Property,
plant and equipment includes $6.4 (2007  $12.5) of assets under capital lease and accumulated depreciation of $5.0
(2007  $11.8) related thereto.

Depreciation
and rental expense for 2008 was $91.1 (2007  $106.1; 2006  $103.2) and $49.1
(2007  $55.9; 2006  $66.5), respectively.

5.     GOODWILL AND INTANGIBLE ASSETS:

Goodwill:

The following table details the changes in goodwill:

Balance December 31, 2006 (a)

$
854.8Acquisition adjustment (b)


(4.3
)Balance December 31, 2007 (a) (c)


850.5Impairment (d)


(850.5
)Balance December 31, 2008

$



---

F-19

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Intangible assets:

2007Cost

Accumulated
Amortization

Net Book
ValueIntellectual property

$
119.6

$
117.9

$
1.7Other intangible assets


201.1


167.6


33.5$
320.7

$
285.5

$
35.2


2008Cost

Accumulated
Amortization

Net Book
ValueIntellectual property

$
119.4

$
118.8

$
0.6Other intangible assets


201.1


181.6


19.5$
320.5

$
300.4

$
20.1


F-20

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

The
following table details the changes in intangible assets:

Intellectual
Property

Other
Intangible
Assets

TotalBalance December 31, 2006

$
3.8

$
56.3

$
60.1Amortization


(2.1
)

(19.2
)

(21.3
)Acquisition adjustment (i)





(3.2
)

(3.2
)Impairment (ii)





(0.4
)

(0.4
)Balance December 31, 2007


1.7


33.5


35.2Amortization


(1.1
)

(14.0
)

(15.1
)Balance December 31, 2008 (iii)

$
0.6

$
19.5

$
20.1


---

Amortization
expense is as follows:

Year ended December 312006

2007

2008Amortization of intellectual property

$
7.0

$
2.1

$
1.1Amortization of other intangible assets


20.0


19.2


14.0$
27.0

$
21.3

$
15.1


We
estimate our future amortization expense as follows, based on the existing intangible asset balances:

2009

$
9.42010


6.92011


3.8$
20.1


F-21

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

6.     OTHER LONG-TERM ASSETS:

2007

2008Deferred pension (note 13)

$
88.4

$
83.2Land rights


13.1


11.8Fair value of interest rate swaps (note 14(2))


8.7


17.3Deferred income taxes (note 11)


2.2


8.0Other


6.8


6.5$
119.2

$
126.8


7.     LONG-TERM DEBT:

2007

2008Secured, revolving credit facility due 2009 (a)

$


$
Senior Subordinated Notes due 2011 (2011 Notes) (b)(c)(d)


500.0


489.4Senior Subordinated Notes due 2013 (2013 Notes) (b)(d)


250.0


223.1Embedded prepayment option at fair value (e)


(6.5
)

(19.2
)Basis adjustments on debt obligation (e)


6.5


4.9Unamortized debt issue costs (b)


(9.6
)

(7.0
)Fair value adjustment of 2011 Notes attributable to interest rate risks (e)


17.9


40.9758.3


732.1Capital lease obligations


0.2


1.0758.5


733.1Less current portion


0.2


1.0$
758.3

$
732.1


---

The
facility has restrictive covenants relating to debt incurrence and sale of assets and also contains financial covenants that require us to maintain certain financial ratios. A change of control is
an event of default. Based on the required financial ratios at December 31, 2008, we have full access to the $300.0 available under this facility. We were in compliance with all covenants at
December 31, 2008.

We
also have uncommitted bank overdraft facilities available for operating requirements which total $68.0 at December 31, 2008. There were no borrowings outstanding under these facilities at
December 31, 2008.

F-22

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)



As
at December 31, 2008, principal repayments due within each of the next five years on all long-term debt are as follows:

2009

$
1.02010


2011


489.42012


2013


223.1$
713.5


8.     CAPITAL STOCK:

(a)   Authorized:

We are authorized to issue an unlimited number of subordinate voting shares (SVS), which entitle the holder to one vote per share, and an unlimited number of
multiple voting shares (MVS), which entitle the holder to 25 votes per share. Except as otherwise required by law, the SVS and MVS vote together as a single class on all matters submitted to a
vote of shareholders, including the election of directors. The holders of the SVS and MVS are entitled to share ratably, as a single class, in any dividends declared subject to any preferential rights
of any outstanding preferred shares in respect of the payment of dividends. Each MVS is convertible at any time at the option of the holder thereof and automatically, under certain circumstances, into
one SVS. We are also authorized to issue an unlimited number of preferred shares, issuable in series.

F-23

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

(b)   Issued and outstanding:

Number of Shares (in millions)

SVS

MVS

Total SVS
and MVS
outstanding

WarrantsBalance December 31, 2006


198.2


29.6


227.8


1.1Other share issuances (i)


1.0





1.0


Other (ii)











(0.7
)Balance December 31, 2007


199.2


29.6


228.8


0.4Other share issuances (iii)


0.4





0.4


Other (iv)











(0.4
)Balance December 31, 2008


199.6


29.6


229.2





Amount

SVS

MVS

Total SVS
and MVS
outstanding

WarrantsBalance December 31, 2006

$
3,471.2

$
105.4

$
3,576.6

$
8.4Other share issuances (i)


8.6





8.6


Other (ii)











(5.3
)Balance December 31, 2007


3,479.8


105.4


3,585.2


3.1Other share issuances (iii)


3.3





3.3


Other (iv)











(3.1
)Balance December 31, 2008

$
3,483.1

$
105.4

$
3,588.5

$



2007 Capital transactions:



2008 Capital transactions:



(c)   Warrants:

In connection with the Manufacturer's Services Limited (MSL) acquisition in 2004, we issued Series A and Series B warrants to replace the
outstanding MSL warrants. The Series A warrants expired in 2007 and the Series B warrants expired in 2008.

F-24

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Long-Term Incentives:

Long-Term Incentive Plan (LTIP):

Under the LTIP, we may grant stock options, performance options, performance share units and stock appreciation rights to eligible
employees, executives and consultants. Under the LTIP, up to 29.0 million SVS may be issued from treasury.

Share Unit Plan (SUP):

Under the SUP, we may grant restricted share units and performance share units to eligible employees. Under the SUP, we will satisfy
the delivery of the share units by purchasing SVS in the open market or by cash, rather than issuing SVS from treasury.

(d)   Stock option plans:



We
have granted stock options and performance options as part of our LTIP. Options are granted at prices equal to the market value on the day prior to the date of the grant and are
exercisable during a period not to exceed 10 years from the grant date.



We
have ESPO plans that were available to certain employees and executives. Pursuant to the ESPO plans, our employees and executives were offered the opportunity to purchase, at prices
equal to market value, SVS and, in connection with such purchase, receive options to acquire an additional number of SVS based on the number of SVS acquired by them under the ESPO plans. The exercise
price for the options is equal to the price per share paid for the corresponding SVS acquired under the ESPO plans. The ESPO options expired in 2008.

F-25

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Stock option transactions were as follows:

Number of Options (in millions)

Shares

Weighted
Average
Exercise PriceOutstanding at December 31, 2005


14.5

$
21.73Granted


1.8

$
9.96Exercised


(1.0
)
$
5.60Forfeited/Expired


(3.8
)
$
23.63Outstanding at December 31, 2006


11.5

$
20.62Granted


2.7

$
6.42Exercised


(0.7
)
$
4.99Forfeited/Expired


(5.3
)
$
27.25Outstanding at December 31, 2007


8.2

$
15.58Granted


2.4

$
5.97Exercised


(0.2
)
$
7.95Forfeited/Expired


(1.3
)
$
13.58Outstanding at December 31, 2008


9.1

$
12.35Shares reserved for issuance upon exercise of stock options or awards (in millions)


27.0


The
following options were outstanding as at December 31, 2008:

Plan

Range of Exercise
Prices

Outstanding
Options

Weighted Average
Exercise Price

Weighted Average
Remaining Life
of Outstanding
Options

Exercisable
Options

Weighted Average
Exercise Price(in millions)



(years)

(in millions)LTIP

$  4.76 - $  5.77


1.9

$
5.43


8.8


0.2

$
5.68$  5.88 - $  6.05


1.4

$
6.04


8.1


0.4

$
6.04$  6.25 - $  8.75


1.4

$
6.64


9.0


0.1

$
7.02$  9.21 - $14.00


1.0

$
10.40


6.7


0.6

$
10.65$14.19 - $18.46


1.4

$
16.31


4.6


1.3

$
16.25$18.50 - $25.75


1.4

$
20.31


4.1


1.4

$
20.34$28.05 - $70.32


0.4

$
47.02


2.0


0.4

$
47.02MSL

$  9.73 - $12.99


0.1

$
11.91


3.1


0.1

$
11.91$13.07 - $58.00


0.1

$
18.23


2.6


0.1

$
18.239.1








4.6


We
have applied fair-value method of accounting for stock option awards granted after January 1, 2003 and, accordingly, have recorded compensation expense. Prior to
January 1, 2003, we accounted for stock option awards using the settlement method and no compensation expense was recognized. For awards granted in 2002, we have disclosed the pro forma
earnings and per share information as if we had accounted for employee stock options under the fair-value method. We were not required to determine the pro forma impact of awards
granted prior to January 1, 2002.

F-26

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

We
amortize the estimated fair value of options to expense over the vesting period of three to four years, on a straight-line basis. We determined the fair value of the
options using the Black-Scholes option pricing model with the following weighted average assumptions:

Year ended December 312006

2007

2008Risk-free rate


4.5% - 5.0%


3.6% - 4.8%


1.0% - 3.3%Dividend yield


0.0%


0.0%


0.0%Volatility factor of the expected market price of our shares


34% - 65%


35% - 52%


38% - 59%Expected option life (in years)


3.5 - 5.5


4.0 - 5.5


4.0 - 5.5Weighted-average fair value of options granted


$5.55


$2.57


$3.12


For
2008, we expensed $6.6 (2007  $7.0; 2006  $5.1) relating to the fair value of options granted after
January 1, 2003.

The
pro forma disclosure relating to options granted in 2002 is as follows:

Year ended
December 312006Loss as reported

$
(150.6
)Deduct: Stock-based compensation costs using fair-value method


(4.1
)Pro forma net loss

$
(154.7
)Loss per share:Basic  as reported

$
(0.66
)Basic  pro forma

$
(0.68
)Diluted  as reported

$
(0.66
)Diluted  pro forma

$
(0.68
)


All
of the 2002 option grants were fully vested by the end of 2006 and, therefore, do not impact our 2007 or 2008 pro forma disclosure.

(e)   Restricted share units and performance share units:

We have granted restricted share units (RSUs) and performance share units (PSUs) as part of our LTIP and SUP. These grants generally entitle the holder to receive
one SVS or, at our discretion, the cash equivalent of the market value of a share at the date of vesting. The grant date fair value of RSUs and PSUs is amortized to expense over the vesting period on
a straight-line basis. The weighted-average grant date fair value of these share units for 2008 was $6.52 (2007  $6.10;
2006  $10.00). A total of $16.8 has been recognized in cost of sales and SG&A in 2008 (2007  $6.2;
2006  $10.9) for RSUs and PSUs.

F-27

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

RSUs
granted before 2008 completely vest at the end of their respective terms, which is generally three years. RSUs granted in 2008 vest approximately one-third each year.
PSUs vest at the end of their respective terms, generally three years, to the extent that performance conditions have been met.

Number of RSUs and PSUs (in millions)

RSUs

Vested

PSUs

VestedOutstanding at December 31, 2006


2.1


0.1


2.0


Granted


1.6





0.8Forfeited/Expired


(0.5
)




(1.0
)Exercised


(0.8
)




Outstanding at December 31, 2007


2.4





1.8


Granted


3.2





2.1Forfeited/Expired


(0.4
)




(0.5
)Exercised


(0.8
)




(0.1
)Outstanding at December 31, 2008


4.4





3.3





9.     ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX:

Year ended
December 312007

2008Opening balance of foreign currency translation account

$


$
35.2Transitional adjustment  January 1, 2007


26.5


Foreign currency translation gain


8.7


11.5Closing balance


35.2


46.7Opening balance of unrealized net gain on cash flow hedges





20.7Transitional adjustment  January 1, 2007 (note 2(n))


(0.5
)

Net gain (loss) on cash flow hedges (i)


37.5


(53.1
)Reclass net gain on cash flow hedges to operations (ii)


(16.3
)

(4.9
)Closing balance (iii)


20.7


(37.3
)Accumulated other comprehensive income

$
55.9

$
9.4


---

We
expect that the majority of losses on cash flow hedges reported in the 2008 accumulated other comprehensive income balance will be reclassified to operations during 2009.

F-28

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

10.   OTHER CHARGES:

Year ended December 312006

2007

2008Restructuring (a)

$
178.1

$
37.3

$
35.3Goodwill impairment (b)








850.5Long-lived asset impairment (c)


1.4


15.1


8.8Gain on repurchase of Notes (note 7(d))








(7.6
)Loss on sale of operations (note 3)


33.2





Other


(0.9
)

(4.8
)

(1.8
)$
211.8

$
47.6

$
885.2


(a)   Restructuring:

Between 2001 and 2004, we announced global restructuring plans as a result of end market weakness and the shifting of manufacturing capacity from
higher-cost regions in North America and Europe to lower-cost regions in Asia. During 2005 and 2006, we announced further plans to improve capacity utilization and accelerate
margin improvements, primarily in our North America and Europe regions as end-market demand and profitability had not recovered to sustainable levels. In January 2008, we estimated
that an additional restructuring charge of between $50 to $75 would be recorded throughout 2008 and 2009. As we finalized our 2009 plan in the fourth quarter of 2008, we estimated that our
restructuring costs would reach the high end of our previously announced range of $50 to $75. We will continue to evaluate our operations and may propose additional restructuring actions as a result.
During 2008, we recorded $35.3 in restructuring charges. We expect to complete the remainder of the restructuring actions by the end of 2009. As we finalize the detailed plans of these restructuring
actions, we will recognize the related charges. The recognition of these charges requires management to make certain judgments and
estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to our expense and the
liability amounts recorded.

Our
restructuring actions included consolidating facilities and reducing our workforce. The majority of the employees terminated were manufacturing and plant employees. Approximately
32,900 employees have been terminated since 2001. Approximately 70% of these employee terminations were in the Americas, 25% in Europe and 5% in Asia. For leased facilities that were no longer
used, the lease costs included in the restructuring costs represent future lease payments less estimated sublease recoveries. Adjustments are made to lease and other contractual obligations to reflect
incremental cancellation fees paid for terminating certain facility leases and to reflect higher accruals for other leases due to delays in the timing of sublease recoveries and changes in estimated
sublease rates, relating principally to facilities in the Americas. We recorded non-cash charges to write-down certain long-lived assets (70% in the Americas, 20%
in Europe and 10% in Asia) which became impaired as a result of the rationalization of facilities. We expect our long-term lease and other contractual obligations to be paid out over the
remaining lease terms through 2015. Our restructuring liability is recorded in accrued liabilities.

F-29

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Details
of the activity through the accrued restructuring liability and the non-cash charge are as follows:

Employee
termination
costs

Lease and other
contractual
obligations

Facility exit
costs and
other

Total accrued
liability

Non-cash
charge

Total
chargeJanuary 1, 2001

$


$


$


$


$


$
Provision


90.7


35.3


12.4


138.4


98.6


237.0Cash payments


(51.2
)

(1.6
)

(2.9
)

(55.7
)




December 31, 2001


39.5


33.7


9.5


82.7


98.6


237.0Provision /adjustments


124.7


63.1


5.8


193.6


191.8


385.4Cash payments


(77.1
)

(14.7
)

(7.5
)

(99.3
)




December 31, 2002


87.1


82.1


7.8


177.0


290.4


622.4Provision /adjustments


68.8


24.4


4.0


97.2


(2.3
)

94.9Cash payments


(112.0
)

(44.4
)

(8.9
)

(165.3
)




December 31, 2003


43.9


62.1


2.9


108.9


288.1


717.3Provision /adjustments


101.3


10.9


6.2


118.4


35.3


153.7Cash payments


(110.6
)

(32.0
)

(4.1
)

(146.7
)




December 31, 2004


34.6


41.0


5.0


80.6


323.4


871.0Provision /adjustments


122.7


20.7


5.7


149.1


11.0


160.1Cash payments


(106.6
)

(12.7
)

(9.0
)

(128.3
)




December 31, 2005


50.7


49.0


1.7


101.4


334.4


1,031.1Provision /adjustments


115.2


9.1


5.9


130.2


47.9


178.1Cash payments


(89.8
)

(16.7
)

(6.1
)

(112.6
)




Settlement (i)


(23.2
)







(23.2
)




December 31, 2006


52.9


41.4


1.5


95.8


382.3


1,209.2Provision /adjustments


20.7


8.6


2.9


32.2


5.1


37.3Cash payments


(64.6
)

(13.5
)

(3.8
)

(81.9
)




December 31, 2007


9.0


36.5


0.6


46.1


387.4


1,246.5Provision /adjustments


31.9


1.4


0.9


34.2


1.1


35.3Cash payments


(22.2
)

(11.2
)

(1.3
)

(34.7
)




December 31, 2008

$
18.7

$
26.7

$
0.2

$
45.6

$
388.5

$
1,281.8


---

(b)   Goodwill impairment:

In 2006 and 2007, we conducted our annual impairment assessment and determined there was no goodwill impairment. In 2008, we recorded a non-cash
charge of $850.5 in connection with our annual impairment assessment. See note 5(d).

F-30

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

(c)   Long-lived asset impairment:

In 2006, we recorded a non-cash impairment charge of $1.4 primarily against property, plant and equipment in the Americas. In 2007, we recorded a
non-cash impairment charge of $15.1 primarily against property, plant and equipment in the Americas and Europe. In 2008, we recorded a non-cash impairment charge of $8.8
against property, plant and equipment in the Americas and Europe.

11.   INCOME TAXES:

Year ended December 312006

2007

2008Earnings (loss) before income tax:Canadian operations

$
(91.5
)
$
(143.2
)
$
(154.7
)Foreign operations


(44.6
)

150.3


(560.8
)$
(136.1
)
$
7.1

$
(715.5
)Current income tax expense (recovery):Canadian operations

$
(1.2
)
$
15.6

$
0.4Foreign operations


(39.5
)

(1.2
)

18.0$
(40.7
)
$
14.4

$
18.4Deferred income tax expense (recovery):Canadian operations

$
57.8

$
8.7

$
(4.9
)Foreign operations


(2.6
)

(2.3
)

(8.5
)$
55.2

$
6.4

$
(13.4
)


The
overall income tax provision differs from the provision computed at the statutory rate as follows:

Year ended December 312006

2007

2008Combined Canadian federal and provincial income tax rate


36.1
%

36.1
%

33.5
%Income tax expense (recovery) based on earnings or loss before income taxes at statutory rate

$
(49.1
)
$
2.6

$
(239.7
)Impact on income taxes from:Manufacturing and processing deduction


1.6


5.2


(4.9
)Foreign income taxed at lower rates


(50.2
)

(92.4
)

216.8Unrealized foreign exchange on Canadian companies' loans


73.5


47.8


(4.2
)Other, including non-taxable and non-deductible items


6.2


34.3


(0.7
)Change in valuation allowance


32.5


23.3


3.1Amortization and write-down of non-deductible goodwill and other intangible assets








34.6Income tax expense

$
14.5

$
20.8

$
5.0


F-31

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Deferred
income tax assets and liabilities are recognized for future income tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities, and their respective tax bases. Deferred income tax assets and liabilities are comprised of the following:

December 312007

2008Deferred income tax assets:Income tax effect of operating losses carried forward

$
557.2

$
555.1Accounting provisions not currently deductible


69.9


45.6Property, plant and equipment, intangible and other assets


61.5


78.5Share issue and debt issue costs


0.1


Restructuring accruals


20.1


12.4708.8


691.6Valuation allowance


(588.8
)

(591.9
)120.0


99.7Deferred income tax liabilities:Deferred pension asset


(12.7
)

(15.1
)Unrealized foreign exchange gains


(164.6
)

(113.1
)Share issue and debt issue costs





(2.7
)(177.3
)

(130.9
)Deferred income tax liability, net

$
(57.3
)
$
(31.2
)


The
net deferred income tax asset (liability) is classified as follows:

December 312007

2008Current

$
3.8

$
8.0Long-term


(61.1
)

(39.2
)Total

$
(57.3
)
$
(31.2
)


In
certain jurisdictions, we currently have significant operating losses and other deductible temporary differences that will reduce taxable income in these jurisdictions in future
periods. We have determined that
a valuation allowance of $591.9 is required in respect of our deferred income tax assets as at December 31, 2008 (2007  $588.8).

In
2006, we recorded net deferred income tax liabilities relating to net unrealized foreign exchange gains in Canada. We determined during the fourth quarter of 2006 that certain foreign
exchange losses accrued on Canadian assets may not be available to offset the unrealized foreign exchange gains accrued on Canadian liabilities. This was due to the potential timing of realization of
foreign exchange gains and losses and/or potential challenges that, more likely than not, would result in a lack of availability of the unrealized foreign exchange losses to offset the unrealized
foreign exchange gains.

The
aggregate amount of undistributed earnings of our foreign subsidiaries, for which no deferred income tax liability has been recorded, is $980.0 as at December 31, 2008
(2007  $885.1). We intend to indefinitely re-invest income in these foreign subsidiaries.

F-32

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

We
have been granted tax incentives, including tax holidays, for our China, Czech Republic, Malaysia, Philippines and Thailand subsidiaries. The tax benefit arising from these incentives
is approximately $42.6 or $0.19 per diluted share for 2008, $45.0 or $0.20 per diluted share for 2007 and $41.2 or $0.18 per diluted share for 2006. These tax incentives expire between 2009 and 2015,
and are subject to certain conditions with which we intend to comply.

As
at December 31, 2008, our operating loss carry forwards by year of expiry are as follows:

Year of Expiry

Americas

Europe

Asia

Total2009

$
2.0

$
0.1

$
9.6

$
11.72010


7.1


310.2





317.32011


11.6


165.4


1.5


178.52012


15.0


32.6


23.0


70.62013


19.0


20.5


14.4


53.92014


57.0





7.1


64.12015 - 2028


831.5


81.9


9.8


923.2Indefinite


268.8


292.2


45.8


606.8$
1,212.0

$
902.9

$
111.2

$
2,226.1


See
note 16 regarding income tax contingencies.

12.   RELATED PARTY TRANSACTIONS:

In 2008, management fees of $2.7 (2007  $1.2; 2006  $1.0) were charged by our parent
company, based on the terms of a management agreement. These fees were recorded at the exchange amount, being the amount agreed to by the parties.

In
2008, we entered into a manufacturing agreement with a company under the control of our parent company. During 2008, we recorded revenue of $19.3 from this related party. As at
December 31, 2008, we had $7.1 due from this related party. All transactions with this related party were in the normal course of operations and were recorded at the exchange amount, being the
amount agreed to by the parties.

13.   PENSION AND NON-PENSION POST-EMPLOYMENT BENEFIT PLANS:

We
provide pension and non-pension post-employment benefit plans for our employees. Pension benefits include traditional pension plans as well as supplemental
pension plans. Some employees in Canada, Japan, the United Kingdom and the Philippines participate in defined benefit plans. Defined contribution plans are offered to employees, mainly in
Canada and the U.S.

We
provide non-pension post-employment benefits (other benefit plans) to retired and terminated employees in Canada, the U.S., Mexico and Thailand. These benefits
include one-time retirement and termination benefits, medical, surgical, hospitalization coverage, supplemental health, dental and group life insurance.

Our
pension funding policy is to contribute amounts sufficient to meet minimum local statutory funding requirements that are based on actuarial calculations. We may make additional
discretionary contributions based on actuarial assessments. Contributions made by us to support ongoing plan obligations have been included in the deferred asset or liability accounts on the balance
sheet. The most recent statutory pension actuarial valuations were completed using measurement dates as of December 2005 and April 2007. The

F-33

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

measurement
dates to be used for the next actuarial valuation for pensions will be December 2008 and April 2010.

We
currently fund our non-pension post-employment benefit plans as we incur benefit payments. The most recent actuarial valuations for non-pension
post-employment benefits were completed using measurement dates of May 2005 and January 2008. The measurement dates of the next actuarial valuations for
non-pension post-employment benefits will be January 2009 and January 2010. We accrue the expected costs of providing non-pension
post-employment benefits during the periods in which the employees render service.

The
measurement date used for the accounting valuation for pension and non-pension post-employment benefits is December 31, 2008.

Pension
fund assets are invested primarily in fixed income and equity securities. Asset allocation between fixed income and equity is adjusted based on the expected life of the plan and
the expected retirement of the plan participants. Currently, the asset allocation allows for 39%-50% investment in fixed income and 46%-73% investment in equities through
mutual funds, and 4%-7% in real estate/other investments. We employ passive investment approaches in our pension plan asset management strategy. Our pension funds do not invest directly in
equities or derivative instruments. Our pension funds do not invest directly in our shares, but may invest indirectly as a result of the inclusion of our shares in certain market investment funds.

The
table below presents the market value of the assets as follows:

Fair Market
Value at
December 31

Actual Asset
Allocation (%)
at December 312007

2008

2007

2008Equities through mutual funds

$
205.2

$
133.0


48%


46%Fixed income


198.1


134.8


46%


47%Other


26.4


18.7


6%


7%Total

$
429.7

$
286.5


100%


100%


The
following tables provide a summary of the estimated financial position of our pension and non-pension post-employment benefit plans:

Pension Plans
Year ended
December 31

Other Benefit
Plans
Year ended
December 312007

2008

2007

2008Plan assets, beginning of year

$
384.1

$
429.7

$


$
Employer contributions


21.0


22.0


3.0


2.7Actual return on assets


14.8


(56.9
)




Voluntary employee contributions


0.2


0.1





Plan settlements


(0.6
)







Benefits paid


(22.2
)

(23.8
)

(3.0
)

(2.7
)Foreign currency exchange rate changes


32.4


(84.6
)




Plan assets, end of year

$
429.7

$
286.5

$


$



F-34

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Pension Plans
Year ended
December 31

Other
Benefit Plans
Year ended
December 312007

2008

2007

2008Projected benefit obligations, beginning of year

$
456.7

$
473.3

$
67.1

$
81.1Service cost


4.9


2.4


2.8


2.5Interest cost


23.1


23.0


3.8


4.2Voluntary employee contributions


0.2


0.1





Actuarial losses (gains)


(23.1
)

(54.1
)

1.7


(4.6
)Plan amendments








0.3


Plan curtailments


(1.3
)




(1.3
)

(1.2
)Plan settlements


(0.6
)







Benefits paid


(22.2
)

(23.8
)

(3.0
)

(2.7
)Foreign currency exchange rate changes


35.6


(94.2
)

9.7


(13.2
)Projected benefit obligations, end of year

$
473.3

$
326.7

$
81.1

$
66.1Excess of projected benefit obligations over plan assets

$
(43.6
)
$
(40.2
)
$
(81.1
)
$
(66.1
)Unrecognized actuarial losses


123.7


117.5


33.3


21.3Unrecognized net transition obligation and prior service cost


(4.0
)

(4.9
)

(10.3
)

(7.6
)Deferred (accrued) pension cost

$
76.1

$
72.4

$
(58.1
)
$
(52.4
)


The
following table reconciles the deferred (accrued) pension balances to those reported as of December 31, 2007 and 2008:

2007

2008Pension
Plans

Other Benefit
Plans

Total

Pension
Plans

Other Benefit
Plans

TotalAccrued pension and post-employment benefits

$
(12.3
)
$
(58.1
)
$
(70.4
)
$
(10.8
)
$
(52.4
)
$
(63.2
)Deferred pension assets (note 6)


88.4





88.4


83.2





83.2$
76.1

$
(58.1
)
$
18.0

$
72.4

$
(52.4
)
$
20.0


The
following table outlines the net periodic benefit cost as follows:

Pension Plans
Year ended December 31

Other Benefit Plans Year
ended December 312006

2007

2008

2006

2007

2008Service cost

$
5.9

$
4.9

$
2.4

$
4.5

$
2.8

$
2.5Interest cost


19.2


23.1


23.0


3.5


3.8


4.2Expected return on assets


(19.5
)

(22.7
)

(23.1
)







Net amortization of prior service cost


(0.1
)

(0.1
)

(0.1
)

(0.8
)

(0.8
)

(0.7
)Net amortization of actuarial losses


8.0


5.0


3.9


1.1


1.1


1.0Curtailment/settlement loss (gain)


2.1


(0.2
)

0.1


0.6


(0.3
)

(0.5
)15.6


10.0


6.2


8.9


6.6


6.5Defined contribution pension plan expense


20.1


11.5


11.8








Total expense for the year

$
35.7

$
21.5

$
18.0

$
8.9

$
6.6

$
6.5


F-35

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

The
following table outlines the actuarial assumption percentages used in measuring the projected benefit obligations at December 31 and the net periodic benefit costs for the
year ended December 31 as follows:

Pension Plans

Other Benefit Plans2006

2007

2008

2006

2007

2008Weighted average discount rate (i) for:Projected benefit obligations


5.0


5.4


5.9


5.5


5.6


6.5Net periodic benefit cost


4.7


5.0


5.4


5.3


5.5


5.6Weighted average rate of compensation increase for:Projected benefit obligations


3.5


3.7


3.2


3.6


3.4


4.7Net periodic benefit cost


3.4


3.5


3.7


3.5


3.6


3.4Weighted average expected long-term rate of return on plan assets (ii) for:Net periodic benefit cost


5.7


5.8


5.9








Healthcare cost trend rate (iii) for:Projected benefit obligations











8.0


7.8


7.3Net periodic benefit cost











9.3


8.0


7.8Estimated rate for the following 12-month net periodic benefit cost











8.0


7.8


7.3


Management
applied significant judgment in determining these assumptions. We evaluate these assumptions on a regular basis taking into consideration current market conditions and
historical market data. Actual results could differ materially from those estimates and assumptions.



Assumed
healthcare trend rates impact the amounts reported for healthcare plans. A one percentage-point change in the assumed healthcare trend rates has the following impact:

Other
Benefit Plans
Year ended
December 312007

20081% IncreaseEffect on projected benefit obligation

$
14.1

$
10.8Effect on service cost and interest cost


1.2


1.21% DecreaseEffect on projected benefit obligation

$
(10.9
)
$
(7.8
)Effect on service cost and interest cost


(0.9
)

(0.9
)


F-36

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

At December 31, 2008, we have pension plans that have accrued benefit obligations of $213.0 in excess of plan assets of $164.4. We also have pension plans
with plan assets of $122.1 that are in excess of accrued benefit obligations of $113.7.

At
December 31, 2008, the total accumulated benefit obligations for the pension plans was $324.4 and the projected benefit obligations for the non-pension
post-employment benefit plans was $66.1.

In
2008, we made contributions to the pension plans of $33.8, of which $11.8 was for defined contribution plans and $22.0 was for defined benefit plans. We may, from time to time, make
voluntary contributions to the pension plans. In 2008, we made contributions to the non-pension post-employment benefit plans of $2.7 to fund benefit payments.

The
estimated future benefit payments for the next 10 years, which reflect expected future service, and estimated employer contributions are as follows:

Year

Pension Benefits

Other BenefitsExpected benefit payments:

2009

$
16.0

$
3.12010


16.3


3.02011


16.9


3.22012


17.7


3.32013


17.9


3.52014 - 2018


95.3


20.6Expected employer contributions:

2009

$
31.9

$
3.1


14.   FINANCIAL INSTRUMENTS:

Financial risk management objectives:

We
have exposures to a variety of financial risks through our operations. In addition to credit risk and liquidity risk that we face in the normal course of business, there is also
market risk associated with interest rate movements on outstanding debt obligations and exchange rate movements on non-U.S. dollar denominated receipts and payments. We have
regularly monitored these risks and established policies and business practices to mitigate the adverse effects of these potential exposures. We have used certain types of derivative financial
instruments to reduce the effects of some of these risks. We do not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Our
major currency exposures, as of December 31, 2008, are summarized in U.S. dollar equivalents in the following table. For purposes of this table, we have excluded items
such as pensions, post-employment benefits

F-37

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

and
income taxes, in accordance with the financial instruments standard. The local currency amounts have been converted to U.S. dollar equivalents using the spot rates as of
December 31, 2008.

Chinese
renminbi

Brazilian
real

Canadian
dollar

Thai
baht

Malaysian
ringgitCash and cash equivalents

$
23.7

$
1.8

$
40.0

$
0.7

$
5.7Accounts receivable


42.8


13.6


0.1





0.1Other financial assets


2.6


7.0





1.4


0.4Accounts payable and accrued liabilities


(23.1
)

(1.7
)

(55.7
)

(16.9
)

(18.5
)Other financial liabilities


(5.7
)

(2.6
)







Net financial assets (liabilities)

$
40.3

$
18.1

$
(15.6
)
$
(14.8
)
$
(12.3
)


At
December 31, 2008, a one-percentage point strengthening or weakening of the following currencies against the U.S. dollar for our financial instruments
denominated in these non-functional currencies has the following impact:

Chinese
renminbi

Brazilian
real

Canadian
dollar

Thai
baht

Malaysian
ringgitIncrease (decrease)1% StrengtheningNet earnings

$
0.4

$
0.1

$
(0.2
)
$
(0.1
)
$
(0.1
)Other comprehensive income








2.0


0.7


0.61% WeakeningNet earnings


(0.4
)

(0.1
)

0.2


0.1


0.1Other comprehensive income








(1.9
)

(0.7
)

(0.6
)




F-38

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Fair values:



December 31, 2007

December 31, 2008Carrying
Amount

Fair Value
(ii)

Carrying
Amount

Fair Value
(ii)2011 Notes (i)

$
514.2

$
480.0

$
512.6

$
452.72013 Notes (i)


253.7


233.8


226.5


185.2


---

The
carrying values of our Notes are comprised of elements recorded at fair value and amortized cost. Bifurcated embedded prepayment options in the Notes are recorded at fair value using
option pricing models. We have applied fair value hedge accounting to our 2011 Notes. The change in the fair value of the 2011 Notes due to the hedged interest rate risk has been reflected in the
carrying value of the 2011 Notes. See note 7(e). Our 2013 Notes are not hedged and, therefore, are recorded at amortized cost except for the embedded prepayment options which are recorded at
fair value.

The
fair value of our hedged debt obligation (2011 Notes) in relation to the hedged interest rate risk is estimated by discounting future cash flows at current interest rates. The fair
values of the prepayment options embedded in our Notes are estimated using option pricing models with inputs of observable market data, including future interest rates, implied volatilities and
credit spreads.

F-39

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Derivatives and hedging activities:

All
derivative financial instruments are recorded at fair value on our consolidated balance sheet. The counterparties to the contracts are financial institutions each of which had at
December 31, 2008 a Standard and Poor's rating of A or above. Therefore, we believe the credit risk of counterparty non-performance is low.

Currency

Amount of
U.S. dollars

Weighted average
exchange rate of
U.S. dollars

Maximum
period in
months

Fair value
gain/(loss)Canadian dollar

$
230.3

$
0.91


15

$
(22.0
)Mexican peso


88.6


0.08


12


(9.2
)Thai baht


77.7


0.03


12


(2.6
)Malaysian ringgit


60.6


0.30


12


(2.7
)British pound sterling


48.1


1.49


4


1.7Singapore dollar


31.0


0.71


12


(0.7
)Czech koruna


26.7


0.06


7


(3.8
)Euro


19.4


1.45


12


0.4Brazilian real


4.7


0.41


2


Total

$
587.1







$
(38.9
)


At
December 31, 2008, the fair value of these contracts was a net unrealized loss of $38.9 (2007  unrealized gain of $20.0). This is
comprised of $4.1 of derivative assets recorded in prepaid and other assets and $43.0 of derivative liabilities recorded in accrued liabilities. The decrease in the fair value of these forward
exchange contracts for 2008 is due primarily to unrealized losses from the fluctuations in foreign exchange rates in the second half of 2008 and the settlement of certain foreign currency forwards
with significant gains during the first half of 2008. The unrealized losses are a result of fluctuations in foreign exchange rates between the time the currency forward contracts were entered into and
the valuation date at period end.

We
have not designated certain forward contracts to trade U.S. dollars as hedges, most significantly our British pound sterling contract, and have marked these contracts to market
each period through operations.

F-40

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

15.   CAPITAL MANAGEMENT:

Our main objectives in managing our capital resources are to ensure liquidity and to have funds available for working capital or other investments required to
grow our business. Our capital resources consist of cash, short-term investments, access to credit facilities, senior subordinated notes and share capital.

We
manage our capitalization levels and make adjustments, as available, for changes in economic conditions. We have full access to a $300.0 credit facility and we can sell up to $250.0,
on a committed basis, under an accounts receivable sales program to provide short-term liquidity. Our credit facility has restrictive covenants relating to debt incurrence and the sale of
assets. The facility also contains financial covenants that may limit the amount of debt that can be incurred under the facility. We closely monitor our business performance to evaluate compliance
with our covenants. Our Notes also have restrictions on financing activities. We continue to monitor and review the most cost-effective methods for raising capital, taking into account
these restrictions and covenants. Our credit facility expires in April 2009 and we are currently assessing whether we will renew all or a portion of this facility. Our accounts receivable sales
program is available until November 2009.

There
were no significant changes to our capital structure during 2008. We have not distributed, nor do we have any current plan to distribute, any dividends to our shareholders.

Our
strategy on capital risk management has not changed since 2007. Other than the restrictive covenants associated with our debt obligations noted above, we are not subject to any
contractual or regulatorily imposed capital requirements. While some of our international operations are subject to government restrictions on the flow of capital into and out of their jurisdictions,
these restrictions have not had a material impact on our operations.

16.   COMMITMENTS, CONTINGENCIES AND GUARANTEES:

At December 31, 2008, we have operating leases that require future payments as follows:

Operating
Leases2009

$
47.22010


33.42011


22.02012


8.82013


7.7Thereafter


32.4


We
have contingent liabilities in the form of letters of credit, letters of guarantee, and surety and performance bonds which we provided to various third parties. These guarantees cover
various payments,
including customs and excise taxes, utility commitments and certain bank guarantees. At December 31, 2008, these contingent liabilities amounted to $55.4
(2007  $74.4).

In
addition to the above guarantees, we have also provided routine indemnifications, whose terms range in duration and often are not explicitly defined. These may include
indemnifications against adverse impacts due to changes in tax laws and patent infringements by third parties. We have also provided indemnifications in connection with the sale of certain businesses
and real property. The maximum potential liability from these indemnifications cannot be reasonably estimated. In some cases, we have recourse against other parties to mitigate our risk of loss from
these indemnifications. Historically, we have not made significant payments relating to these types of indemnifications.

F-41

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Litigation:

In the normal course of our operations, we are subject to litigation and claims from time to time. We may also be subject to lawsuits,
investigations and other claims, including environmental, labor, product, customer disputes and other matters. Management believes that adequate provisions have been recorded in the accounts where
required. Although it is not possible to estimate the extent of potential costs, if any, management believes that the ultimate resolution of such contingencies will not have a material adverse impact
on our results of operations, financial position or liquidity.

In
2007, securities class action lawsuits were commenced against the Company and our former Chief Executive and Chief Financial Officers, in the United States District Court of
the Southern District of New York by certain individuals, on behalf of themselves and other unnamed purchasers of our stock, claiming that they were purchasers of our stock during the period
January 27, 2005 through January 30, 2007. The plaintiffs allege violations of United States federal securities laws and seek unspecified damages. They allege that during the
purported class period we made statements concerning our actual and anticipated future financial results that failed to disclose certain purportedly adverse information with respect to demand and
inventory in our Mexican operations and our information technology and communications divisions. In an amended complaint, the plaintiffs have added one of our directors and Onex Corporation as
defendants. All defendants have filed motions to dismiss the amended complaint. Those motions are pending. A parallel class proceeding has also been issued against the Company and our former Chief
Executive and Chief Financial Officers in the Ontario Superior Court of Justice, but neither leave nor certification of the action has been granted by that court. We believe that the allegations in
these claims are without merit and we intend to defend against them vigorously. However, there can be no assurance that the outcome of the litigation will be favorable to us or will not have a
material adverse impact on our financial position or liquidity. In addition, we may incur substantial litigation expenses in defending these claims. We have liability insurance coverage that may cover
some of our litigation expenses, potential judgments or settlement costs.

Income taxes:

We are subject to tax audits by local tax authorities. Tax authorities could challenge the validity of our inter-company financing and
transfer pricing policies which generally involve subjective areas of taxation and a significant degree of judgment. If any of these tax authorities is successful in challenging our inter-company
transactions, our income tax expense may be adversely affected and we could also be subjected to interest and penalty charges.

In
connection with ongoing tax audits in Canada, tax authorities have taken the position that income reported by one of our Canadian subsidiaries in 2001 and 2002 should have been
materially higher as a result of certain inter-company transactions. The successful pursuit of that assertion could result in that subsidiary owing significant amounts of tax, interest and possibly
penalties. We believe we have substantial defenses to the asserted position and have adequately accrued for any probable potential adverse tax impact. However, there can be no assurance as to the
final resolution of this claim and any resulting proceedings, and if this claim and any ensuing proceedings are determined adversely to us, the amounts we may be required to pay could
be material.

In
connection with tax audits in the United States, tax authorities asserted that our United States subsidiaries owed significant amounts of tax, interest and penalties
arising from inter-company transactions. A significant portion of these asserted deficiencies were resolved in our favour in the fourth quarter of 2006 which resulted in a reduction to our current
income tax liabilities in 2006. In the third quarter of 2007, we resolved the remaining deficiencies in our favour which resulted in a reduction to current income tax liabilities in that quarter. The
tax audit resolution also resulted in a small reduction in the amount of our U.S. tax loss carryforwards for years 1998 to 2004.

F-42

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

17.   SEGMENT AND GEOGRAPHIC INFORMATION:

The accounting standards establish the criteria for the disclosure of certain information in the interim and annual financial statements regarding operating
segments, products and services, geographic areas and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is
regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our operating segment is comprised of our electronics manufacturing
services business. Our chief operating decision maker is our Chief Executive Officer.

Year ended
December 312006

2007

2008Consumer


18%


22%


26%Enterprise communications


28%


28%


25%Servers


17%


19%


16%Telecommunications


18%


14%


15%Storage


10%


10%


10%Industrial, aerospace and defense


9%


7%


8%


Year ended
December 312006

2007

2008China


19%


18%


19%Thailand


20%


17%


18%Mexico


15%


14%


14%Canada


11%


12%


11%


December 312006

2007

2008China


20%


21%


23%Canada


19%


18%


16%Thailand


14%


16%


13%Mexico


11%





13%


18.   SIGNIFICANT CUSTOMERS:

During 2006, two customers individually comprised 10% of total revenue. At December 31, 2006, no customer represented more than 10% of total accounts
receivable.

F-43

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

During
2007, two customers individually comprised 11% and 10% of total revenue. At December 31, 2007, no customer represented more than 10% of total accounts receivable.

During
2008, no customer represented more than 10% of total revenue. At December 31, 2008, two customers individually represented more than 10% of total accounts receivable.

19.   SUPPLEMENTAL CASH FLOW INFORMATION:

Year ended December 312006

2007

2008Paid (recovered) during the year:Interest (a)

$
70.5

$
76.6

$
65.4Taxes (b)

$
(36.5
)
$
23.2

$
17.0


---

Cash
is comprised of the following:

December 312007

2008Cash (i)

$
328.7

$
406.2Short-term investments (i)


788.0


794.8$
1,116.7

$
1,201.0


---

20.   CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES:

Our consolidated financial statements have been prepared in accordance with Canadian GAAP. The significant differences between Canadian and U.S. GAAP, and
their effects on our consolidated financial statements, are described below:

Consolidated statements of operations:

The following table reconciles net loss and other comprehensive income (loss), as reported in the accompanying consolidated statements
of operations and consolidated statements of other comprehensive

F-44

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

income
(loss), respectively, to net loss and other comprehensive income (loss) that would have been reported had the consolidated financial statements been prepared in accordance with
U.S. GAAP:

Year ended December 312006

2007

2008Net loss in accordance with Canadian GAAP

$
(150.6
)
$
(13.7
)
$
(720.5
)Gain on foreign exchange contract, net of tax (a)


3.2





(15.3
)Impact of debt instruments and interest rate swaps, net of tax (b)(iii)





(1.4
)

2.4Tax uncertainties (h)








7.6Stock-based compensation expense (e)


(1.9
)

(1.0
)

Net loss in accordance with U.S. GAAP

$
(149.3
)
$
(16.1
)
$
(725.8
)Other comprehensive income (loss):Other comprehensive income in accordance with Canadian GAAP


7.1


29.9


(46.5
)Net loss on derivatives designated as cash flow hedges, net of tax ((b)(i))


(4.8
)




Changes to funded status of defined benefit pension and other post-employment benefit plans (c)





6.5


16.3Minimum pension liability, net of tax (c)


(38.1
)




Comprehensive income (loss) in accordance with U.S. GAAP

$
(185.1
)
$
20.3

$
(756.0
)


The
following table details the computation of U.S. GAAP basic and diluted loss per share:

Year ended December 312006

2007

2008Loss attributable to common shareholders  basic and diluted

$
(149.3
)
$
(16.1
)
$
(725.8
)Weighted average shares  basic (in millions)


227.2


228.9


229.3Weighted average shares  diluted (in millions)(1)


227.2


228.9


229.3Basic loss per subordinate voting share(2)

$
(0.66
)
$
(0.07
)
$
(3.17
)Basic loss per multiple voting share(2)

$
(0.66
)
$
(0.07
)
$
(3.17
)Diluted loss per share

$
(0.66
)
$
(0.07
)
$
(3.17
)


---



F-45

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

The
cumulative effect of these adjustments on our shareholders' equity is as follows:

As at December 312006

2007

2008Shareholders' equity in accordance with Canadian GAAP

$
2,094.6

$
2,118.2

$
1,365.5Gain on foreign exchange contract, net of tax (a)


15.3


15.3


Net loss on cash flow hedges ((b)(i))


(0.5
)




Impact of debt instruments and interest rate swaps, net of tax ((b)(iii))





5.5


7.9Recognition of funded status of benefit plans, net of tax (c)


(149.0
)

(142.5
)

(126.2
)Tax uncertainties (h)








7.6Shareholders' equity in accordance with U.S. GAAP

$
1,960.4

$
1,996.5

$
1,254.8


---



F-46

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)



F-47

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)



Other disclosures required under U.S. GAAP:



F-48

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)

Year ended December 312006

2007

2008Accumulated other comprehensive income in accordance with Canadian GAAP

$
26.5

$
55.9

$
9.4Opening balance of accumulated net gain (loss) on cash flow hedges


4.3


(0.5
)

Transitional adjustment  January 1, 2007 (note 9)





0.5


Net loss on derivatives designated as cash flow hedges, net of tax ((b)(i))


(4.8
)




Closing balance


(0.5
)




Opening balance related to pension and non-pension post-employment benefit plans


(53.9
)

(149.0
)

(142.5
)Minimum pension liability, net of tax (c)


(38.1
)




Recognition of funded status of defined benefit pension and other post-employment benefit plans, net of tax (c)


(57.0
)

6.5


16.3Closing balance


(149.0
)

(142.5
)

(126.2
)Accumulated other comprehensive loss in accordance with U.S. GAAP

$
(123.0
)
$
(86.6
)
$
(116.8
)




The
following table details the changes in the warranty liability:

2006

2007

2008Balance at January 1

$
23.9

$
23.2

$
24.8Accruals


14.3


15.5


14.0Payments


(15.0
)

(13.9
)

(18.1
)Balance at December 31

$
23.2

$
24.8

$
20.7




F-49

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)



2007

2008Balance at January 1

$
88.3

$
79.8Additions based on tax provisions related to the current year


12.8


3.8Increases (reductions) due to foreign exchange


9.8


(9.8
)Increases for tax positions of prior years





9.3Reductions relating to settlements


(31.1
)

(12.3
)Balance at December 31

$
79.8

$
70.8




YearsCanada (specific item under waiver)


1996-1998, 2000Hong Kong


1998-2000




F-50

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)





Level 1

Level 2

TotalAssets:Cash equivalents (money market funds)

$
390.1

$


$
390.1Derivatives  foreign currency forward contracts





4.2


4.2Derivatives  interest rate swap agreements





17.3


17.3$
390.1

$
21.5

$
411.6Liabilities:Derivatives  foreign currency forward contracts

$


$
43.1

$
43.1$


$
43.1

$
43.1






F-51

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars)



21.   COMPARATIVE INFORMATION:



22.   SUBSEQUENT EVENT:



F-52

---