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, 2012
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:

For the transition period from  to

Commission file number: 1-14832



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

Ontario, Canada(Jurisdiction of incorporation or organization)

844 Don Mills Road
Toronto, Ontario, Canada M3C 1V7(Address of principal executive offices)Manny Panesar
416-448-2211
clsir@celestica.com
844 Don Mills Road
Toronto, Ontario, Canada M3C 1V7(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)



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

Subordinate Voting Shares (Title of each 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.

163,825,129 Subordinate Voting Shares

0 Preference Shares18,946,368 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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o

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 basis of accounting the registrant has used to prepare the statements included in this filing:

U.S. GAAP
o        International Financial Reporting Standards as issued by the International Accounting Standards
Board ý        Other o

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o Item 18 o

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

PagePart I

1Item 1.

Identity of Directors, Senior Management and Advisers

3Item 2.

Offer Statistics and Expected Timetable

3Item 3.

Key Information

3A.

Selected Financial Data

3B.

Capitalization and Indebtedness

6C.

Reasons for the Offer and Use of Proceeds

6D.

Risk Factors

6Item 4.

Information on the Company

20A.

History and Development of the Company

20B.

Recent Acquisitions

20C.

Business Overview

20D.

Organizational Structure

30E.

Property, Plants and Equipment

30Item 4A.

Unresolved Staff Comments

31Item 5.

Operating and Financial Review and Prospects

32Item 6.

Directors, Senior Management and Employees

64A.

Directors and Senior Management

64B.

Compensation

67C.

Board Practices

99D.

Employees

102E.

Share Ownership

103Item 7.

Major Shareholders and Related Party Transactions

105A.

Major Shareholders

105B.

Related Party Transactions

106C.

Interests of Experts and Counsel

107Item 8.

Financial Information

107A.

Consolidated Statements and Other Financial Information

107B.

Significant Changes

108Item 9.

The Offer and Listing

108A.

Offer and Listing Details

108B.

Plan of Distribution

110C.

Markets

110D.

Selling Shareholders

110E.

Dilution

110F.

Expenses of the Issue

110Item 10.

Additional Information

110A.

Share Capital

110


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PageB.

Memorandum and Articles of Incorporation

110C.

Material Contracts

110D.

Exchange Controls

110E.

Taxation

111F.

Dividends and Paying Agents

116G.

Statement by Experts

116H.

Documents on Display

116I.

Subsidiary Information

117Item 11.

Quantitative and Qualitative Disclosures about Market Risk

117Item 12.

Description of Securities Other than Equity Securities

118A.

Debt Securities

118B.

Warrants and Rights

118C.

Other Securities

118D.

American Depositary Shares

118Part II

118Item 13.

Defaults, Dividend Arrearages and Delinquencies

118Item 14.

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

118Item 15.

Controls and Procedures

118Item 16.

[Reserved.]

118Item 16A.

Audit Committee Financial Expert

118Item 16B.

Code of Ethics

118Item 16C.

Principal Accountant Fees and Services

119Item 16D.

Exemptions from the Listing Standards for Audit Committees

119Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

120Item 16F.

Change in Registrant's Certifying Accountant

120Item 16G.

Corporate Governance

120Item 16H.

Mine Safety Disclosure

121Part III

122Item 17.

Financial Statements

122Item 18.

Financial Statements

122Item 19.

Exhibits

123


ii

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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, 2012. 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 Board of Governors of the Federal Reserve Bank, the average daily exchange rate was U.S.$1.00 = C$0.9995.

Unless we indicate otherwise, all information in this Annual Report is stated as of February 15, 2013, 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", Item 5, "Operating and Financial Review and Prospects" 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, Section 21E of the
Securities Exchange Act of 1934, as amended, or the U.S. Exchange Act, and applicable Canadian provincial and territorial securities legislation including, without limitation: statements
related to our future growth; trends in our industry; our financial or operational results, including our revenue and margin forecasts; the impact of acquisitions and program wins or losses on our
financial results and working capital requirements; anticipated expenses, restructuring charges, capital expenditures or benefits; our expected tax outcomes; our cash flows, financial targets and
priorities; changes in our mix of revenue by end market; our ability to diversify and grow our customer base and develop new capabilities; and the effect of the global economic environment on customer
demand. 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", "continues", or similar expressions, or may employ such future or conditional verbs as "may", "will", "could", "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 provincial and territorial 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 3D, "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:



1

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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 involve factors that are beyond our control. Our material assumptions may include the following:



2

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Our
assumptions and estimates 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
and elsewhere in this Annual Report. 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.

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 our actual future results may be materially different from what
we expect. All forward-looking statements attributable to us are expressly qualified by the cautionary statements contained in this Annual Report.

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 presented below is derived from our Consolidated Financial Statements.

The
Consolidated Financial Statements for 2010, 2011 and 2012 were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB"). See Item 18. Prior to adopting IFRS, we prepared our Consolidated Financial Statements using Canadian generally accepted accounting principles ("GAAP").
GAAP differs in some respects from IFRS. We have provided an explanation of our transition to IFRS in note 3 of our Consolidated Financial Statements in Item 18 of our 2011 Annual
Report.

3

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The
consolidated financial information in the below tables for 2010, 2011 and 2012 was prepared in accordance with IFRS.

Year ended December 312010

2011

2012(in millions, except per share amounts)Consolidated Statements of Operations Data (IFRS):Revenue

$
6,526.1

$
7,213.0

$
6,507.2Cost of sales


6,082.0


6,721.6


6,068.8Gross profit


444.1


491.4


438.4Selling, general and administrative expenses (SG&A)(1)


252.1


267.2


252.2Amortization of intangible assets


15.8


13.5


11.3Other charges(2)


49.9


6.5


59.5Finance costs(3)


6.9


5.4


3.5Earnings before income taxes


119.4


198.8


111.9Income tax expense (recovery)


18.2


3.7


(5.8
)Net earnings

$
101.2

$
195.1

$
117.7Other Financial Data (IFRS):Basic earnings per share

$
0.44

$
0.90

$
0.56Diluted earnings per share

$
0.44

$
0.89

$
0.56Property, plant and equipment and computer software cash expenditures

$
60.8

$
62.3

$
105.9Shares used in computing per share amounts (in millions):Basic


227.8


216.3


208.6Diluted


230.1


218.3


210.5




As at December 312010

2011

2012(in millions)Consolidated Balance Sheet Data (IFRS):Cash and cash equivalents

$
632.8

$
658.9

$
550.5Working capital(4)


1,009.1


1,116.0


911.8Property, plant and equipment


332.2


322.7


337.0Total assets


3,013.9


2,969.6


2,658.8Equity


1,282.9


1,463.8


1,316.7


(1)SG&A
expenses include research and development costs.(2)Other
charges in 2010 totaled $49.9 million, comprised primarily of: (a) a $35.8 million restructuring charge, (b) a
non-cash write-down of $9.1 million relating to the annual impairment assessment, primarily against computer software assets and property, plant and equipment and
(c) an $8.8 million loss on repurchase of long-term debt. Other
charges in 2011 totaled $6.5 million, comprised primarily of: (a) a $14.5 million restructuring charge offset, in part, by (b) a $6.5 million reversal
of provisions.


Other
charges in 2012 totaled $59.5 million, comprised primarily of: (a) a $44.0 million restructuring charge and (b) a non-cash write-down of
$17.7 million relating to the annual impairment assessment, primarily against goodwill. (3)Finance
costs is comprised of interest expense incurred on indebtedness (including indebtedness under our credit facilities) less interest income earned on
cash and cash equivalents.(4)Calculated
as current assets less current liabilities.


4

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We were not required to retroactively apply IFRS to our financial statements for years prior to 2010. The consolidated financial information in
the below tables for 2008 and 2009 was prepared in accordance with GAAP which conform in all material respects with U.S. GAAP except as described in footnote 4 below.

Year ended December 312008

2009(in millions, except per share amounts)Consolidated Statements of Operations Data (Canadian GAAP):Revenue

$
7,678.2

$
6,092.2Cost of sales


7,147.1


5,662.4Gross profit


531.1


429.8SG&A(1)


292.0


244.5Amortization of intangible assets


26.9


21.9Other charges(2)


885.2


68.0Interest expense(3)


42.5


35.0Earnings (loss) before income taxes


(715.5
)

60.4Income tax expense


5.0


5.4Net earnings (loss)

$
(720.5
)
$
55.0Other Financial Data (Canadian GAAP):Basic earnings (loss) per share

$
(3.14
)
$
0.24Diluted earnings (loss) per share

$
(3.14
)
$
0.24Property, plant and equipment and computer software cash expenditures

$
88.8

$
77.3Consolidated Statements of Operations Data (U.S. GAAP)(4):Net earnings (loss)

$
(725.8
)
$
39.0Shares used in computing per share amounts (in millions):Basic


229.3


229.5Diluted


229.3


230.9




As at December 312008

2009(in millions)Consolidated Balance Sheet Data (Canadian GAAP):Cash and cash equivalents

$
1,201.0

$
937.7Working capital(5)


1,603.6


1,023.0Property, plant and equipment


433.5


393.8Total assets


3,786.2


3,106.1Total long-term debt, including current portion(6)


733.1


222.8Equity


1,365.5


1,475.8Consolidated Balance Sheet Data (U.S. GAAP)(4):Total assets

$
3,786.2

$
3,106.1Total long-term debt, including current portion(6)


723.4


221.2Equity


1,254.8


1,346.8


(1)SG&A
expenses include research and development costs.(2)Other
charges in 2008 totaled $885.2 million, comprised primarily of: (a)(i) a non-cash write-down of $850.5 million
relating to the annual goodwill impairment assessment, (ii) a $35.3 million restructuring charge and (iii) a non-cash write-down of $8.8 million
relating to the annual impairment assessment, primarily against property, plant and equipment, offset, in part, by (b) a $7.6 million gain on repurchase of
long-term debt. Other
charges in 2009 totaled $68.0 million, comprised primarily of: (a)(i) a $83.1 million restructuring charge and (ii) a non-cash write-down of
$12.3 million relating to the annual impairment assessment, primarily against property, plant and equipment, offset, in


5

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part,
by (b)(i) a net $23.7 million recovery of damages from the settlement of a class action lawsuit and (ii) a net $2.8 million gain on repurchase of long-term debt,
net of a write-down of the embedded options on the debt. (3)Interest
expense is comprised of interest expense incurred on indebtedness (including indebtedness under our credit facilities) less interest income earned
on cash and cash equivalents and the marked-to-market adjustments related to our subordinated debt and interest rate swaps. Our swap agreements were terminated in
February 2009 and we redeemed all outstanding subordinated debt by March 2010.(4)The
significant differences between the line items under Canadian GAAP and U.S. GAAP arose
primarily from:
For 2008: reversal of gain on foreign exchange contract, the timing of recording certain tax uncertainties and the
adjustments relating to the adoption of financial instruments, hedges and comprehensive income for Canadian GAAP; andFor 2009: adjustments relating to financial instruments and hedging, and the timing of recording certain tax uncertainties.(5)Calculated
as current assets less current liabilities.(6)Long-term
debt includes capital lease obligations.


Exchange Rate Information

The rate of exchange as of February 15, 2013 for the conversion of Canadian dollars into United States dollars was
U.S.$0.9931 and for the conversion of United States dollars into Canadian dollars was C$1.0069. The following table sets forth the exchange rates for the conversion of U.S.$1.00 into Canadian
dollars for the identified periods. The rates of exchange set forth herein are shown as, or are derived from, the reciprocals of the noon buying rates in New York City for cable transfers
payable in Canadian dollars, as certified for customs purposes by the Federal Reserve Bank of New York. The source of this data is the Board of Governors of the Federal Reserve's website
(http://www.federalreserve.gov).

2008

2009

2010

2011

2012Average


1.0660


1.1412


1.0298


0.9887


0.9995


February
2013

January
2013

December
2012

November
2012

October
2012

September
2012High


1.0286


1.0078


0.9958


1.0029


1.0003


0.9901Low


0.9959


0.9839


0.9841


0.9927


0.9763


0.9710


B.    Capitalization and Indebtedness

Not applicable.

C.    Reasons for the Offer and Use of Proceeds

Not applicable.

D.    Risk Factors

Any of the following risk factors, or a combination of them, could have a material adverse impact on our business, financial condition, and operating results. 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.

We are dependent on a limited number of customers and on our customers' ability to compete and succeed in the marketplace with the products we manufacture.

Our
customers include original equipment manufacturers ("OEMs") and service providers. A decline in revenue from the customers on which we are dependent or the loss of a significant
customer could have a material adverse effect on our financial condition and operating results. During 2012, two customers (2011  two customers;
2010  one customer) individually represented more than 10% of our total revenue, and our top 10 customers represented 67%
(2011  71%; 2010  72%) of our total revenue. In June 2012, we announced that we would wind down our manufacturing
services for Research In Motion Limited ("RIM"). We completed our manufacturing services for RIM and the related transition activities by the end of 2012. Our operating results are highly dependent
upon our customers' ability to compete and succeed in the marketplace with the

6

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products
we manufacture. These marketplaces are characterized by continued and rapid shifts in technology, changes in preferences by the end customer or other changes in end-market demand,
as well as increased competition. Certain of our customers have experienced, and may in the future experience, severe revenue erosion, pricing and margin pressures, and excess inventories that, in
turn, have adversely affected our operating results.

We
depend upon a relatively small number of customers for a significant percentage of our revenue. The mix of our customers and the types of products or services we provide to these
customers will have an impact on our operating results from period-to-period. There can be no assurance that our efforts to target new customers and services in our traditional
and newly expanding markets, including the pursuit of acquisitions, will succeed in reducing our customer concentration risk. Acquisitions are also subject to integration risk and volumes and margins
could be lower than we anticipate. As we continue to
pursue opportunities in new markets, we may encounter challenges as our knowledge or experience may be limited in these new markets or technologies.

There
can be no assurance that present or future significant customers will not terminate their manufacturing or service arrangements with us, or that they will not significantly change,
reduce or delay the volume of manufacturing or other services they order from us, any of which would adversely affect our operating results. Customers may also shift business to our competitors or
bring programs in-house or adjust the concentration of their supplier base. Significant reductions in, or the loss of, revenue from any of our customers may have a material adverse effect
on us. We cannot assure the replacement of delayed, cancelled or reduced orders with new business. In addition, the ramping of new programs may take from several months to more than a year before
production starts and may require significant up-front investments and increased working capital requirements. During this start-up period, these programs may generate losses
or may not achieve the expected financial performance due to production ramp inefficiencies, lower than expected volume or delays in ramping to volume. Our customers may significantly change these
programs, or even cancel them altogether, due to changes in end-market demand or changes in the viability of our customers' products in the marketplace.

We are in an industry comprised of numerous competitors and aggressive pricing dynamics.

We
are in a highly competitive industry. Our competitors include Benchmark Electronics, Inc., Flextronics International Ltd., Hon Hai Precision
Industry Co., Ltd., Jabil Circuit, Inc., Plexus Corp., and Sanmina-SCI Corporation, as well as smaller EMS companies that often have a regional, product, service or
industry-specific focus or original design manufacturers ("ODMs") that provide internally designed products and manufacturing services. 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, or they may choose to insource
previously outsourced business, particularly where internal excess capacity exists.

The
competitive environment in our industry is very intense and aggressive pricing is a common business dynamic. Some of our competitors have greater scale and a broader range of
services than we offer. While we have increased our capacity in lower-cost regions to reduce our costs, these regions may not provide the same operational benefits that they have in the
past due to rising costs and a more aggressive pricing environment. Additionally, our current or potential competitors may increase or shift their presence in new lower-cost regions to try
to offset continuous competitive pressure and increasing labor costs or to secure new business; may develop or acquire services comparable or superior to those we develop; combine or merge to form
larger competitors; or adapt more quickly than we may to new technologies, evolving industry trends and changing customer requirements. Some of our competitors have increased their vertical
capabilities by manufacturing modules or components used in the products they assemble, such as metal or plastic parts and enclosures, backplanes, circuit boards, cabling and related products. This
expanded capability may provide them with a competitive advantage and greater cost savings and may lead to more aggressive pricing for electronics manufacturing services. Competition may cause
pricing pressures, reduced profits or a loss of market share (for example, from program losses or customer disengagements). We may not be able to compete successfully against our current and
future competitors.

7

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We are operating in an uncertain global economic environment.

The global economy continues to be uncertain and may continue to negatively impact our operations. Uncertainty surrounding the current
global economic and geo-political outlook continues to limit the overall demand visibility of our end markets and may impact the future demand for some of the products we manufacture or
services we provide. This environment may also impact the financial condition of our customers or suppliers, as well as the number and pace of further customer consolidation.

A
deterioration in the economic environment may accelerate the effect of the various risk factors described in this Annual Report and could result in other unforeseen events that may
impact our business and financial condition.

We are dependent on a limited number of end markets for our revenue. Our mix of revenue by end market will continue to change, which may adversely affect our margins and our
ability to grow our revenue and may increase the effects of seasonality on our business.

To
reduce our reliance on any one customer or end market, we have been targeting new customers and new services in our traditional markets, exploring acquisition opportunities, and
expanding our business in our diversified end markets such as industrial, aerospace and defense, healthcare, solar, green technology and the semiconductor equipment market. As a result, our mix of
revenue by end market has changed and may continue to change. Our mix by end market is also impacted by the overall end market demand, the timing and extent of new program wins, losses or
follow-on business from customers and from acquisitions, amongst other factors.

Changes
to our mix of revenue by end market, and the conditions that are specific to each end market, could lead to volatility in our revenue and operating margins and adversely impact
our financial position and cash flows.

In
the past, we have experienced some level of seasonality in our quarterly revenue patterns across a number of the end markets we serve. As our revenue from
quarter-to-quarter is dependent on the level of demand and mix in each of our end markets, it is difficult for us to predict the extent and impact of seasonality on
our business.

Our results can be affected by rising labor costs.

There is some uncertainty with respect to the pace of rising labor costs in various regions in which we operate. Any increase in labor
costs that we are unable to recover in our pricing to our customers could adversely impact our operating results.

Our operations could be adversely affected by local events, including natural disasters, political instability, labor or social unrest, criminal activity and other risks
present in the jurisdictions in which we operate.

Our
operations and those of our customers, component suppliers or our logistic partners may be disrupted by local events, including natural disasters (such as the 2011 earthquake and
tsunami in Japan and the flooding in Thailand), political instability, labor or social unrest, criminal activity and other risks present in the jurisdictions in which we, our suppliers and customers
operate. Such events could seriously harm our results of operations and increase our costs. We carry insurance to cover damage to our facilities and interruptions to our operations, including those
that may occur as a result of natural disasters, such as flooding and earthquakes, hurricanes, tsunamis or other events. Our insurance policies are subject to deductibles, coverage limitations and
exclusions, and may not provide adequate coverage.

Increased
international political instability, terrorism, enhanced national security measures, armed conflicts, security issues at the U.S./Mexico border related to illegal immigration
or criminal activities associated with illegal drug activities, labor or social unrest, strained international relations and the related decline in consumer confidence arising from these factors may
hinder our ability to conduct business or reduce demand for our products or services. Any escalation in these events or similar future events may disrupt our operations or those of our customers and
suppliers and could adversely 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.

8

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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
and other transportation hubs. A work stoppage, strike or shutdown of any important supplier's facility or operations, or at any major port or airport, or the inability to access any such facility for
any reason, could result in manufacturing and shipping delays or expediting charges, which could have a material adverse effect on our operating results.

Such
events have had and may in the future 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 operating results. Such events 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.

We may encounter difficulties expanding our operations which could adversely affect our operating results.

As we expand our business, enter into new markets and products, invest in research, design and development, acquire new businesses or
capabilities, and transfer business from one region to another, we may encounter difficulties that result in higher than expected costs associated with such activities and customer dissatisfaction
with our performance. Potential difficulties related to our growth and/or operations include our ability to:



We
may encounter difficulties with the ramping and execution of new program wins from existing or new customers. We may require significant investments to support these new programs,
including increased working capital requirements, and may generate lower margins during the ramp period. There can be no assurance our increased investments will benefit us or result in business
growth. As we pursue opportunities in new markets or technologies, we also may encounter challenges due to our limited knowledge or experience. Any of these factors could prevent us from realizing the
anticipated benefits of growth in new markets, which could adversely affect our business and operating results.

Inherent challenges in managing unanticipated changes in customer demand impact our planning, supply chain execution and manufacturing and may affect our operating
performance and results.

Our customers are dependent on EMS providers for new product introductions and rapid response times to meet changes in volume
requirements. 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
program-by-program basis and typically receive customer purchase orders for specific quantities and timing of products. Most of our customers typically do not commit to
production schedules for more than 30 days to 90 days in advance and we often experience volatility in customer orders. Additionally, a significant portion of our revenue can occur in
the last month of the quarter and may be subject to change or cancellation that will affect our operating results. Accordingly, our forecasts of customer orders may be inaccurate. This situation may
make it difficult to order appropriate levels of materials and to schedule production and maximize utilization of our manufacturing capacity and resources.

Our
customers may change their forecast, production quantities or product type, or may accelerate, delay or cancel production quantities for various reasons. When customers change
production volumes or request different products to be manufactured than what they originally forecasted, the unavailability of components and materials for such changes could also impact our revenue
and working capital performance. Further, to guarantee continuity of supply for many of our customers, we are required to manufacture and warehouse specified quantities of finished goods. The
uncertainty of our customers' end markets, intense competition in our customers' industries and general order volume volatility may result in customers delaying or canceling the

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delivery
of products we manufacture for them or placing purchase orders for lower volumes of products than previously anticipated.

Changes
or delays in customer orders that require us to carry higher than expected levels of inventory could have a material adverse impact on our operating results and working capital
performance. We may not be able to return or re-sell this inventory, or we may be required to hold the inventory for a period of time, any of which may result in our having to record
additional reserves for the inventory if it becomes excess or obsolete. Order cancellations and delays could lower our asset utilization, resulting in higher levels of unproductive assets and
lower margins.

Consolidation in the electronics industry may adversely affect our business relationships or the volume of business we conduct with our customers.

Our customers, competitors and suppliers are subject to merger and acquisition transactions. Future mergers involving, or acquisitions
of, our customers may 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. Mergers or
consolidation among our competitors may create a competitive advantage over us, which may also result in a loss of business and revenue if customers shift their production.

We may encounter challenges in completing or integrating our acquisitions which could adversely affect our operating results.

We expect to expand our presence in new end markets and expand our capabilities, some of which may occur through acquisitions. These
transactions may involve acquisitions of entire companies or acquisitions of selected assets. Potential challenges related to our acquisitions include:



Any
of these factors may prevent us from realizing the anticipated benefits of an acquisition, including additional revenue, operational synergies and economies of scale. Our failure to
realize the anticipated benefits of acquisitions may adversely affect our business and operating results and require us to write-down the carrying value of goodwill and intangible assets
in periods subsequent to the acquisitions. For example, the majority of our $17.7 million impairment charge in 2012 was incurred to write-down goodwill related to the healthcare
business we acquired in 2010, as our progress and our ability to ramp this business have been slower than we had anticipated.

Our results can be affected by the availability of components.

The purchase of materials and electronic components represents a significant portion of our costs. A delay or interruption in supply
from a component 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 products in a timely
manner. Additionally, quality or reliability issues at any of our component providers, or financial difficulties that affect their production and ability to supply us with components, could halt or
delay production of a customer's product, which could adversely impact our operating results.

Supply
shortages for a particular component can delay production of, and revenue from, products using that component. Shortages also may result in our carrying higher levels of inventory
and extended lead times, or result in increased component prices, which could cause price increases in the products and services we provide. Any increase in our costs that we are unable to recover in
our pricing to our customers may negatively impact our operating margins and our operating results.

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At
various times in our industry's history, there have been industry-wide shortages of electronic components. Shortages, or fluctuations in the cost of components, may have a
material adverse effect on our business or cause our operating results to fluctuate from period-to-period. Changes in forecasted volumes or in our customers' requirements can
affect our ability to obtain components and adversely impact our operating results.

Rising oil and other commodity prices may negatively impact our operating results due to higher production and transportation costs.

We
rely on various energy sources in our production and transportation activities. The price of commodities, including oil, has been volatile and remains uncertain. Increased prices for
energy and other commodities could result in higher raw material and component costs and transportation costs. Any increase in our costs that we are unable to recover in our pricing to our customers
may negatively impact our operating margins and could adversely impact our operating results.

We may experience increased financial risk due to non-performance by counterparties.

A failure by a counterparty, which includes customers, suppliers, financial institutions and other third parties with which we conduct
business, to fulfill its contractual obligations may result in a financial loss to us. We generally provide payment terms to our customers ranging from 15 days to 60 days. Our accounts
receivable balance at December 31, 2012 was $700.5 million, with one customer individually representing more than 10% of our total accounts receivable. If any of our customers have
insufficient liquidity, we could encounter significant delays or defaults in payments owed to us by such customers, or we may extend our payment terms, which could adversely impact our financial
condition and operating results. We also may not be able to recover all of the amounts owed to us by a customer, including amounts to cover unused inventory or capital investments we acquired to
support that customer's business. If a key supplier experiences financial difficulties, this may affect its ability to supply us with materials or components, which could halt or delay the production
of a customer's product, and have a material adverse impact on our operations.

We face financial risks due to foreign currency volatility.

Global currency markets can be volatile. Although we conduct the majority of our business in U.S. dollars, our financial results
are affected by the valuation of foreign currencies relative to the U.S. dollar. Events such as the European sovereign debt crisis can increase uncertainty in financial and currency markets and
may negatively impact our operating results.

Our
significant non-U.S. currency exposures include the Canadian dollar, Thai baht, Malaysian ringgit, Mexican peso, British pound sterling, Chinese renminbi, Euro,
and the Romanian leu. We enter into forward exchange contracts, generally for periods of up to 15 months, intended to hedge our cash flows and significant balance sheet exposures against
significant fluctuations in the foreign exchange rates of many of these foreign currencies. Our operating results may be adversely impacted by currency fluctuations to the extent our hedging program
does not mitigate the impact of our foreign currency costs and exposures.

Our customers may be affected by rapid technological changes that may have an impact on their success in their markets and on our business.

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 shorter 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 or their models become obsolete, fail to gain widespread acceptance or are cancelled, our
business could be adversely affected. As an example, declines in end-market demand for customer-specific proprietary systems in favor of open systems with standardized technologies could
have an adverse impact on our business. The highly competitive nature of our customers' products could also drive consolidation among OEMs, and result in product line consolidation that could
adversely impact our customer relationships and our revenue.

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Global operations are subject to inherent risks. Our ability to successfully manage our global operations and supply chain has an impact on our financial performance and
operating results.

We have facilities in numerous countries, including Canada, the United States, Austria, China, Ireland, Japan, Malaysia, Mexico,
Romania, Scotland, Singapore, Spain and Thailand. During 2012, approximately two-thirds of our revenue was produced at locations outside of the Americas. We also purchase the majority of
our components and materials from international suppliers.

Global
operations are subject to inherent risks which may adversely affect us, including:



We are subject to the risk of increasing income taxes, increased levels and scrutiny of tax audits globally and the challenges of successfully defending our tax positions or
meeting the conditions of tax incentives and credits, any of which could adversely affect our financial condition and operating results.

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 tax expense could increase if certain tax incentives or credits from which we currently benefit are retracted. A retraction could occur if we
fail to satisfy the conditions on which these tax incentives or credits are based, if they are not renewed upon expiration, if tax rates applicable to us in such jurisdictions are otherwise increased,
or due to changes in legislation, regulation or administrative practices. We believe we will comply with the conditions of the tax incentives and credits from which we currently benefit; however,
changes in our outlook in any particular country could impact our ability to meet the conditions.

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 increased levels and scrutiny of tax audits and reviews globally by various 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 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. 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.

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We
currently have ongoing tax audits. Tax authorities have asserted that income reported by certain of our subsidiaries for certain years should have been materially higher as a result
of certain inter-company transactions, and that certain interest amounts deducted by a subsidiary on historical debt instruments should be re-characterized as capital losses. The
successful pursuit of the assertions made by tax authorities arising from tax audits may result in our owing significant amounts of tax, interest and possibly penalties. The amounts we may be required
to pay, or to put on deposit with the tax authorities to permit the subsidiary to continue to defend its tax filing positions, could be material.

We
expect to continue to recognize the future benefit of certain Brazilian tax losses on the basis that these tax losses can and will be fully utilized in the fiscal period ending on the
date of dissolution of our Brazilian subsidiary. While we believe that our interpretation of applicable Brazilian law is correct, our ability to realize this benefit is not certain and a failure to do
so could have a material adverse effect on our operating results and financial condition.

As
at December 31, 2012, a significant portion of our cash and cash equivalents was held by numerous foreign subsidiaries outside of Canada. Although substantially all of the cash
and cash equivalents held outside of Canada could be repatriated, a significant portion may be subject to withholding taxes under current tax laws. We have not recognized deferred tax liabilities for
cash and cash equivalents held by certain foreign subsidiaries related to earnings that are considered indefinitely reinvested outside of Canada and that we do not intend to repatriate in the
foreseeable future (approximately $325 million of cash and cash equivalents as at December 31, 2012).

We have incurred significant restructuring charges, impairment charges and accounting losses in the past and may experience such charges and losses in future periods.

In the past, we have recorded charges resulting primarily from restructuring actions and the write-down of goodwill. These
amounts have varied from period-to-period. We have undertaken numerous initiatives to restructure and reduce our capacity and cost structures in response to changes in the EMS
industry and in end-market demand, with the intention of improving utilization and reducing our overall cost structure. See note 15 to the Consolidated Financial Statements
in Item 18. We may also incur higher operating expenses during periods of transition. In certain situations, we have not been able to retain existing business or grow revenue due to execution
problems resulting from significant headcount reductions, plant closures and product transfers. During 2012, we announced that we would take restructuring actions throughout our global network. We
have estimated total restructuring charges of between $55.0 million to $65.0 million to complete our planned actions by the end of June 2013. Of this amount, we recorded
restructuring charges of $44.0 million in 2012. Our restructuring charges in 2011 were $14.5 million (2010  $35.8 million). We evaluate our
operations from time to time and may propose additional restructuring actions in the future. Any failure to successfully execute or realize the expected benefits from these initiatives, including any
delay in implementing these initiatives, may have a material adverse impact on our operating results. During 2012, we also recorded impairment charges of $17.7 million
(2011  nil; 2010  $9.1 million), primarily to write-down goodwill.

Our operations and our customer relationships may be adversely affected by disruptions to our information technology ("IT") systems, including disruptions from cybersecurity
breaches of our IT infrastructure.

We rely on information technology networks and systems, including those of third-party service providers, to process, transmit and
store electronic information. In particular, we depend on our information technology infrastructure for a variety of functions, including worldwide financial reporting, inventory and other data
management, procurement, invoicing and email communications. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks,
sabotage and similar events. Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to our information technology systems to
sophisticated and targeted measures known as advanced persistent threats. Despite the implementation of network security measures and disaster recovery plans, our systems and those of third parties on
which we rely may also be vulnerable to computer viruses, break-ins and similar disruptions. If we or our vendors are unable to prevent such outages and breaches, our operations may be
disrupted and our business reputation could be adversely affected.

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We
expect that risks and exposures related to cybersecurity attacks will remain high for the foreseeable future due to the rapidly evolving nature and sophistication of
these threats.

If we are unable to recruit or retain highly skilled personnel, our business could be adversely affected.

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 attract and retain highly skilled executive, technical and management personnel. We do not have employment or non-competition agreements with the majority of our employees. The
loss of the services of certain executive, management and technical employees, individually or in the aggregate, could have a material adverse effect on our operations.

If we are required to make larger contributions to our defined benefit pension plans in the future, this may have an adverse impact on our liquidity and our operating
results.

We maintain multiple defined benefit pension plans, as well as supplemental pension plans. 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 asset
performance, salary escalation, employee turnover, retirement ages, life expectancy, expected healthcare costs, the performance of the financial markets and future interest rates. If actual results or
future expectations differ from these assumptions or if statutory funding requirements change, the amounts we are obligated to contribute to the pension plans may increase and such increase could
be significant.

If our products or services are subject to warranty claims, our business reputation may be damaged and we may incur significant costs.

In certain of our sales contracts, we provide warranties against defects or deficiencies in our products, services or designs. As we
expand our service offerings and pursue business in new end markets, our warranty obligations may increase and we may not be successful in pricing our products to appropriately cover our warranty
costs. A successful claim for damages arising from defects or deficiencies for which we are not adequately insured, and for which indemnification from a third party is not available, could have a
material adverse effect on our reputation and business, and our operating results and financial condition.

We may not be successful in keeping pace with technology changes.

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 deliver electronic and complex mechanical manufacturing services that meet our customers' evolving needs. This may involve investing in new processes,
capabilities or equipment to support new technologies used in our customers' current or future products, and to support their supply chain processes. Additionally, as we expand our service offerings
or pursue business in new end markets, such as the semiconductor equipment, precision machining or green technology markets, where our experience may be 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 due to rapid technological shifts in any of
these areas.

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

We may not be successful in protecting our intellectual property or the intellectual property of others.

We believe that certain of our proprietary intellectual property rights and information provide us with a competitive advantage.
Accordingly, we take steps to protect this proprietary information, including entering into non-disclosure agreements with customers, suppliers, employees and other parties, and by
implementing security measures. However, our protection measures may not be sufficient to prevent or detect the misappropriation or unauthorized use or disclosure of our property
or information.

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There
is also a risk that claims of intellectual property infringement could be brought against us, our customers or our suppliers. If such claims are successful, we may be required to
spend significant time and money to develop processes that do not infringe upon the rights of another 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 the litigation. As we expand our service offerings and pursue business in new end markets, we may be less effective in anticipating or mitigating the
intellectual property risks related to new manufacturing, design and other services, which could be significant.

We may not be successful in preventing or detecting all errors or fraud.

Due to the inherent limitations of a cost-effective internal controls system, misstatements due to error or fraud may occur
and may not be detected. All systems of internal control contain inherent limitations. Accordingly, we cannot provide absolute assurance that all control issues, errors or instances of fraud, if any,
within the Company have been or will be prevented or detected. In addition, over time, certain aspects of a control system may become inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate, which we may not be able to address quickly enough to prevent all instances of error or fraud.

We may not be successful in increasing revenue if the trend of outsourcing by OEMs or service providers slows.

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 or service providers. Our future growth will be limited to the extent that these opportunities are not available as a result of OEMs or
service providers deciding to perform these functions internally or delaying their decision to outsource or our inability to win new contracts. As a result of the weak global economic environment,
customers may 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.

Compliance with governmental laws and obligations could be costly and may impact our operations.

We are subject to various federal/national, state/provincial, local and supra-national environmental laws and regulations. Our
environmental management systems and practices have been designed to ensure compliance with these laws and regulations in a manner consistent with local practice. Maintaining compliance with and
responding to increasingly stringent regulations require a significant investment of time and resources and may restrict our ability to modify or expand our facilities or to continue production. Our
failure to comply with these laws and regulations may potentially result in significant fines and penalties, our operations may be suspended and our cost of related investigations could be material in
any period.

More
complex and stringent environmental legislation continues to be imposed, including laws that place increased responsibility and requirements on the "producers" of electronic
equipment and, in turn, their providers and suppliers. Such laws may relate to product inputs (such as hazardous substances and energy consumption) and product use (such as energy efficiency and waste
management/recycling). Noncompliance with these requirements may potentially result in substantial costs, including fines and penalties, and we may incur liability to our customers
and consumers.

Where
compliance responsibility rests primarily with OEMs rather than with EMS companies, OEMs may turn to EMS companies such as Celestica for assistance in meeting their
obligations. Our customers are becoming increasingly concerned about issues such as waste management (including recycling), climate change (including the reduction of carbon emissions) and product
stewardship, and expect their suppliers to be environmental leaders. We strive to meet such customer expectations, although these demands may extend beyond our regulatory obligations and require
significant investments of time and resources to attract and retain customers.

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We
generally have obtained environmental assessment reports, or reviewed recent assessment reports undertaken by others, for most of our manufacturing facilities at the time of
acquisition or leasing. Such assessments may not reveal all environmental liabilities and current assessments are not available for all facilities. As well, some of our operations have involved
hazardous substances that could cause contamination. Although we may investigate, remediate or monitor soil and groundwater contamination at certain of our owned sites, we may not be aware of or
address all such conditions and we may incur significant costs to perform such work in the future. 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
discharge or migration of such substances. In some instances where soil or groundwater contamination existed prior to our ownership or occupation, landlords or former owners may have retained some
contractual responsibility or regulatory liability, but this may not provide sufficient protection to reduce or eliminate liability to us. Third-party claims for damages or personal injury are also
possible. Moreover, current remediation, mitigation and risk assessment measures may not be adequate to comply with future laws.

In
the healthcare end market, we face substantial regulations, primarily from the U.S. Food and Drug Administration in the U.S., as well as in other jurisdictions, relating to
some of the medical devices we manufacture. Several of our sites around the world are certified in quality management standards applicable to the healthcare industry. We are required to comply with
the various statutes and regulations related to the design, development, testing, manufacturing and labeling of our medical devices in addition to reporting of certain information with respect to the
safety of such products. If we are unable to comply with these regulations, we may be faced with fines, injunctions, product recalls, or suspension of production, among other adverse outcomes. Failure
to comply with these regulations may materially affect our relationships with customers and our operating results.

We
provide design, engineering and manufacturing related services to our customers in the aerospace and defense end market. As part of these services, we are subject to substantial
regulation from government agencies including the U.S. Department of Defense and the U.S. Federal Aviation Administration. Several of our sites around the world are certified in quality
management standards applicable to the aerospace and defense industry. Failure to comply with these regulations or the loss of any of our quality management certifications may result in fines,
penalties and injunctions, and could prevent us from executing on current or winning future contracts, any of which may materially adversely affect our financial condition and operating results.

Our
international operations require us to comply with various anti-bribery laws, including the U.S. Foreign Corrupt Practices Act ("FCPA"). In some countries in which
we operate, it may be customary for businesses to engage in business practices that are prohibited by the FCPA or other laws and regulations. Although we have implemented policies and procedures
designed to ensure compliance with the FCPA and similar laws, there can be no assurance that all of our employees and agents, as well as those of companies to which we outsource certain business
operations, will not be in violation of our policies. In addition to the difficulty of monitoring compliance, any suspected activity would require a costly investigation by us. Failure to comply with
these laws may subject us to, among other things, adverse publicity, penalties and legal
expenses that may harm our reputation and have a material adverse effect on our business, financial condition and operating results.

Government
regulators or our customers may require us to comply with product or manufacturing standards that are more restrictive than current laws and regulations related to
environmental matters or other social responsibility initiatives. An example is theDodd-Frank Wall Street Reform and Consumer Protection
Actwhich contains provisions concerning specified minerals originating from the Democratic Republic of Congo ("DRC") and adjoining countries that are believed to benefit armed
groups (referred to as "conflict minerals"). As required by this Act, the SEC recently adopted due diligence, disclosure and reporting requirements for companies that manufacture, or contract to
manufacture, products that include conflict minerals. We manufacture such products for our customers. Due to our complex supply chain, we expect compliance with these rules to be
time-consuming and costly. If we are unable to ascertain the origins of all such minerals used in the manufacturing of our products through the due diligence procedures we implement, we
may be unable to satisfy our customers' certification requirements. This may harm our reputation, damage our customer relationships and result in a loss of revenue. If the SEC rules or other new
social or environmental standards limit our pool of suppliers in order to produce "conflict free" or "socially responsible" products, or otherwise

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adversely
affect the sourcing, supply and pricing of materials used in our products, we could also experience cost increases and a material adverse impact on our operating results.

Compliance or the failure to comply with employment laws and regulations may adversely impact our operating results.

We are subject to a variety of domestic and foreign employment laws, including without limitation those related to: workplace safety,
discrimination, whistle-blowing, wages and overtime, classification of employees and severance payments. Such laws are subject to change, and enforcement activity relating to these laws, particularly
outside the United States, can increase as a result of increased media attention due to alleged violations by other companies, changes in law, political and other factors. There can be no
assurance that, in the future, we will not be found to have violated elements of such laws. Any such violations could lead to the assessment of fines or damages against us by regulatory authorities or
by employees, any of which could adversely affect our operating results.

Failure to comply with the conditions of government grants could lead to grant repayments and adversely impact our financial position and operating results.

We have received grants from government organizations or other third parties as incentives related to capital investments or other
spending. These grants often have future conditions with which we must comply. If we do not meet these future conditions, we could be obligated to repay all or a portion of the grant, which could
adversely affect our financial position and operating results.

Our credit agreement contains restrictive covenants that may impair our ability to conduct business.

Our credit agreement contains financial and operating covenants that limit our management's discretion with respect to certain business
matters. Among other factors, 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, and merge or consolidate with other entities.

We are exposed to interest rate fluctuations.

We have a $400.0 million revolving credit facility that matures in January 2015. Borrowings under this facility bear
interest at LIBOR or Prime rate plus a margin. At December 31, 2012, we had drawn $55.0 million under this facility (December 31,
2011  undrawn). Our borrowings under this facility, which vary from time to time, expose us to interest rate risks due to fluctuations in these rates. If the
amount drawn on our credit facility is substantial, an increase in interest rates would have a more pronounced impact on our interest expense. Significant interest rate fluctuations may affect our
business, operating results and financial condition.

Deterioration in financial markets or in macro-economic conditions may adversely affect our ability to raise funds or may increase the cost of raising those funds.

We currently have access to a revolving credit facility through financial institutions. We may also issue debt or equity securities to
fund our operations or make acquisitions. Our ability to borrow or raise capital may be impacted if financial markets are unstable. In addition, a downgrade of our credit rating or an adverse change
in the published outlook by a rating agency may impact our ability to raise funds in the time and amount necessary for us or increase our cost of capital. Unstable financial markets or a downgrade in
our credit rating could adversely affect our business, operating results and financial condition.

The interest of our controlling shareholder, Onex Corporation, with a 74% voting interest, may conflict with the interests of other shareholders.

Onex Corporation, or Onex, owns, directly or indirectly, all of the outstanding multiple voting shares and less than 1% of the
outstanding subordinate voting shares. The number of subordinate voting shares and multiple voting shares owned by Onex, together with those subordinate voting shares and multiple voting shares that
Onex has the right to vote, represents approximately 74% of the voting interest in Celestica. Accordingly, Onex has the ability to exercise a significant influence over our business and affairs and
generally has the power to determine all matters submitted to a vote of our shareholders where our shares vote together as a single class. Onex may make decisions regarding Celestica and our business
that are opposed to other shareholders' interests

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or
with which other shareholders may disagree. 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.

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. The directors so elected have the authority, subject to applicable laws, to appoint or replace senior management, cause us to issue
additional subordinate voting shares or multiple voting shares or repurchase subordinate voting shares or multiple voting shares, declare dividends or take other actions. Under our credit agreement,
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 of the Board, President and Chief Executive Officer of Onex, is also one of our directors, and holds, indirectly or directly, shares representing the
majority of the voting rights of the shares of Onex. The interests of Onex and Mr. Schwartz may differ from the interests of the remaining holders of subordinate voting shares. For additional
information about shareholder rights and restrictions relative to our subordinate voting shares and multiple voting shares, see Item 10(B), "Memorandum and Articles of Incorporation".
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 take similar actions in the future. These sales may impact our
share price or have consequences on our debt and ownership structure.

We face securities class action and shareholder derivative lawsuits which may result in substantial costs, diversion of management's attention and resources and negative
publicity.

In 2007, securities class action lawsuits were commenced against us 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 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 added one of our
directors and Onex Corporation as defendants. On October 14, 2010, the District Court granted the defendants' motions to dismiss the consolidated amended complaint in its entirety. The
plaintiffs appealed to the United States Court of Appeals for the Second Circuit the dismissal of its claims against us and our former Chief Executive and Chief Financial Officers, but not as
to the other defendants. In a summary order dated December 29, 2011, the Court of Appeals reversed the District Court's dismissal of the consolidated amended complaint and remanded the case to
the District Court for further proceedings. The parties are currently engaged in the discovery process. Parallel class proceedings, including a claim issued in October 2011, remain against us
and our former Chief Executive and Chief Financial Officers in the Ontario Superior Court of Justice. On October 15, 2012, the Ontario Superior Court of Justice granted limited aspects of the
defendants' motion to strike, which ruling is subject to appeal, but the court has not granted leave nor certification of any actions. We believe the allegations in the 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 that it will not have a material adverse impact on our
financial position or liquidity. In addition, we may incur substantial litigation expenses in defending the claims. We have liability insurance coverage that may cover some of our litigation expenses
and potential judgments or settlement costs.

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Potential unenforceability of civil liabilities and judgments.

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 U.S. federal securities laws.

Changes in accounting standards enacted by the standard-setting bodies may adversely affect our reported operating results, profitability and financial condition.

Accounting standards are revised periodically and/or expanded upon by the standard-setting bodies. We are required to adopt new or
revised accounting standards and to comply with revised interpretations issued from time-to-time by these authoritative bodies, which include the Canadian Accounting Standards
Board ("CASB"), the International Accounting Standards Board ("IASB"), the Financial Accounting Standards Board ("FASB") and the U.S. Securities and Exchange Commission ("SEC"). In 2008, the
CASB announced the adoption of IFRS for publicly accountable enterprises in Canada, effective 2011. The impact of our transition to IFRS is summarized in note 3 to our 2011 Consolidated
Financial Statements included in our 2011 Annual Report. Our reported financial information may not be comparable to the information reported by our competitors because we are required to use
different accounting standards. The FASB and IASB have been jointly collaborating on a series of projects to converge, improve and align the U.S. and international accounting standards as one global
high quality standard. While there have been some delays in the convergence effort, we continue to monitor developments and consider the potential impacts. Future changes in accounting standards could
adversely affect our reported operating results, profitability or financial condition.

Shares eligible for public sale could adversely affect our share price.

Future sales of our subordinate voting shares in the public market, or the issuance of subordinate voting shares in connection with our
equity-based compensation plans or otherwise could adversely affect the market price of the subordinate voting shares.

At
February 15, 2013, we had 164.9 million subordinate voting shares and 18.9 million 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 0.5 million subordinate voting shares held directly or indirectly by 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 of 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 15, 2013, there were 20.3 million subordinate voting shares reserved for issuance from treasury under our employee equity-based compensation
plans and for director compensation, including 6.5 million subordinate voting shares underlying stock options (whether vested or unvested) and 2.4 million subordinate voting shares
underlying restricted share units (all unvested). Moreover, pursuant to our articles of incorporation, we may 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.

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The market price of our stock may be volatile.

The stock market in recent years has experienced significant price and volume fluctuations that have affected the market price of our
stock. These fluctuations have often been unrelated to the operating performance of our company. Factors such as fluctuations in our operating results, announcements by our customers, competitors or
other events affecting companies in the electronics industry, currency fluctuations, general market fluctuations, and macro-economic conditions may cause the market price of our subordinate voting
shares to decline.

Item 4.    Information on the Company

A.    History and Development of the Company

We were incorporated in Ontario, Canada on September 27, 1996. Our legal and commercial name is Celestica Inc. We are domiciled in the Province of
Ontario, Canada and operate under the Business Corporations Act (Ontario). Our principal executive offices are located at 844 Don Mills Road, Toronto, Ontario, Canada M3C 1V7 and our
telephone number is (416) 448-5800. Our website is 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 that provided manufacturing services to IBM for more than 75 years. In 1993, we began providing electronics
manufacturing services to non-IBM customers. In October 1996, we were purchased from IBM by an investor group, led by Onex, which included members of our senior executive team at
the time.

B.    Recent Acquisitions

Certain information concerning our acquisition activities, including property, plant and equipment expenditures, and financing activities, currently in progress
and in the last three fiscal years, is set forth in notes 3, 7, 8, 11, 12, 21 and 24 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".

Certain
information concerning our divestiture activities, including our restructurings, currently in progress and in the last three fiscal years, is set forth in notes 6
and 15 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".

C.    Business Overview

We deliver innovative supply chain solutions globally to customers in the communications (comprised of enterprise communications and telecommunications),
consumer, enterprise computing (comprised of servers and storage) and diversified (comprised of industrial, aerospace and defense, healthcare, solar, green technology, semiconductor equipment and
other) end markets. We believe our services and solutions create value for our customers by accelerating their time-to-market, and by providing higher quality, lower cost, and
reduced cycle times in our customers' supply chains, resulting in lower total cost of ownership, greater flexibility, higher return on invested capital and improved competitive advantage for our
customers in their respective markets.

Our
global operating network spans the Americas, Asia and Europe. We manage and operate facilities around the world with specialized supply chain management, including
high-mix/low-volume manufacturing capabilities, to meet the specific market and customer product lifecycle requirements. In an effort to drive speed and flexibility for our
customers, we conduct the majority of our business through centers of excellence strategically located throughout the world. We strive to align a network of preferred suppliers in close proximity to
these centers in order to increase the velocity and flexibility of our supply chain, to deliver higher quality, shorter product lead times and reduced inventory.

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We
offer a range of services to our customers including design, engineering services, supply chain management, new product introduction, component sourcing, electronics manufacturing,
assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and after-market repair and return services.

Although
we supply products and services to over 100 customers, we depend upon a relatively small number of customers for a significant portion of our revenue. In the aggregate,
our top 10 customers represented 67% of revenue in 2012 and our largest customer represented 12% of total revenue. In 2012, our revenue by end market was as follows: communications (35% of
revenue); diversified (20% of revenue); consumer (18% of revenue); servers (15% of revenue); and storage (12% of revenue). The products and services we provide can be found in a wide variety of
applications, including servers; networking, wireless and telecommunications equipment; storage devices; aerospace and defense electronics, such as in-flight entertainment and guidance
systems; healthcare products for diagnostic imaging; audiovisual equipment; set top boxes; printer supplies; peripherals; semiconductor equipment; and a range of industrial and green technology
electronic equipment, including solar panels and inverters.

We
continue to invest to strengthen our position in the EMS industry, through investments in people, new service offerings and capabilities, and we will continue to improve our
operational performance and global quality and information technology systems, software and tools to be recognized as one of the leading companies in the industry.

Our
priorities include (i) profitable growth in our targeted business areas; (ii) continuous improvement in our financial results, including revenue growth, operating
margins, returns on invested capital, and free cash flow; (iii) developing and enhancing profitable relationships with leading customers in our strategic target markets; and
(iv) increasing and strengthening our capabilities in technologies and service offerings beyond our traditional areas of EMS expertise. We believe that success in these areas will continue to
strengthen our competitive position and enhance customer satisfaction, and increase long-term shareholder value. We will continue to focus on expanding our revenue base in our
higher-value-added services, such as design, engineering, supply chain management and after-market services, and to grow our business with new and existing customers in our enterprise computing,
communications and diversified end markets.

Electronics Manufacturing Services Industry

Overview

Leading EMS companies operate global networks delivering worldwide supply chain management solutions. They offer
end-to-end services for the entire product lifecycle, including design and engineering services, manufacturing and systems integration, fulfillment and after-market services.
OEMs and other companies have increased their reliance on these services to become more efficient and to enhance their competitive positions. By outsourcing the manufacturing and related
services, they are able to overcome their most pressing business challenges related to cost, asset utilization, quality, time-to-market, demand volatility, and rapidly changing
technologies.

We
believe the adoption of outsourcing by OEMs and other companies will continue across a number of industries, because it allows them 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.

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Focus Resources on Core Competencies.Our customers operate in a highly competitive environment characterized by rapid technological
change and
shortening product lifecycles. In this environment, many customers are prioritizing their resources on their core competencies of product development, sales, marketing and customer service, and
outsourcing design, engineering, manufacturing, supply chain and other product support requirements to their EMS partners.

Improve Time-to-Market.Electronic products experience shorter lifecycles, requiring OEMs to continually reduce the
time and cost of bringing 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, including capabilities relating to design and engineering 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 IT systems and 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 are
complex and require significant investment. As a result, OEMs increasingly rely on EMS companies to provide design, engineering services, supply chain management, manufacturing and
technological expertise. Through their design and engineering services, and through the knowledge gained from manufacturing and repairing products, EMS companies can assist OEMs in the
development of new product concepts, or the re-design of existing products, as well as assist 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.Some of our customers provide products or services to a global customer base. EMS companies with
global
infrastructure and support capabilities provide customers with efficient global manufacturing solutions, distribution capabilities and after-market services.

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 services such as design, fulfillment and after-market services, including repair and recycling. 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 delivering innovative supply chain solutions to our customers. To achieve this, we
collaborate with our customers to proactively identify and fulfill current requirements and anticipate future needs. We strive to exceed our customers' expectations by offering a range of services to
help them lower costs, increase flexibility and predictability, improve quality and provide better service to their customers. We also look at ways to invest in our customers' 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 achieve a competitive advantage.
By succeeding in the following areas, we believe we will continue to strengthen our competitive position and enhance customer satisfaction and shareholder value:

Continue to Penetrate Strategic Target End Markets.We strive to establish a diverse customer base in several
industries. We believe our legacy of expertise in technology, quality and supply chain management, in addition to our service offerings and centers of excellence, have positioned us as an attractive
partner to companies across these markets. Our goal is to grow across our targeted end markets, with particular emphasis on growing our diversified end market, which is comprised of industrial,
aerospace and defense, healthcare, solar, green technology, semiconductor equipment and other end markets. Revenue from our diversified end markets has

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increased
from 12% of total revenue in 2010 to 20% of total revenue in 2012, representing a 78% growth in revenue dollars over the same period.

Our
revenue by end market as a percentage of total revenue is as follows:

2010

2011

2012Communications


37%


35%


35%Consumer


25%


25%


18%Diversified


12%


14%


20%Servers


14%


15%


15%Storage


12%


11%


12%


Selectively Pursue Strategic Acquisitions.We will selectively seek acquisition opportunities in order to (i) profitably grow our
revenue,
(ii) further develop strategic relationships with customers in our target markets and (iii) enhance the scope of our capabilities and service offerings. As an example, in 2012 we
acquired D&H Manufacturing Company ("D&H"), a leading manufacturer of precision machined components and assemblies, primarily for the semiconductor market.

Continue to Improve Financial Results, Including Revenue Growth, Operating Margins, Return on Invested Capital, and Free Cash Flow.We
continue to
focus on (i) managing the mix of business, service offerings and volume of business to improve our overall operating margins, (ii) leveraging our 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, (iii) improving operating efficiencies to reduce
costs and improve operating margins, (iv) completing our planned restructuring actions to reduce costs and improve operating margins, and (v) maximizing free cash flow.

Develop and Enhance Profitable Relationships with Leading Customers.We seek to build profitable, strategic relationships with targeted
industry
leaders that can benefit from our services and solutions. We strive to conduct ourselves as an extension of our customers' organizations which enables us to respond to their needs with speed,
flexibility and predictability in delivering results. We have established and maintain strong relationships with a diverse mix of leading OEMs and service providers across several of our
targeted markets. We believe that our customer base is a strong potential 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 services we offer to our customers, which include prototyping,
design,
engineering, supply chain services, systems assembly, logistics, fulfillment and after-market services. In 2012, the acquisition of D&H strengthened our offering to semiconductor equipment customers.

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. We believe our expertise in these areas enables us to meet the rigorous demands of our customers, and allows us to produce a variety of electronic products ranging
from high-volume consumer electronics to highly complex technology infrastructure products. We believe our commitment to quality allows us to deliver consistently reliable products to our
customers. The systems and collaborative processes associated with our expertise in supply chain management generally have 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 collaborate with
suppliers to influence component design for the benefit of our customers. As a result of the successes that we have had in these areas, we have been recognized with numerous customer and industry
achievement awards.

Celestica's Business

Innovative Supply Chain Solutions and Services

We are a global provider of innovative supply chain solutions. We offer a range of services including design, engineering services,
supply chain management, new product introduction,
component sourcing, electronics manufacturing, assembly and test, complex mechanical assembly, systems integration, precision machining, order

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fulfillment,
logistics and after-market repair and return services. We leverage our global centers of excellence, information technology and supply chain expertise using collaborative processes and a
team of highly skilled, customer-focused employees. We believe that our ability to deliver a range of supply chain solutions to our customers provides them with a competitive lead time, quality,
flexibility and total cost of ownership advantage.

Quality and Lean Six Sigma Culture

We believe 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 and ISO 14001 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 operations network. Implementing Lean throughout the manufacturing process improves
efficiency, shortens cycle times 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. We also apply the knowledge we gain in our after-market services to improve the quality and reliability of next-generation products for our
customers. Success in these areas helps our customers lower their costs, positioning them more competitively in their respective markets.

Design and Engineering Services

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 strive to provide flexible design solutions and expertise to help customers optimize their development to reduce overall product costs, improve
time-to-market and introduce competitively differentiated products. For customer-owned designs, we use design analysis capabilities to minimize design revisions, shorten
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 believe we can provide quality and cost-focused solutions for our customers' design needs.

We
continue to increase our investment in research and development. As trusted design partners to some of our core customers, our teams collaborate with our customers' product designers
in the early stages of product development. Our design teams use 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.

Prototyping and New Product Introduction

Prototyping is a critical early-stage process in the development of new products. Our engineers collaborate with our customers'
engineers to build early-stage products at our new product introduction centers. These centers are strategically located around the world to enable us to provide a quick response in the early stages
of the product development lifecycle.

Supply Chain Management and Services

We use advanced 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 our customers' success, as it directly impacts the time and cost required to deliver products to market
and the capital requirements associated with carrying inventory.

We
strive to provide our customers with the total cost of ownership, including 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 total cost. We also strive to align a network of preferred suppliers in close proximity to our centers of excellence
in order to increase the velocity and flexibility of our supply chain, and to deliver the shortest overall product lead times. We believe we deliver a differentiated supply chain offering.

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Through
our global supply chain management processes and integrated information technology tools, we strive to provide our customers with enhanced visibility to balance their global
demand and supply requirements, including inventory management and order management.

Manufacturing Services

Printed Circuit Board Assembly

Printed circuit board assembly includes the attachment of electronic components, such as capacitors, microprocessors, resistors and
memory modules, to printed circuit boards. Leveraging the skills and expertise of our global network of engineers, we provide our customers with full printed circuit board ("PCB") assembly technology
capabilities. These capabilities include design for manufacturing, PCB layout, packaging, assembly, lead-free soldering, test development and data analytics for complex flexible and
rigid-flex circuits and hybrid PCBs.

Complex Mechanical Assembly

We provide systems integration and precision machined components to our semiconductor equipment customers. Complex mechanical systems
integration consists of multiple interconnected subsystems that interact with various materials,e.g., fluids, solids, particles and rigid bodies. Such
systems are often used in advanced manufacturing applications such as semiconductor manufacturing and processes equipment, medical applications using robotics, and other applications such as cash
handling machines where very exact standards are required.

Precision Machining

We utilize specialized computer numerically controlled machines to manufacture components to high quality and very tight tolerance
requirements. Such components are often used in similar applications as noted above for the complex mechanical assembly.

Systems Assembly and Test

We use sophisticated technologies in the assembly and testing of our products. We continue to make 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, customers 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 respond to our customers' needs.

Product Assurance

We provide complete product reliability testing, inspection and qualification capabilities to support our customers' full product
lifecycle requirements. Our product assurance teams perform product life testing and full circuit characterization to ensure that designs meet or exceed required specifications. We are capable of
testing to various industry standards, and we work closely with our customers to execute unique test protocols. We believe that this service allows our customers to assess certification risks early in
the product development cycle, saving costs and reducing time-to-market.

Failure Analysis and After-Market Services

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 specifications. Products are subjected to various environmental extremes, including
temperature, humidity, vibration, voltage and contamination. Field conditions are simulated in failure analysis laboratories which employ advanced electron microscopes, spectrometers and other
advanced equipment. We

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are
also able to discover failures before products are shipped. Our highly qualified engineers work proactively in partnership with suppliers and customers to develop and implement resolutions.

We
provide value to our customers through our after-market services offerings which include repair, fulfillment, reverse logistics, reclamation and returns processing and prevention. Our
fulfillment offering includes the design and management of integrated supply chain and materials management for light manufacturing and final assembly. Our reverse logistics offering includes the
design and management of transportation networks, warehousing and distribution of product, asset recovery services, and transportation and supply chain event monitoring. The returns processing and
prevention offering provides our customers with product screening and testing and product design and process analysis. We offer these services individually or integrated through a 'Control Tower'
model which combines our resources, systems and processes with those of our partner organizations to provide the customer with an increased level of visibility and analytics throughout the entire
after-market value stream.

Geographies

For 2012, approximately one-half (2011 and 2010  one-half) of our
revenue was produced in Asia and one-third (2011 and 2010  one-third) of our revenue was produced in the Americas. A listing of our
principal locations is included in Item 4(E), "Information on the Company  Property, Plants and Equipment". Certain geographic information is set forth in
note 24 to the Consolidated Financial Statements in Item 18.

Marketing, Sales and Solutions

We structure our business development teams by targeted end market, with a focus on offering complete manufacturing and supply chain
solutions to our customers. We have customer-focused teams, each headed by a group general manager who oversees the global relationship with our key customers. These teams work with our solutions
architects to develop specific solutions that meet the 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, and supply chain management teams, as well as senior executives.

Customer Experience and Relationship Management

We supply products and services to over 100 customers. We target industry leading customers in our strategic markets. Our
customers include Alcatel-Lucent, Cisco Systems, Inc., EMC Corporation, Hewlett-Packard Company, Hitachi Global Storage Technologies, Honeywell Inc., IBM Corporation, Juniper
Networks, Inc., NEC Corporation, Oracle Corporation, Polycom, Inc. and Raytheon Company. We are focused on strengthening our relationships with these strategic customers through the
delivery of new and expanding end-to-end solutions.

During
2012, two customers individually represented more than 10% of total revenue (2011  two customers). Our top 10 customers represented
67% and 71%, respectively, of total revenue for 2012 and 2011.

We
generally enter into master supply agreements with our customers that provide the framework for our overall relationship, although the level of business under those agreements is not
guaranteed. Instead, we bid on a program-by-program basis and typically receive customer purchase orders for specific quantities and timing of products. A majority of these
agreements also require the customer to purchase unused inventory that we have purchased to fulfill that customer's forecasted manufacturing demand.

Research and Technology Development

We use advanced technology in the design, assembly and test of the products we manufacture. We continue to deploy more resources in our
global research and development organization to expand our design capabilities. We believe that our processes and skills are among the most sophisticated in the industry.

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 and test processes. We work with a variety of substrate types based on the products we build for our customers, from thin, flexible printed
circuit boards to highly complex, dense multi-layer boards as

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well
as a broad array of advanced component and attachment technologies employed in our customers' products. Increasing demand for full-system assembly solutions continues to drive
technical advancement in complex mechanical assembly and configuration. We also work with some sub-components, such as optical modules and complex machined parts, to drive targeted
technical advancements to support these opportunities.

Our
assembly capabilities are complemented by advanced test capabilities. The technologies we use include high-speed functional testing, optical, 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 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.

Our
ongoing research and development activities include the development of processes and test technologies, as well as some focused product development and technology building blocks
that can be used by customers in the development of their products or to accelerate their products time-to-market. Our Joint Design and Manufacturing strategy is focused on
developing these design solutions and subsequently managing the other aspects of the supply chain, including manufacturing. We focus our solutions in developing current and next generation storage,
server and communications products, in particular, elements of data centers, an area we believe will grow in the future. We work directly with our customers to understand their product roadmaps and to
develop the technology solutions to optimally meet their future needs. We are proactive in developing manufacturing techniques that take advantage of the latest component, product and packaging
designs and we have worked with, and taken a leadership role in, industry groups that strive to advance the state of technology in the industry. As we continue to pursue deeper relationships with our
customers, and participate in additional services and revenue opportunities with them, we will increase our spending in these development areas.

Supply Chain Management

We share data electronically with our key suppliers and ensure speed of supply through strong relationships with our component
suppliers and logistics partners. During 2012, we procured and managed over $5 billion in materials and related services. We view the size and scale of our procurement activities, including our
IT systems, as an important competitive advantage, as they enhance our ability to obtain better pricing, influence component packaging and designs, and obtain a supply of components in constrained
markets. We procure substantially all of our materials and components pursuant to individual purchase orders that are short-term in nature.

We
strive to provide our customers with the total cost of ownership, including 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 total cost. We also strive to align a network of preferred suppliers in close proximity to our centers of excellence
in order to increase the velocity and flexibility of our supply chain and to deliver the shortest overall product lead times.

We
utilize our enterprise systems, as well as specific supply chain IT tools, to 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
applicable customer 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.

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 work with our suppliers and customers to attempt to ensure continuity in the supply of

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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.

Intellectual Property

We hold licenses to various technologies which we have 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, suppliers, employees and other parties, and upon 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 to protect our intellectual property. 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 that 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.

Competition

The EMS industry is highly competitive with multiple global EMS providers competing for the same customers and programs. Our
competitors include Benchmark Electronics, Inc., Flextronics International Ltd., Hon Hai Precision Industry Co., Ltd., Jabil Circuit, Inc., Plexus Corp., and
Sanmina-SCI Corporation, as well as smaller EMS companies that often have a regional, product, service or industry-specific focus or ODMs that provide internally designed products
and manufacturing services.

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 have greater scale and a broader range of services than we offer. We believe our competitive advantage in our
targeted markets is our track record in manufacturing technology, quality, complexity, responsiveness and 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 and services on time and
compete favorably on price. To enhance our competitiveness, we continue to focus on expanding our service offerings and capabilities beyond our traditional areas of EMS expertise.

Environmental Matters

We are subject to various federal/national, state/provincial, local and supra-national laws and regulations, including environmental
measures relating to the release, use, storage, treatment, transportation, discharge, disposal and remediation of contaminants, hazardous substances and waste, and health and safety measures related
to 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 laws and have management
systems in place to maintain compliance.

Our
past operations and historical operations of others may have resulted in soil and groundwater contamination on our sites. From time-to-time we investigate,
remediate and monitor soil and groundwater contamination at certain of our operating sites. Generally, Phase I or similar environmental assessments (which involve general inspections
without soil sampling or groundwater analysis) were obtained for most of our

28

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manufacturing
facilities at the time of acquisition or leasing. Where contamination is suspected at sites being acquired, Phase II intrusive environmental assessments (including soil and/or
groundwater testing) are usually performed. We expect to conduct Phase I or similar environmental assessments in respect of future property acquisitions and will perform Phase II
assessments where appropriate. Past environmental assessments have not revealed any environmental liability that we believe will have a material adverse effect on our operating results or financial
condition, in part because of contractual retention of liability by landlords and former owners at certain sites.

Environmental
legislation also occurs at the product level. Since 2004, we have developed our Green Services, offering a suite of services that help our customers comply
with environmental legislation, such as the European Union's Restriction of Hazardous Substances ("RoHS") and Waste Electrical and Electronic Equipment directive laws and China's RoHS legislation.

Backlog

Although we obtain purchase orders from our customers, they typically do not commit to delivery of products more than 30 days to
90 days in advance. We do not believe that the backlog of expected product sales covered by purchase orders is a meaningful measure of future sales, since orders may be rescheduled
or cancelled.

Seasonality

Seasonality is reflected in the mix and complexity of the products we manufacture from quarter-to-quarter. In
the past, we have experienced some level of seasonality across some of the end markets we serve. The pace of technological change, the frequency of customers transferring business among EMS
competitors and the constantly changing dynamics of the global economy will also continue to impact us. As a result of these factors, the impact of new program wins, and limited visibility in
technology end markets, it is difficult for us to predict the extent and impact of seasonality on our business.

Controlling Shareholder Interest

Onex is our controlling shareholder with a 74% voting interest in Celestica. Accordingly, Onex has the ability to exercise a
significant influence over our business and affairs and generally has the power to determine all matters submitted to a vote of our shareholders where the subordinate voting shares and multiple voting
shares vote together as a single class. Such matters include electing our board of directors and thereby influencing significant corporate transactions, including mergers, acquisitions, divestitures
and financing arrangements. For further details, refer to footnote 2 in Item 7(A), "Major Shareholders and Related Party Transactions  Major
Shareholders".

Government Regulation

Information regarding material effects of government regulations on Celestica's business is provided in the risk factors entitled "We
are subject to the risk of increasing income taxes, increased levels and scrutiny of tax audits globally and the challenges of successfully defending our tax positions or meeting the conditions of tax
incentives and credits, any of which could adversely affect our financial condition and operating results", "Compliance with governmental laws and obligations could be costly and may impact our
operations", and "Compliance or the failure to comply with employment laws and regulations may adversely impact our operating results" in Item 3(D), "Key
Information  Risk Factors".

Social Responsibility

We have a heritage of strong corporate citizenship and uphold policies and principles that focus our corporate social responsibility
initiatives across five key focus areas: labor, ethics, the environment, occupational health and safety, and giving back to the community.

Our
guiding policies and principles include:



29

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We
publish a Corporate Social Responsibility Report and a Business Conduct Governance Policy, both of which are available on our corporate website at
www.celestica.com. These documents outline our high standards for business ethics, the policies we value and uphold, the progress we have made as a socially responsible
organization and the key milestones we are working to achieve in 2013 and beyond.

Financial Information Regarding Geographic Areas

Details of our financial information regarding geographic areas, including revenues generated in, or property, plants and equipment
located in, Canada and foreign countries are disclosed in note 24 to the Consolidated Financial Statements in Item 18. Risks associated with the foreign operations are disclosed
in Item 3(D), "Key Information  Risk Factors".

D.    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
European Holdings S.À.R.L., a Luxembourg corporation;

Celestica
(Gibraltar) Limited, a Gibraltar corporation;

Celestica
Holdings Pte Limited, a Singapore corporation;

Celestica
Hong Kong Limited, a Hong Kong corporation;

Celestica LLC,
a Delaware limited liability company;

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

Celestica
(Luxembourg) S.À.R.L., a Luxembourg corporation;

Celestica
(Thailand) Limited, a Thailand corporation;

Celestica
(USA) Inc., a Delaware corporation;

Celestica
(US Holdings) LLC, a Delaware limited liability company;

IMS
International Manufacturing Services Limited, a Cayman Islands corporation;

1681714 Ontario Inc.,
an Ontario corporation;

1755630 Ontario Inc.,
an Ontario corporation; and

3250297 Nova
Scotia Company (formerly 1282087 Ontario Inc.), a Nova Scotia corporation.

E.    Property, Plants and Equipment

The following table summarizes our principal facilities as of February 15, 2013. Our facilities are used to provide manufacturing services and solutions,
such as the manufacture of printed circuit boards, assembly and configuration of final systems, complex mechanical assembly, precision machining and other related

30

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manufacturing
and customer support activities, including warehousing, distribution, fulfillment and after-market services.

Major locations

Square Footage

Owned/Leased(in thousands)Canada


888

OwnedCalifornia(1)


428

LeasedOregon


188

LeasedTexas


51

LeasedMexico(1)


504

LeasedIreland(1)


241

LeasedSpain


100

OwnedAustria


54

LeasedRomania


186

OwnedScotland


58

LeasedChina(1)


1,198

Owned/LeasedMalaysia(1)


1,549

Owned/LeasedThailand(1)


1,085

LeasedSingapore(1)


260

LeasedJapan


274

Owned


(1)This
represents multiple locations.


Our
principal executive office is located at 844 Don Mills Road, Toronto, Ontario, Canada M3C 1V7. Our principal facilities are certified to ISO 9001 and
ISO 14001 standards, as well as to other industry-specific certifications.

Our
land and facility leases expire between 2013 and 2060. We currently expect to be able to extend the terms of expiring leases or to find replacement facilities on commercially
reasonable terms.

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 2012 consolidated financial statements, which we prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board
("IASB"). All dollar amounts are expressed in U.S. dollars. The information in this discussion is provided as of February 15, 2013 unless we indicate otherwise.

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 of 1933, as amended, section 21E of the U.S. Securities Exchange Act of 1934, as amended, and applicable Canadian provincial and territorial securities
legislation, including, without limitation: statements related to our future growth; trends in our industry; our financial or operational results including our revenue and margin forecasts; the impact
of acquisitions and program wins or losses on our financial results and working capital requirements; anticipated expenses, restructuring charges, capital expenditures or benefits; our expected tax
outcomes; our cash flows, financial targets and priorities; changes in our mix of revenue by end market; our ability to diversify and grow our customer base and develop new capabilities; and the
effect of the global economic environment on customer demand. 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", "continues", or similar expressions, or may employ such future or conditional
verbs as "may", "will", "could", "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. Readers should understand that the following important factors, among others, may affect our future results and could cause those
results to differ materially from those expressed in such forward-looking statements: our dependence on a limited number of customers and on our customers' ability to compete and succeed in the
marketplace with the products we manufacture; the effects of price and other competitive factors generally affecting the electronics manufacturing services ("EMS") industry; the challenges of
effectively managing our operations and our working capital performance during uncertain economic conditions, including responding to rapid changes in demand and changes in our customers' outsourcing
strategies, including the insourcing of programs; the challenges of diversifying our customer base, including the extent and timing of replacing revenue from lost programs or customer disengagements;
the challenges of managing changing commodity, material and component costs, as well as labor costs and conditions; disruptions to our operations, or those of our customers, component suppliers, or
our logistics partners, resulting from local events, including natural disasters, political instability, labor or social unrest, criminal activity and other risks present in the jurisdictions in which
we operate; our inability to retain or expand our business due to execution problems relating to the ramping of new programs; delays in the delivery and availability of components, services and
materials used in our manufacturing process; the risk of non-performance by counterparties; the challenges of mitigating our financial exposure to foreign currency volatility; our
dependence on industries affected by rapid technological change; variability of operating results; our ability to successfully manage our global operations and supply chain; increasing income taxes,
increased levels and scrutiny of tax audits globally and the challenges of successfully defending our tax positions or meeting the conditions of tax incentives and credits; our ability to successfully
implement and complete our restructuring plans and integrate our acquisitions in a timely manner; our ability to define and successfully implement an information technology strategy and
countermeasures to mitigate the risk of computer viruses, malware, hacking attempts or outages that may disrupt our operations; and our compliance with applicable laws, regulations and social
responsibility initiatives may impact our operations. 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 involve factors that are beyond our control. The material assumptions may include the following: forecasts from our customers, which generally range from
30 days to

32

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90 days and can fluctuate significantly in terms of volume and mix of products or services; the timing and execution of, and investments associated with, ramping new business; the success in
the marketplace of our customers' products; general economic and market conditions; currency exchange rates; pricing, the competitive environment and contract terms and conditions; supplier
performance, pricing and terms; compliance by all third parties with their contractual obligations, the accuracy of their representations and warranties, and the
performance of their covenants; components, materials, services, plant and capital equipment, labor, energy and transportation costs and availability; operational and financial matters; technological
developments; the timing and execution of our restructuring actions; and our ability to diversify our customer base and develop new capabilities. Our assumptions and estimates 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 and elsewhere in this MD&A. 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. These and other risks and uncertainties, as well as other information related to the company, are discussed herein and 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 Administrators.

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. Readers 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 deliver innovative supply chain solutions globally to customers in the Communications (comprised of enterprise communications and
telecommunications), Consumer, Enterprise Computing (comprised of servers and storage), and Diversified (comprised of industrial, aerospace and defense, healthcare, solar, green technology,
semiconductor equipment and other) end markets. We believe our services and solutions create value for our customers by accelerating their time-to-market, and by providing
higher quality, lower cost and reduced cycle times in their supply chains, resulting in lower total cost of ownership, greater flexibility, higher return on invested capital and improved competitive
advantage for our customers in their respective markets.

Our
global operating network spans the Americas, Asia and Europe. We manage and operate facilities around the world with specialized supply chain management, including
high-mix/low-volume manufacturing capabilities, to meet the specific market and customer product lifecycle requirements. In an effort to drive speed and flexibility for our
customers, we conduct the majority of our business through centers of excellence strategically located throughout the world. We strive to align a network of preferred suppliers in close proximity to
these centers in order to increase the velocity and flexibility of our supply chain, to deliver higher quality, shorter product lead times and reduced inventory.

We
offer a range of services to our customers including design, engineering services, supply chain management, new product introduction, component sourcing, electronics manufacturing,
assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and after-market repair and return services. We are focused on expanding these
service offerings across our major markets with existing and new customers and on growing our business in our diversified end market. We continue to invest in assets and resources to expand our
design, engineering and after-market service capabilities, while continuing to pursue higher-value opportunities with existing customers. In September 2012, we completed the acquisition of D&H
Manufacturing Company ("D&H"), a leading manufacturer of precision machined components and assemblies, strengthening our complex mechanical and systems integration offering.

Although
we supply products and services to over 100 customers, we depend upon a relatively small number of customers for a significant portion of our revenue. Revenue generated
from our customers will vary from period to period depending on the success in the marketplace of our customers' products, changes in demand from our customers for the products we manufacture, and the
volume and timing of new program wins, losses or

33

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follow-on
business from our customers, among other factors. In the aggregate, our top 10 customers represented 67% of revenue in 2012
(2011  71%). In June 2012, we announced that we would wind down our manufacturing services for Research In Motion Limited ("RIM"). We completed our
manufacturing services for RIM and the related transition activities by the end of 2012. Our revenue from RIM was minimal in the fourth quarter of 2012, down from 10% of revenue in the third quarter
of 2012 and 20% of revenue in the fourth quarter of 2011. RIM represented 12% of revenue in 2012 (2011  19%; 2010  20%).
We cannot assure the timely replacement of the RIM revenue. See "Summary of 2012" below for further discussion.

The
products and services we provide can be found in a wide variety of applications, including servers; networking, wireless and telecommunications equipment; storage devices; aerospace
and defense electronics, such as in-flight entertainment and guidance systems; healthcare products for diagnostic imaging; audiovisual equipment; set top boxes; printer supplies;
peripherals; semiconductor equipment; and a range of industrial and green technology electronic equipment, including solar panels and inverters.

We
continue to invest to strengthen our position in the EMS industry, through investments in people, new service offerings and capabilities; and we will continue to improve our
operational performance and global quality and information technology systems, software and tools to be recognized as one of the leading companies in the industry.

Our
priorities include (i) profitable growth in our targeted business areas, (ii) continuous improvement in our financial results, including revenue growth, operating
margins, returns on invested capital, and free cash flow,
(iii) developing and enhancing profitable relationships with leading customers in our strategic target markets, and (iv) increasing and strengthening our capabilities in technologies and
service offerings beyond our traditional areas of EMS expertise. We believe that success in these areas will continue to strengthen our competitive position and enhance customer satisfaction, and
increase long-term shareholder value. We will continue to focus on expanding our revenue base in our higher-value-added services such as design, engineering, supply chain management and
after-market services, and to grow our business with new and existing customers in our enterprise computing, communications and diversified end markets.

We
established three-year financial targets at the beginning of 2010. These targets included achieving a compound annual revenue growth rate of 6% to 8% by the end of 2012,
and generating the following performance on non-IFRS measures: annual operating margin of 3.5% to 4.0%, annual return on invested capital ("ROIC") of greater than 20% and annual free cash
flow of between $100 million and $200 million. As a result of the wind down of our manufacturing services for RIM and the challenging demand outlook, in the second quarter of 2012, we
withdrew our compound annual revenue growth target and annual operating margin target and maintained our targets for annual ROIC and annual free cash flow. The three-year period ended
December 31, 2012.

For
2012, we achieved a ROIC of 21.5% (exceeding our target of 20%), despite a 10% decrease in revenue compared to 2011. We generated free cash flow of $211.4 million (exceeding
our target of $100 million to $200 million).

Our
financial results are impacted by such factors as the changing demand for our customers' products in various end markets, our revenue mix, changes to our customers' supply chain
strategies, the size and timing of customer program bookings by end markets, the costs and timing of ramping new business, program losses or customer disengagements, and the operating margin achieved
and capital deployed for the services we provide to customers, among other factors discussed below.

Operating
margin, ROIC and free cash flow are non-IFRS measures without standardized meanings and are not necessarily comparable to similar measures presented by other
companies. We use non-IFRS measures to (i) assess operating performance and the effective use and allocation of resources, (ii) provide more meaningful
period-to-period comparisons of operating results, (iii) enhance investors' understanding of the core operating results of our business, and (iv) set management
incentive targets. See "Non-IFRS measures" below.

Overview of business environment:

The EMS industry is highly competitive with multiple global EMS providers competing for the same customers and programs. Although the
industry is characterized by a large revenue base and new business

34

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opportunities,
the revenue is volatile on a quarterly basis, the business environment is highly competitive, and aggressive pricing is a common business dynamic. Capacity utilization, customer mix and
the types of products and services we provide are important factors affecting operating margins. The amount and location of qualified people, manufacturing capacity, and the mix of business through
that capacity are vital considerations for EMS providers. The EMS industry is also working capital intensive. As a result, we believe that ROIC, which is primarily affected by operating margin and
investments in working capital and equipment, is an important metric for measuring an EMS provider's financial performance.

EMS
companies are exposed to a variety of customers and end markets. Demand visibility is limited, making revenue from customers and by end markets difficult to predict. Short product
lifecycles inherent in technology markets, short production lead times expected by our customers, rapid shifts in technology for our customers' products, frequent changes in preference by our
customers' customers, model obsolescence and general volatility in the economy are contributing factors. The global economy and financial markets continue to be uncertain and may continue to
negatively impact the operations of major EMS providers such as Celestica. Uncertainty surrounding the extent and timing of the global economic recovery may impact future demand for our products and
services. We will continue to monitor the dynamics and impacts of the global economic environment and will work to manage our priorities, costs and resources to address changes as they occur.

External
factors that could impact the EMS industry and our business include natural disasters, political instability, labor or social unrest, criminal activity and other risks present
in the jurisdictions in which we, our suppliers and our customers operate. These types of local events could disrupt operations at one or more of our facilities or those of our customers, component
suppliers or our logistics partners. These events could lead to higher costs or supply shortages or may disrupt the delivery of components to us or the ability to provide finished products or services
to our customers, any of which could adversely affect our operating results. We carry insurance to cover damage to our facilities and interruptions to our operations, including those that may occur as
a result of natural disasters, such as flooding and earthquakes, or other events. Our insurance policies are subject to deductibles, coverage limitations and exclusions, and may not provide adequate
coverage.

Our
business is also affected by customers who will sometimes shift production between EMS providers for a number of reasons, including pricing concessions, more favorable terms and
conditions, or their preference or need to consolidate their supply chain capacity or the number of supply chain partners. Customers may also choose to accelerate the amount of business they
outsource, insource previously outsourced business, or change the concentration or location of their EMS suppliers to better balance their supply continuity risk. As we respond to the impact of these
customer decisions, these changes may impact, among other items, our revenue and operating margin, the costs of planned restructuring, the level of our capital expenditures and our cash flows.

We
expect overall end market demand to remain soft and, together with the impact of seasonality, we expect revenue, at the mid-point of our guidance ($1.325 billion to
$1.425 billion, provided on January 22, 2013), for the first quarter of 2013 to decrease approximately 8% compared to the fourth quarter of 2012, and to decrease approximately 19%
compared to the first quarter of 2012 primarily due to our disengagement from the RIM manufacturing services business. Excluding revenue from RIM in the first
quarter of 2012, we expect revenue for the first quarter of 2013 to be relatively flat year-over-year. We were recently notified by one of our customers in the server end
market that it will insource a systems assembly program commencing in the second quarter of 2013. As a result, we expect revenue from our server end market to decline by approximately
$50 million in the second quarter of 2013 compared to the first quarter of 2013. We expect revenue from our communications end market to increase in the second half of 2013 compared to the
first half, in part due to a new program win from a significant customer which is consolidating its supplier base. We anticipate a challenging first half of 2013 with operating margin in the range of
2.0% to 2.5%, based on current customer forecasts and the timing of ramping new programs. Our revenue and operating margin will be impacted by the overall end market demand, the timing, extent and
pricing of new or follow-on business, as well as the costs and timing of the ramping. Despite the challenging environment, we remain committed to making the appropriate investments
required to support our long-term objectives necessary to create value while managing costs and resources to maximize productivity.

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Summary of 2012

Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB and accounting policies we
adopted in accordance with IFRS. These consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly our financial position as at
December 31, 2012 and the results of operations, comprehensive income and cash flows for the year ended December 31, 2012.

Wind down of manufacturing services for RIM and restructuring update:

In June 2012, we announced the wind down of our manufacturing services for RIM. We completed our manufacturing services for RIM
and the related transition activities by the end of 2012. Revenue from RIM was 10% of total revenue in the third quarter of 2012 and was minimal in the fourth quarter of 2012. RIM represented 12% of
revenue in 2012, down from 19% in 2011 and 20% in 2010.

We
are actively pursuing new business opportunities to replace the lost revenue from RIM. We cannot assure the timely replacement of this lost revenue. We anticipate continued
short-term pressure on our operating margins in the first half of 2013. Our operating margins each quarter are also impacted by changes in demand from our customers, the mix of customers
and the types of products or services we provide, pricing pressures, utilization of manufacturing capacity, and the costs and timing of ramping new business, among other factors.

Due
to the historical significance of RIM to our operations and in order to improve our overall margin performance, we previously announced that we would take restructuring actions
throughout our global network to reduce our overall cost structure. In July 2012, we estimated total restructuring charges of between $40 million and $50 million in connection
with these restructuring actions. Our current estimate of the total restructuring charges to complete our planned actions, which we expect to complete by the end of June 2013, is between
$55 million and $65 million, taking into account additional actions in response to the continued challenging demand environment. Of this estimated amount, we recorded
$44.0 million of restructuring charges in 2012. In 2012, we recorded cash charges of $27.8 million, primarily related to employee termination costs for our RIM operations and other
actions throughout our global network, and non-cash charges of $16.2 million, primarily to write down to recoverable amounts the RIM-related equipment that was no longer
in use in Mexico, Romania and Malaysia. We recorded restructuring charges of $14.5 million in 2011 related to a previous restructuring program.

The
following table shows certain key operating results and financial information for the years indicated (in millions, except per share amounts):

Year ended December 312010

2011

2012Revenue

$
6,526.1

$
7,213.0

$
6,507.2Gross profit


444.1


491.4


438.4Selling, general and administrative expenses (SG&A)


252.1


253.4


237.0Other charges


49.9


6.5


59.5Net earnings


101.2


195.1


117.7Diluted earnings per share

$
0.44

$
0.89

$
0.56




December 31
2010

December 31
2011

December 31
2012Cash and cash equivalents

$
632.8

$
658.9

$
550.5Total assets


3,013.9


2,969.6


2,658.8


Revenue
of $6.5 billion for 2012 decreased 10% from $7.2 billion for 2011; approximately 90% of this decrease was due to the wind down of our RIM manufacturing services.
Excluding revenue from RIM for both years, our revenue for 2012 decreased 1% compared to 2011. Compared to 2011, revenue dollars from consumer decreased 37% primarily due to the wind down of our
manufacturing for RIM, and communications and servers

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decreased
10% and 6%, respectively, due to overall demand weakness. These decreases were offset in part by our diversified end market which increased 27%, or $285 million, compared to 2011,
primarily driven by new program wins and acquisitions. Revenue from our acquisitions contributed approximately one-half of the revenue increase in this end market
year-over-year. Revenue dollars from our storage end market in 2012 were flat compared to 2011. Communications and diversified were our largest end markets for 2012,
representing 35% and 20%, respectively, of total revenue.

Gross
profit decreased 11% to $438.4 million (6.7% of total revenue) for 2012 from $491.4 million (6.8% of total revenue) for 2011, in line with the revenue decrease. SG&A
for 2012 decreased 6% to $237.0 million (3.6% of total revenue) from $253.4 million (3.5% of total revenue) for 2011, reflecting lower variable compensation expenses and overall cost
savings. The change in gross margin and SG&A as a percentage of total revenue in 2012 was primarily driven by lower revenue levels in 2012. Net earnings for 2012 of $117.7 million were
$77.4 million lower than for 2011, primarily due to overall lower volumes and higher
restructuring and impairment charges, offset in part by higher income tax recoveries in 2012 compared to 2011.

Our
balance sheet remains strong. Our cash and cash equivalents at December 31, 2012 were $550.5 million (December 31,
2011  $658.9 million). Free cash flow for 2012 was $211.4 million, up 47% from $144.1 million for 2011. At December 31, 2012, we had
drawn $55.0 million (December 31, 2011  no amounts drawn) under our revolving credit facility. We entered into a new uncommitted accounts
receivable ("A/R") sales facility in November 2012 and had sold $50.0 million of A/R under this program as of December 31, 2012 (December 31,
2011  sold $60.0 million of A/R under a prior A/R sales facility). We repaid a deposit of $30.0 million to RIM in the fourth quarter of 2012 and
had no customer deposits at December 31, 2012 (December 31, 2011  $120.0 million deposit).

In
September 2012, we completed the acquisition of D&H, a leading manufacturer of precision machined components and assemblies based in California, U.S.A. D&H provides
manufacturing and engineering services, coupled with dedicated capacity and equipment for prototype and quick-turn support, to some of the world's leading semiconductor capital equipment
manufacturers. We financed the purchase price of $71.0 million, net of cash acquired, from cash on hand. This acquisition did not have a significant impact on our consolidated results of
operations for 2012.

During
the fourth quarter of 2012, we launched and successfully completed a substantial issuer bid ("SIB") and paid $175 million to repurchase for cancellation 22.4 million
subordinate voting shares at a price of $7.80 per share. We funded the share repurchases using a combination of cash on hand and cash from our revolving credit facility. During 2012, we also paid
$113.8 million to repurchase for cancellation 13.3 million subordinate voting shares at a weighted average price of $8.52 per share under our recently completed Normal Course Issuer Bid
("NCIB"). During 2012, we returned over $280 million to our shareholders through share repurchases under our SIB and NCIB.

In
the fourth quarter of 2012, we entered into an Automatic Share Purchase Plan ("ASPP") with a trustee for the purchase of 2.2 million subordinate voting shares in the open
market to satisfy the deliveries in respect of share unit awards vesting under our equity-based compensation plans in the first quarter of 2013. This ASPP allowed the trustee to purchase our
subordinate voting shares for such purposes at any time through January 31, 2013, including during any applicable trading blackout periods. We paid $17.9 million to the trustee to fund
purchases under this ASPP. During 2012 and prior to the ASPP, we also paid $3.8 million for the trustee to purchase our subordinate voting shares in the open market for delivery under our
equity-based compensation plans.

Summary of 2011

Revenue for 2011 of $7.2 billion increased 11% from $6.5 billion in 2010. Compared to 2010, revenue dollars from our
diversified end market increased 40%, server increased 14%, consumer increased 11%, and communications increased 5%. These revenue increases were primarily due to new program wins with existing and
new customers and from acquisitions. Revenue from our acquisitions
contributed approximately one-third of the revenue increase in our diversified end market. Communications and consumer were our largest end markets for 2011, representing 35% and 25%,
respectively, of total revenue (2010  37% and 25%, respectively). Revenue dollars from our storage end market decreased 4% from 2010.

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Gross
profit for 2011 increased 11% from 2010, in line with the revenue increase. Gross margin as a percentage of revenue was 6.8% in both years. SG&A for 2011 was relatively flat
compared to 2010. Net earnings for 2011 of $195.1 million were $93.9 million higher than 2010 primarily reflecting improved operating earnings and lower restructuring charges, as well as
lower income tax expense resulting from income tax recoveries recognized in 2011.

In
June 2011, we completed the acquisition of the semiconductor equipment contract manufacturing operations of Brooks Automation Inc. ("Brooks Automation") for
$80.5 million, funded with cash on hand and $45.0 million from our revolving facility which we repaid in 2011.

During
2011, we paid $49.4 million (2010  $26.2 million) for a trustee's purchase of our subordinate voting shares in the open market
for delivery under our equity-based compensation plans.

Other performance indicators:

In addition to the key operating results and financial information described above, management reviews the following
non-IFRS measures:

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12Cash cycle days:Days in A/R


45


42


40


41


42


41


46


45Days in inventory


50


53


52


51


52


50


53


51Days in A/P


(64
)

(60
)

(56
)

(56
)

(59
)

(57
)

(60
)

(57
)Cash cycle days


31


35


36


36


35


34


39


39Inventory turns


7.4x


6.8x


7.0x


7.2x


7.0x


7.3x


7.0x


7.2x


2011

2012March 31

June 30

September 30

December 31

March 31

June 30

September 30

December 31Amount of A/R sold (in millions)

$
60.0

$
120.0

$
100.0

$
60.0

$
60.0

$
45.0

$
60.0

$
50.0Amount of customer deposits (in millions)

$
50.0

$
83.0

$
100.0

$
120.0

$
99.0

$
57.6

$
30.0

$



Days
in 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 for the quarter divided by average daily cost of sales. Cash cycle days is calculated as the sum of days in
A/R and days in inventory, minus the days in A/P. Inventory turns is calculated as 365 divided by the number of days in inventory. These non-IFRS measures do not have comparable
measures under IFRS to which we can reconcile.

Cash
cycle days for the fourth quarter of 2012 increased by 3 days to 39 days compared to the same period in 2011 primarily as a result of the increase in the days in A/R.
The increase in the days in A/R for the fourth quarter of 2012 was primarily due to a lower revenue base and changes in customer mix compared to the same period in 2011. A reduction in the amount of
A/R we sold in the fourth quarter of 2012, compared to the same period in 2011, also negatively impacted this quarter's days in A/R.

Management
reviews other non-IFRS measures including adjusted net earnings, operating margin, ROIC and free cash flow. See "Non-IFRS measures" below.

38

---



Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities. Actual results
could differ materially from these estimates and assumptions. We review our estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are
revised and may impact future periods as well. Significant accounting policies and methods used in the preparation of our consolidated financial statements are described in note 2 to our
2012 consolidated financial statements.

Key sources of estimation uncertainty and judgment:

We have applied significant estimates and assumptions in the following areas which we believe could have a significant impact on our
reported results and financial position: our valuations of inventory, assets held for sale and income taxes; the amount of restructuring charges or recoveries; the measurement of the recoverable
amount of our cash generating units (CGU); our valuations
of financial assets and liabilities, pension and non-pension post-employment benefit costs, stock-based compensation, provisions and contingencies; and the allocation of our
purchase price and other valuations we use in our business acquisitions. The near-term economic environment could also impact certain estimates necessary to prepare our consolidated
financial statements, in particular, the recoverable amount used in our impairment testing of our non-financial assets, the rate of return on our pension assets and the discount rates
applied to our pension and non-pension post-employment benefit liabilities.

We
have applied significant judgment to the following areas: the determination of our CGUs and whether events or changes in circumstances during the year are indicators that a review for
impairment should be conducted; and the timing of the recognition of charges associated with restructuring plans.

Inventory valuation:

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. We procure inventory based on specific customer orders and forecasts. We may require valuation adjustments if actual market conditions or demand for our
customers' products are less favorable than we had projected. The determination of net realizable value involves significant management judgment. We consider factors such as shrinkage, the aging of
and the future demand for the inventory, and contractual arrangements with customers. We attempt to utilize excess inventory in other products we manufacture or return inventory to the suppliers or
customers. We use estimates to forecast future sales volume and to identify excess inventory balances. A change to these assumptions could impact our inventory valuation and impact our gross margins.
To the extent circumstances change, we may adjust our previous write-downs through our consolidated statement of operations in the period a change in estimate occurs.

Income taxes:

We record an income tax expense or recovery based on the income earned or loss incurred in each tax jurisdiction at the enacted or
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 and estimates are
required for exposures related to examinations by taxation authorities. We review these transactions and exposures and record tax liabilities for open years based on our assessment of many factors,
including past experience and interpretations of tax law applied to the facts of each matter. The determination of tax liabilities is subjective and generally involves a significant amount of
judgment. We believe that our income tax liability reflects the probable outcome of our income tax obligations based on the facts and the circumstances; however, the final income tax outcome may be
different from our estimates. A change to these estimates could impact our income tax provision.

We
recognize deferred income tax assets to the extent we believe it is probable that the amount will be realized. We consider factors such as the reversal of taxable temporary
differences, projected future taxable

39

---



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 amount of deferred income tax assets
we recognize.

Goodwill, intangible assets and property, plant and equipment:

We estimate the useful lives of intangible assets and property, plant and equipment based on the nature of the asset, historical
experience, the projected period of future economic benefits to be provided by the assets, the terms of any related customer contract, and expected changes in technology. We review the carrying
amounts of goodwill, intangible assets and property, plant and equipment for impairment on an annual basis and whenever events or changes in circumstances (triggering events) indicate that the
carrying amount of an asset or CGU may not be recoverable. If any such indication exists, we test the carrying amount of an asset or CGU for impairment. Absent triggering events during the year, we
conduct our impairment assessment in the fourth quarter of the year to correspond with our planning cycle. Judgment is required in the determination of our CGUs and whether events or changes in
circumstances during the year are indicators that a review for impairment should be conducted prior to the annual assessment.

We
recognize an impairment loss when the carrying amount of an asset, CGU or group of CGUs exceeds the recoverable amount. The recoverable amount of an asset, CGU or group of CGUs is
measured as the greater of its value-in-use and its fair value less costs to sell. The process of determining the recoverable amount of an asset, CGU or group of CGUs is
subjective and requires management to exercise significant judgment in estimating future growth and discount rates, and projecting cash flows, among other factors. The process of determining fair
value less costs to sell requires the valuation and use of appraisals to support our real property values. We recognize impairment losses in our consolidated statement of operations. We first allocate
impairment losses in respect of a CGU or group of CGUs to reduce the carrying amount of goodwill and then to reduce the carrying amount of other assets in the CGU or group of CGUs on a
pro rata basis.

We
do not reverse impairment losses for goodwill in future periods. We reverse impairment losses other than for goodwill if the losses we recognized in prior periods no longer exist or
have decreased. At each reporting date, we review for indicators that could change the estimates we used to determine the recoverable amount. The amount of the reversal is limited to restoring the
carrying amount to the amount that would have been determined, net of depreciation or amortization, had we recognized no impairment loss in prior periods.

Restructuring charges:

We incur restructuring charges relating to workforce reductions, facility consolidations and costs associated with exiting businesses.
Our restructuring charges include employee severance and benefit costs, costs related to leased facilities and equipment we no longer use, gains, losses or impairments related to owned facilities and
equipment we no longer use and which are 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 restructuring plans. Our major assumptions include the timing and number of employees we will terminate, the measurement of termination
costs, and the timing of disposition and estimated fair values less costs to sell for assets we no longer use and are available for sale. We recognize employee termination costs in the period the
detailed plans are approved and when the restructuring actions have either commenced or have been announced to employees. For owned facilities and equipment that are no longer in use and are available
for sale, we recognize an impairment loss based on the fair value less costs to sell, with fair value estimated based on market prices for similar assets. For leased facilities that we have vacated,
we discount the lease obligation based on future lease payments net of estimated sublease income. We recognize the change in provisions due to the passage of time as finance costs. To estimate future
sublease income, we work with independent brokers to determine the estimated tenant rents we can expect to realize. At the end of each reporting period, we evaluate the appropriateness of the
remaining balances. We may require adjustments to the recorded amounts to reflect actual experience or changes in future estimates.

40

---





Pension:

We have pension and non-pension post-employment benefit costs and liabilities that are determined from
actuarial valuations. Actuarial valuations require management to make certain judgments and estimates relating to expected plan investment performance, salary escalation, compensation levels at the
time of retirement, retirement ages, the discount rate used in measuring the liability and expected healthcare costs. These actuarial assumptions could change from
period-to-period and actual results could differ materially from the estimates originally made by management. The fair values of our pension assets were based on a measurement
date of December 31, 2012. We evaluate our assumptions on a regular basis, taking into consideration current market conditions and historical data. There can be no assurance that our pension
plan assets will earn the assumed rate of return. Market driven changes may affect our discount rates and other variables which could cause actual results to differ from our estimates, and such
differences may be material. Changes in assumptions could impact our pension plan valuations and our future pension expense and funding. See notes 2(n) and 18 to our consolidated
financial statements.

Stock-based compensation:

We recognize the grant date fair value of options granted to employees as compensation expense, with a corresponding charge to
contributed surplus in our consolidated balance sheet, over the period the employees become entitled to the options. We adjust compensation expense to reflect the estimated number of options we expect
to vest at the end of the vesting period. When options are exercised, we credit the proceeds to capital stock. We measure the fair value of options using the Black-Scholes option pricing model.
Measurement inputs include the price of our subordinate voting shares on the grant date, the exercise price of the option, and our estimates of the following: expected price volatility of our
subordinate voting shares (based on weighted average historic volatility), weighted average expected life of the option (based on historical experience and general option holder behavior), expected
dividends, and the risk-free interest rate.

The
cost we record for equity-settled restricted share units ("RSUs"), and for performance share units ("PSUs") granted prior to 2011, is based on the market value of our subordinate
voting shares at the time of grant. We amortize the cost of RSUs and PSUs to compensation expense with a corresponding charge to contributed surplus over the period the employees become entitled to
the awards. The cost we record for PSUs, which vest based on a non-market performance condition, is based on our estimate of the outcome of the performance condition. We adjust the cost of
PSUs as new facts and circumstances arise; and the timing of these adjustments is subject to judgment. Historically, we have generally settled these awards with subordinate voting shares purchased in
the open market by a trustee. We have also cash-settled certain awards which we account for as liabilities and remeasure them based on our share price at each reporting date until the
settlement date. We record the corresponding charge or recovery to compensation expense in our consolidated statement of operations.

We
determine the cost we record for PSUs granted in 2011 and 2012 using a Monte Carlo simulation model. The number of awards expected to be earned is factored into the grant date Monte
Carlo valuation for the award. The number of PSUs that will vest depends on the level of achievement of a market performance condition, over a three-year period, based on our total
shareholder return ("TSR") relative to the TSR of a pre-defined EMS competitor group. We do not adjust the grant date fair value regardless of the eventual number of awards that are earned
based on the market performance condition. We recognize compensation expense in our consolidated statement of operations on a straight-line basis over the requisite service period and we
reduce this expense for the estimated PSU awards that are not expected to vest because the employment conditions will not be satisfied.

We
grant deferred share units ("DSUs") to certain members of our board of directors as part of their compensation, which is comprised of an annual retainer, an annual equity award and
meeting fees. We amortize the cost of DSUs to compensation expense over the period the services are rendered.

41

---



Operating Results

Our annual and quarterly operating results, including working capital performance, vary from period-to-period
as a result of the level and timing of customer orders, mix of revenue, and fluctuations in materials and other costs. The level and timing of customer orders will vary due to changes in demand for
their products, general economic conditions, their attempts to balance their inventory, availability of components and materials, and changes in their supply chain strategies or suppliers. Our annual
and quarterly operating results are specifically affected by, among other factors: our mix of customers and the types of products or services we provide; the rate at which, and the costs associated
with, new program ramps; volumes and seasonality of business; price competition; the mix of manufacturing or service value-add; capacity utilization; manufacturing efficiency; the degree
of automation used in the assembly process; the availability of components or labor; the timing of receiving components and materials; costs and inefficiencies of transferring programs between
facilities; the loss of programs and customer disengagements and the timing of replacement business; the impact of foreign exchange fluctuations; the performance of third-party providers; our ability
to manage inventory, production location and equipment effectively; our ability to manage changing labor, component, energy and transportation costs effectively; fluctuations in variable compensation
costs; the timing of our expenditures in anticipation of forecasted sales levels; and the timing of acquisitions and the related integration costs. Our operations may also be affected by natural
disasters or other local risks present in the jurisdictions in which we, our suppliers and our customers operate. These events could lead to higher costs or supply shortages or may disrupt the
delivery of components to us or our ability to provide finished products or services to our customers, any of which could adversely affect our operating results.

In
the EMS industry, customers can 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 or quality issues, preference for consolidation or a change in their supplier base, rebalancing the concentration or location of their EMS providers,
mergers and consolidation among customers, as well as decisions to adjust the volume of business being outsourced. Customer or program transfers between EMS providers are part of the competitive
nature of our industry. Some customers use more than one EMS provider to manufacture a product and/or may have the same EMS provider support them from more than one geographic location. Customers may
choose to change the allocation of demand amongst their EMS providers and/or may shift programs from one region to another region within an EMS provider's global network. Customers may also decide to
insource production they had previously outsourced to utilize their excess internal capacity or for other reasons. Our operating results for each period include the impacts associated with program
wins, losses or follow-on business from customers as well as acquisitions. The volume of, profitability of or the location of new business awards will vary from
period-to-period and from program-to-program. Significant period-to-period variations can also result from the timing of new
programs reaching full production or programs reaching end-of-life, the timing of follow-on or next generation programs and/or the timing of existing programs being
fully or partially transferred internally or to a competitor.

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

Year ended
December 312010

2011

2012Revenue


100.0
%

100.0
%

100.0
%Cost of sales


93.2


93.2


93.3Gross profit


6.8


6.8


6.7SG&A


3.9


3.5


3.6Research and development costs





0.2


0.2Amortization of intangible assets


0.2


0.2


0.2Other charges


0.8


0.1


0.9Finance costs


0.1





0.1Earnings before income tax


1.8


2.8


1.7Income tax expense (recovery)


0.2


0.1


(0.1
)Net earnings


1.6
%

2.7
%

1.8
%


42

---



Revenue:

Effective the first quarter of 2012, we combined our enterprise communications and telecommunications end markets into one
communications end market for reporting purposes. We also combined prior period percentages for comparison purposes.

Revenue
for 2012 of $6.5 billion decreased 10% from $7.2 billion in 2011; approximately 90% of this decrease was due to the wind down of our RIM manufacturing services.
Excluding revenue from RIM for both years, our revenue for 2012 decreased 1% compared to 2011. Compared to 2011, revenue dollars from consumer decreased 37% primarily due to the wind down of our
manufacturing for RIM, and communications and servers decreased 10% and 6%, respectively, due to overall demand weakness. These decreases were offset in part by our diversified end market which
increased 27%, or $285 million, compared to 2011, primarily driven by new program wins and acquisitions. Revenue from our acquisitions contributed approximately one-half of the
revenue increase in this end market year-over-year. Revenue dollars from our storage end market in 2012 were flat compared to 2011. Communications and diversified were our
largest end markets for 2012, representing 35% and 20%, respectively, of total revenue.

Revenue
for 2011 of $7.2 billion increased 11% from $6.5 billion in 2010. Compared to 2010, revenue dollars from our diversified end market increased 40%, server increased
14%, consumer increased 11%, and communications increased 5%. These revenue increases were primarily due to new program wins with existing and new customers and from acquisitions. Revenue from our
acquisitions contributed approximately one-third of the revenue increase in our diversified end market. Communications and consumer were our largest end markets for 2011, representing 35%
and 25%, respectively, of total revenue (2010  37% and 25%, respectively). Revenue dollars from our storage end market decreased 4% from 2010.

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

2010

2011

2012Communications


37%


35%


35%Consumer


25%


25%


18%Diversified


12%


14%


20%Servers


14%


15%


15%Storage


12%


11%


12%Revenue (in billions)

$
6.53

$
7.21

$
6.51


Our
product and service volumes, revenue and operating results vary from period-to-period depending on the success in the marketplace of our customers' products,
changes in demand from the customer for the products we manufacture, the impact of seasonality for various end markets, the mix and complexity of the products or services we provide, the timing of
receiving components and materials, the extent, timing and rate of new program wins, loss or follow-on business from customers, the transfer of programs among our facilities at our
customers' request and the timing and rate at which new programs are ramped up, among other factors. We are dependent on a limited number of customers in the communications and enterprise computing
end markets for a substantial portion of our revenue. We also expect that the pace of technological change, the frequency of customers transferring business among EMS competitors or customers changing
the volumes
they outsource and the constantly changing dynamics of the global economy will continue to impact our business from period to period.

In
the past, we have experienced some level of seasonality in our quarterly revenue patterns across some of the end markets we serve. We expect that the numerous factors described above
that affect our period-to-period results will continue to make it difficult for us to predict the extent and impact of seasonality and other external factors on
our business.

The
significant decrease in revenue from our consumer end market in 2012, primarily due to our disengagement from RIM, resulted in proportionately higher percentages of total revenue for
all of our other end markets in 2012 compared to their respective revenue percentages in the prior periods.

43

---



Our
communications end market represented 35% of total revenue for both 2012 and 2011 and 37% for 2010. Revenue dollars from this end market decreased 10% in 2012 compared to 2011,
primarily due to weaker demand across a number of customers in this end market. The decrease in our communications end market as a percentage of total revenue from 2010 to 2011 was a result of lower
volumes associated with weaker demand from some of our customers for the products we manufacture and the insourcing of a program by one customer.

Our
consumer end market represented 18% of total revenue for 2012, down from 25% of total revenue for 2011 and 2010, primarily as a result of our disengagement from RIM in 2012. RIM was
our largest customer and had represented approximately three-quarters of our consumer business in 2011 and 2010. Our revenue from RIM was minimal for the fourth quarter of 2012 and 12% for 2012
(2011  19%, 2010  20%) as we completed our manufacturing services and the related transition activities for RIM by the end
of 2012. We cannot assure the timely replacement of this lost revenue.

Our
diversified end market represented 20% of total revenue for 2012, up from 14% in 2011 and 12% in 2010. Revenue dollars from our diversified end market increased 40% in 2011 compared
to 2010, and a further 27% in 2012 compared to 2011. New program wins and revenue from acquisitions contributed to the increases in revenue in this end market during the past two years. Revenue from
our acquisitions contributed approximately one-half of the revenue increase in our diversified end market from 2011.

Revenue
dollars from our server end market decreased 6% compared to 2011 as a result of demand weakness from one of our top customers. Revenue dollars from our storage end market for
2012 were flat compared to 2011. Compared to 2010, revenue dollars from our server end market increased 14% in 2011, primarily due to new program wins, and revenue dollars from our storage end market
deceased 4% in 2011.

For
2012, we had two customers (RIM and Cisco Systems) that individually represented more than 10% of total revenue (2011  two customers;
2010  one customer). RIM accounted for 12% of total revenue for 2012 (2011  19%;
2010  20%).

Whether
any of our customers individually accounts for more than 10% of revenue in any period depends on various factors affecting our business with that customer and with other
customers, including overall changes in demand for our customers' product, seasonality of business, the extent and timing of new program wins, losses or follow-on business, the phasing in
or out of programs, the growth rate of other customers, price competition and changes in our customers' supplier base or supply chain strategies.

In
the aggregate, our top 10 customers represented 67% of revenue in 2012 (2011  71%; 2010  72%). We
are dependent upon continued revenue from our largest customers. We generally enter into master supply agreements with our customers that provide the framework for our overall relationship. These
agreements do not typically guarantee a particular level of business or fixed pricing. Instead, we bid on a program-by-program basis and typically receive customer purchase
orders for specific quantities and timing of products. There can be no assurance that revenue from any of our major customers will continue at historical levels or will not decrease in absolute terms
or as a percentage of total revenue. A significant revenue decrease or pricing pressures from these or other customers, or a loss of a major customer, would have a material adverse impact on our
business, our operating results and our financial position.

In
the EMS 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 or to adjust the concentration of their supplier base to manage supply continuity risk. 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. Order cancellations and changes or delays in production could have a material
adverse impact on our results of operations and working capital performance, including requiring us to carry higher than expected levels of inventory. Order cancellations and delays could also lower
our asset utilization, resulting in lower margins. Significant period-to-period changes in margins can also result if new program wins or follow-on business are
more competitively priced than past programs.

We
believe that delivering profitable revenue growth depends on increasing sales to existing customers for their current and future product generations and expanding the range of
services we provide to these customers. We continue to pursue new customers and acquisition opportunities to expand our end market penetration, diversify our end market mix, and to enhance and add new
technologies and capabilities to our offerings.

44

---



Gross profit:

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

Year ended December 312010

2011

2012Gross profit (in millions)

$
444.1

$
491.4

$
438.4Gross margin


6.8%


6.8%


6.7%


Gross
profit for 2012 decreased 11% from 2011, in line with the revenue decrease. Gross margin as a percentage of total revenue decreased from 6.8% for 2011 to 6.7% for 2012, primarily
due to lower revenue levels.

Gross
profit for 2011 increased 11% from 2010, in line with the revenue increase. Gross margin as a percentage of revenue was 6.8% in both 2011 and 2010.

Multiple
factors cause gross margin to fluctuate including, among others: volume and mix of products or services; higher revenue concentration in lower gross margin products and end
markets; pricing pressure; production efficiencies; utilization of manufacturing capacity; changing material and labor costs, including variable labor costs associated with direct manufacturing
employees; manufacturing and transportation costs; start-up and ramp-up activities; new product introductions; disruption in production at individual sites; cost structures at
individual sites; foreign exchange volatility; and the availability of components and materials.

Our
gross profit and SG&A are impacted by the level of variable compensation expense we record in each period. Variable compensation includes our team incentive plans available to
eligible employees, sales incentive plans and equity-based compensation, such as stock options, PSUs and RSUs. See "Stock-based compensation" below. The amount of variable compensation expense varies
each period depending on the level of achievement of pre-determined performance goals and financial targets.

Selling, general and administrative expenses:

SG&A for 2012 of $237.0 million (3.6% of revenue) decreased 6% compared to $253.4 million (3.5% of revenue) for 2011,
reflecting lower variable compensation expenses and overall cost savings. The increase in SG&A as a percentage of revenue for 2012 compared to 2011 reflects the lower revenue levels in 2012.

SG&A
for 2011 of $253.4 million (3.5% of revenue) was relatively flat compared to $252.1 million (3.9% of revenue) for 2010. The decrease in SG&A as a percentage of revenue
for 2011 compared to 2010 reflects the higher revenue levels in 2011.

Stock-based compensation:

Our stock-based compensation expense varies each period, and includes mark-to-market adjustments for awards we
settle in cash and plan adjustments. The portion of our expense that relates to performance-based compensation generally varies depending on the level of achievement of pre-determined
performance goals and financial targets. We recorded the following stock-based compensation expense in cost of sales and SG&A for the years indicated (in millions):

Year ended December 312010

2011

2012Stock-based compensation

$
41.9

$
44.2

$
35.6


Stock-based
compensation expense for 2012 decreased $8.6 million from 2011, reflecting lower mark-to-market and plan adjustments, as described below, and
higher expense reversals due to forfeited awards related to terminated employees.

45

---



Stock-based
compensation expense for 2011 increased $2.3 million from 2010. Our 2011 expense included $4.8 million due to changes to our retirement eligibility of our
equity-based compensation plans and a $2.7 million mark-to-market adjustment for awards we settled in cash, compared to a $7.6 million
mark-to-market adjustment in 2010.

In
2010, we elected to cash-settle certain awards vesting in the first quarter of 2011 due to limitations on the number of subordinate voting shares that could be purchased
in the open market during the term of a prior share buy-back program. We also elected to cash-settle certain RSUs vesting in the fourth quarter of 2012 due to a prohibition on
the purchase of subordinate voting shares in the open market during the SIB. We account for cash-settled awards as liabilities and we remeasure these based on our share price at each
reporting date until the settlement date, with a corresponding charge to compensation expense. The mark-to-market adjustment on these cash-settled awards was
$0.2 million for 2012 (2011  $2.7 million; 2010  $7.6 million). When we made the decision in the
fourth quarter of 2012 to settle these awards with cash, we reclassified $3.4 million, representing the fair value of these awards, from contributed surplus to accrued liabilities. As
management currently intends to settle all other share unit awards with shares purchased in the open market by a trustee, we have accounted for these share unit awards as equity-settled awards. See
"Cash requirements" below.

We
made changes in 2011 to the retirement eligibility clauses in our equity-based compensation plans which required us to accelerate recognition of the related compensation expense. The
adjustment we recorded to stock-based compensation expense for 2011 was $1.7 million higher than the adjustment we recorded in 2012; the adjustment in 2011 also included an adjustment for
unvested awards granted prior to 2011.

Other charges:



Year ended December 312010

2011

2012Restructuring charges

$
35.8

$
14.5

$
44.0


Due
to the significance of RIM to our operations and in order to improve our overall margin performance, we announced in July 2012 that we would take restructuring actions
throughout our global network to reduce our overall cost structure. In July 2012, we estimated total restructuring charges of between $40 million and $50 million in connection
with these restructuring actions. Our current estimate of the total restructuring charges to complete our planned actions, which we expect to complete by the end of June 2013, is between
$55 million and $65 million, taking into account additional actions in response to the continued challenging demand environment. Of this amount, we recorded $44.0 million
in 2012.

Our
restructuring charges in 2012 were related to the wind down of our manufacturing services for RIM and other actions throughout our global network. In 2012, we recorded cash charges
of $27.8 million, primarily related to employee termination costs for our RIM operations and other actions throughout our global network. We also recorded non-cash charges of
$16.2 million primarily to write down to recoverable amounts the RIM-related equipment that was no longer in use in Mexico, Romania and Malaysia. At December 31, 2012, our
restructuring liability was $14.8 million, comprised primarily of employee termination costs which we expect to pay during the first half of 2013. All cash outlays have been, and the balance
will be, funded from cash on hand.

During
2011 and 2010, we recorded net restructuring charges of $14.5 million and $35.8 million, respectively, related to a previous restructuring program. These
restructuring charges were primarily for employee termination costs and contractual lease obligations.

We
evaluate our operations from time-to-time and may propose future restructuring actions or divestitures as a result of changes in the marketplace and/or our
exit from less profitable, non-core or non-strategic operations. The frequency of customers transferring business among EMS competitors, or customers changing the volumes they
outsource, or the transfer of programs among our facilities at our customers' request may also result in future restructuring actions.

46

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Year ended December 312010

2011

2012Asset impairment

$
9.1

$


$
17.7


We
conduct our annual impairment assessment of goodwill, intangible assets and property, plant, and equipment in the fourth quarter of each year and whenever triggering events indicate
that the carrying amount of an asset, CGU or group of CGUs may not be recoverable. We recognize an impairment loss when the carrying amount of an asset, CGU or group of CGUs exceeds the recoverable
amount, which is measured as the greater of its value-in-use and its fair value less costs to sell.

In
the second quarter of 2012, we tested the carrying amounts of the CGUs that were impacted by the wind down of our manufacturing services for RIM in Mexico, Romania and Malaysia. We
recorded an impairment loss on our RIM-related assets that were available for sale through restructuring charges. See discussion under restructuring charges in "Other charges" above. We
then compared the remaining carrying amounts of these CGUs to their recoverable amounts and determined there was no impairment to these assets that had not been recorded to restructuring charges
in 2012.

In
the fourth quarter of 2012, we performed our annual impairment assessment of goodwill, intangible assets and property, plant and equipment. We recorded non-cash impairment
charges totaling $17.7 million, comprised of $14.6 million against goodwill, $0.7 million against computer software and $2.4 million against property, plant and equipment.
The majority of our goodwill impairment related to the Allied Panels business we acquired in 2010. Our overall progress and our ability to ramp the healthcare business have been slower than we
originally anticipated. As a result, we recorded an impairment loss of $11.9 million relating to Allied Panels.

Our
CGU arising from the 2011 acquisition of the semiconductor equipment contract manufacturing operations of Brooks Automation, which includes $33.8 million of goodwill, has been
impacted by the downturn in the semiconductor industry. This CGU continues to develop business with its significant customers and we have assumed growth for this CGU in 2013 and beyond. In addition to
new business, we have assumed an overall improvement in semiconductor end market demand. Failure to realize the assumed revenues at an appropriate profit margin could result in an impairment in a
future period for this CGU. For our impairment test of this CGU, we used a discount rate of 20%. No impairment would arise if the discount rate were to increase to 30%.

During
the fourth quarter of 2011, we performed our annual impairment assessment of goodwill, intangible assets and property, plant and equipment and determined there was no impairment
(2010  impairment of $9.1 million).

Income taxes:

We had an income tax recovery of $5.8 million on earnings before tax of $111.9 million in 2012 compared to an income tax
expense of $3.7 million on earnings before tax of $198.8 million for 2011 and income tax expense of $18.2 million on earnings before tax of $119.4 million for 2010. Current
income taxes for 2012 consisted primarily of the tax expense in jurisdictions with current taxes payable and tax benefits arising from changes to our provisions related to certain tax uncertainties.
Deferred income taxes for 2012 were comprised primarily of deferred income tax assets of $10.4 million we recognized in the United States as a result of the D&H acquisition, offset in
part by net deferred income tax expense for changes in temporary differences in various jurisdictions. In addition, during the fourth quarter of 2012, we commenced a corporate tax reorganization
involving certain of our European subsidiaries. As a result, we recognized $17.0 million of deferred income tax assets as it became probable that the temporary differences associated with our
investment in these subsidiaries would reverse in the foreseeable future.

Current
income taxes for 2011 consisted primarily of the tax expense in jurisdictions with current taxes payable and changes to our net provisions related to tax uncertainties, including
current tax recoveries resulting from the settlement of tax audits. Deferred income taxes for 2011 were comprised primarily of the deferred tax recovery we recognized in Canada for an inter-company
investment we wrote off relating to a restructured

47

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subsidiary.
Current income taxes for 2010 consisted primarily of the tax expense in jurisdictions with current taxes payable and additional taxes and penalties related to a tax audit in Hong Kong
(which we formally settled in the second quarter of 2011). Deferred income taxes for 2010 were comprised primarily of deferred tax recoveries for future deductible temporary differences and
recognition of certain deferred income tax assets previously not recognized in Canada.

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 vary significantly period to period for various reasons, including the mix and volume of business in lower tax jurisdictions in Europe and Asia, and in jurisdictions with
tax holidays and tax incentives that have been negotiated with the respective tax authorities (which expire between 2014 and 2020). Our effective tax rate can also vary due to the impact of
restructuring charges, foreign exchange fluctuations, operating losses, certain tax exposures, the time period in which losses may be used under tax laws and whether management
believes it is probable that future taxable profit will be available to allow us to recognize deferred income tax assets.

Certain
countries in which we do business negotiate tax incentives to attract and retain our business. Our tax expense could increase if certain tax incentives from which we benefit are
retracted. A retraction could occur if we fail to satisfy the conditions on which these tax incentives are based, if they are not renewed upon expiration, if tax rates applicable to us in such
jurisdictions are otherwise increased, or due to changes in legislation or administrative practices. Changes in our outlook in any particular country could impact our ability to meet
the conditions.

In
certain jurisdictions, primarily in the Americas and Europe, we currently have significant net operating losses and other deductible temporary differences, which we expect will reduce
taxable income in these jurisdictions in future periods.

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 and
reviews by local tax authorities of historical information which could result in additional tax expense in future periods relating to prior results. Reviews by tax authorities generally focus on, but
are not limited to, 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. 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, and may from time-to-time undertake certain significant transactions, with other
subsidiaries in different jurisdictions. 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.

In
connection with ongoing tax audits in Canada, tax authorities have taken the position that income reported by one of our Canadian subsidiaries should have been materially higher in
2001 and 2002 and materially lower in 2003 and 2004 as a result of certain inter-company transactions, with additional proposed limitations on benefits associated with favorable adjustments arising
from inter-company transactions and other adjustments. If tax authorities are successful with their challenge, we estimate that the maximum net impact for additional income taxes and interest charges
associated with the proposed limitations of the favorable adjustments could be approximately $41 million Canadian dollars (approximately $41 million at current exchange rates).

Canadian
tax authorities have taken the position that certain interest amounts deducted by one of our Canadian entities in 2002 through 2004 on historical debt instruments should be
re-characterized as capital losses. If tax authorities are successful with their challenge, we estimate that the maximum net impact for additional income taxes and interest charges could
be approximately $30.5 million Canadian dollars (approximately $30.6 million at current exchange rates). We
believe that our asserted position is appropriate and would be sustained upon full examination by the tax authorities and, if necessary, upon consideration by the judicial courts. Our position is
supported by our Canadian legal tax advisers.

48

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In
connection with a tax audit in Brazil, tax authorities had taken the position that income reported by our Brazilian subsidiary in 2004 should have been materially higher as a result
of certain inter-company transactions. In June 2011, we received a ruling from the Brazilian Lower Administrative Court that was largely consistent with our original filing position. As the
ruling generally favored the taxpayer, the Brazilian tax authorities appealed the matter to a higher court. In June 2012, the Brazilian Higher Administrative Court unanimously upheld the Lower
Administrative Court decision. Although we believe it is unlikely to occur due to the recent unanimous decision by the higher court, the Brazilian tax authorities have the right to present a Special
Appeal to change the decision. We did not previously accrue for any potential adverse tax impact for the 2004 tax audit. Brazilian tax authorities are not precluded from taking similar positions in
future audits with respect to these types of transactions.

We
have and expect to continue to recognize the future benefit of certain Brazilian tax losses on the basis that these tax losses can and will be fully utilized in the fiscal period
ending on the date of dissolution of our Brazilian subsidiary. While our ability to do so is not certain, we believe that our interpretation of applicable Brazilian law will be sustained upon full
examination by the Brazilian tax authorities and, if necessary, upon consideration by the Brazilian judicial courts. Our position is supported by our Brazilian legal tax advisors. A change to the
benefit realizable on these Brazilian losses could increase our net deferred tax liabilities by approximately 48.8 million Brazilian reais (approximately $23.9 million at current
exchange rates).

The
successful pursuit of the assertions made by any taxing authority related to the above noted tax audits or others could result in us owing significant amounts of tax, interest and
possibly penalties. We believe we have substantial defenses to the asserted positions and have adequately accrued for any probable potential adverse tax impact. However, there can be no assurance as
to the final resolution of these claims and any resulting proceedings. If these claims and any ensuing proceedings are determined adversely to us, the amounts we may be required to pay could
be material.

Acquisitions:

We may, at any time, be engaged in ongoing discussions with respect to possible acquisitions that could expand our service offerings,
increase our penetration in various industries, establish strategic relationships with new or existing customers and/or enhance our global supply chain network. In order to enhance our competitiveness
and expand our revenue base or the services we offer our customers, we may also look to grow our services or capabilities beyond our traditional areas of EMS expertise. 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. There can also be no assurance that an acquisition will be successfully integrated or will generate the returns
we expected.

In
January 2010, we completed the acquisition of Scotland-based Invec Solutions Limited ("Invec"), a provider of warranty management, repair and parts management services. In
August 2010, we completed the acquisition of Austrian-based Allied Panels Entwicklungs-und Produktions GmbH ("Allied Panels") which enhanced our healthcare offering by
expanding our capability in the healthcare diagnostics and imaging market. In June 2011, we completed the acquisition of the semiconductor equipment contract manufacturing operations of Brooks
Automation. The operations, based in Oregon, U.S.A. and Wuxi, China, specialize in manufacturing complex mechanical equipment and providing systems integration services to some of the world's largest
semiconductor equipment manufacturers. This acquisition strengthened our service offerings by providing our customers with additional capabilities in complex mechanical and systems integration
services.

In
September 2012, we completed the acquisition of D&H, a leading manufacturer of precision machined components and assemblies based in California, U.S.A. D&H provides
manufacturing and engineering services, coupled with dedicated capacity and equipment for prototype and quick-turn support, to some of the world's leading semiconductor capital equipment
manufacturers. This acquisition further enhanced our entry into the semiconductor capital equipment market. We financed the purchase price of $71.0 million, net of cash acquired, from cash on
hand. The amount of goodwill arising from the acquisition was $26.4 million (of which we expect none to be tax deductible) and the amount of amortizable customer intangible assets was
$24.0 million. We expensed acquisition-related transaction costs of $0.9 million in 2012 through other charges. This acquisition did not have a significant impact on our consolidated
results of operations for 2012.

49

---



Revenue
and earnings for each of the reporting periods would not have been materially different had the acquisitions occurred at the beginning of their respective years.

Liquidity and Capital Resources

Liquidity

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

December 312010

2011

2012Cash and cash equivalents

$
632.8

$
658.9

$
550.5




Year ended December 312010

2011

2012Cash provided by operating activities

$
165.9

$
196.3

$
312.4Cash used in investing activities


(61.1
)

(125.7
)

(168.0
)Cash used in financing activities


(409.7
)

(44.5
)

(252.8
)Changes in non-cash working capital items (included with
operating activities above):A/R

$
(111.8
)
$
147.0

$
116.7Inventories


(162.8
)

2.0


147.3Other current assets


(11.9
)

3.9


6.7A/P, accrued and other current liabilities and provisions


211.4


(216.9
)

(193.1
)Working capital changes

$
(75.1
)
$
(64.0
)
$
77.6


Cash provided by operating activities:

Cash generated from operations for 2012 increased 59% to $312.4 million from $196.3 million for 2011, despite the lower
net earnings in 2012 compared to 2011. The increase in cash generated from operations is primarily due to lower A/R and inventory at the end of 2012, due in part to our disengagement from RIM.

We
generated $196.3 million in cash from operations during 2011 driven primarily by the net earnings for 2011, after adding back non-cash items such as depreciation
and amortization expense, offset partially by negative working capital. Negative working capital was driven primarily by a decrease in A/P compared to 2010, offset partially by a reduction in A/R. The
decrease in A/P, accrued and other liabilities and provisions reflects primarily lower inventory purchases, offset partially by a $45.0 million increase in the amount of the RIM deposit. The
improvement in A/R for 2011 reflects lower revenue levels in the fourth quarter of 2011 relative to the fourth quarter of 2010 and continued strong collections.

Included
in our cash and A/P balances at December 31, 2011 was a $120 million deposit we received from RIM, which was repaid in 2012. We did not have any customer deposits
as at December 31, 2012. At December 31, 2010, we had a $75 million deposit from RIM which we repaid in 2011.

Cash used in investing activities:

Our capital expenditures for 2012 were $105.9 million (2011  $62.3 million;
2010  $60.8 million). The capital expenditures were incurred primarily to enhance our manufacturing capabilities in various geographies and to support new
customer programs. We spent approximately $30 million during 2012 related to a building we acquired in Malaysia. From time-to-time, we receive cash proceeds from the
sale of surplus equipment and property.

50

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In
September 2012, we completed the acquisition of D&H. We financed the purchase price of $71.0 million, net of cash acquired, with cash on hand. In June 2011, we
acquired the semiconductor equipment contract manufacturing operations of Brooks Automation. We financed the purchase price of $80.5 million with cash on hand and $45.0 million from our
revolving credit facility, which we repaid in 2011. During 2010, we completed the acquisitions of Invec and Allied Panels for $16.2 million which we financed from cash on hand.

Cash used in financing activities:

In the fourth quarter of 2012, we completed the SIB and repurchased for cancellation $175 million of our subordinate voting
shares, which we funded using a combination of cash on hand and cash from our revolving credit facility. At December 31, 2012, we had drawn $55.0 million under our revolving credit
facility which we expect to repay during the first half of 2013.

During
2012, we also paid $113.8 million (2011  none; 2010  $140.6 million) to repurchase
subordinate voting shares in the open market for cancellation under our NCIB programs.

In
the fourth quarter of 2012, we entered into an ASPP with a trustee for the purchase of 2.2 million subordinate voting shares in the open market to satisfy the deliveries in
respect of share unit awards vesting in the first quarter of 2013. This ASPP allowed the trustee to purchase our subordinate voting shares for
such purposes at any time through January 31, 2013, including during any applicable trading blackout periods. In the fourth quarter of 2012, we paid $17.9 million to the trustee to fund
purchases under this ASPP. We paid an additional $0.4 million in January 2013 to complete the ASPP. During 2012 and prior to the ASPP, we also paid $3.8 million for the trustee to
purchase subordinate voting shares in the open market for delivery under our equity-based compensation plans. During 2011, we paid $49.4 million
(2010  $26.2 million) for the trustee to purchase our subordinate voting shares in the open market for the same purpose.

In
June 2011, we borrowed $45.0 million under our revolving credit facility to fund a portion of our Brooks Automation acquisition which we repaid in the third quarter
of 2011.

In
March 2010, we paid $231.6 million to repurchase all of our outstanding senior subordinated notes.

Cash requirements:

We maintain a revolving credit facility and an A/R sale program to provide short-term liquidity and to have funds available
for working capital and other investments to support our business strategies. Our working capital requirements can vary significantly from month-to-month due to a range of
business factors which includes the ramping of new programs, timing of purchases, higher levels of inventory for new programs and anticipated customer demand, timing of payments and A/R collections,
and customer forecasting variations. The international scope of our operations may also create working capital requirements in certain countries while other countries generate cash in excess of
working capital needs. Moving cash between countries on a short-term basis to fund working capital is not always expedient due to local currency regulations, tax considerations, and other
factors. To meet our working capital requirements and to provide short-term liquidity, we may draw on our revolving credit facility or sell A/R utilizing our A/R sales program. The timing
and the amounts we borrow or repay under these facilities can vary significantly from month-to-month depending upon our cash requirements.

At
times, our customers require us to carry inventory in excess of current production requirements. We may negotiate cash deposits from customers to cover such excess inventory. At
December 31, 2011, we had a deposit of $120 million from RIM that was repaid in full in 2012. We had no customer deposits as at December 31, 2012.

We
had $550.5 million in cash and cash equivalents at December 31, 2012 (December 31, 2011  $658.9 million;
December 31, 2010  $632.8 million). We believe that cash flow from operating activities, together with cash on hand, borrowings available under our
revolving credit facility and intraday and overnight bank overdraft facilities, and cash from the sale of A/R, will be sufficient to fund currently anticipated working capital needs, planned capital
spending and planned restructuring actions. We may issue debt, convertible debt or equity securities in the future to fund operations or make acquisitions. Equity or convertible debt securities could
dilute current shareholders' positions; debt or convertible debt securities could have rights and privileges senior to those of equity holders and the terms of
these debt securities could impose restrictions on our operations. The pricing of our securities would be subject to market conditions at the time of issuance.

51

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As
at December 31, 2012, a significant portion of our cash and cash equivalents was held by numerous foreign subsidiaries outside of Canada. Although substantially all of the cash
and cash equivalents held outside of Canada could be repatriated, a significant portion may be subject to withholding taxes under current tax laws. We have not recognized deferred tax liabilities for
cash and cash equivalents held by certain foreign subsidiaries related to earnings that are considered indefinitely reinvested outside of Canada and that we do not intend to repatriate in the
foreseeable future (December 31, 2012 and 2011  approximately $325 million and $380 million of cash and cash equivalents, respectively).

As
at December 31, 2012, we have contractual obligations that require future payments as follows (in millions):

Total(i)

2013

2014

2015

2016

2017

ThereafterOperating leases

$
75.4

$
26.7

$
17.7

$
8.6

$
4.3

$
3.0

$
15.1Pension plan contributions(ii)


19.2


19.2














Non-pension post-employment plan payments


45.2


9.8


3.2


3.3


3.8


3.7


21.4Revolving credit facility(iii)


55.0


55.0














Total

$
194.8

$
110.7

$
20.9

$
11.9

$
8.1

$
6.7

$
36.5


(i)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 fluctuate based on our usage.(ii)Based
on our latest actuarial valuations, we estimate our minimum funding requirement for 2013 to be $19.2 million
(2012  $30.8 million; 2011  $45.5 million). See further details in note 18 to our consolidated
financial statements. A significant deterioration in the asset values or asset returns could lead to higher than expected future contributions. Risks associated with actuarial valuation measurements
may also result in higher future cash 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 future results of operations, cash flows or liquidity.(iii)Represents
the amount drawn under our revolving credit facility at December 31, 2012 that we expect to repay during the first half of 2013.


As
at December 31, 2012, we have commitments that expire as follows (in millions):

Total

2013

2014

2015

2016

2017

ThereafterForeign currency contracts(i)

$
682.2

$
651.6

$
30.6

$


$


$


$
Letters of credit, letters of guarantee and surety bonds(ii)


43.2


37.3


2.0





1.6





2.3Capital expenditures(iii)


16.3


16.3














Total

$
741.7

$
705.2

$
32.6

$


$
1.6

$


$
2.3


(i)Represents
the aggregate notional amounts of the forward currency contracts.(ii)Includes
$31.1 million of letters of credit that we issued under our revolving credit facility.(iii)Our
capital spending varies each period based on the timing of new business wins and forecasted sales levels. Based on our current operating plans, we
anticipate capital spending for 2013 to be approximately 1.1% to 1.5% of revenue, and expect to fund this spending from cash on hand. As at December 31, 2012, we had committed
$16.3 million in capital expenditures, principally for machinery and equipment to support new customer programs. In addition, based on the tax incentives we have benefited from as at
December 31, 2012, we have met the capital expenditure commitments as at that date and have other ongoing conditions for retaining these tax incentives which we expect to meet.


Cash
outlays for our contractual obligations and commitments identified above are expected to be funded from 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

52

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assumed
liability for such material. We cannot quantify with a reasonable degree of accuracy the amount of our liability from purchase obligations under these purchase orders.

We
have granted share unit awards to employees under our equity-based compensation plans. We have the option to satisfy the delivery of shares upon vesting of the awards by issuing new
subordinate voting shares from treasury, purchasing subordinate voting shares in the open market, or by settling in cash. During 2012, we paid $21.7 million for a trustee to purchase
2.6 million subordinate voting shares in the open market, including those purchased under the ASPP. During 2011, we paid $49.4 million for the trustee to purchase in the open market
5.7 million subordinate voting shares, which we distributed to employees as awards vested during 2011 and the first quarter of 2012. During 2010, we paid $26.2 million for the trustee to
purchase 2.8 million subordinate voting shares for equity-based awards that vested during 2010 and the first quarter of 2011. In 2012, we also cash-settled $3.4 million of
RSUs that vested in December 2012 due to a prohibition on the purchase of subordinate voting shares in the open market during the SIB. We have an ongoing obligation to settle awards as they
vest in future periods. We currently estimate that approximately 2 million equity-based awards will vest in the first quarter of 2013. We expect to satisfy these awards with the subordinate
voting shares purchased in the open market under the ASPP.

The
NCIB that was accepted by the TSX in February 2012 allowed us to repurchase up to 16.2 million subordinate voting shares in the open market. During 2012, we paid
$113.8 million to repurchase for cancellation 13.3 million subordinate voting shares at a weighted average price of $8.52 per share. The
maximum number of subordinate voting shares we were permitted to repurchase for cancellation under the NCIB was reduced by the number of subordinate voting shares purchased for equity-based
compensation plans. This NCIB expired on February 8, 2013.

During
the fourth quarter of 2012, we launched and successfully completed an SIB. We paid $175 million to repurchase for cancellation 22.4 million subordinate voting shares
at a price of $7.80 per share, representing approximately 12% of our subordinate voting shares issued and outstanding prior to completion of the SIB. We funded the share repurchases using a
combination of cash on hand and cash from our revolving credit facility. During 2012, we returned over $280 million to our shareholders through share repurchases under our NCIB and SIB.

We
provide routine indemnifications, the terms of which range in duration and often are not explicitly defined. These may include indemnifications against third-party intellectual
property infringement claims and third-party claims for property damage resulting from our negligence. 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.

Litigation and contingencies:

In the normal course of our operations, we may 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 always possible to estimate the extent
of potential costs, if any, management believes that the ultimate resolution of such matters 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 us 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 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 added one of our directors and Onex Corporation as defendants.
On October 14, 2010, the District Court granted the defendants' motions to dismiss the consolidated amended complaint in its entirety. The

53

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plaintiffs
appealed to the United States Court of Appeals for the Second Circuit the dismissal of its claims against us and our former Chief Executive and Chief Financial Officers, but not as
to the other defendants. In a summary order dated December 29, 2011, the Court of Appeals reversed the District Court's dismissal of the consolidated amended complaint and remanded the case to
the District Court for further proceedings. The parties are currently engaged in the discovery process. Parallel class proceedings, including a claim issued in October 2011, remain against us
and our former Chief Executive and Chief Financial Officers in the Ontario Superior Court of Justice. On October 15, 2012, the Ontario Superior Court of Justice granted limited aspects of the
defendants' motion to strike, which ruling is subject to appeal, but the court has not granted leave nor certification of any actions. We believe the allegations in the 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 that it will not have a material adverse impact on our
financial position or liquidity. In addition, we may incur substantial litigation expenses in defending the claims. We have liability insurance coverage that may cover some of our litigation expenses,
and potential judgments or settlement costs.

Our
manufacturing facility in Miyagi, Japan was damaged as a result of the major earthquake and tsunami in March 2011. In March 2012, we settled a related insurance claim
for an amount that was consistent with our expectation.

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 a revolving credit facility, intraday and overnight bank overdraft
facilities, an A/R sales program and capital stock. We regularly review our borrowing capacity and make adjustments, as available, for changes in economic conditions.

At
December 31, 2012, we had cash and cash equivalents of $550.5 million (December 31, 2011  $658.9 million;
December 31, 2010  $632.8 million), of which approximately 48% was cash and 52% was cash equivalents. Our current portfolio consists of bank
deposits and certain money market funds that hold primarily U.S. government securities. The majority of our cash and cash equivalents is held with financial institutions each of which had at
December 31, 2012 a Standard and Poor's short-term rating of A-1 or above. Our cash and cash equivalents are subject to intra-quarter swings, generally related to the
timing of A/R collections, inventory purchases and payments, and other capital uses.

We
have a $400.0 million revolving credit facility that matures in January 2015. The facility has restrictive covenants, including those relating to debt incurrence, the
sale of assets and a change of control. We are also required to comply with financial covenants relating to indebtedness, interest coverage and liquidity and we have pledged certain assets as
security. In December 2012, we completed an SIB which we funded in part
with cash drawn from our revolving credit facility. At December 31, 2012, we had drawn $55.0 million under this facility (undrawn at December 31, 2011 and 2010) which we expect to
repay during the first half of 2013. At December 31, 2012, we were in compliance with all covenants of this facility.

At
December 31, 2012, we had issued $31.1 million (December 31, 2011  $27.0 million; December 31,
2010  $35.7 million) of letters of credit under our revolving credit facility. We also arranged letters of credit and surety bonds outside of our
revolving credit facility. At December 31, 2012, we had $12.1 million (December 31, 2011  $13.9 million; December 31,
2010  $13.8 million) of such letters of credit and surety bonds outstanding.

We
also have access to $70.0 million in intraday and overnight bank overdraft facilities, which were undrawn at December 31, 2012 (undrawn at December 31, 2011
and 2010).

In
November 2012, we entered into an agreement to sell up to $375 million in A/R on an uncommitted basis (subject to pre-determined limits by customers) to two
third-party banks. Both banks had a Standard and Poor's short-term rating of A-1 and a long-term rating of A or above at December 31, 2012. This agreement
has no fixed termination date and can be terminated at any time by the banks or us. At December 31, 2012, we had sold $50.0 million of A/R under this facility (December 31, 2011
and 2010  sold $60.0 million of A/R under our prior A/R sale facility, respectively). Since the current A/R sales program is on an uncommitted basis,
there can

54

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be
no assurance that either of the banks would purchase the A/R we plan to sell to them under this program. Our prior A/R sales program, which expired in November 2012, allowed us to sell up to
$250 million in A/R on a committed basis and up to an additional $150 million in A/R on an uncommitted basis.

The
timing and the amounts we borrow and repay under our revolving credit and overdraft facilities, or sell under our A/R sales program, can vary significantly from
month-to-month depending upon our working capital and other cash requirements.

Standard
and Poor's provides a corporate credit rating on Celestica. This 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 December 31, 2012, our Standard and Poor's corporate credit rating
is BB, with a stable outlook. A reduction in our credit rating could adversely impact our future cost of borrowing.

Our
strategy on capital risk management has not changed significantly since the end of 2011. Other than the restrictive covenants associated with our revolving credit facility noted
above, we are not subject to any
contractual or regulatory 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 or cash flows.

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 objectives, we maintain a portfolio consisting of a variety of securities, including
bank deposits and certain money market funds that hold primarily 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, pensions, 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. We enter into forward exchange contracts to hedge against our cash flows and significant balance
sheet exposures in certain foreign currencies. Balance sheet hedges are based on our forecasts of the future position of net monetary assets or liabilities denominated in foreign currencies and,
therefore, may not mitigate the full impact of any translation impacts in the future. There can be no assurance that our hedging transactions will be successful in mitigating our foreign
exchange risk.

55

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At
December 31, 2012, we had forward exchange contracts to trade U.S. dollars for the following currencies:

Currency

Amount of U.S.
dollars
(in millions)

Weighted average
exchange rate of
U.S. dollars

Maximum period
in months

Fair value
gain/(loss)
(in millions)Canadian dollar

$
288.2

$
1.01


9

$
(0.7
)Thai baht


118.3


0.03


15


2.1Malaysian ringgit


87.6


0.32


15


1.1Mexican peso


37.9


0.08


12


0.4British pound


68.3


1.62


4


0.1Chinese renminbi


34.1


0.16


12


0.1Euro


11.9


1.31


4


0.1Romanian leu


11.3


0.28


12


0.5Other


24.6





12


0.5Total

$
682.2







$
4.2


These
contracts generally extend for periods of up to 15 months and expire by the end of the first quarter of 2014. The fair value of these contracts at December 31, 2012
was a net unrealized gain of $4.2 million (December 31, 2011  net unrealized loss of $13.9 million; December 31,
2010  net unrealized gain of $13.0 million). The unrealized gains or losses are a result of fluctuations in foreign exchange rates between the date the
currency forward contracts were entered into and the valuation date at period end.

Financial risks:

We are exposed to a variety of market risks associated with financial instruments.

Currency
risk: Due to the global nature of our operations, we are exposed to exchange rate fluctuations on our cash receipts, cash payments and balance sheet exposures denominated in
various currencies. The majority of our currency risk is driven by the operational costs incurred in local currencies by our subsidiaries. We manage our currency risk through our hedging program using
forecasts of future cash flows and balance sheet exposures denominated in foreign currencies. We do not use derivative financial instruments for speculative purposes.

Interest
rate risk: Borrowings under our revolving credit facility bear interest at LIBOR or Prime rate plus a margin. Our borrowings under this facility expose us to interest rate risks
due to fluctuations in these rates.

Credit
risk: Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss to us. We believe our credit risk of counterparty
non-performance is low. To mitigate the risk of financial loss from defaults under our foreign currency forward exchange contracts, our contracts are held by counterparty financial
institutions each of which had at December 31, 2012 a Standard and Poor's rating of A-1 or above. Each financial institution with which we have our A/R sales program had a Standard
and Poor's short-term rating of A-1 and a long-term rating of A or above at December 31, 2012. We also provide unsecured 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. We consider credit risk in establishing our
allowance for doubtful accounts and we believe our allowances are adequate.

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, accrued and other current liabilities and provisions are due within 90 days. We believe that cash flow from operations, together with cash on hand, cash from the sale of
A/R, and borrowings available under our revolving credit facility and intraday and overnight bank overdraft facilities are sufficient to fund our financial obligations.

56

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Related Party Transactions

Onex Corporation ("Onex") owns, directly or indirectly, all of our outstanding multiple voting shares. Accordingly, Onex has the
ability to exercise a significant influence over our business and affairs and generally has the power to determine all matters submitted to a vote of our shareholders where the subordinate voting
shares and multiple voting shares vote together as a single class. Gerald Schwartz, the Chairman of the Board, President and Chief Executive Officer of Onex, is also one of our directors, and holds,
directly or indirectly, shares representing the majority of the voting rights of Onex.

We
currently have, or had, manufacturing agreements with one or more companies related to or under the control of Onex or Gerald Schwartz. During 2012, we recorded revenue of
$38.0 million from one related company and had $6.5 million due from this related company at December 31, 2012. During 2011, we recorded revenue of $90.9 million from two
related companies and had $15.5 million due from these related companies at December 31, 2011. During 2010, we recorded revenue of $43.3 million from one related company and had
$4.9 million due from this related company at December 31, 2010. All transactions with these related companies were in the normal course of operations and were recorded at the exchange
amounts as agreed to by the parties based on arm's length terms.

In
January 2009, we entered into a Services Agreement with Onex for the services of Gerald Schwartz, as a director of Celestica. The initial term of this agreement was one year
and it automatically renews for successive one-year terms unless either party provides a notice of intent not to renew. Onex receives compensation under the Services Agreement in an amount
equal to $200,000 per year, payable in DSUs in equal quarterly installments in arrears.

Outstanding Share Data

As of February 15, 2013, we had 164.9 million outstanding subordinate voting shares and 18.9 million outstanding
multiple voting shares. We also had 6.5 million outstanding stock options, 4.0 million outstanding RSUs, 5.5 million outstanding PSUs (based on a maximum payout of 200%), and
0.8 million outstanding deferred share units, each such option or unit entitling the holder to receive one subordinate voting share (or in certain cases, cash at our option) 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(e) and 15d-15(e) under the U.S. Exchange Act) designed to ensure that information we are required to disclose in the reports that we file or
submit under the U.S. Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC'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 U.S. 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 period. 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 U.S. 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.

57

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Changes in internal controls over financial reporting:

During 2012, there were no changes in our internal controls over financial reporting that 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 as of December 31, 2012. This report appears on
page F-2 of our Annual Report on Form 20-F.

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

2011

2012First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

First
Quarter

Second
Quarter

Third
Quarter

Fourth
QuarterRevenue

$
1,800.1

$
1,829.4

$
1,830.1

$
1,753.4

$
1,690.9

$
1,744.7

$
1,575.4

$
1,496.2Gross profit %


6.5%


6.9%


6.9%


7.0%


6.6%


6.7%


6.9%


6.7%Net earnings

$
30.0

$
45.7

$
50.2

$
69.2

$
43.2

$
23.6

$
43.7

$
7.2Weighted average # of basic shares


215.4


216.6


216.6


216.6


215.7


210.4


207.0


201.5Weighted average # of diluted shares


219.2


220.0


219.5


218.7


217.9


212.3


208.8


203.4# of shares outstanding


216.3


216.4


216.4


216.5


211.6


207.8


205.1


182.8Net earnings per share:basic

$
0.14

$
0.21

$
0.23

$
0.32

$
0.20

$
0.11

$
0.21

$
0.04diluted

$
0.14

$
0.21

$
0.23

$
0.32

$
0.20

$
0.11

$
0.21

$
0.04


Comparability quarter-to-quarter:

The quarterly data reflects the following: the fourth quarters of 2011 and 2012 include the results of our annual impairment testing of
goodwill, intangible assets and property, plant and equipment; and all quarters of 2011 and 2012 were impacted by our restructuring plans. The amounts vary from
quarter-to-quarter.

Fourth quarter 2012 compared to fourth quarter 2011:

Revenue for the fourth quarter of 2012 decreased 15% to $1.50 billion from $1.75 billion for the same period in 2011.
Excluding revenue from RIM from both periods, our revenue for the fourth quarter of 2012 increased 6% compared to the same period of 2011. Compared to revenue from our end markets in the fourth
quarter of 2011, revenue dollars from consumer decreased 69% primarily due to our disengagement from RIM; revenue dollars from communications decreased 3%, reflecting continued demand softness in this
end market; revenue dollars from storage increased 18%; diversified increased 11%; and server increased 5%. The growth in our storage and server end markets was due primarily to stronger demand across
a number of our customers. Compared to the fourth quarter of 2011, approximately three-quarters of the revenue growth in our diversified end market was due to organic growth. Excluding revenue from
our D&H acquisition, revenue from our diversified end market grew 7% from the same period in 2011. Gross margin decreased to 6.7% of revenue for the fourth quarter of 2012 from 7.0% for the same
period in 2011, primarily due to lower revenue levels. Net earnings for the fourth quarter of 2012 of $7.2 million were $62.0 million lower than the fourth quarter of 2011, primarily due
to lower revenue levels, higher restructuring and impairment charges and lower income tax recoveries.

Fourth quarter 2012 compared to third quarter 2012:

Revenue for the fourth quarter of 2012 decreased 5% sequentially. Excluding revenue from RIM from both periods, our revenue for the
fourth quarter of 2012 increased 4% sequentially. Compared to revenue from our end markets in the third quarter of 2012, revenue dollars from consumer and communications decreased 42% and 3%,
respectively; revenue dollars from server increased 10%, storage increased 4%, and diversified increased 3%. Revenue dollars from our consumer end market reflect the decrease in revenue from RIM,
offset

58

---



in
part by growth from a few customers. Our server and storage end markets benefited from strong customer demand in the fourth quarter of 2012. The revenue increase in our diversified end market in
the fourth quarter of 2012 was primarily driven by our D&H acquisition. Gross margin decreased to 6.7% of revenue for the fourth quarter of 2012 from 6.9% for the third quarter of 2012, primarily due
to favorable customer mix and one-time recoveries in the third quarter of 2012. SG&A for the fourth quarter of 2012 decreased $7.7 million sequentially, reflecting primarily lower
variable compensation costs. Net earnings decreased $36.5 million from the third quarter of 2012, primarily due to higher restructuring and impairment charges and lower income
tax recoveries.

Fourth quarter 2012 actual compared to guidance:

On October 23, 2012, we provided the following guidance for the fourth quarter of 2012:

Q4 2012Guidance

ActualRevenue (in billions)

$1.425 to $1.525

$
1.50Adjusted net earnings per share (diluted)

$0.15 to $0.21

$
0.25


For
the fourth quarter of 2012, revenue of $1.5 billion was within the range of our published guidance. Adjusted net earnings of $0.25 per share for the fourth quarter of 2012 was
higher than our guidance; this included a $0.06 per share net income tax benefit arising from a corporate tax reorganization involving certain of our European subsidiaries and changes to our tax
provisions related to certain tax uncertainties that was not included in our guidance.

Our
guidance includes a range for adjusted net earnings per share (which is a non-IFRS measure and is defined below). We believe adjusted net earnings is an important measure
for investors to understand our core operating performance and to compare our operating results with those of our competitors. A reconciliation of adjusted net earnings to IFRS net earnings is set
forth below.

IFRS
net earnings per share for the fourth quarter of 2012 was $0.04 on a diluted basis. IFRS net earnings for the fourth quarter included an aggregate charge of $0.13
(pre-tax) per share for stock-based compensation, amortization of intangible assets (excluding computer software) and restructuring charges. This is within the range we provided on
October 23, 2012 of a charge between $0.08 and $0.14 per share (diluted). IFRS net earnings for the fourth quarter of 2012 also included a $0.09 (pre-tax) per share impairment
charge, primarily against goodwill.

Non-IFRS measures:

Management uses adjusted net earnings and other non-IFRS measures to (i) assess operating performance and the
effective use and allocation of resources, (ii) provide more meaningful period-to-period comparisons of operating results, (iii) enhance investors' understanding
of the core operating results of our business, and (iv) set management incentive targets.

We
believe investors use both IFRS and non-IFRS measures to assess management's past, current and future decisions associated with strategy and allocation of capital, as well
as to analyze how businesses operate in, or respond to, swings in economic cycles or to other events that impact core operations.

Our
non-IFRS measures include gross profit, gross margin (gross profit as a percentage of revenue), SG&A, SG&A as a percentage of revenue, operating earnings, operating
margin, adjusted net earnings, adjusted net earnings per share, ROIC, free cash flow, cash cycle days and inventory turns. In calculating these non-IFRS financial measures, management
excludes the following items, as applicable: stock-based compensation, amortization of intangible assets (excluding computer software), restructuring and other charges, net of recoveries (most
significantly restructuring charges), the write-down of goodwill, intangible assets and property, plant and equipment, and gains or losses related to the repurchase of shares or debt, net
of tax adjustments, and significant deferred tax write-offs or recoveries.

59

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These
non-IFRS measures do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other companies.
Non-IFRS measures are not measures of performance under IFRS and should not be considered in isolation or as a substitute for any standardized measure under IFRS. The most significant
limitation to management's use of non-IFRS financial measures is that the charges and credits excluded from the non-IFRS measures are nonetheless charges and credits that are
recognized under IFRS and that have an economic impact on us. Management compensates for these limitations primarily by issuing IFRS results to show a complete picture of our performance, and
reconciling non-IFRS results back to IFRS, unless there are no comparable IFRS measures.

The
economic substance of these exclusions and management's rationale for excluding these from non-IFRS financial measures is provided below:

Stock-based
compensation, which represents the estimated fair value of stock options, RSUs and PSUs granted to employees, is excluded because grant activities vary significantly from
quarter-to-quarter in both quantity and fair value. In addition, excluding this expense allows us to better compare core operating results with those of our competitors who
also generally exclude stock-based compensation from their core operating results, who may have different granting patterns and types of equity awards, and who may use different valuation assumptions
than we do.

Amortization
charges (excluding computer software) consist of non-cash charges against intangible assets that are impacted by the timing and magnitude of acquired businesses.
Amortization of intangibles varies among competitors, and we believe that excluding these charges permits a better
comparison of core operating results with those of our competitors who also generally exclude amortization charges.

Restructuring
and other charges, net of recoveries, include costs relating to employee severance, lease terminations, facility closings and consolidations, write-downs to owned property
and equipment which are no longer used and are available for sale, reductions in infrastructure and acquisition-related transaction costs. We exclude restructuring and other charges, net of
recoveries, because they are not directly related to ongoing operating results and do not reflect expected future operating expenses after completion of these activities. We believe this exclusion
permits a better comparison of our core operating results with those of our competitors who also generally exclude these charges in assessing operating performance.

Impairment
charges, which consist of non-cash charges against goodwill, intangible assets and property, plant and equipment, result primarily when the carrying value of these
assets exceeds their fair value. Our competitors may record impairment charges at different times and excluding these charges permits a better comparison of our core operating results with those of
our competitors who also generally exclude these charges in assessing operating performance.

Gains
or losses related to the repurchase of shares or debt are excluded as these gains or losses do not impact core operating performance and vary significantly among our competitors
who also generally exclude these charges or recoveries in assessing operating performance.

Significant
deferred tax write-offs or recoveries are excluded as these write-offs or recoveries do not impact core operating performance and vary significantly
among our competitors who also generally exclude these charges or recoveries in assessing operating performance.

60

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The
following table sets forth, for the periods indicated, a reconciliation of IFRS to non-IFRS measures (in millions, except per share amounts):

Three months ended December 31

Year ended December 312011

2012

2011

2012% of revenue



% of revenue



% of revenue



% of revenueRevenue

$
1,753.4




$
1,496.2




$
7,213.0




$
6,507.2IFRS gross profit

$
122.1


7.0%

$
99.8


6.7%

$
491.4


6.8%

$
438.4


6.7%Stock-based compensation


3.8





2.9





15.5





13.4Non-IFRS gross profit

$
125.9


7.2%

$
102.7


6.9%

$
506.9


7.0%

$
451.8


6.9%IFRS SG&A

$
58.5


3.3%

$
54.7


3.7%

$
253.4


3.5%

$
237.0


3.6%Stock-based compensation


(5.9
)




(4.9
)




(28.7
)




(22.2
)Non-IFRS SG&A

$
52.6


3.0%

$
49.8


3.3%

$
224.7


3.1%

$
214.8


3.3%IFRS earnings before income taxes

$
54.2




$
2.2




$
198.8




$
111.9Finance costs


1.1





1.0





5.4





3.5Stock-based compensation


9.7





7.8





44.2





35.6Amortization of intangible assets (excluding computer software)


0.8





1.5





6.2





4.1Restructuring and other charges, net of recoveries


1.0





34.5





6.5





59.5Non-IFRS operating earnings (EBIAT)(1)

$
66.8


3.8%

$
47.0


3.1%

$
261.1


3.6%

$
214.6


3.3%IFRS net earnings

$
69.2


3.9%

$
7.2


0.5%

$
195.1


2.7%

$
117.7


1.8%Stock-based compensation


9.7





7.8





44.2





35.6Amortization of intangible assets (excluding computer software)


0.8





1.5





6.2





4.1Restructuring and other charges, net of recoveries


1.0





34.5





6.5





59.5Adjustments for taxes(2)


(9.6
)




(0.7
)




(10.1
)




(11.1
)Non-IFRS adjusted net earnings

$
71.1


4.1%

$
50.3


3.4%

$
241.9


3.4%

$
205.8


3.2%Diluted EPSWeighted average # of shares (in millions)


218.7





203.4





218.3





210.5IFRS earnings per share

$
0.32




$
0.04




$
0.89




$
0.56Non-IFRS adjusted net earnings per share

$
0.33




$
0.25




$
1.11




$
0.98# of shares outstanding (in millions)


216.5





182.8





216.5





182.8IFRS cash provided by operations

$
96.8




$
104.6




$
196.3




$
312.4Purchase of property, plant and equipment, net of sales proceeds


(6.8
)




(13.4
)




(45.2
)




(97.0
)Finance costs paid


(1.0
)




(1.0
)




(7.0
)




(4.0
)Non-IFRS free cash flow(3)

$
89.0




$
90.2




$
144.1




$
211.4ROIC %(4)


27.5%





18.4%





27.5%





21.5%


(1)EBIAT
is defined as earnings before interest, amortization of intangible assets (excluding computer software) and income taxes. EBIAT also excludes
stock-based compensation, restructuring and other charges, net of recoveries, gains or losses related to the repurchase of shares or debt, and impairment charges.(2)The
adjustments for taxes, as applicable, represent the tax effects on the non-IFRS adjustments and significant deferred tax
write-offs or recoveries that do not impact our core operating performance.(3)Management
uses free cash flow as a measure, in addition to cash flow from operations, to assess operational cash flow performance. We believe free cash
flow provides another level of transparency to our liquidity as it represents cash generated from or used in operating activities after the purchase of property, plant and equipment (net of
proceeds from sale of certain surplus equipment and property) and finance costs paid.(4)Management
uses ROIC as a measure to assess the effectiveness of the invested capital we use to build products or provide services to our customers. Our
ROIC measure includes operating margin, working capital management and asset utilization. ROIC is calculated by dividing EBIAT by average net invested capital. Net invested capital consists of total
assets less cash, accounts payable, accrued and other current liabilities, provisions, and income taxes payable. We use a two-point average to calculate average net invested capital for
the quarter and a five-point average to calculate average net invested capital for the year. There is no comparable measure under IFRS.


61

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The following table sets forth, for the periods indicated, our calculation of ROIC % (in millions, except ROIC %):

Three months ended
December 31

Year ended
December 312011

2012

2011

2012Non-IFRS operating earnings (EBIAT)

$
66.8

$
47.0

$
261.1

$
214.6Multiplier


4


4


1


1Annualized EBIAT

$
267.2

$
188.0

$
261.1

$
214.6Average net invested capital for the period

$
972.1

$
1,021.1

$
950.7

$
997.1ROIC %


27.5%


18.4%


27.5%


21.5%




December 31
2011

March 31
2012

June 30
2012

September 30
2012

December 31
2012Net invested capital consists of:Total assets

$
2,969.6

$
2,955.4

$
2,951.2

$
2,885.5

$
2,658.8Less: cash


658.9


646.7


630.6


598.2


550.5Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable


1,346.6


1,317.8


1,332.1


1,209.6


1,143.9Net invested capital by quarter

$
964.1

$
990.9

$
988.5

$
1,077.7

$
964.4




December 31
2010

March 31
2011

June 30
2011

September 30
2011

December 31
2011Net invested capital consists of:Total assets

$
3,013.9

$
2,997.3

$
3,020.6

$
2,914.8

$
2,969.6Less: cash


632.8


584.0


552.6


586.1


658.9Less: accounts payable, accrued and other current liabilities, provisions and income taxes payable


1,552.6


1,483.1


1,417.3


1,348.6


1,346.6Net invested capital by quarter

$
828.5

$
930.2

$
1,050.7

$
980.1

$
964.1


Recent Accounting Developments:

IFRS 7, Financial Instruments  Disclosures:

Effective 2012, we adopted the amendment issued by the IASB to IFRS 7 which requires enhanced disclosures relating to the
derecognition of financial assets that have been transferred, including quantitative and qualitative disclosures of the nature and extent of risks arising from the transfer. The adoption of this
amendment did not have a material impact on the disclosures related to our A/R sales program in our consolidated financial statements.

In
December 2011, the IASB issued further amendments to IFRS 7 which requires new disclosures relating to the offsetting of financial assets and financial liabilities,
effective January 1, 2013. We do not expect the adoption of this amendment to have a material impact on our consolidated financial statements.

IFRS 9, Financial Instruments:

This standard replaces IAS 39,Financial Instruments: Recognition and
Measurement,in phases. IFRS 9 (2009) reflects the IASB's first phase of the project relating to the classification and measurement of financial assets. Under
IFRS 9 (2009), financial assets are classified and measured based on the business model in which they were held and the characteristics of their contractual cash flows. IFRS 9 (2010)
provides guidance on the classification and measurement of financial liabilities and the requirements of IAS 39 for the derecognition of

62

---



financial
assets and liabilities. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. We will evaluate the overall impact on our consolidated financial
statements when the final standard, including all phases, is issued.

IFRS 10, Consolidated Financial Statements:

This standard is effective January 1, 2013 and replaces certain sections of IAS 27,Consolidated
And Separate Financial Statements. This standard is intended to ensure the same criteria are applied to all types of entities when determining control for consolidated
reporting. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

IFRS 11, Joint Arrangements:

This standard is effective January 1, 2013 and replaces the existing standards on joint ventures. It distinguishes joint
ventures from joint operations and establishes the accounting for interests in each of these joint arrangements. The adoption of this standard is not expected to have a material impact on our
consolidated financial statements unless we enter into such arrangements.

IFRS 12, Disclosure Of Interests In Other Entities:

This standard is effective January 1, 2013 and supplements the existing disclosure requirements about interests in subsidiaries,
joint arrangements, associates and unconsolidated structured entities, and focuses on the nature, risks and financial effects associated with such interests on financial position, financial
performance and cash flows. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

IFRS 13, Fair Value Measurement:

This standard provides extensive guidance on determining fair value for measurement or disclosure purposes. We will adopt the standard
prospectively effective January 1, 2013. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

IAS 1, Presentation Of Financial Statements (revised):

This amendment is effective January 1, 2013 and requires changes to the presentation of items in other comprehensive income
("OCI"). The adoption of this amendment is not expected to have a material impact on our consolidated financial statements.

IAS 19, Employee Benefits (revised):

This amendment is effective January 1, 2013 and requires retroactive adoption. It eliminates the option of deferring actuarial
gains and losses resulting from defined benefit plans (corridor approach) and requires that all past service costs and credits, whether vested or unvested, be recognized immediately in operations. The
amendment also identifies changes to the required calculation of net interest expense and requires additional disclosures about defined benefit plans and termination benefits. The adoption of this
revised standard is not expected to have a material impact on our consolidated financial statements. Upon our transition to IFRS on January 1, 2010, we elected to recognize all cumulative
actuarial gains or losses through OCI and deficit. As a result, the elimination of the corridor approach does not impact us, although we are assessing the impact of the amendment on our presentation
of cumulative actuarial gains or losses within equity. As of January 1, 2011, we had $7.6 million of unrecognized past service credits that we currently amortize to operations on a
straight-line basis over the vesting period. Upon retroactive adoption of this amendment, we will decrease our post-employment benefit obligations and our deficit by
$7.6 million as of January 1, 2011. We will also decrease our net earnings for 2011 by $2.8 million, reflecting changes in the calculation of the interest component of pension
expense and the reversal of past service credits that we retroactively recorded directly to deficit on January 1, 2011. The impact on our net earnings for 2012 is insignificant.

IAS 32, Financial Instruments  Presentation (revised):

This amendment will be effective January 1, 2014 and clarifies the requirements for offsetting financial assets and liabilities.
We do not expect the adoption of this amendment to have a material impact on our consolidated financial statements.

63

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Item 6.    Directors, Senior Management and Employees

A.    Directors and Senior Management

Each director of Celestica is elected by the shareholders to serve until close of the next annual meeting of shareholders or until a successor is elected or
appointed, unless such office is earlier vacated in accordance with the Company's by-laws. The following table sets forth certain information regarding the current directors and executive
officers of Celestica, as of February 15, 2013.

Name

Age

Position with Celestica

ResidenceWilliam A. Etherington


71

Chairman of the Board and Director

Ontario, CanadaDan DiMaggio


62

Director

Georgia, U.S.Laurette Koellner


58

Director

Florida, U.S.Joseph M. Natale


48

Director

Ontario, CanadaEamon J. Ryan


67

Director

Ontario, CanadaGerald W. Schwartz


71

Director

Ontario, CanadaMichael Wilson


61

Director

Alberta, CanadaCraig H. Muhlhauser


64

Director, President and Chief Executive Officer

New Jersey, U.S.Darren G. Myers


39

Executive Vice President and Chief Financial Officer

Ontario, CanadaElizabeth L. DelBianco


53

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

Ontario, CanadaGlen McIntosh


51

Executive Vice President, Global Operations and Supply Chain Management

Ontario, CanadaMichael L. Andrade


49

Executive Vice President, Diversified Markets

Ontario, CanadaMichael McCaughey


50

Executive Vice President, Communications, Enterprise and Managed Services

Québec, CanadaMary Gendron


47

Senior Vice President and Chief Information Officer

Illinois, U.S.


The
following is a brief biography of each of Celestica's directors and executive officers:

William A. Etheringtonhas been a director of Celestica since 2001 and Chairman of the Board of Directors of Celestica since
April 2012. He is also a director of Onex Corporation, which holds a 74% voting interest in Celestica, and of SS&C Technologies Inc., each of which is a public corporation, and of
St. Michael's Hospital. He is a former director and non-executive Chairman of the board of directors of the Canadian Imperial Bank of Commerce. In 2001, Mr. Etherington
retired as Senior Vice President and Group Executive, Sales and Distribution, IBM Corporation, and as Chairman, President and Chief Executive Officer of IBM World Trade Corporation. He holds a
Bachelor of Science degree in Electrical Engineering and a Doctor of Laws (Hon.) from the University of Western Ontario.

Dan DiMaggiohas been a director of Celestica since July 2010. Prior to retiring in 2006, he spent 35 years with United
Parcel Services ("UPS"), most recently as Chief Executive Officer of the UPS Worldwide Logistics Group. Prior to leading UPS' Worldwide Logistics Group, Mr. DiMaggio held a number of positions
at UPS with increasing responsibility, including leadership roles for the UPS International Marketing Group, as well as the Industrial Engineering function. In addition to his senior leadership roles
at UPS, Mr. DiMaggio was a member of the board of directors of Greatwide Logistics Services, Inc. and CEVA Logistics. Mr. DiMaggio was serving as a director of Greatwide Logistics
Services, Inc., a privately held
company, when that entity filed for bankruptcy in 2008. He holds a Bachelor of Science degree from the Lowell Technological Institute (now the University of Massachusetts Lowell).

64

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Laurette Koellnerhas been a director of Celestica since 2009. She is the Executive Chairman of International Lease Finance Corporation
("ILFC"), an indirect wholly owned subsidiary of American International Group and the world's largest aircraft lessor. She retired as President of Boeing International, a division of The Boeing
Company (an aerospace company), in 2008. Prior to May 2006, she was President of Connexion by Boeing and prior to that was a member of the Office of the Chairman and served as the
Executive Vice President, Internal Services, Chief Human Resources and Administrative Officer, President of Shared Services, as well as Corporate Controller for The Boeing Company. In addition to
acting as chair of the board of directors of ILFC, Ms. Koellner currently serves on the board of directors and is the Chair of the Audit Committee of Hillshire Brands Company (formerly Sara Lee
Corporation), a public corporation. She is also a member of the Council on Foreign Relations and a member of the University of Central Florida Dean's Executive Council. She holds a Bachelor of Science
degree in Business Management from the University of Central Florida and a Masters of Business Administration from Stetson University. She holds a Certified Professional Contracts Manager designation
from the National Contracts Management Association.

Joseph M. Natalehas been a director of Celestica since January 2012. Mr. Natale joined Telus Corporation
(an integrated telecommunication services company), a public company, in 2003 and is currently Executive Vice President and Chief Commercial Officer, a position he has held since
May 2010. Prior to 2003, Mr. Natale held successive senior leadership roles within KPMG Consulting, which he joined after it acquired the company he co-founded, PNO
Management Consultants Inc., in 1997. Mr. Natale served on the board of directors of KPMG Canada in 1998 and 1999. Mr. Natale is a member of the board of directors of Soulpepper
Theatre and acted as Telecommunications Chair for United Way Toronto's 2011 Campaign Cabinet. He is a past recipient of Canada's Top 40 Under 40 Award and holds a Bachelor of Applied
Science degree in Electrical Engineering from the University of Waterloo.

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., a publicly traded company. 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 International Inc. in 1991 as the President of Lexmark Canada. Prior to that, he spent 22 years at IBM Canada, where he held a number of sales and
marketing roles in its Office Products and Large Systems divisions. Mr. Ryan's last role at IBM Canada was Director of Operations for its 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. Schwartzhas been a director of Celestica since 1998. He is the Chairman of the Board, President and Chief Executive Officer of
Onex Corporation, a public corporation which holds a 74% voting interest in Celestica. 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., each of which is 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 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.

Michael Wilsonhas been a director of Celestica since 2011. He is the President and Chief Executive Officer of Agrium Inc.
(an agricultural crop inputs company), a public company, and has over 30 years of international and executive management experience. Prior to joining Agrium Inc.,
Mr. Wilson served as President of Methanex Corporation, a public company, and held various senior positions in North America and Asia during his 18 years with The Dow Chemical Company,
also a public company. Mr. Wilson also serves on Agrium Inc.'s board of directors and is the Chair of Canpotex Ltd. and the Calgary Prostate Cancer Foundation. Additionally, he is
currently a director of the International Plant Nutrient Institute, The Fertilizer Institute, the Alberta Economic Development Authority and Finning International Inc., a public company. He
holds a degree in Chemical Engineering from the University of Waterloo.

65

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Craig H. Muhlhauseris President and Chief Executive Officer, and since 2007, is also a director of Celestica. Prior to his current
position, he 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. He 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. Throughout his career, he has worked in a range of industries spanning the consumer, industrial, communications, utility, automotive and aerospace and defense sectors. He was a director of
Intermet Corporation, a privately held company, which filed for bankruptcy in the U.S. in August 2008 and emerged from Chapter 11 protection in September 2009. He holds a
Master of Science degree in Mechanical Engineering and a Bachelor of Science degree in Aerospace Engineering from the University of Cincinnati.

Darren G. Myersis Executive Vice President and Chief Financial Officer. In this role, he is responsible for overseeing Celestica's
accounting, financial and investor relations functions. He also leads Celestica's corporate development organization which focuses on creating value through acquisitions and partnerships.
Mr. Myers joined Celestica in 2000 and has held numerous financial roles of increasing responsibility. Mr. Myers left Celestica and joined Bell Canada during the period of
2006-2008, where he was the Vice President of Finance for their Small and Medium Business Division. He re-joined Celestica in 2008 and most recently was the Senior Vice
President and Corporate Controller with responsibilities including external reporting, corporate tax, investor relations and all corporate finance and treasury-related matters. Prior to joining
Celestica, Mr. Myers held various roles at PricewaterhouseCoopers. Mr. Myers holds a Bachelor of Commerce (Honours) degree from McMaster University and is a Chartered Accountant.

Elizabeth L. DelBiancois Executive Vice President, Chief Legal and Administrative Officer and Corporate Secretary. In this role, she
oversees human resources, 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 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.

Glen McIntoshis Executive Vice President, Global Operations and Supply Chain Management. In this role, he is responsible for the strategy
and execution of Celestica's operations and supply chain network across the Americas, Europe and Asia. Previously, he was Senior Vice President, Global Customer Business Unit, with responsibility for
the strategy and execution for one of Celestica's largest customer business units. Mr. McIntosh joined Celestica in 1997 and has held roles of increasing responsibility with Celestica business
units that supported customers in the enterprise and communications markets. Prior to joining Celestica, he held progressively senior engineering and sales roles with other companies in the technology
industry. He holds a Bachelor of Applied Science degree in Mechanical Engineering from the University of Waterloo.

Michael L. Andradeis Executive Vice President, Diversified Markets. In this role, he is responsible for the strategy and execution of
Celestica's industrial, healthcare, aerospace and defense, semiconductor equipment and green technology businesses. Previously, he was Senior Vice President, North America Business Development, where
he was responsible for leading the company's North American business strategy. He has also held the role of Senior Vice President, Strategic Business Development and Sales Operations.
Mr. Andrade joined Celestica from IBM in 1994 as part of the company's original management team and has held positions of increasing responsibility with the company. He holds a Bachelor of
Engineering Science degree from the University of Western Ontario and a Master of Business Administration degree from York University.

66

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Michael McCaugheyis Executive Vice President, Communications, Enterprise and Managed Services. In this role, he is responsible for the
strategic direction of the company's enterprise and communications market segments, and managed services businesses. He also oversees key activities for all customer accounts in the enterprise and
communications segments. Prior to that, he was the Senior Vice President, Enterprise and Communications Markets, with responsibility for the strategic direction of Celestica's enterprise and
communications business. 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 and studied Electrical Engineering at McGill University.

Mary Gendronis Senior Vice President and Chief Information Officer. She is responsible for aligning Celestica's information technology
strategy and its investments in IT tools and processes with Celestica's business goals. Ms. Gendron joined Celestica in October 2008 following a five-year career at The
Nielsen Company, one of the largest global information measurement and media companies, where she was the Senior Vice President, IT Infrastructure Shared Services. Prior to that, she was the Chief
Information Officer at ACNielsen U.S. 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.

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 executive
officers were selected.

None
of the directors of the Company serve together as directors of other corporations other than Messrs. Schwartz and Etherington who serve together on the board of directors
of Onex.

B.    Compensation

Compensation of Directors

Director compensation is set by the Board of Directors of the Company (the "Board") on the recommendation of the Compensation
Committee and in accordance with director compensation guidelines established by the Nominating and Corporate Governance Committee. Under these guidelines, the Board seeks to maintain director
compensation at a level that is competitive with director compensation at comparable companies. The Compensation Committee engaged Towers Watson Inc. (the "Compensation Consultant") to
provide benchmarking information in this regard (see " Compensation Discussion and Analysis  Compensation Process" and
" Compensation Discussion and Analysis  Comparator Companies" for a discussion regarding the role of the Compensation Consultant). In
2011, the Compensation Consultant conducted a competitive review of director compensation drawing a comparator group comprised of similarly-sized technology companies. Based on the results of the
review, the Compensation Committee determined that the current structure and levels of the Company's director compensation remained competitive and no adjustments were required. As director
compensation does not tend to vary greatly from year-to-year, the Board has determined that a competitive review of director compensation every two years is generally
considered to be sufficient. The Compensation Committee anticipates conducting a competitive review of director compensation in 2013. The director compensation
guidelines also contemplate that at least half of each director's annual retainer and meeting fees be paid in DSUs. Each DSU represents the right to receive one subordinate voting share or an
equivalent value in cash when the director both (a) ceases to be a director of the Company and (b) is not an employee of the Company or a director or employee of any corporation that
does not deal at arm's length with the Company (collectively, "Retires").

67

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The following table sets out the annual retainers and meeting fees payable in 2012 to the Company's directors, other than
Mr. Muhlhauser, President and Chief Executive Officer of the Company, whose compensation is set out in Table 12.

Table 1: Retainers and Meeting Fees for 2012

Annual Retainer for Chairman(1)

$
130,000Annual Board Retainer (for directors other than the Chairman)

$
65,000Annual Retainer for Audit Committee Chair

$
20,000Annual Retainer for Compensation Committee Chair

$
10,000Annual Retainer for Executive Committee Chair(2)

$
10,000Board and Committee Per Day Meeting Fee(3)

$
2,500Travel Fee(4)

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

$
120,000Annual DSU Grant  Chairman

$
180,000


(1)The
Chairman of the Board also served as the Chair of the Nominating and Corporate Governance Committee, for which no additional fee is paid.(2)The
Board determined effective April 23, 2012 that the Executive Committee would no longer be a standing committee of the Board.(3)Attendance
fees are paid per day of meetings, regardless of whether a director attends more than one meeting in a single day.(4)The
travel fee is available only to directors who travel outside of their home state or province to attend a Board or Committee meeting.




Directors receive half of their annual retainer and meeting fees (or all of such retainer and fees, if they so elect) in DSUs.
Each DSU represents the right to receive one subordinate voting share or an equivalent value in cash when the director Retires. The date used in valuing the DSUs for payment is the date that is
45 days following the date on which the director Retires, or as soon as practicable thereafter. DSUs are redeemed and payable on or prior to the 90th day following the date
on which the director Retires.

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 (the "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 2012, each director receiving a retainer received an annual grant of $120,000 in value of DSUs, except for the Chairman, who received an
annual grant of $180,000. 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.

Eligible
directors also receive an initial grant of DSUs when they are appointed to the Board. Currently, the initial grant is equal to the value of the annual DSU grant 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. 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 Retires due to a change of control of the Company.

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Mr. Natale
received an initial grant of $180,000 in value of DSUs upon his appointment to the Board on January 25, 2012.

Directors' Fees Earned in 2012

The compensation paid in 2012 by the Company to its directors is set out in Table 2, except for Mr. Muhlhauser, President
and Chief Executive Officer of the Company, whose compensation is set out in Table 12.

Table 2: Director Fees Earned in 2012

Name

Board
Annual
Retainer
(a)

Chairman
Annual
Retainer
(b)

Committee
Chair Annual
Retainer
(c)

Total
Meeting
Attendance
Fees
(d)(1)

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

Portion of Fees
Applied to DSUs
and Value of
DSUs(2)
(f)

Annual
DSU Grant (#)
and Value of
DSUs(2)
(g)

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

Total
((e)+(g)+(h))Dan DiMaggio

$
65,000







$
37,500

$
102,500

100%/$102,500

15,150/$
120,000




$
222,500William A. Etherington

$
20,357

$
89,286
(3)
$
3,132
(3)
$
27,500

$
140,275

100%/$140,275

20,634/$
161,208




$
301,483Laurette Koellner

$
65,000




$
13,736
(4)
$
37,500

$
116,236

50%/$58,118

15,150/$
120,000




$
236,236Joseph M. Natale(5)

$
65,000







$
25,000

$
90,000

100%/$90,000

15,150/$
120,000

24,557/$
180,000

$
390,000Eamon J. Ryan

$
65,000




$
6,868
(6)
$
27,500

$
99,368

100%/$99,368

15,150/$
120,000




$
219,368Gerald W. Schwartz(7)

























Michael Wilson

$
65,000







$
37,500

$
102,500

100%/$102,500

15,150/$
120,000




$
222,500Robert L. Crandall




$
40,714
(8)
$
9,396
(8)
$
20,000

$
70,110

100%/$70,110

6,267/$
56,374




$
126,484


(1)Includes
travel fees payable to directors.(2)The
annual retainer, meeting fees and annual grant for 2012 were paid quarterly and the number of DSUs granted in respect of the amounts paid quarterly for
each such item was determined using the closing prices of subordinate voting shares on the NYSE on the last business day of each quarter, which were $9.57 on March 30, 2012, $7.26 on
June 29, 2012, $7.14 on September 28, 2012 and $8.15 on December 31, 2012.(3)Mr. Etherington
was appointed Chairman of the Board effective April 24, 2012 and received a prorated chairman annual retainer for 2012.
Mr. Etherington resigned as the Chair of the Compensation Committee effective April 23, 2012 and received a prorated committee chair annual retainer. Mr. Etherington was appointed
the Chair of the Nominating and Corporate Governance Committee effective April 24, 2012, but does not receive a committee chair annual retainer in such capacity.(4)Ms. Koellner
was appointed the Chair of the Audit Committee effective April 24, 2012 and received a prorated committee chair annual retainer
for 2012.(5)Mr. Natale
was appointed to the Board on January 25, 2012 and was appointed to each of the Audit, Compensation, and Nominating and Corporate
Governance Committees effective April 23, 2012.(6)Mr. Ryan
was appointed Chair of the Compensation Committee effective April 24, 2012 and received a prorated committee chair annual retainer
for 2012.(7)Mr. Schwartz
is an officer of Onex and did not receive any compensation in his capacity as a director of the Company in 2012. However, Onex did
receive compensation for providing the services of Mr. Schwartz as a director pursuant to a Services Agreement between the Company and Onex initially entered into on January 1, 2009. The
initial term of the Services Agreement was one year and the agreement automatically renews for successive one-year terms unless either the Company or Onex provide notice of intent not to
renew. The Services Agreement terminates automatically and the rights of Onex to receive compensation (other than accrued and unpaid compensation) will terminate (a) 30 days after the
first day on which Onex ceases to hold at least one multiple voting share of Celestica or any successor company or (b) the date Mr. Schwartz ceases to be a director of Celestica, for any
reason. Onex receives compensation under the Services Agreement in an amount equal to $200,000 per year, payable in DSUs in equal quarterly installments in arrears. The number of DSUs is determined
using the closing price of subordinate voting shares on the NYSE on the last day of the fiscal quarter in respect of which the installment is to be paid.(8)Mr. Crandall
was Chairman of the Board and Chair of each of the Audit Committee, Executive Committee and the Nominating and Corporate Governance
Committee from January 1, 2012 through April 23, 2012. Mr. Crandall did not stand for re-election to the Board at the Company's annual meeting held on April 24,
2012, having passed the age of retirement provided for in the Company's Corporate Governance Guidelines. Accordingly, Mr. Crandall's chairman annual retainer and committee chair annual retainer
for each of the Audit Committee and the Executive Committee were prorated for 2012. No additional fees were payable to him as Chair of the Executive Committee and the Nominating and Corporate
Governance Committee during 2012.


69

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The total annual retainer and meeting fees earned by the Board in 2012 were $720,989. In addition, total annual grants of DSUs in the amount of
$817,582, and an initial grant of DSUs in the amount of $180,000 were issued in 2012.

Director's Ownership of Securities



In 2005, the Company amended its Long-Term Incentive Plan ("LTIP") to prohibit the granting of options to acquire
subordinate voting shares to directors. The Outstanding Option-Based and Share-Based Awards Table sets out information relating to option grants to directors that were made between 1998 and 2004 and
which remain outstanding. All options were granted with an exercise price set at the closing market price on the business day prior to the date of the grant. Exercise prices range from $10.62 to
$18.25. Options vest over three or four years and expire after ten years. The final grant of 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. Messrs. DiMaggio, Natale, Ryan and Wilson and Ms. Koellner, all of whom became directors after
May 2004, have not been granted any options under the LTIP.

DSUs
that were granted prior to January 1, 2007 may be paid out in the form of subordinate voting shares issued from treasury, subordinate voting shares purchased in the open
market, or an equivalent value in cash. DSUs granted after January 1, 2007 may only be satisfied in the form of subordinate voting shares purchased in the open market or an equivalent value in
cash. The total number of DSUs outstanding for each director is included in the Outstanding Option-Based and Share-Based Awards Table under the column "Share-Based Awards".

The
following table sets out information concerning all option-based and share-based awards of the Company outstanding as of December 31, 2012 (this includes awards granted before
the most recently completed financial year) for each director proposed for election at the Annual Meeting of Shareholders (the "Meeting") (other than Mr. Muhlhauser, whose information is
set out in Table 13).

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
DSUs
(#)

Payout Value
of
Outstanding
DSUs
($)Dan DiMaggio














89,469

$
729,172William A. Etherington
Apr. 18, 2003
May 10, 2004


5,000
5,000


$$
10.62
18.25



Apr. 18, 2013
May 10, 2014










227,609

$


1,855,013Laurette Koellner














107,956

$
879,841Joseph M. Natale














50,922

$
415,014Eamon J. Ryan














146,956

$
1,197,691Gerald W. Schwartz(3)

















Michael Wilson














60,474

$
492,863


(1)All
option-based awards have vested.(2)Represents
all outstanding DSUs. The payout value of such share-based awards was determined using a share price of $8.15, which was the closing price of
subordinate voting shares on the NYSE on December 31, 2012.(3)Mr. Schwartz
did not have any option-based or share-based awards of the Company outstanding as of December 31, 2012; however,
688,807 subordinate voting shares are subject to options granted to Mr. Schwartz pursuant to certain management investment plans of Onex.


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The following table sets out, for each director proposed for election at the Meeting, such director's direct or indirect beneficial
ownership of, or control or direction over, equity in the Company, and any changes therein since February 22, 2012.

Table 4: Equity Interest Other than Options and
Outstanding Share-Based Awards(1)(3)

Name

Date

Subordinate
Voting Share
#

Market Value*Dan DiMaggio


Feb. 22, 2012
Feb. 15, 2013
Change







William A. Etherington


Feb. 22, 2012
Feb. 15, 2013
Change


10,000
10,000


$
79,900Laurette Koellner


Feb. 22, 2012
Feb. 15, 2013
Change







Craig H. Muhlhauser


Feb. 22, 2012
Feb. 15, 2013
Change


865,512
965,489
99,977

$
7,714,257Joseph M. Natale


Feb. 22, 2012
Feb. 15, 2013
Change







Eamon J. Ryan


Feb. 22, 2012
Feb. 15, 2013
Change







Gerald W. Schwartz(2)


Feb. 22, 2012
Feb. 15, 2013
Change


690,337
666,324
(24,013
)
$
5,323,929Michael Wilson


Feb. 22, 2012
Feb. 15, 2013
Change










---

71

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The Company has minimum shareholding requirements for directors who are not employees or officers of the Company or Onex
(the "Guideline"). The Guideline provides that such a director who has been on the Board:



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 are required to purchase
further securities within a reasonable period of time to comply with the Guideline. Each director's holdings of securities, which for the purposes of the Guideline include all subordinate voting
shares and DSUs, are reviewed annually each year on December 31. The following table sets out, for each director proposed for election at the Meeting, whether such director was in compliance
with the Guideline as of December 31, 2012.

Table 5: Shareholding Requirements

Shareholding RequirementsDirector

Target Value as of
December 31, 2012

Value as of
December 31, 2012(1)

Met Target as of
December 31, 2012Dan DiMaggio

$
195,000

$
729,172

YesWilliam A. Etherington

$
650,000

$
1,936,513

YesLaurette Koellner

$
255,000

$
879,841

YesCraig H. Muhlhauser(2)


N/A


N/A

N/AJoseph M. Natale(3)


N/A


N/A

N/AEamon J. Ryan

$
225,000

$
1,197,691

YesGerald W. Schwartz(4)


N/A


N/A

N/AMichael Wilson

$
65,000

$
492,863

Yes


(1)The
value of the aggregate number of subordinate voting shares and DSUs held by each director is determined using a share price of $8.15, which was the
closing price of subordinate voting shares on the NYSE on December 31, 2012.(2)Mr. Muhlhauser,
as an officer of the Company, is not subject to the minimum shareholding requirements of the Guideline applicable to directors. See
" Executive Share Ownership" for share ownership guidelines applicable to Mr. Muhlhauser in his role as President and Chief Executive Officer of the Company.(3)Mr. Natale
was appointed to the Board on January 25, 2012. As he has been a director for less than a year, he is not yet subject to the
minimum shareholding requirements of the Guideline.(4)Mr. Schwartz,
as an officer of Onex, is not subject to the minimum shareholding requirements of the Guideline applicable to directors of
the Company.


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Attendance of Directors at Board of Directors and Committee Meetings

The following table sets forth the attendance of directors at Board and Committee meetings from the beginning of 2012 to
February 15, 2013.

Table 6: Directors' Attendance at Board and Committee Meetings

Meetings Attended
%Nominating and
Corporate
GovernanceDirector

Board

Audit

Compensation

Board

CommitteeDan DiMaggio


9 of 9


7 of 7


6 of 6


4 of 4


100%


100%William A. Etherington


9 of 9


7 of 7


6 of 6


4 of 4


100%


100%Laurette Koellner


9 of 9


7 of 7


6 of 6


4 of 4


100%


100%Craig H. Muhlhauser


9 of 9











100%


Joseph M. Natale(1)


8 of 9


4 of 4


4 of 4


2 of 2


89%


100%Eamon J. Ryan


9 of 9


7 of 7


6 of 6


4 of 4


100%


100%Gerald W. Schwartz


8 of 9











89%


Michael Wilson


9 of 9


7 of 7


6 of 6


4 of 4


100%


100%


(1)Mr. Natale
was appointed to each of the Audit, Compensation, and Nominating and Corporate Governance Committees effective
April 23, 2012.


COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis sets out the policies of the Company for determining compensation paid to the Company's Chief
Executive Officer ("CEO"), its current Chief Financial Officer ("CFO"), its former 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 2012 is set out in " Compensation Discussion and
Analysis  2012 Compensation Decisions".

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 Compensation Committee reviews compensation policies and practices every year, considers related risks and makes any adjustments it deems necessary to ensure the
compensation policies are not reasonably likely to have a material adverse effect on the Company.

Compensation
for executives is linked to the Company's performance. A comparator group of similarly sized technology companies (the "Comparator Group") is set out in
Table 8. The Company benchmarks target compensation with reference to the median of the Comparator Group, with the opportunity for higher compensation for performance that exceeds the benchmark
and lower compensation for performance that is below the benchmark.

The
compensation package is designed to:



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The Compensation Committee, which has the sole authority to retain and terminate a consulting firm, initially engaged the Compensation
Consultant in October 2006 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 those of both the Comparator Group and the market
in general.

The
Compensation Consultant may also assist management to review and, where appropriate, develop and recommend compensation programs that will ensure the Company's practices are
competitive with market practices. The Compensation Consultant 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. The Compensation Consultant attended portions of all Compensation Committee meetings held in 2012, in person or by telephone, as
requested by the Chair of the Compensation Committee. At each of its meetings, the Compensation Committee holdsin camerasessions with the Compensation
Consultant and without any member of management being present.

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 the Compensation Consultant.

Each
year, the Compensation Committee reviews the scope of activities of the Compensation Consultant and, if it deems appropriate, approves the corresponding budget. The Compensation
Consultant meets with the Chair of the Compensation Committee and management at least annually to identify any initiatives requiring external support as well as agenda items for each Compensation
Committee meeting throughout the year. Any service in excess of $25,000 provided by the Compensation Consultant at the request of management not relating to executive compensation, must be
pre-approved by the Chair of the Compensation Committee. In addition, any fee that will cause total non-executive compensation consulting fees to exceed an aggregate of $25,000
in a calendar year must also be pre-approved by the Compensation Committee.

Table 7: Fees of the Compensation Consultant

Year Ended December 312012

2011Executive Compensation-Related Fees

C$
255,013
(1)
C$
273,907
(2)All Other Fees(3)

C$
17,522

C$
18,007


(1)Comprised
of annual retainer fee of C$200,000 and fees related to performance share unit valuation, Celestica Team Incentive (CTI) plan design for
executives and non-executives, long-term incentive plan design analysis for executives and non-executives, competitive benchmarking, compensation program risk
assessment andad hocmarket research.(2)Comprised
of annual retainer fee of C$185,000, performance share unit valuation and long-term incentive accounting analysis, CEO compensation
under retirement/termination scenarios and relative pay-for-performance comparisons, executive promotions competitive data, relative cost of NEO compensation, and compensation program risk assessment.(3)Represents
fees for non-executive compensation surveys.




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. The Committee evaluates the performance of the CEO relative to established objectives. The Committee reviews competitive data for the Comparator Group and
consults with the Compensation Consultant before exercising its independent judgment to determine appropriate compensation levels. The CEO reviews the performance evaluations of the other

74

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NEOs
with the Committee and provides compensation recommendations. The Committee considers these recommendations, reviews market compensation information, consults with the Compensation Consultant and
exercises its independent judgment to determine if any adjustments are required prior to approval.

The
Compensation Committee generally meets five times a year in January, April, July, October and December. At the July meeting, the Compensation Committee, based on recommendations from
the Compensation Consultant, selects the comparator group that will be used for the compensation review. At the October meeting, the Compensation Consultant 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 (the "CLAO"), who has
responsibility for Human Resources, and the CEO, together with the Compensation Consultant, develop base salary and equity-based incentive recommendations for the NEOs, except that the CEO and CLAO do
not participate in the preparation of their own compensation recommendations. At the December meeting, preliminary compensation proposals for the NEOs for the following year are reviewed, including
base salary recommendations and the value and mix of their equity-based incentives. By reviewing the compensation proposals in advance, the Compensation Committee is afforded sufficient time to
discuss and provide input regarding proposed compensation changes prior to the January meeting at which time the Compensation Committee approves the compensation proposals, revised as necessary or
appropriate based on input provided at the December meeting. Previous grants of equity-based awards and the current retention value of same are reviewed and may be taken into consideration when making
the decision related to equity-based compensation. The CEO and the CLAO are not present at the Compensation Committee meetings when their respective compensation is discussed.

The
foregoing process is also followed for determining the CEO's compensation except that the CLAO works with the Compensation Consultant to develop a proposal for base salary and
equity-based incentive grants. The Compensation Committee then reviews the proposal with the Compensation Consultant 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 to
ensure that there is an appropriate link between pay and performance taking into consideration the range of potential total compensation.

Based
on a management plan approved by the Board, the annual incentive plan targets 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 October and December meetings. At the January meeting of the following year, final payments under the
annual incentive 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.



The Compensation Committee, in accordance with its mandate, reviews the risks associated with the Company's compensation policies and
practices on a regular basis.

In
2011, the Compensation Committee engaged the Compensation Consultant, to assist with a comprehensive risk assessment of compensation programs provided to the senior executive team,
including the annual performance incentive and the Company's two long-term incentive plans. The compensation risk assessment included interviews with key Board and management
representatives to (a) identify significant risks; (b) understand the role of compensation in supporting appropriate risk taking; and (c) understand how risk is governed and
managed at the Company. The Compensation Consultant also reviewed documentation relating to the Company's risk factors and compensation governance processes and programs. The Company's executive
compensation programs for the NEOs were reviewed against the Compensation Consultant's compensation risk assessment framework. Results of the review were presented to the Compensation Committee.

In
April 2012, the Compensation Consultant provided the Compensation Committee with updates on current trends in executive compensation, including a review of Celestica's
compensation policies and practices concerning risk oversight and risk management. In October 2012, the Compensation Consultant also made a presentation to the Compensation Committee on matters
including compensation risk assessment.

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The
Company's compensation programs are designed with a balanced approach aligned with its business strategy and risk profile. A number of compensation practices have been implemented to
mitigate potential
compensation risk. Key risk-mitigating features in the Company's compensation governance processes and compensation structure include:



In
performing its duties, the Compensation Committee considers the implications of the risks associated with the Company's compensation policies and practices. This includes: identifying
any such policies or practices that encourage executive officers to take inappropriate or excessive risks, including those identified by the Canadian Securities Administrators ("CSA"); identifying
risks arising from such policies and practices that are reasonably likely to have a material adverse effect on the Company; and considering the risk implications of the Company's compensation policies
and practices and any proposed changes to them.

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It
is the Compensation Committee's view that the Company's compensation policies and practices do not encourage inappropriate or excessive risk-taking.



The Compensation Committee benchmarks salary, annual incentive and equity-based incentive awards to those of the Comparator Group,
which is comprised of companies in the technology sector that are of comparable size, scope, market presence and/or complexity to the Company. The revenues of the Comparator Group companies are
generally in the range of half to twice the Company's revenues. Because of the international scope and the size of the Company, the Comparator Group is composed of companies with international
operations, thus allowing the Company to offer its executives total compensation that is competitive in the markets in which it competes for talent. No changes were made to the 2012 Comparator Group
from the prior year.

The
following table, which was reviewed by the Compensation Committee at its July meeting, sets out the Company's 2012 Comparator Group companies.

Table 8: Comparator Group(1)

Company Name

2011 Annual
Revenue
(millions)

Company Name

2011 Annual
Revenue
(millions)Advanced Micro Devices Inc.

$
6,568

Plexus Corp.

$
2,231Agilent Technologies Inc.

$
6,615

Sanmina-SCI Corp.

$
6,602Applied Materials Inc.

$
10,517

Seagate Technology

$
10,971Benchmark Electronics, Inc.

$
2,253

SanDisk Corp.

$
5,662Broadcom Corp.

$
7,182

Texas Instruments Inc.

$
13,735Corning Inc.

$
7,890

TE Connectivity Ltd. (formerly TycoEMC Corp.

$
20,008

Electronics Ltd.)

$
14,312Flextronics International Ltd.(2)

$
29,388

Western Digital Corp.

$
9,526Harris Corp.

$
5,925Jabil Circuit Inc.

$
16,519

25th Percentile

$
5,126Lexmark International Inc.

$
4,173

50th Percentile

$
6,899Micron Technology Inc.

$
8,788

75th Percentile

$
11,662Molex Inc.

$
3,587NCR Corp.

$
5,443

Celestica Inc.

$
7,213NVIDIA Corp.(2)

$
3,998

Percentile    52nd percentile


(1)All
data was provided by the Compensation Consultant and sourced by it from Standard & Poor's Capital IQ as at June 30, 2012.(2)Figures
shown for these companies reflect fiscal 2012 revenue.


Additionally,
broader market compensation survey data for other similarly-sized organizations provided by the Compensation Consultant is referenced in accordance with a process approved
by the Compensation Committee. The Compensation Committee used such survey data, among other things, in making compensation decisions. In addition to the survey data, proxy disclosure of the
Comparator Group companies for the most recently completed fiscal year was considered when determining compensation for the CEO and the other NEOs.

Compensation Hedging Policy

The Company has adopted a policy regarding executive officer and director hedging. The policy prohibits executives and directors from,
among other things, entering into speculative transactions and transactions designed to hedge or offset a decrease in market value of equity securities of the Company granted as compensation.
Accordingly, executives may not sell short, buy put options or sell call options on the Company's

77

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securities
or purchase financial instruments (including prepaid variable contracts, equity swaps, collars or units of exchange funds) which hedge or offset a decrease in the market value of the
Company's securities.

"Clawback" Provisions

The Company is subject to the "clawback" provisions of the Sarbanes-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 period covered by the restatement, as well as
any profits they had realized from the sale of securities of the Company during that period.

Under
the terms of the stock option grants and the grants made under the LTIP and the CSUP, an 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 are terminated for cause also forfeit all unvested RSUs, PSUs and stock options as well as all vested and unexercised stock options.

Compensation Elements for the Named Executive Officers

The compensation of the NEOs is comprised of the following elements:





The at-risk portion of total compensation has the highest weighting at the most senior levels. Annual and equity-based
incentive plan rewards are contingent upon the Company's performance and ensure a strong alignment with shareholder interests. The target weighting of compensation elements for NEOs for 2012 is set
out in the following table.

Table 9: Target Weighting of Compensation Elements

Base Salary

Annual
Incentive

Equity-based
IncentivesCEO


14.8%


18.5%


66.7%Executive Vice Presidents(1)


19.8%


15.8%


64.4%


(1)The
target weighting for the Executive Vice Presidents excludes Mr. Nicoletti, whose employment with the Company terminated effective
December 28, 2012.


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The
Compensation Committee may exercise its discretion to either award compensation absent attainment of a relevant performance goal or similar condition, or to reduce or increase the
size of any award or payout to any NEO. The Compensation Committee did not exercise such discretion in 2012 with respect to any NEO.



The objective of base salary is to attract, reward and retain top talent. Executive positions are benchmarked against those in the
Comparator Group, with base salary determined with reference to 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 the executive's level of responsibility within the Company.



The objective of the Celestica Team Incentive Plan ("CTI") is to reward all eligible employees, including the NEOs, for the achievement
of annual corporate and individual goals and objectives. CTI awards for the NEOs are based on the achievement of pre-determined corporate and individual goals, and are paid in cash. Actual
payouts can vary from 0% for performance below a threshold up to a maximum capped at 200% of the Target Award. Awards are determined in accordance with the following formula:

GRAPHIC

Business
Results Factor: The Business Results Factor of CTI is based on certain corporate financial goals established at the beginning of the performance period and approved by the
Compensation Committee and can vary from 0% to 200%.

Individual
Performance Factor: Individual contribution is recognized through the individual performance factor of CTI ("IPF"). The IPF is determined through the annual performance review
process and is based on an evaluation of the NEO's performance measured against specific criteria established at the beginning of each year. The criteria may include factors such as the NEO's
individual performance relative to business results, teamwork and the executive's key accomplishments. The IPF can adjust the executive's actual award by a factor of between 0.0x and 2.0x
(for exceptional performance).

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 result component, and (ii) the maximum CTI payment is two times the target incentive.

Target
Award: The Target Award is calculated as each NEO's Eligible Earnings (i.e. base salary) multiplied by the Target Incentive (expressed as a percentage of base salary in the
applicable plan year).



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



At
the December or January meeting, as the case may be, the Compensation Committee determines the dollar value and mix of the equity-based grants to be awarded to the NEOs based on the
Comparator Group

79

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data
analysis. On the grant date, the dollar value is converted into the number of units that will be granted using the closing price of subordinate voting shares on the day prior to the grant. The
annual grants are made following the blackout period that ends 48 hours after the Company's year-end results have been released.

Target
equity-based incentives are determined with reference to 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 level where there is a stronger influence on results. The mix of equity-based incentives is
reviewed by the Compensation Committee each year.

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 such grants to NEOs must be reviewed with the Compensation Committee at the next meeting following such grant and in practice are reviewed in
advance with the Chair of the Compensation Committee.



NEOs are granted RSUs under either the LTIP or the CSUP as part of the Company's annual grant. Each RSU entitles the holder to one
subordinate voting share on the release date. The issuance of such shares may be subject to vesting requirements, including such time or other conditions as may be determined by the Board in its
discretion. RSUs granted by the Company are generally released in one-third installments. The payout value of the award is based on the number of RSUs being released and the market price
of the SVS at the time of release. The Company has the right to settle RSUs in either cash or subordinate voting shares. See " Executive
Compensation  Equity Compensation Plans."



NEOs are granted PSUs under the CSUP. Each PSU entitles the holder to receive one subordinate voting share on the applicable release
date. The issuance of such shares may be subject to vesting requirements, including any time-based conditions established by the Board at its discretion. The vesting of PSUs also requires
the achievement of specified performance-based conditions as determined by the Compensation Committee. PSUs granted by the Company generally vest at the end of a three-year performance
period subject to pre-determined performance criteria. The payout value of the award is based on the number of PSUs that vest and the market price of subordinate voting shares at the time
of release. The Company has the right to settle the PSUs in either cash or subordinate voting shares, provided that such subordinate voting shares may not be issued from treasury. See
" Executive Compensation  Equity Compensation Plans  Celestica Share Unit Plan."



Stock options are awarded under the LTIP. The exercise price of a stock option is the closing market price on the business day prior to
the date of the grant. In determining the number of stock options to be granted, the Company keeps within a maximum level for option "burn rate", which refers to the number of shares issuable pursuant
to stock options granted under the LTIP in a given year relative to the total number of shares outstanding. Stock options granted by the Company generally vest at a rate of 25% annually on each of the
first four anniversaries of the date of grant and expire after a ten year term. The plan is not an evergreen plan and no stock options have been re-priced.

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NEOs 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.



NEOs are entitled to a bi-annual comprehensive medical examination 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, the services of a tax advisor and the associated tax equalization, if any.

2012 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 compared to the Comparator Group for median levels of corporate and individual performance is achieved.



Salary, target annual incentive and equity-based incentive grants for the NEOs were benchmarked with reference to the market median of
the Comparator Group.



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

Messrs. Muhlhauser
and Andrade and Ms. DelBianco did not receive increases in 2012 as their existing base salaries were competitive with the Comparator Group.
Mr. Nicoletti's annualized salary for 2012 was $550,000. Mr. Myers' annual salary was increased from $357,600 to $500,000 (approximately a 40% increase) at the time of his promotion to
CFO on December 6, 2012. Although Mr. Andrade did not receive an increase, his annual base salary was converted from Canadian dollars to be set in U.S. dollars, at $413,000. The
Compensation Committee granted an increase to Mr. McCaughey on September 10, 2012 to reflect the additional responsibilities he assumed for Managed Services. Mr. McCaughey's
salary increased from $385,700 to $400,000 (approximately a 4% increase).



Equity grants to NEOs in respect of 2012 performance consisted of RSUs (40%), PSUs (35%) and stock options (25%). The number of RSUs
and stock options issued under the LTIP and the number of PSUs issued under the CSUP to the NEOs was based on the closing price of subordinate voting shares on the NYSE on the day prior to the grant.
See " Compensation Discussion and Analysis  Compensation Elements for the Named Executive
Officers  Equity-Based Incentives" for a general description of the process for determining the mix and amounts of these awards.

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On
January 28, 2013, the Company awarded equity-based compensation to the following NEOs in respect of their 2012 performance, as set forth in the table below.

Table 10: NEO Equity Awards

Name

RSUs
(#)(1)(2)(3)

PSUs
(#)(1)(4)

Stock Options
(#)(1)

Value of LTIP
AwardCraig H. Muhlhauser


218,447


191,141


301,655

$
4,500,000Darren Myers


72,816


63,714


100,552

$
1,500,000Michael Andrade(3)


81,016


59,466


93,848

$
1,500,000Michael McCaughey(3)


81,016


59,466


93,848

$
1,500,000Elizabeth L. DelBianco


69,175


60,528


95,524

$
1,425,000


(1)Grants
were based on share price of $8.24, which was the closing price on the NYSE on January 25, 2013 and, with respect to stock options, a
Black-Scholes factor of 0.4526.(2)The
RSUs will be released in one-third installments.(3)Includes
a grant of 13,055 RSUs made in 2012 upon Messrs. Andrade's and McCaughey's promotions to their current respective positions. The RSU
grants were based on a share price of $7.66, which was the closing price on the NYSE on September 4, 2012.(4)The
number of PSUs is included at 100% of target level of performance.


PSUs
granted in 2013 in respect of 2012 NEO compensation vest at the end of a three-year performance period subject to pre-determined performance criteria. For
such awards, each NEO is granted a target number of PSUs. The number of PSUs that will actually vest ranges from 0% to 200% of target and will be determined by Celestica's total shareholder return
("TSR") and Return on Invested Capital ("ROIC") ranking against five direct competitors in the EMS industry (Benchmark Electronics, Inc., Flextronics International Ltd., Jabil
Circuit, Inc., Sanmina-SCI Corporation and Plexus Corp., collectively, the "EMS Competitors"). Of the target number of PSUs granted to each NEO, 60% will vest based on Celestica's
TSR ranking and 40% will vest based on Celestica's ROIC ranking, each calculated as described below.

The
PSUs that will vest based on Celestica's TSR ranking will be determined as follows:



Celestica's TSR Ranking

Percentage of target
number that will vestFirst

200%Second

160%Third

120%Fourth

80%Fifth

40%Sixth

0%


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The
PSUs that will vest based on Celestica's ROIC Ranking will be determined as follows:

Celestica's ROIC Ranking

Percentage of target
number that will vestHighest (First)

200%Between Median and Highest

Prorated between 100% and 200%Median (Average of third and fourth)

100%Between Lowest and Median

Prorated between 0% and 100%Lowest (Sixth)

0%


The
value of the stock options granted on January 28, 2013 in respect of 2012 performance was determined at the January meeting of the Compensation Committee. The number of stock
options granted was determined using (i) the closing price on January 25, 2013 on the NYSE of $8.24, and (ii) an average Black Scholes factor of 0.4526. 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 stock
options. The exercise price for the stock options is the closing price on January 25, 2013, being $8.24 on the NYSE for Mr. Muhlhauser and C$8.29 on the Toronto Stock Exchange ("TSX")
for Messrs. Myers, Andrade and McCaughey and Ms. DelBianco. The stock options vest at a rate of 25% annually on each of the first four anniversaries of the date of grant and expire after
a ten year term. As of February 15, 2013, the total number of subordinate voting shares issuable pursuant to stock options granted in respect of 2012 performance to the NEOs was equal to 0.4%
of issued and outstanding shares, and the total number of subordinate voting shares issuable pursuant to stock options granted in respect of 2012 performance to all employees entitled to receive stock
options was 0.5% of issued and outstanding shares.



The 2012 Business Results Factor portion of the CTI calculation is based on the performance of certain financial measures and
associated targets for such measures. A minimum threshold level of financial performance is required in order to achieve a Business Result Factor greater than
zero. Since the minimum threshold level of financial performance was not achieved in respect of any of the applicable measures for 2012, the Business Result Factor was zero, as noted below:

Table 11: Business Results Factor

Measure

Weight

Percentage Achievement
Relative to Target(1)Operating Margin (EBIAT margin)(2)


50%


%Corporate Revenue(3)


25%


%Corporate ROIC(4)


25%


%Business Results Factor





0%


(1)If
the minimum threshold level of financial performance for a measure is not achieved, the Percentage Achievement Relative to Target is set at zero rather
than the actual Percentage Achievement Relative to Target.(2)Operating
Margin is calculated as EBIAT divided by Corporate Revenue. "EBIAT" is earnings before interest, amortization of intangible assets (excluding
computer software), income taxes, stock-based compensation, restructuring and other charges, gains or losses related to the repurchase of shares or debt and impairment charges.(3)Corporate
Revenue means the Company's gross annual revenue.(4)Corporate
ROIC was calculated as EBIAT divided by average net invested capital, where average net invested capital includes total assets less cash, accounts
payable, accrued and other current liabilities and provisions, and income taxes payable.


In
assessing operating performance and operational effectiveness, the Company uses certain non-International Financial Reporting Standards ("non-IFRS") measures
such as adjusted gross margin, EBIAT,

83

---



operating
margin (EBIAT margin), ROIC and adjusted net earnings that do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other
companies. Additional information regarding these non-IFRS measures can be found in Item 5, "Operating and Financial Review and
Prospects  Management's Discussion and Analysis of Financial Condition and Results of Operations."



At the beginning of each year, the Board and the CEO agree on performance goals for the CEO. Goals for the other NEOs that will support
the CEO's goals are then established and agreed to by the CEO. For 2012, the CEO's goals focused on: financial performance, growing the business, employee engagement, and operational effectiveness.
Each NEO's performance is measured on a number of factors including the formal goals established for the year.

Each
of the other NEOs has responsibility for achievement of the overall corporate goals and objectives of the CEO. Each NEO has specific documented performance objectives that are
assessed at year end. In addition, the CEO undertakes an assessment of the NEO's contributions to the Company's results. This assessment is largely subjective and based on his judgment of each of the
other NEOs' contributions as a part of the senior leadership team. Based on the CEO's assessment, the Compensation Committee considered each of the NEOs to have either met or exceeded expectations in
2012 based on his or her individual performance and contribution to corporate goals.

However,
as the specific Business Results Factor thresholds were not achieved, there was no CTI payment to the NEOs in respect of 2012. Accordingly, despite the achievement of a number
of their respective performance goals for the year, it was not necessary for the Compensation Committee to formally consider
the specific measures and achievements of the CEO and other NEOs for purposes of calculating the individual performance factor component of CTI.



The Target Award (as a percentage of base salary) for each eligible NEO was
as follows:



84

---



EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation of the NEOs for the financial years ended December 31, 2010 through
December 31, 2012.

Table 12: Summary Compensation Table

Non-equity
Incentive Plan
CompensationName & Principal Position

Year

Salary
($)

Share-
based
Awards
($)(1)(2)

Option-
based
Awards
($)(3)

Annual
Incentive
Plans
($)(4)

Pension
Value
($)(5)

All Other
Compensation
($)(6)

Total
Compensation
($)Craig H. Muhlhauser


2012

$
1,000,000

$
3,375,000

$
1,125,000




$
142,400

$
92,328

$
5,734,728President and Chief


2011

$
1,000,000

$
3,375,000

$
1,125,000

$
967,500

$
228,897

$
53,650

$
6,750,047Executive Officer


2010

$
1,000,000

$
3,750,000

$
1,250,000

$
2,044,969

$
137,696

$
211,918

$
8,394,583Paul Nicoletti(7)


2012

$
545,492










$
238,241
(8)
$
2,227,576

$
3,011,309Former EVP, Chief


2011

$
544,170

$
1,557,500

$
452,500

$
408,263

$
93,995

$
2,099

$
3,058,527Financial Officer


2010

$
512,000

$
1,350,000

$
450,000

$
609,178

$
73,119

$
2,245

$
2,996,542Darren Myers(9)


2012

$
370,280

$
1,125,000

$
375,000




$
43,272

$
901

$
1,914,453EVP, Chief Financial


2011

$
349,498

$
450,000

$
150,000

$
178,538

$
53,564

$
911

$
1,182,511Officer


2010

$
315,595

$
450,000

$
150,000

$
309,784

$
40,309

$
1,088

$
1,266,776Michael Andrade


2012

$
410,888

$
1,150,000

$
350,000




$
47,876

$
1,508

$
1,960,272EVP, Diversified Markets


2011

$
414,423

$
645,000

$
215,000

$
192,458

$
65,583

$
3,548

$
1,536,0122010

$
397,883

$
480,000

$
160,000

$
390,556

$
44,683

$
1,695

$
1,474,817Michael McCaughey


2012

$
388,187

$
1,150,000

$
350,000




$
47,868

$
1,338

$
1,937,393EVP, Communications,


2011

$
387,094

$
600,000

$
200,000

$
215,720

$
66,785

$
1,353

$
1,470,952Enterprise and Managed Services


2010

$
371,645

$
600,000

$
200,000

$
431,129

$
49,190

$
76,530

$
1,728,494Elizabeth L. DelBianco


2012

$
444,000

$
1,068,750

$
356,250




$
57,223

$
1,763

$
1,927,986EVP and Chief Legal &


2011

$
444,000

$
1,068,750

$
356,250

$
274,925

$
79,394

$
1,782

$
2,225,101Administrative Officer


2010

$
444,000

$
1,125,000

$
375,000

$
528,271

$
68,062

$
2,078

$
2,542,411


(1)Amounts
in the column represent the value of RSUs and PSUs that were issued under the LTIP and CSUP, respectively, on January 28, 2013 in respect of
2012 performance. See " Compensation Discussion and Analysis  Compensation Elements for the Named Executive
Officers  Equity-Based Incentives" for a description of the process followed in determining the grant, and see " Compensation
Discussion and Analysis  2012 Compensation Decisions  Equity-Based Incentives" for a description of the vesting terms of
the awards. The value included for PSUs is at 100% of target level performance. The number that will actually vest will vary from 0%-200% of the target grant, depending on the Company's
level of achievement of pre-determined performance measure(s) as described in this Annual Report.(2)The
estimated accounting fair value of the share-based awards is calculated using the market price for subordinate voting shares as defined under each of
the plans and various fair value pricing models. The grant date fair value of the RSU portion of the share-based awards in Table 12 is the same as the accounting fair value of such awards. The
accounting fair values of the PSU portion of the share-based awards to the NEOs with respect to 2012 were as follows: Mr. Muhlhauser  $1.7 million;
Mr. Nicoletti  nil; Mr. Myers  $0.6 million;
Mr. Andrade  $0.5 million, Mr. McCaughey  $0.5 million and
Ms. DelBianco  $0.6 million. The accounting fair values for the PSU portion of the share-based awards reflect various assumptions as to estimated
vesting for such awards in accordance with applicable accounting standards. The grant date value for the PSU portion of the share-based awards reflects the dollar amount of the award intended for
compensation purposes, based on the market value of the underlying shares on the grant dates based on an assumption of 100% vesting. The accounting fair value for these NEOs assumed a zero forfeiture
rate for all equity-based awards. The cost the Company records for PSUs granted for 2010 and 2011 is determined using a Monte Carlo simulation model. The number of awards expected to be earned is
factored into the grant date Monte Carlo valuation for the award. The number of PSUs that will vest depends on the level of achievement of a market performance condition, over a three-year
period, based on the TSR of Celestica relative to the TSR of a pre-defined EMS competitor group. The grant date fair value is not subsequently adjusted regardless of the eventual number of
awards that are earned based on the market performance condition. For the PSUs granted on January 28, 2013 in respect of 2012, the market performance condition impacts 60% of the actual number
of PSUs that will vest based on TSR. The remaining 40% of the actual number of PSUs that will vest is based on ROIC that is not a market performance condition.(3)Amounts
in the column represent the value of stock options that were issued under the LTIP on January 28, 2013 in respect of 2012 performance. See
" Compensation Discussion and Analysis  Compensation Elements for the Named Executive Officers 


85

---



Equity-Based
Incentives" for a description of the process followed in determining the value of the grant, and see " Compensation Discussion and
Analysis  2012 Compensation Decisions  Equity-Based Incentives" for the vesting terms of the awards. The grant date fair
value of the option-based awards in Table 12 is the same as the accounting fair value of such awards. The number of stock options granted was determined using (i) the closing price on
January 25, 2013 on the NYSE of $8.24, and (ii) an average Black-Scholes factor of 0.4526. The Black-Scholes factor was determined using the average following variables for each of the
four vestings: (i) volatility of 49.57%; (ii) risk-free interest rate of 1%; and (iii) expected life of the stock options of 5.5 years. (4)Amounts
in this column represent incentive payments made to the NEOs through the CTI. See " Compensation Discussion and
Analysis  Compensation Elements for the Named Executive Officers  Celestica Team Incentive Plan" for a description of the
plan. As the CTI Business Results Factor was 0%, no incentive payments were made to the NEOs in respect of 2012.(5)Pension
values for Messrs. Nicoletti, Myers, Andrade and McCaughey and Ms. DelBianco are reported in U.S. dollars, having been
converted from Canadian dollars.(6)Amounts
in this column represent, for 2012: (i) for Mr. Muhlhauser, housing expenses of $40,220 while in Canada, travel expenses between
Toronto and New Jersey of $16,523, group life insurance premiums totaling $11,484, a 401(k) contribution of $15,000 and tax preparation fees of $2,500; (ii) For Mr. Nicoletti, a
severance payment of $2,200,000, a lump sum payment of $25,500 representing the net present value of benefits for a period of two years and group life insurance premiums totaling $2,076. See also
Note 8.(7)Mr. Nicoletti's
employment with the Company terminated effective December 28, 2012.(8)Includes,
in connection with Mr. Nicoletti's severance payment, $162,000 contribution to the Supplemental Executive Pension Plan ("SERP")
representing the net present value of such contributions for two years.(9)Mr. Myers
was promoted to EVP, CFO effective December 6, 2012.


86

---



Option-Based and Share-Based Awards

The following table provides details of each stock option grant outstanding and the aggregate number of unvested equity-based awards
for each of the NEOs as of December 31, 2012.

Table 13: Outstanding Option-Based and Share-Based Awards(1)

Option-Based Awards

Share-Based AwardsName

Number of
Securities
Underlying
Unexercised
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Value of
Unexercised
In-the-
Money
Options
($)(2)

Number
of Shares
or Units
that have
not
Vested
(#)(3)

Payout
Value of
Share
Awards that
have not
Vested at
Minimum
($)(4)

Payout
Value of
Share
Awards that
have not
Vested at
Target
($)(4)

Payout
Value of
Share
Awards that
have not
Vested at
Maximum
($)(4)

Payout Value
of Vested
Share-Based
Awards Not
Paid Out or
Distributed
($)Craig H. MuhlhauserJun. 6, 2005


50,000

$
13.00


Jun. 6, 2015

















Jan. 31, 2006


148,488

$
10.00


Jan. 31, 2016

















Feb. 2, 2007


125,000

$
6.05


Feb. 2, 2017

$
262,500














Feb. 5, 2008


225,000

$
6.51


Feb. 5, 2018

$
369,000














Feb. 3, 2009


520,833

$
4.13


Feb. 3, 2019

$
2,093,749














Feb. 2, 2010


217,865

$
10.20


Feb. 2, 2020





137,255




$
1,118,628

$
2,237,257


Feb. 1, 2011


258,462

$
9.87


Feb. 1, 2021





312,395

$
1,100,984

$
2,546,019

$
3,991,055


Jan. 31, 2012


287,270

$
8.21


Jan. 31, 2022





411,084

$
1,786,847

$
3,350,335

$
4,913,822


Jan. 28, 2013


301,655

$
8.24


Jan. 28, 2023





409,588

$
1,800,000

$
3,375,000

$
4,950,000


Paul NicolettiJan. 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

















Jul. 31, 2007


22,875

C$
6.27


Jul. 31, 2017

$
41,196














Feb. 5, 2008


150,000

C$
6.51


Feb. 5, 2018

$
234,117














Feb. 3, 2009


225,000

C$
5.13


Feb. 3, 2019

$
661,831














Feb. 2, 2010


58,823

C$
10.77


Feb. 2, 2020





49,412




$
398,954

$
797,919


Feb. 1, 2011


46,523

C$
9.87


Feb. 1, 2021





91,185

$
392,657

$
736,231

$
1,079,806


Mar. 11, 2011














10,120

$
81,709

$
81,709

$
81,709


Jan. 31, 2012


28,887

C$
8.26


Jan. 31, 2022





94,312

$
553,806

$
761,479

$
969,151


Darren MyersSep. 5, 2008


10,000

C$
8.06


Sep. 5, 2018

$
100














Feb. 3, 2009


20,833

C$
5.13


Feb. 3, 2019

$
61,280














Feb. 2, 2010


26,144

C$
10.77


Feb. 2, 2020





16,471




$
132,987

$
265,975


Feb. 1, 2011


31,015

C$
9.87


Feb. 1, 2021





37,488

$
130,888

$
302,679

$
474,471


Jan. 31, 2012


38,303

C$
8.26


Jan. 31, 2022





54,812

$
236,028

$
442,554

$
649,080


Jan. 28, 2013


100,552

C$
8.29


Jan. 28, 2023





136,530

$
603,947

$
1,132,400

$
1,660,853


Michael AndradeJan. 31, 2004


26,667

C$
22.75


Jan. 31, 2014

















Dec. 9, 2004


18,000

C$
18.00


Dec. 9, 2014

















Jan. 31, 2006


11,364

C$
11.43


Jan. 31, 2016

















Feb. 3, 2009


42,555

C$
5.13


Feb. 3, 2019

$
125,174














Feb. 2, 2010


34,858

C$
10.77


Feb. 2, 2020





21,961




$
177,314

$
354,628


Feb. 1, 2011


33,083

C$
9.87


Feb. 1, 2021





39,987

$
139,616

$
322,857

$
506,097


Mar. 11, 2011


7,435

C$
10.69


Mar. 11, 2021





8,986

$
31,376

$
72,553

$
113,731


Jan. 31, 2012


44,687

C$
8.26


Jan. 31, 2022





63,947

$
275,365

$
516,310

$
757,256


Sep. 5, 2012














13,055

$
105,407

$
105,407

$
105,407


Jan. 28, 2013


93,848

C$
8.29


Jan. 28, 2023





127,427

$
563,679

$
1,056,898

$
1,550,118





87

---



Option-Based Awards

Share-Based AwardsName

Number of
Securities
Underlying
Unexercised
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Value of
Unexercised
In-the-
Money
Options
($)(2)

Number
of Shares
or Units
that have
not
Vested
(#)(3)

Payout
Value of
Share
Awards that
have not
Vested at
Minimum
($)(4)

Payout
Value of
Share
Awards that
have not
Vested at
Target
($)(4)

Payout
Value of
Share
Awards that
have not
Vested at
Maximum
($)(4)

Payout Value
of Vested
Share-Based
Awards Not
Paid Out or
Distributed
($)Michael McCaugheyJul. 5, 2005


15,000

C$
16.20


Jul. 5, 2015

















Jan. 31, 2006


20,455

C$
11.43


Jan. 31, 2016

















Feb. 3, 2009


27,778

C$
5.13


Feb. 3, 2019

$
81,708














Feb. 2, 2010


34,858

C$
10.77


Feb. 2, 2020





21,961




$
177,314

$
354,628


Feb. 1, 2011


41,354

C$
9.87


Feb. 1, 2021





49,983

$
174,512

$
403,565

$
632,617


Jan. 31, 2012


51,070

C$
8.26


Jan. 31, 2022





73,082

$
314,702

$
590,067

$
865,432


Sep. 5, 2012














13,055

$
105,407

$
105,407

$
105,407


Jan. 28, 2013


93,848

C$
8.29


Jan. 28, 2023





127,427

$
563,679

$
1,056,898

$
1,550,118


Elizabeth L. DelBiancoApr. 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

















Feb. 2, 2007


9,091

C$
7.10


Feb. 2, 2017

$
8,823














Feb. 5, 2008


60,000

C$
6.51


Feb. 5, 2018

$
93,647














Feb. 3, 2009


156,250

C$
5.13


Feb. 3, 2019

$
459,605














Feb. 2, 2010


65,359

C$
10.77


Feb. 2, 2020





41,176




$
332,457

$
664,913


Feb. 1, 2011


77,539

C$
9.87


Feb. 1, 2021





93,718

$
327,216

$
756,683

$
1,186,149


Jan. 31, 2012


90,969

C$
8.26


Jan. 31, 2022





130,177

$
560,564

$
1,051,054

$
1,541,544


Jan. 28, 2013


95,524

C$
8.29


Jan. 28, 2023





129,703

$
573,748

$
1,075,776

$
1,577,804





(1)Includes
option-based and share-based awards granted on January 28, 2013 in respect of 2012 performance. See " Compensation
Discussion and Analysis  2012 Compensation Decisions  Equity-Based Incentives" for a discussion of the
equity grants.(2)The
value of unexercised in-the-money stock options for Mr. Muhlhauser was determined using a share price of $8.15, which was
the closing price of subordinate voting shares on the NYSE on December 31, 2012. For Messrs. Nicoletti, Myers, Andrade and McCaughey and Ms. DelBianco, a share price of C$8.07 was
used, which was the closing price of subordinate voting shares on the TSX on December 31, 2012, converted to U.S. dollars at the average exchange rate for 2012 of $1.00 equals C$0.9995.(3)The
value included for PSUs is at 100% of target level performance.(4)Market
payout values at minimum vesting include the value of RSUs only as the minimum value of PSUs would be 0% of target. Market payout values at target
vesting is determined using 100% of PSUs vesting and market payout values at maximum vesting is determined using 200% of PSUs vesting. Market payout values for Mr. Muhlhauser are determined
using a share price of $8.15, which was the closing price of subordinate voting shares on the NYSE on December 31, 2012, except for the share-based awards granted on January 28, 2013 in
respect of 2012 performance for which the market payout values are determined using a share price of $8.24, which was the closing price of subordinate voting shares on the NYSE on January 25,
2013, the last business day before the grants. Market payout values for Messrs. Nicoletti, Myers, Andrade and McCaughey and Ms. DelBianco are determined using a share price of C$8.07,
which was the closing price of subordinate voting shares on the TSX on December 31, 2012, converted to U.S. dollars, except for the share-based awards granted on January 28, 2013
in respect of 2012 performance for which the market payout values are determined using a share price of C$8.29, which was the closing price of subordinate voting shares on the TSX on
January 25, 2013, the last business day before the grants, converted to U.S. dollars.


88

---





The
following table provides details for each NEO of the value of option-based and share-based awards that vested during 2012 and the value of annual incentive awards earned in respect
of 2012 performance.

Table 14: Incentive Plan Awards  Value Vested or Earned in 2012

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

$
1,006,861

$
8,159,764

$
0Paul Nicoletti

$
287,394

$
2,962,266

$
0Darren Myers

$
71,285

$
970,273

$
0Michael Andrade

$
117,106

$
1,291,251

$
0Michael McCaughey

$
124,460

$
1,293,691

$
0Elizabeth L. DelBianco

$
237,042

$
2,425,691

$
0


(1)Amounts
in this column reflect the value of stock options that vested in 2012 and were in-the-money on the vesting date. Stock
options for Mr. Muhlhauser vested as follows:


Vesting Date

Exercise Price

Closing Price on
NYSE of Subordinate
Voting Shares on
Vesting DateFebruary 3, 2012

$
4.13

$
8.64February 5, 2012

$
6.51

$
8.50


Stock
options for Messrs. Nicoletti, Andrade, and McCaughey and Ms. DelBianco vested as follows:


Vesting Date

Exercise
Price

Closing Price on
TSX of Subordinate
Voting Shares on
Vesting DateFebruary 3, 2012

C$
5.13

C$
8.55February 5, 2012

C$
6.51

C$
8.47


Stock
options for Mr. Myers vested as follows:


Vesting Date

Exercise
Price

Closing Price on
TSX of Subordinate
Voting Shares on
Vesting DateFebruary 3, 2012

C$
5.13

C$
8.55


(2)Amounts
in this column reflect share-based awards that were released in 2012. Share-based awards were released for Mr. Muhlhauser based on the price
of subordinate voting shares on the NYSE as follows:


Type of Award

Date

PriceRSU

February 1, 2012

$
8.79PSU

February 3, 2012

$
8.64RSU

February 6, 2012

$
8.50RSU

December 3, 2012

$
7.30




89

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Share-based
awards were released for Messrs. Nicoletti, Myers, Andrade and McCaughey and Ms. DelBianco based on the price of subordinate voting shares on the TSX as follows:


Type of Award

Date

PriceRSU

February 1, 2012

C$
8.74PSU

February 3, 2012

C$
8.55RSU

February 6, 2012

C$
8.47RSU

December 3, 2012

C$
7.24


All
of the preceding C$ values were converted to U.S. dollars at the average exchange rate for 2012 of $1.00 equals C$0.9995. PSUs that vested in 2012 were paid out at 200% as a result of the
Company's ROIC performance being equal to or greater than the highest performance of the applicable EMS competitor group. (3)Amounts
in this column include incentive payments under the CTI in respect of 2012 performance, which were nil for each of the NEOs. See
" Compensation Discussion and Analysis  2012 Compensation Decisions  Target Award." These are
the same amounts as disclosed in Table 12 under the column "Non-equity Incentive Plan Compensation  Annual Incentive Plans".


The following table sets out the gains realized by NEOs from exercising stock options in 2012.

Table 15: Gains Realized by NEOs from Exercising Options

Name

AmountCraig H. Muhlhauser


Paul Nicoletti


Darren Myers

$
88,232Michael Andrade

$
82,633Michael McCaughey

$
122,602Elizabeth L. DelBianco





Securities Authorized for Issuance Under Equity Compensation Plans

Table 16: Equity Compensation Plans as at December 31, 2012

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)


133,214

$13.41

0LTIP (Options)


5,852,679

$8.89/C$10.13

N/ALTIP (RSUs)


1,660,977

N/A

N/ATotal(2)


7,646,870

$9.06/C$10.13

13,951,760Equity Compensation Plans Not Approved by Securityholders






6,546,867(3)

N/A

N/ATotal:


14,193,737

N/A

13,951,760


(1)Excluding
securities that may be issued upon exercise of outstanding stock options, warrants and rights.


90

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(2)The
total number of securities to be issued under all equity compensation plans approved by shareholders represent 4.18% of the total number of outstanding
shares at December 31, 2012 (MSL  0.07%; LTIP (Options)  3.20%; and LTIP
(RSUs)  0.91%).(3)Consists
solely of subordinate voting shares that must be purchased in the open market to satisfy RSUs and PSUs granted pursuant to the CSUP. These
securities are not issuable from treasury.


Equity Compensation Plans



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 and the NYSE. Under the LTIP, the Board may in its discretion from time to time grant stock options,
performance shares, RSUs, PSUs and stock appreciation rights ("SARs") to employees and consultants of the Company and affiliated entities.

Up
to 29,000,000 subordinate voting shares may be issued from treasury pursuant to the LTIP. The number of subordinate voting shares that may be issued from treasury under the
LTIP to directors is limited to 2,000,000; however, the Company decided in 2004 that no more stock option grants under the LTIP would be made to directors. Under the LTIP, as of February 15,
2013, 8,653,631 subordinate voting shares have been issued from treasury, 6,433,231 subordinate voting shares are issuable under outstanding stock options and
2,364,992 subordinate voting shares are issuable under outstanding RSUs. Also as of February 15, 2013, 20,346,369 subordinate voting shares are reserved for issuance from treasury
pursuant to future grants of securities-based compensation under the LTIP. In addition, the Company may satisfy obligations under the LTIP by acquiring subordinate voting shares in the market.

As
of February 15, 2013, the Company had a "gross overhang" of 11.1%. "Gross overhang" refers to the total number of shares reserved for issuance from treasury under equity plans
at any given time relative to the total number of shares outstanding, including shares reserved for outstanding stock options and RSUs. The Company's "net overhang"
(i.e.the total number of shares that have been reserved for issuance from treasury to satisfy outstanding equity grants to employees relative to
the total number of shares outstanding) was 4.8%.

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 stock 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 stock options for services granted by the Company, in each case to 10% of the aggregate issued and outstanding subordinate voting shares and multiple
voting shares of the Company. The LTIP also limits the number of subordinate voting shares that may be reserved for issuance to any one participant pursuant to stock 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 stock options for services granted by the Company, to 5% of the
aggregate issued and outstanding subordinate voting shares and multiple voting shares. The number of subordinate voting shares issuable pursuant to securities-based compensation awarded under the LTIP
in any given year cannot exceed 1.2% of the average aggregate number of subordinate voting shares and multiple voting shares outstanding during that period.

Stock
options issued under the LTIP may be exercised during a period determined in the LTIP, which may not exceed ten years. The LTIP also provides that, unless otherwise determined by
the Board, stock 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
stock options issued under the LTIP is the closing price for subordinate voting shares on the last business 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 stock 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 of stock options to, or exercise of stock options by, an eligible participant may also be subject to certain share ownership requirements.

The
interest of any participant under the LTIP is generally not transferable or assignable. However, the LTIP does provide that a participant may assign his or her rights to a spouse, or
a personal holding company or

91

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family
trust controlled by the participant, of which any combination of the participant, the participant's spouse, minor children or grandchildren are shareholders or beneficiaries,
as applicable.

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 closing price for 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. 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 stock options and SARs,
including such time or performance-based conditions as may be determined by the Board in its discretion. The number of subordinate voting shares that may be issued to any one person pursuant to the
performance unit program shall not exceed 1% of the aggregate issued and outstanding subordinate voting shares and multiple voting shares.

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



92

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The 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 number of subordinate voting shares that may be issued pursuant to RSUs and PSUs granted under the terms of
the CSUP. The issuance of subordinate voting shares may be subject to vesting requirements, including any time-based conditions established by the Board at its discretion. The vesting of
PSUs also requires the achievement of specified performance-based conditions as determined by the Compensation Committee.

Pension Plans

The following table provides details of the amount of Celestica's contributions to the pension plans and the accumulated value as of
December 31, 2012 for each NEO.

Table 17: Defined Contribution Pension Plan

Name

Accumulated Value
at Start of Year
($)

Compensatory
($)

Accumulated Value
at End of Year(1)
($)Craig H. Muhlhauser(2)

$
372,480

$
142,400

$
563,787Paul Nicoletti(3)(4)

$
554,866

$
238,241

$
840,674Darren Myers

$
171,808

$
43,272

$
220,749Michael Andrade

$
623,466

$
47,876

$
720,072Michael McCaughey

$
203,427

$
47,868

$
253,537Elizabeth L. DelBianco(3)

$
474,160

$
57,223

$
572,489


(1)The
difference between (i) the sum of the Accumulated Value at Start of Year column plus the Compensatory column and (ii) the Accumulated
Value at End of Year column is attributable to non-compensatory changes in the Company's accrued obligations during the year ended December 31, 2012.(2)Amounts
for Mr. Muhlhauser include only amounts in his supplementary retirement plans and not amounts in his 401(k) plan.(3)The
difference between the Accumulated Value at Start of Year and the Accumulated Value at End of Year reported in the 2011 Form 20-F for
Mr. Nicoletti and Ms. DelBianco is attributable to different exchange rates used in the 2011 and 2012 Form 20-Fs. The exchange rate used in the 2011
Form 20-F was $1.00 = C$0.9887.(4)Includes
$162,000 contribution to the SERP representing the net present value of such contributions for two years. Mr. Nicoletti's employment with
the Company terminated effective December 28, 2012.


Mr. Muhlhauser participates in two defined contribution retirement programs, one of which qualifies as a deferred salary arrangement under
section 401(k) of the Internal Revenue Code (United States) (the "401(k) Plan"). Under the 401(k) 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 401(k) 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 the participant, and
(ii) up to an additional 3% of eligible compensation by matching 50% of the first 6% contributed by the participant. The maximum contribution of the Company to the 401(k) Plan, based on the
Internal Revenue Code rules and the 401(k) Plan formula for 2012, is $15,000. Mr. Muhlhauser also participates in a supplementary retirement plan that is also a defined contribution plan. It is
designed to provide annual benefits equal to the difference between 8% of the participant's salary and paid incentive and the amount that Celestica would contribute to the 401(k) Plan assuming the
participant contributes the amount required to receive the matching 50% contribution by Celestica. A notional account is maintained for Mr. Muhlhauser and he is entitled to select from among
the investment options available in the 401(k) Plan for the purpose of determining the return on their notional accounts.

Messrs. Nicoletti,
Myers, Andrade and McCaughey and Ms. DelBianco participate in the defined contribution portion of the Canadian Pension Plan. The defined contribution
portion of the Canadian Pension

93

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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. Retirement benefits depend upon
the performance of the investment options chosen. Messrs. Nicoletti, Myers, Andrade and McCaughey and Ms. DelBianco also participate in an unregistered supplementary pension plan
(the "Canadian Supplementary Plan"). This is also a defined contribution plan that is designed to provide benefits of an amount equal to the difference between (i) the maximum annual
contribution limit as determined in accordance with the formula set out in the Canadian Pension Plan and with Canada Revenue Agency rules and (ii) 8% of the total salary and paid annual
incentives. Notional accounts are maintained for each participant in the
Canadian 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.

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 certainty to the Company and such NEOs
with respect to issues such as obligations of confidentiality, non-solicitation and non-competition after termination of employment, the amount of severance to be paid in the
event of termination of the NEO's employment, and to provide a retention incentive in the event of a change in control scenario.

Mr. Muhlhauser 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, they are terminated without cause or resign for good reason as defined in their agreements (which provision is commonly referred to as a "double trigger"
provision). A change in control period is defined in their agreements as the period (a) commencing on the date the Company enters into a binding agreement for a change in control, an intention
is announced by the Company to effect a change in control or the Board adopts a resolution that a change in control has occurred, and (b) 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. 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
based on expected financial results, prorated to the date of termination. The amount of the severance payment for Ms. DelBianco is equal to three times her annual base salary and target annual
incentive, together with a portion of her target annual incentive for the year prorated to the date of termination. 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. In addition, in these
circumstances, (a) the stock options granted to each of them vest immediately, (b) the unvested PSUs granted to each of them vest immediately at target level performance unless the terms
of a PSU grant provide otherwise, or on such other more favorable terms as the Board in its discretion may provide, and (c) the RSUs granted to each of them shall vest immediately.

Outside
a change in control period, upon termination without cause or resignation for good reason as defined 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 based on expected financial results, prorated to the date of termination. The amount of the severance payment for Ms. DelBianco is equal to two times
her annual base salary and target annual incentive, together with a portion of her target annual incentive for the year prorated to the date of termination. There is no accelerated vesting of stock
options or PSUs. Stock options that would have otherwise vested and become
exercisable during the 12-week period following the date of termination shall vest and become exercisable in accordance with the terms of the plan. All remaining unvested stock options are
cancelled. All RSUs shall vest immediately on apro ratabasis based on the ratio of (i) the number of full years of employment completed
between the date of grant and the termination of employment, to (ii) the number of years between the date of grant and the vesting date. PSUs vest based on actual performance and on a pro ratabasis based on the ratio of (i) the number of full years of employment completed between the date of grant and the termination of
employment, to (ii) the number of years between

94

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the
date of grant and the vesting date. The Company's obligations provide for a cash settlement to cover benefits for a two-year period following termination. In addition, the Company also
provides for a cash settlement of contributions to, or continuation of their pension and retirement plans for, a three-year period for Mr. Muhlhauser and a two-year
period for Ms. DelBianco.

Mr. Muhlhauser
is the only NEO currently eligible for retirement treatment under the LTIP or CSUP, however, these values have been provided for the other NEOs in Tables 18
to 22 as an indication of the amount of such benefit when the NEO is eligible for retirement. In the event of retirement, or a termination without cause at a time when the NEO is eligible for
retirement treatment under the LTIP or CSUP, (a) stock options continue to vest and are exercisable until the earlier of three years following retirement or termination and the original expiry
date, (b) RSUs will continue to vest on their vesting date, and (c) PSUs vest based on actual performance on apro ratabasis based
on the number of days between the date of grant and the date of retirement or termination.

The
foregoing entitlements are conferred on Mr. Muhlhauser and Ms. DelBianco in part upon their fulfillment of certain confidentiality, non-solicitation and
non-competition obligations for a period of three years following termination of employment in the case of Mr. Muhlhauser and a period of two years following termination of
employment in the case of Ms. DelBianco. In the event of a breach of such obligations, the Company is entitled to seek appropriate legal, equitable and other remedies, including injunctive
relief.

The
following tables summarize the incremental payments to which Mr. Muhlhauser and Ms. DelBianco would have been entitled upon a change in control, or if their employment
had been terminated on December 31, 2012 as a result of a change in control, retirement or termination without cause.

Table 18: Mr. Muhlhauser's Benefits

Cash
Portion

Incremental Value of Option-Based and Share-Based Awards(1)

Other
Benefits(2)

TotalChange in Control  No Termination











Change in Control  Termination

$
6,012,469




$
475,191

$
6,487,660Retirement











Termination without Cause

$
2,967,500




$
465,408

$
3,432,908


(1)No
incremental amount would be received in respect of accelerated vesting of options, RSUs and PSUs, if any, on the assumption that the discount rate
applied to calculate the net present value of the accelerated entitlements is not greater than the rate at which the SVS would otherwise be expected to appreciate over the period of acceleration.(2)Other
benefits include group health and welfare benefits and 401(k) contribution.


Table 19: Ms. DelBianco's Benefits

Cash
Portion

Incremental Value of Option-Based and Share-Based Awards(1)

Other
Benefits(2)

TotalChange in Control  No Termination











Change in Control  Termination

$
2,752,800




$
233,013

$
2,985,813Retirement











Termination without Cause

$
1,953,600




$
155,034

$
2,108,634


(1)No
incremental amount would be received in respect of accelerated vesting of options, RSUs and PSUs, if any, on the assumption that the discount rate
applied to calculate the net present value of the accelerated entitlements is not greater than the rate at which the SVS would otherwise be expected to appreciate over the period of acceleration.(2)Other
benefits include group health benefits and pension plan contribution.


95

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Mr. Nicoletti

Mr. Nicoletti's employment with the Company terminated effective December 28, 2012. Mr. Nicoletti received a cash
payment of $2,389,576 comprised of: a severance payment of $2,200,000; a lump sum payment of $25,500 representing the net present value of benefits for a period of two years; pension contributions of
$162,000 representing the net present value of such contributions for two years; and group life insurance premiums totaling $2,076.

Messrs. Myers, Andrade and McCaughey

The terms of employment with the Company for Messrs. Myers, Andrade and McCaughey are governed by the Company's Executive
Employment Guidelines (the "Executive Guidelines"). Upon termination without cause within two years following a change in control of the Company (a "double-trigger" provision),
Messrs. Myers, Andrade and McCaughey are eligible to receive a severance payment up 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 their annual incentive for the year prorated to the date of termination. In addition, upon a change in
control, (a) all unvested stock options granted to Messrs. Myers, Andrade and McCaughey vest on the date of change in control, (b) all
unvested RSUs granted to them vest on the date of change in control, and (c) all unvested PSUs granted to them vest on the date of change in control at target level of performance.

Under
the Executive Guidelines, the pension and group benefits of Messrs. Myers, Andrade and McCaughey discontinue on the date of termination.

Outside
of the two-year period following a change in control, upon termination without cause, Messrs. Myers, Andrade and McCaughey 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 (a) vested stock options may be exercised for a period of
30 days and unvested stock options are forfeited on the termination date, (b) RSUs shall vest immediately on apro ratabasis based
on the ratio of (i) the number of full years of employment completed between the date of grant and termination of employment, to (ii) the number of years between the date of grant and
the vesting date, and (c) PSUs vest based on actual performance on apro ratabasis based on the ratio of (i) the number of full
years of employment completed between the date of grant and the termination of employment, to (ii) the number of years between the date of grant and the vesting date.

In
the event of retirement, (a) stock options continue to vest and are exercisable until the earlier of three years following retirement and the original expiry date,
(b) RSUs will continue to vest on their vesting dates, and (c) PSUs vest based on actual performance and are prorated for the number of days between the date of grant and the date
of retirement.

The
foregoing entitlements are conferred on Messrs. Myers, Andrade and McCaughey in part upon their fulfillment of certain confidentiality, non-solicitation and
non-competition obligations for a period of two years following termination of their employment.

The
following tables summarize the incremental payments to which Messrs. Myers, Andrade and McCaughey would have been entitled upon a change in control, or if their employment had
been terminated on December 31, 2012 as a result of a change in control, retirement or termination without cause.

Table 20: Mr. Myers' Benefits

Cash
Portion

Incremental Value of Option-Based and Share-Based Awards(1)

Other
Benefits

TotalChange in Control  No Termination











Change in Control  Termination

$
1,000,000







$
1,000,000Retirement











Termination without Cause

$
1,000,000







$
1,000,000


(1)No
incremental amount would be received in respect of accelerated vesting of options, RSUs and PSUs, if any, on the assumption that the discount rate
applied to calculate the net present value of the accelerated entitlements is not greater than the rate at which the SVS would otherwise be expected to appreciate over the period of acceleration.


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Table 21: Mr. Andrade's Benefits

Cash
Portion

Incremental Value of Option-Based
and Share-Based Awards(1)

Other
Benefits

TotalChange in Control  No Termination











Change in Control  Termination

$
826,000







$
826,000Retirement











Termination without Cause

$
826,000







$
826,000


(1)No
incremental amount would be received in respect of accelerated vesting of options, RSUs and PSUs, if any, on the assumption that the discount rate
applied to calculate the net present value of the accelerated entitlements is not greater than the rate at which the SVS would otherwise be expected to appreciate over the period of acceleration.


Table 22: Mr. McCaughey's Benefits

Cash
Portion

Incremental Value of Option-Based
and Share-Based Awards(1)

Other
Benefits

TotalChange in Control  No Termination











Change in Control  Termination

$
800,000







$
800,000Retirement











Termination without Cause

$
800,000







$
800,000


(1)No
incremental amount would be received in respect of accelerated vesting of options, RSUs and PSUs, if any, on the assumption that the discount rate
applied to calculate the net present value of the accelerated entitlements is not greater than the rate at which the SVS would otherwise be expected to appreciate over the period of acceleration.


Performance Graph

Subordinate voting shares 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 was CLS.SV). The following chart compares the cumulative TSR of
C$100 invested in subordinate voting shares with the cumulative TSR of the S&P/TSX Composite Total Return Index for the period from December 31, 2007 to December 31, 2012.

GRAPHIC

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As
can be seen from the performance graph above, an investment in the Company on January 1, 2008 would have resulted in a 39.4% increase in value over the five-year
period ended December 31, 2012 compared with a 4.1% increase that would have resulted from an investment in the S&P/TSX Composite Total Return Index over the same period. Over the same period,
total NEO Compensation (as defined below) decreased by 26.5%. The decrease in NEO Compensation from 2008 to 2012 is due, in part, to the achievement of certain annual corporate financial
targets for CTI in 2008 which resulted in a CTI Business Results Factor of 119% for 2008. As the annual corporate financial targets for 2012 were not achieved, the CTI Business Results Factor for 2012
was 0% and no CTI payments were made to NEOs in respect of 2012. SeeCompensation Discussion and Analysis  2012 Compensation
Decisions  Annual Incentive Award (CTI).In the medium to long term, compensation of the Company's NEOs is directly impacted by the
market value of the subordinate voting shares, as a significant portion of NEO Compensation is awarded in the form of equity-based incentives with payout tied to the market price performance of the
subordinate voting shares.

For
the purpose of the above discussion, NEO Compensation is defined as aggregate annual compensation (i.e. the sum of base salary, CTI payments (if applicable) and the
grant date fair value of share-based awards and option-based awards, but excluding all other compensation). The executive compensation values have been calculated for the NEOs based on the same
methodology disclosed in the Summary Compensation Table. This is a methodology adopted by Celestica solely for the purposes of this comparison. It is not a recognized or prescribed methodology for
this purpose, and may not be comparable to methodologies used by other issuers for this purpose.

In
2012, total compensation for NEOs was 6.6% of 2012 adjusted earnings.

EXECUTIVE SHARE OWNERSHIP

The Company has share ownership guidelines for the CEO, Executive Vice Presidents and Senior Vice Presidents. The guidelines provide
that these individuals are to hold a multiple of their salary in securities of the Company as shown in Table 23. Executives subject to ownership guidelines are expected to achieve the specified
ownership within a period of five years following the later of: (i) the date of hire, or (ii) the date of promotion to a level subject to ownership guidelines. Compliance is reviewed
annually as of December 31 of each year. As of December 31, 2012, the applicable NEOs were in compliance with the share ownership guidelines, as follows:

Table 23: Share Ownership Guidelines

Name

Ownership Guidelines

Share Ownership
(Value)(1)

Share Ownership
(Multiple of Salary)Craig H. Muhlhauser

$3,000,000
(3 × salary)

$
11,364,010


11.4xDarren Myers(2)

$1,000,000
(2 × salary)

$
783,940


1.6xMichael Andrade

$826,000
(2 × salary)

$
914,919


2.2xMichael McCaughey

$800,000
(2 × salary)

$
1,365,679


3.4xElizabeth L. DelBianco

$888,000
(2 × salary)

$
2,477,567


5.6x


(1)Includes
the following, as of December 31, 2012: (i) subordinate voting shares beneficially owned, (ii) all unvested RSUs, and
(iii) PSUs that vested on February 2, 2013 at 200% of target, which, on December 31, 2012, was the Company's anticipated payout and was in fact the resulting payout; in each case,
the value of which was determined using a share price of $8.15 being the closing price of subordinate voting shares on the NYSE on December 31, 2012.


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(2)Mr. Myers
was promoted to EVP, CFO effective December 6, 2012 and, accordingly, pursuant to the share ownership guidelines, he is expected to
achieve the specified share ownership threshold within a period of five years following such promotion. Including the January 28, 2013 RSU grant in respect of 2012, Mr. Myers' share
ownership value is $1,383,940 or 2.8 times his base salary of $500,000.


C.    Board Practices

Members of the Board are elected until the next annual meeting or until their successors are elected or appointed. See Item 6(A), "Directors
and Senior Management" for details for the period during which each director has served in his/her office. Our non-management directors meetin
camera(i.e., without our chief executive officer, chief financial officer or other members of management present) from time to
time to consider such matters as they deem appropriate. In accordance with the NYSE Rules for listed companies, "non-management" directors are all those who are not executive officers of
the Company. We have designated the Chairman of the Board as the presiding non-management director at allin camerasessions. The
non-management directors can set their own agenda, maintain minutes and report back to the Board as a whole. Among the items that the non-management directors meet privately in camerato review is the
performance of the Company's executive officers. Our Audit Committee, which consists solely of independent,
non-management directors, metin cameraimmediately following each Audit Committee meeting in 2012.

Mr. DiMaggio,
Mr. Etherington, Ms. Koellner, Mr. Natale, Mr. Ryan and Mr. Wilson are independent directors under applicable independence
standards in Canada, and were in compliance with the New York Stock Exchange Listed Company Manual.

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



Shareholders and other interested parties may communicate with the Board, the Audit Committee, the Compensation Committee, any
individual director, or all non-management directors as a group, by writing to:



If
the letter is from a shareholder, the letter should state that the sender is a shareholder. Under a process approved by the Board, depending on the subject matter,
management will:



A
summary of all relevant communications that are received after the last meeting of the full Board and which are not forwarded will be presented at each meeting of the Board, together
with any specific communication requested by a director to be presented to the Board.

Shareholders
and other interested parties who have concerns or complaints relating to accounting, internal accounting controls or other matters may also contact the Audit Committee by
writing to the address set out above or by reporting the matter through our Ethics Hotline toll free at 1-888-312-2689. Callers outside the United States or
Canada can
place a collect call to 1-503-726-2457. Alternatively, concerns or complaints can be reported using a secure on-line web-based tool at
www.ethics.celestica.com.

99

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All
communications will be handled in a confidential manner, to the degree the law allows. Communications may be made on an anonymous basis; however, in these cases the reporting
individual must provide sufficient details for the matter to be reviewed and resolved. The Company will not tolerate any retaliation against an employee who makes a good faith report.

Board Committees

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

The
Board previously had as a standing committee a fully independent Executive Committee that was comprised of Robert Crandall (Chairman) and William Etherington. The purpose of the
Executive Committee was to provide a degree of flexibility and ability to respond to time-sensitive matters where it was impractical to call a meeting of the full Board. All decisions of
the Executive Committee were submitted to the Board for approval or ratification.

The
Board determined that it would no longer require the services of an Executive Committee as a standing committee of the Board effective April 23, 2012.



The Audit Committee consists of Ms. Koellner (Chair), Mr. DiMaggio, Mr. Etherington, Mr. Natale,
Mr. Ryan and Mr. Wilson, all of whom are independent directors (as that term is defined in the NYSE listing standards) and are financially literate. Ms. Koellner currently
serves as the Chair of the Audit Committee of Hillshire Brands Company. Mr. Etherington has served as a chief financial officer of a large North American organization. Mr. Natale joined
the audit committee on April 23, 2012. All of the committee members have held executive positions with large corporations. 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 considers appropriate. The Audit Committee reviews and
approves the mandate and plan of the internal audit department on an annual basis. The Audit Committee's duties include 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
Audit Committee has established procedures for: (i) receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, or auditing matters and
(ii) confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. A copy of the Audit Committee Mandate is available on our website at
www.celestica.com.



The Audit Committee has reviewed and discussed the audited financial statements with management;

The
Audit Committee has discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 114 (AICPA, Professional Standards, Vol. 1. AU
section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T;

The
Audit Committee has received the written disclosures and the letter from the independent auditor as required by the Public Company Accounting Oversight Board regarding the
independent auditor's

100

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communications
with the Audit Committee concerning independence, and has discussed with the independent auditor the independent auditor's independence; and

Based
on the review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Celestica's annual report for the last
fiscal year for filing with the Commission.

The
Audit Committee:



The Compensation Committee consists of Mr. Ryan (Chair), Mr. DiMaggio, Mr. Etherington, Ms. Koellner,
Mr. Natale and Mr. Wilson, all of whom are independent directors. Mr. Natale joined the Compensation Committee on April 23, 2012. 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. Pursuant to its mandate, the
Compensation Committee: approves Celestica's overall reward/compensation policy, including an executive compensation policy that is consistent with competitive practice and supports organizational
objectives and shareholder interests; reviews and approves annually the elements of our incentive compensation plans and equity-based plans, including plan design, performance targets, administration
and total funds/shares reserved for payment; reviews and approves the compensation of the CEO based on an assessment of the CEO's annual performance; reviews the compensation of our most senior
executives; reviews our succession plans for key executive positions; reviews and approves material changes to our organizational structure and human resource policies; and reviews, regularly, the
risks associated with our executive compensation policies and practices. See Item 6(B), "Compensation" for details regarding our processes and procedures for the consideration and determination
of executive and director compensation and the role of our compensation consultant in making recommendations to the Compensation Committee regarding executive officer and director compensation.

A
copy of the Compensation Committee Mandate is available on our website at www.celestica.com.



The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and based on such review
and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in Celestica's annual report.

The
Compensation Committee:



101

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The Nominating and Corporate Governance Committee consists of Mr. Etherington (Chair), Mr. DiMaggio, Ms. Koellner,
Mr. Natale, Mr. Ryan and Mr. Wilson, all of whom are independent directors. Mr. Natale joined the Nominating and Corporate Governance Committee on April 23, 2012.
The Nominating and Corporate Governance Committee recommends to the Board the criteria for selecting candidates for nomination to the Board and the individuals to be nominated for election by our
shareholders. The Committee's mandate includes making recommendations to the Board relating to the Company's approach to corporate governance; reviewing the Company's corporate governance guidelines
and recommending appropriate changes to the Board; assessing the performance of the CEO relative to corporate goals and objectives established by the Committee; and assessing the effectiveness of the
Board and its committees.

A
copy of the Nominating and Corporate Governance Committee Mandate is available on our website at www.celestica.com.

D.    Employees

As of December 31, 2012, we employed approximately 29,000 permanent and temporary (contract) employees worldwide. Some of our employees in Austria,
China, Japan, Mexico, Romania, Singapore and Spain are represented by unions or are covered by collective bargaining. The following table sets forth information concerning our employees by geographic
location for the past three fiscal years:

Number of EmployeesDate

Americas

Europe

AsiaDecember 31, 2010


11,000


4,000


20,000December 31, 2011


8,000


3,000


20,000December 31, 2012


7,000


2,000


20,000


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 adjust our production up or down to
maximize efficiency. To achieve this, our approach has been to employ a skilled temporary labor force, as required. As at December 31, 2012, approximately 5,300 temporary (contract)
employees (December 31, 2011  5,800) were engaged by us worldwide. We used, on average, approximately 5,900 temporary (contract) employees
throughout 2012.

102

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E.    Share Ownership

The following table sets forth certain information concerning the direct and beneficial ownership of shares of Celestica at February 15, 2013 by each
director who holds shares and each of the Named Executive Officers and all directors and executive officers of Celestica as a group. Unless otherwise noted, the address of each of 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 PowerWilliam A. Etherington(3)


20,000 SVS

*

*

*Dan DiMaggio


0 SVS





Laurette Koellner


0 SVS





Joseph M. Natale


0 SVS





Eamon J. Ryan


0 SVS





Gerald W. Schwartz(4)(5)


18,946,368 MVS

100.0%

10.3%

74.2%666,324 SVS

*

*

*Michael Wilson


0 SVS





Craig H. Muhlhauser


2,399,258 SVS

1.5%

1.3%

*Darren G. Myers


118,960 SVS

*

*

*Elizabeth L. DelBianco


340,952 SVS

*

*

*Glen McIntosh


119,436 SVS

*

*

*Michael L. Andrade


186,852 SVS

*

*

*Michael McCaughey


178,923 SVS

*

*

*Mary Gendron


272,783 SVS

*

*

*Robert L. Crandall(6)


90,000 SVS

*

*

*Paul Nicoletti(7)


584,572 SVS

*

*

*All directors and executive officers as a group (16 persons)(8)


18,946,368 MVS

100.0%

10.3%

74.2%4,978,060 SVS

3.0%

2.7%

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






13.0%

75.0%


*Less
than 1%.(1)As
used in this table, beneficial ownership means sole or shared power to vote or direct the voting of the security, or the sole or shared investment power
with respect to a security (i.e., the power to dispose, or direct a disposition, of a security). A person is deemed at any date to have beneficial ownership of any security that such person has
a right to acquire within 60 days of such date. Certain shares subject to stock options granted pursuant to management investment plans of Onex are included as owned beneficially by named
individuals, although the exercise of these stock options is subject to Onex meeting certain financial targets. More than one person may be deemed to have beneficial ownership of the same securities.(2)Information
as to shares beneficially owned or shares over which control or direction is exercised is not within Celestica's knowledge. Except as otherwise
disclosed, such information has been provided by each nominee and officer.(3)Includes
10,000 subordinate voting shares subject to exercisable stock options.(4)The
address of this shareholder is: c/o Onex Corporation, 161 Bay Street, P.O. Box 700, Toronto, Ontario, Canada M5J 2S1.(5)Includes
120,657 subordinate voting shares owned by a company controlled by Mr. Schwartz and all of the shares of Celestica beneficially owned
by Onex, or in respect of which Onex exercises control or direction, of which 688,807 subordinate voting shares are subject to stock options granted to Mr. Schwartz pursuant to certain
management incentive plans of Onex and 119,495 subordinate voting shares held in trust for Celestica Employee Nominee Corporation as agent for and on behalf of certain executives and employees
of Celestica pursuant to certain of Celestica's employee share purchase and stock option plans. Mr. Schwartz, a director of Celestica, is the Chairman of the Board, President and Chief
Executive Officer of Onex, and owns, directly or indirectly, multiple voting shares of Onex carrying the right to elect a majority of the Onex board of directors. Accordingly, Mr. Schwartz may
be deemed to be the beneficial owner of the shares of Celestica owned by Onex; Mr. Schwartz, however, disclaims such beneficial ownership of the Celestica shares held by Onex and Celestica
Employee Nominee Corporation.(6)Includes
20,000 subordinate voting shares subject to exercisable stock options. Mr. Crandall did not stand for re-election to the
Board at the Company's annual meeting held on April 24, 2012, having passed the age of retirement provided for in the Company's Corporate Governance Guidelines. Accordingly, Mr. Crandall
ceased to be an insider of Celestica effective April 24, 2012 and is not required to file insider reports subsequent to that date. Information as to shares beneficially owned or shares over
which control or direction is exercised by Mr. Crandall is provided based on public filings as of April 24, 2012.(7)Mr. Nicoletti's
employment with the Company terminated effective December 28, 2012. Accordingly, Mr. Nicoletti ceased to be an insider
of Celestica as of such date and is not required to file insider reports subsequent to that date. Information as to shares beneficially owned or shares over which control or direction is exercised by
Mr. Nicoletti is provided based on public filings as of December 28, 2012.(8)Includes
2,742,586 subordinate voting shares subject to exercisable stock options.


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Multiple
voting shares and subordinate voting shares have different voting rights. Subordinate voting shares represent approximately 26% of the aggregate voting rights attached to
Celestica's shares. See Item 10, "Additional Information  Memorandum and Articles of Incorporation".

At
February 15, 2013, approximately 730 persons held stock options to acquire an aggregate of 6.5 million subordinate voting shares. Most of these stock options were
issued pursuant to our Long-Term Incentive Plan. See Item 6(B), "Compensation". The following table sets forth information with respect to stock options outstanding as at
February 15, 2013.

Outstanding Options

Beneficial Holders

Number of
Subordinate
Voting Shares
Under Option

Exercise Price

Year of Issuance

Date of ExpiryExecutive Officers (7 persons in total)


8,000

C$15.35

April 18, 2003

April 18, 201351,834

C$22.75

January 31, 2004

January 31, 201432,600

C$18.00

December 9, 2004

December 9, 201450,000

$13.00

June 6, 2005

June 6, 201515,000

C$16.20

July 5, 2005

July 5, 2015210,989

$10.00/C$11.43

January 31, 2006

January 31, 2016134,091

$6.05/C$7.10

February 2, 2007

February 2, 2017230,625

$6.51/C$6.51

February 5, 2008

February 5, 201810,000

C$8.06

September 5, 2008

September 5, 2018103,679

$5.26

November 5, 2008

November 5, 2018704,860

$4.13/C$5.13

February 3, 2009

February 3, 2019413,942

$10.20/C$10.77

February 2, 2010

February 2, 2020524,161

$9.87/C$9.87

February 1, 2011

February 1, 20217,435

C$10.69

March 11, 2011

March 11, 2021601,673

$8.21/C$8.26

January 31, 2012

January 31, 2022812,792

$8.24/C$8.29

January 28, 2013

January 28, 2023Non-Executive Director


5,000

$10.62

April 18, 2003

April 18, 20135,000

$18.25

May 10, 2004

May 10, 2014All other Celestica Employees (other than MSL) (approximately 700 persons in total)


80,000

$10.62-$19.90

During 2003

February 26, 2013-December 10, 2013476,083

$17.15/C$22.75

January 31, 2004

January 31, 201496,341

$13.80-C$24.92

During 2004

February 6, 2014-September 7, 2014170,620

$14.86/C$18.00

December 9, 2004

December 9, 201430,400

$9.71-C$16.20

During 2005

January 5, 2015-December 5, 2015222,215

$10.00/C$11.43

January 31, 2006

January 31, 201632,218

$9.35-C$12.54

During 2006

February 6, 2016-December 5, 2016146,666

$6.05/C$7.10

February 2, 2007

February 2, 201787,311

$5.77-C$7.76

During 2007

February 26, 2017-December 7, 2017224,000

$6.51/C$6.51

February 5, 2008

February 5, 201881,670

$4.90-$9.21

During 2008

March 5, 2018-December 5, 2018221,666

C$5.13

February 3, 2009

February 3, 201935,000

$4.04-$8.05

During 2009

February 5, 2019-November 5, 2019114,379

$10.20/C$10.77

February 2, 2010

February 2, 2020146,806

$9.87/C$9.87

February 1, 2011

February 1, 2021171,884

$8.21/C$8.26

January 31, 2012

January 31, 2022174,291

$8.24/C$8.29

January 28, 2013

January 28, 2023MSL Employees(1)


82,781

$10.91-$15.20

During 2003

February 26, 2013-September 8, 2013


(1)Represents
options outstanding under certain stock option plans that were assumed by Celestica on March 12, 2004.


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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 15, 2013 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. Multiple voting shares and subordinate voting shares have different voting rights. Subordinate voting shares represent approximately 26% of
the aggregate voting rights attached to Celestica's shares. See Item 10, "Additional Information  Memorandum and Articles of Incorporation".

Name of Beneficial Owner(1)

Number of Shares

Percentage
of Class

Percentage of
all Equity
Shares

Percentage of
Voting PowerOnex Corporation(2)


18,946,368 MVS


100.0%


10.3%


74.2%545,667 SVS


*


*


*Gerald W. Schwartz(3)


18,946,368 MVS


100.0%


10.3%


74.2%666,324 SVS


*


*


*Mackenzie Financial Corporation(4)


28,319,093 SVS


17.2%


15.4%


4.4%Letko, Brosseau & Ass. Inc.(5)


17,500,848 SVS


10.6%


9.5%


2.7%BlackRock, Inc.(6)


11,254,954 SVS


6.8%


6.1%


1.8%Donald Smith & Co., Inc.(7)


10,962,429 SVS


6.6%


6.0%


1.7%Total percentage of all equity shares and total percentage of voting power








47.7%


84.9%


*Less
than 1%.(1)As
used in this table, beneficial ownership means sole or shared power to vote or direct the voting of the security, or the sole or shared investment power
with respect to a security (i.e., the power to dispose, or direct a disposition, of a security). A person is deemed at any date to have beneficial ownership of any security that such person has
a right to acquire within 60 days of such date. More than one person may be deemed to have beneficial ownership of the same securities.(2)Includes
945,010 multiple voting shares held by wholly-owned subsidiaries of Onex, 119,495 subordinate voting shares held in trust for
Celestica Employee Nominee Corporation as agent for and on behalf of certain executives and employees of Celestica pursuant to certain of Celestica's employee share purchase and stock option plans,
and 102,597 subordinate voting shares directly or indirectly held by certain officers of Onex, which Onex or such other person has the right to vote.
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 share 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, (ii) Onex and its affiliates, collectively, 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, or (iii) if at any time the number of outstanding
multiple voting shares represents less than 5% of the aggregate number of the outstanding multiple voting shares and subordinate voting shares, 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 immediately 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 controlled 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 successor to the Montreal Trust Company of Canada), as trustee for the benefit of the holders of the subordinate voting shares, for the purpose of ensuring that the
holders of subordinate voting shares will not be deprived of any rights under applicable take-over bid legislation to which they would be otherwise entitled in the event of a
take-over bid (as that term is defined in applicable securities legislation) if


105

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multiple
voting shares and subordinate voting shares were of a single class of shares. Subject to certain permitted forms of sale, such as identical or better offers to all holders of subordinate
voting shares, Onex has agreed that it, and any of its affiliates that may hold multiple voting shares from time to time, will not sell any multiple voting shares, directly or indirectly, pursuant to
a take-over bid (as that term is defined under applicable securities legislation) under circumstances in which any applicable securities legislation would have required the same
offer or a follow-up offer to be made to holders of subordinate voting shares if the sale had been a sale of subordinate voting shares rather than multiple voting shares, but otherwise on
the same terms. 
The address of Onex is: c/o Onex Corporation, 161 Bay Street, P.O. Box 700, Toronto, Ontario, Canada M5J 2S1. (3)Includes
120,657 subordinate voting shares owned by a company controlled by Mr. Schwartz and all of the shares of Celestica beneficially owned
by Onex, or in respect of which Onex exercises control or direction, of which 688,807 subordinate voting shares are subject to options granted to Mr. Schwartz pursuant to certain
management incentive plans of Onex. Mr. Schwartz is a director of Celestica and the Chairman of the Board, President and Chief Executive Officer of Onex, and owns, directly or indirectly,
multiple voting shares of Onex carrying the right to elect a majority of the Onex board of directors. Accordingly, Mr. Schwartz may be deemed to be the beneficial owner of the shares of
Celestica owned by Onex; Mr. Schwartz, however, disclaims such beneficial ownership of the Celestica shares held by Onex and Celestica Employee Nominee Corporation.
The
address of Mr. Schwartz is: 161 Bay Street P.O. Box 700, Toronto, Ontario, Canada M5J 2S1.(4)Mackenzie
Financial Corporation ("Mackenzie") is the beneficial owner of 28,319,093 subordinate voting shares and has sole voting power and sole
dispositive power over these shares. The address of Mackenzie is: 180 Queen Street West, Toronto, Ontario, Canada M5V 3K1. The number of shares reported as owned by Mackenzie in this
Major Shareholders Table and the information in this footnote is based on the Schedule 13G filed by Mackenzie with the SEC on February 11, 2013.(5)Letko,
Brosseau & Ass. Inc. ("Letko") is the beneficial owner of 17,500,848 subordinate voting shares and has sole voting power and
sole dispositive power over these shares. Clients of Letko have the right to receive or the power to direct the receipt of dividends from, or the proceeds from sale of, the subordinate voting shares
reported as beneficially owned by Letko. No clients of Letko beneficially owns more than five percent of the subordinate voting shares. The address of Letko is: 1800 McGill College Av.,
Suite 2510, Montréal, Québec, Canada H3A 3J6. The number of shares reported as owned by Letko in this Major Shareholders Table and the information in this
footnote is based on the Schedule 13G filed by Letko with the SEC on January 9, 2013.(6)BlackRock, Inc.
("BlackRock") is the beneficial owner of 11,254,954 subordinate voting shares and has sole voting power and sole dispositive
power over these shares. The address of BlackRock is: 55 East 52nd Street, New York, New York 10055. The number of shares reported as owned by BlackRock in
this Major Shareholders Table and the information in this footnote is based on the Schedule 13G filed with the SEC on January 30, 2013 by BlackRock, on behalf of itself (as a
parent holding company) and certain of its subsidiaries identified therein.(7)Donald
Smith & Co., Inc. ("Donald Smith") is the beneficial owner of 10,962,429 subordinate voting shares and has sole voting
power over 8,072,091 subordinate voting shares and sole dispositive power over 10,962,429 subordinate voting shares. The address of Donald Smith is: 152 West
57th Street, New York, New York 10019. The number of shares reported as owned by Donald Smith in this Major Shareholders Table and the information in this footnote
is based on the Schedule 13G filed with the SEC on February 13, 2013 by Donald Smith, on behalf of itself and Donald Smith Long/Short Equities Fund, L.P.


Mackenzie and Letko have been major shareholders since 2007. Greystone and BMO ceased to hold 5% of subordinate voting shares during 2012.
BlackRock and Donald Smith became holders of 5% or more of the subordinate voting shares during 2012.

Holders

On February 15, 2013, there were approximately 1,800 holders of record of subordinate voting shares, of which
440 holders, holding approximately 60% of the outstanding subordinate voting shares, were resident in the United States and 400 holders, holding approximately 40% of the
outstanding subordinate voting shares, were resident in Canada.

B.    Related Party Transactions

Onex, which beneficially owns, controls or directs, directly or indirectly, all of the outstanding multiple voting shares, has entered into an agreement with
Celestica and with Computershare Trust Company of Canada (as successor to the Montreal Trust Company of Canada), as trustee for the benefit of the holders of the subordinate voting shares, for
the purpose of ensuring that the holders of subordinate voting shares will not be deprived of any rights under applicable take-over bid legislation to which they would be otherwise
entitled in the event of a take-over bid (as that term is defined in applicable securities legislation) if multiple voting shares and subordinate voting shares were of a single
class of shares. Subject to certain permitted forms of sale, such as identical or better offers to all holders of subordinate voting shares, Onex has agreed that it, and any of its

106

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affiliates
that may hold multiple voting shares from time to time, will not sell any multiple voting shares, directly or indirectly, pursuant to a take-over bid (as that term is
defined under applicable securities legislation) under circumstances in which any applicable securities legislation would have required the same offer or a follow-up offer to be made to
holders of subordinate voting shares if the sale had been a sale of subordinate voting shares rather than multiple voting shares, but otherwise on the same terms.

We
currently have, or have had, manufacturing agreements with one or more companies related to or under the control of Onex or Mr. Schwartz, the Chairman of the Board, President
and Chief Executive Officer of Onex and one of our directors (2011  two companies; 2010  one company). During 2012, we
recorded revenue of $38.0 million from one related company (2011  $90.9 million;
2010  $43.3 million). At December 31, 2012, we had $6.5 million due from this related company (December 31,
2011  $15.5 million; December 31, 2010  $4.9 million). All transactions with these companies were in
the normal course of operations and were recorded at the exchange amounts as agreed to by the parties based on arm's length terms.

After
giving effect to our December 2012 purchase of subordinate voting shares pursuant to our substantial issuer bid, the multiple voting shares owned by Onex represented
approximately 74% of the aggregate voting rights attached to Celestica's shares compared to 72% immediately prior to such purchase.

On
January 1, 2009, Celestica and Onex entered into a Services Agreement for the services of Mr. Schwartz as a director of the Company. The initial term of the Services
Agreement was for one year and it automatically renews for successive one-year terms unless either party provides a notice of intent not to renew. Onex receives compensation under the
Services Agreement in an amount equal to $200,000 per year, payable in DSUs in equal quarterly installments in arrears. The number of DSUs is determined using the closing price of the subordinate
voting shares on the NYSE on the last day of the fiscal quarter in respect of which the installment is to be paid.

Our
related party transactions are also disclosed 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  Related Party
Transactions".

Indebtedness of Related Parties

As at February 15, 2013, no related parties were indebted to Celestica, except for trade receivables under the manufacturing
agreements as described herein.

C.    Interests of Experts and Counsel

Not applicable.

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, or financial condition of Celestica. In 2007, securities class action lawsuits were commenced against us
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 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 added one of our directors and Onex Corporation as defendants. On October 14, 2010, the District Court granted the defendants' motions to
dismiss the consolidated amended complaint in its entirety. The

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plaintiffs
appealed to the United States Court of Appeals for the Second Circuit the dismissal of its claims against us and our former Chief Executive and Chief Financial Officers, but not as
to the other defendants. In a summary order dated December 29, 2011, the Court of Appeals reversed the District Court's dismissal of the consolidated amended complaint and remanded the case to
the District Court for further proceedings. The parties are currently engaged in the discovery process. Parallel class proceedings, including a claim issued in October 2011, remain against us
and our former Chief Executive and Chief Financial Officers in the Ontario Superior Court of Justice. On October 15, 2012, the Ontario Superior Court of Justice granted limited aspects of the
defendants' motion to strike, which ruling is subject to appeal, but the court has not granted leave nor certification of any actions. We believe the allegations in the 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 that it 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 and 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 does not anticipate paying any dividends for the foreseeable future. Our Board 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 NYSE and the TSX. The following tables set forth certain trading information for the
subordinate voting shares in Canada and the United States for the periods indicated, as reported by Bloomberg LP. In the following tables, subordinate voting shares are referred to
as SVS.

The annual high and low market prices for the five most recent fiscal years based on market closing prices.

United States Composite TradingHigh

Low

Volume(Price per SVS)Year ended December 31, 2008

$
9.74

$
3.27


424,530,000Year ended December 31, 2009


10.09


2.59


277,960,000Year ended December 31, 2010


11.24


7.51


207,160,000Year ended December 31, 2011


11.98


6.94


194,790,000Year ended December 31, 2012


10.22


6.75


122,930,000




Canadian Composite TradingHigh

Low

Volume(Price per SVS)Year ended December 31, 2008

C$
9.68

C$
4.31


276,890,000Year ended December 31, 2009


10.80


3.41


254,740,000Year ended December 31, 2010


11.41


8.04


259,630,000Year ended December 31, 2011


11.75


7.15


295,270,000Year ended December 31, 2012


10.14


6.63


319,390,000


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The high and low market prices for each full fiscal quarter for the two most recent fiscal years based on market closing prices.

United States Composite TradingHigh

Low

Volume(Price per SVS)Year ended December 31, 2011First quarter

$
11.98

$
9.29


49,200,000Second quarter


11.27


8.08


35,080,000Third quarter


9.35


7.15


68,830,000Fourth quarter


8.81


6.94


41,680,000Year ended December 31, 2012First quarter

$
10.22

$
7.48


45,260,000Second quarter


9.65


6.98


39,380,000Third quarter


8.02


6.91


18,230,000Fourth quarter


8.26


6.75


20,060,000




Canadian Composite TradingHigh

Low

Volume(Price per SVS)Year ended December 31, 2011First quarter

C$
11.75

C$
9.21


83,310,000Second quarter


10.72


7.91


82,870,000Third quarter


8.89


7.15


75,590,000Fourth quarter


8.86


7.31


53,500,000Year ended December 31, 2012First quarter

C$
10.14

C$
7.67


88,470,000Second quarter


9.58


7.17


85,360,000Third quarter


7.92


6.79


59,100,000Fourth quarter


8.18


6.63


86,460,000


The high and low market prices for each month for the most recent six months based on market closing prices.

United States Composite TradingHigh

Low

Volume(Price per SVS)September 2012

$
8.02

$
6.91


5,270,000October 2012


7.32


6.75


5,410,000November 2012


7.52


7.15


8,770,000December 2012


8.26


7.30


5,880,000January 2013


8.63


7.80


7,430,000February 2013


8.28


7.81


6,970,000




Canadian Composite TradingHigh

Low

Volume(Price per SVS)September 2012

C$
7.78

C$
6.79


19,580,000October 2012


7.25


6.63


21,380,000November 2012


7.43


7.16


35,550,000December 2012


8.18


7.24


29,530,000January 2013


8.58


7.79


20,360,000February 2013


8.53


7.80


16,140,000


109

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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.     Expenses 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 attached 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, which
section is 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).

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".

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".

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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 Celestica's understanding of 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 February 15, 2013, and the current published administrative practices of the Canada Revenue Agency.

This
summary does not express an exhaustive discussion 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 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 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" other than "treaty-protected
property", as defined in the Canadian Tax Act, at the time of such disposition. Generally, subordinate voting shares will not be "taxable Canadian property" to a U.S. Holder at a
particular time,
where the subordinate voting shares are listed on a designated stock exchange (which currently includes the TSX and NYSE) at that time, unless at any time during the 60-month period
immediately preceding that time: (A) 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 all such persons,
owned 25% or more

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of
the issued shares of any class or series of shares of the capital stock of Celestica; and (B) more than 50% of the fair market value of the subordinate voting shares was derived directly or
indirectly from one or any combination of (i) real or immoveable properties situated in Canada, (ii) "Canadian resource properties", (iii) "timber resource properties" and
(iv) options in respect of, or interests in, property described in (i) to (iii), in each case as defined in the Canadian Tax Act. In certain circumstances set out in the Canadian
Tax Act, the subordinate voting shares of a particular U.S. Holder could be deemed to be "taxable Canadian property" to that holder. Even if the subordinate voting shares are "taxable
Canadian property" to a U.S. Holder, they generally will be "treaty-protected property" to such holder by virtue of the Tax Treaty if the value of such shares at the time of disposition is not
derived principally from "real property situated in Canada" as defined for these purposes under the Tax Treaty and the Canadian Tax Act. Consequently, on the basis that the value of the
subordinate voting shares should not be considered derived principally from such "real property situated in Canada" at any relevant time, 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 January 31, 2013, 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 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.

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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 15 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.

Individuals,
estates or trusts who receive "qualified dividend income" (excluding dividends from a PFIC) in taxable years beginning after December 31, 2012 generally will be taxed
at a maximum U.S. federal rate of 20% (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 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.

Dividends
received by certain high-income individuals and trusts in taxable years beginning after December 31, 2012 will also be subject to a 3.8% unearned Medicare
contribution tax on passive income.



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.

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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.
Long-term capital gain that is recognized by non-corporate taxpayers in a taxable year beginning after December 31, 2012 is eligible for a maximum 20% rate of taxation
plus a 3.8% tax on passive income derived by certain high-income individuals and trusts. 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 Celestica was 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:



The
special PFIC rules do 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

114

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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 Celestica is classified as a PFIC.

Despite
the fact that we are engaged in an active business, we are unable to conclude that Celestica was not a PFIC in 2012 or in prior years, though we believe, based on our internally
performed analysis, that such status is unlikely. 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 2013 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 Celestica is classified as a PFIC, if Celestica was determined to be a
PFIC with respect to a year in which we had not thought that it 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 Celestica is treated as a PFIC.



Except as described in "Information Reporting and Back-up Withholding" below, a holder of subordinate voting shares that is
not a United States Holder ("non-United States Holder") 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:





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 then applicable rate, will apply if a
United States Holder (a) fails to

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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.

Recently
enacted legislation requires U.S. individuals to report an interest in any "specified foreign financial asset" if the aggregate value of such assets owned by the
U.S. individual exceeds $50,000 (or such higher threshold as may apply to a particular taxpayer pursuant to the instructions to IRS Form 8938). Stock issued by a foreign
corporation is treated as a specified foreign financial asset for this purpose.

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.

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 exhaustive. 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 access this Annual Report, including exhibits and schedules, on our website at www.celestica.com or request a copy free of charge through our
website. Requests may also be directed to clsir@celestica.com, by mail to Celestica Investor Relations, 844 Don Mills Road, Toronto, Ontario, Canada M3C 1V7,
or by telephone at 416-448-2211.

You
may also 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 (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.

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 (www.sedar.com).

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

116

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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 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 be exchanged under the contracts. At December 31, 2012, we had foreign currency contracts covering various currencies in an aggregate notional amount of
$682.2 million (December 31, 2011  $776.5 million). These contracts had a fair value net unrealized gain of $4.2 million at
December 31, 2012 (December 31, 2011  $13.9 million net unrealized loss).

Expected Maturity Date2013

2014 - 2017

2018 and
thereafter

Total

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

$
288.2

$


$


$
288.2

$
(0.7
)Average exchange rate


1.01


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

$
100.0

$
18.3




$
118.3

$
2.1Average exchange rate


0.03


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

$
75.3

$
12.3




$
87.6

$
1.1Average exchange rate


0.32


0.32Receive Mexican Peso/Pay U.S.$Contract amount

$
37.9







$
37.9

$
0.4Average exchange rate


0.08Receive Chinese Renminbi/Pay U.S.$Contract amount

$
34.1







$
34.1

$
0.1Average exchange rate


0.16Pay British Pound Sterling/Receive U.S.$Contract amount

$
68.3







$
68.3

$
0.1Average exchange rate


1.62Pay Euro/Receive U.S.$Contract amount

$
11.9







$
11.9

$
0.1Average exchange rate


1.31Receive Romanian Leu/Pay U.S.$Contract amount

$
11.3







$
11.3

$
0.5Average exchange rate


0.28Receive Other/Pay U.S.$Contract amount

$
24.6







$
24.6

$
0.5Average exchange rate


Total

$
651.6

$
30.6

$


$
682.2

$
4.2


Interest Rate Risk

Borrowings under our revolving credit facility bear interest at LIBOR or Prime rate plus a margin. If we borrow under this facility, we
are exposed to interest rate risks due to fluctuations in these rates. A one-percentage point increase in these rates would increase interest expense by $4.0 million annually,
assuming

117

---



we
borrow a maximum of $400.0 million under our credit facility. On December 31, 2012, we had drawn $55.0 million under this facility, which we expect to repay during the first
half of 2013. See note 11 to the Consolidated Financial Statements in Item 18.

We
redeemed all of our outstanding Senior Subordinated Notes by March 31, 2010. See note 11(b) to the Consolidated Financial Statements in Item 18.

Item 12.    Description of Securities Other than Equity Securities

A.    Debt Securities

Not applicable.

B.    Warrants and Rights

Not applicable.

C.    Other Securities

Not applicable.

D.    American Depositary Shares

None.

Part II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15.    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 Consolidated Financial Statements in Item 18.

Item 16.    [Reserved.]

Item 16A.    Audit Committee Financial Expert

The Board has considered the extensive financial experience of Mr. Etherington and Ms. Koellner 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 also determined that Messrs. Etherington, DiMaggio, Natale, Ryan and Wilson and Ms. Koellner are independent directors, as that term is defined in the NYSE
listing standards.

Item 16B.    Code of Ethics

The Board 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; compliance with all
applicable laws and regulations; prompt internal reporting of violations of the code and

118

---



accountability
for adherence to the code. 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 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,
844 Don Mills Road, Toronto, Ontario, Canada M3C 1V7, or by telephone at 416-448-2211.

Item 16C.    Principal Accountant Fees and Services

The external auditor is engaged to provide services pursuant to pre-approval policies and procedures established by the
Audit Committee of Celestica's Board. The Audit Committee approves the 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 related fees 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 2011 or 2012. 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 $3.7 million in 2012 (2011  $3.6 million) for audit services.

Audit-Related Fees

KPMG billed $0.2 million in 2012 (2011  $0.4 million) for audit-related services,
including due diligence related to acquisitions and pension audits.

Tax Fees

KPMG billed $0.3 million in 2012 (2011  $0.4 million) for tax compliance, tax
advice and tax planning services.

All Other Fees

KPMG billed $0.1 million in 2012 (2011  nil) for other advisory services.

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%)

Not applicable.

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

None.

119

---



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

Period

(a) Total number of
subordinate voting
shares purchased

(b) Average price paid
per subordinate voting share

(c) Total number of
subordinate voting
shares purchased as
part of publicly
announced plans or
programs

(d) Maximum number (or approximate dollar value) of subordinate voting shares that may yet be purchased under the plans or programs(shares in millions)February 2012(1)


2.6

$
9.30


2.6


13.6March 2012(1)


3.7

$
9.49


3.7


9.9April 2012(1)


0.2

$
8.77


0.2


9.7May 2012(1)


3.4

$
7.91


3.4


6.3June 2012(1)


1.1

$
7.43


1.1


5.2July 2012(1)


0.2

$
7.90


0.2


5.0August 2012(1)


1.7

$
7.77


1.7


3.3September 2012(1)


0.8

$
7.76


0.8


2.5December 2012(2)


22.4

$
7.80


22.4


December 2012(3)


0.7

$
8.07


0.7


1.536.8

$
8.09


36.8


4.0


(1)In
February 2012, we filed an NCIB with the TSX to repurchase, at our discretion, until the earlier of February 8, 2013 or the completion of
purchases under the bid, up to 16.2 million subordinate voting shares in the open market or as otherwise permitted, subject to the normal terms and limitations of such bids. As of
December 31, 2012, we repurchased for cancellation a total of 13.3 million shares at a weighted average price of $8.52 per share under the NCIB. From
time-to-time, a trustee also purchases subordinate voting shares in the open market, on our behalf, to settle awards to employees vesting under our equity-based compensation
plans. During February, March and June 2012, we repurchased a total of 0.4 million subordinate voting shares under the NCIB which were not cancelled as we used them to settle employee
awards.(2)In
December 2012, we completed an SIB pursuant to which we repurchased for cancellation 22.4 million subordinate voting shares at a price of
$7.80 per share.(3)In
the fourth quarter of 2012, we entered into an ASPP with a trustee to purchase 2.2 million subordinate voting shares in the open market to satisfy
our deliveries in respect of share unit awards vesting in the first quarter of 2013. At December 31, 2012, 1.5 million subordinate voting shares remained to be purchased under
the ASPP.


Item 16F.   Change in Registrant's Certifying Accountant

Not applicable.

Item 16G.    Corporate Governance

Corporate Governance

We are subject to a variety of corporate governance guidelines and requirements enacted by the TSX, the CSA, 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

120

---



TSX
rules, which 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.

In
2012, we submitted to the NYSE an officer's certificate, signed by Craig H. Muhlhauser, in his capacity as our CEO, certifying that he was not aware of any violation by Celestica of
its corporate governance listing standards.

The
corporate governance guidelines can be accessed electronically at www.celestica.com.

Corporate Social Responsibility

We have a heritage of strong corporate citizenship and uphold policies and principles that focus our corporate social responsibility
initiatives across five key focus areas: labor, ethics, the environment, occupational health and safety, and giving back to the community.

Our
guiding policies and principles include:



We
publish a Corporate Social Responsibility Report and a Business Conduct Governance Policy, both of which are available on our corporate website at
www.celestica.com. These documents outline our high standards for business ethics, the policies we value and uphold, the progress we have made as a socially responsible
organization and the key milestones we are working to achieve in 2013 and beyond.

Item 16H.    Mine Safety Disclosure

Not applicable.

121

---





Part III

Item 17.    Financial Statements

Not applicable.

Item 18.    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

F-2, F-3Consolidated Balance Sheet as at December 31, 2011 and 2012

F-4Consolidated Statement of Operations for the years ended December 31, 2010, 2011 and 2012

F-5Consolidated Statement of Comprehensive Income for the years ended December 31, 2010, 2011 and 2012

F-6Consolidated Statement of Changes in Equity for the years ended December 31, 2010, 2011 and 2012

F-7Consolidated Statement of Cash Flows for the years ended December 31, 2010, 2011 and 2012

F-8Notes to the Consolidated Financial Statements

F-9


122

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Item 19.    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

Restated Article of Incorporation effective June 25, 2004


20-F


001-14832


March 23, 2010


1.101.11

Bylaw No. 1


20-F


001-14382


March 23, 2010


1.111.12

Bylaw No. 2


F-1


333-8700


April 29, 1998


3.91.13

Bylaw No. 3


20-F


001-14832


May 19, 2004


1.121.14

Bylaw No. 4


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


4.1


123

---



Incorporated by ReferenceExhibit
Number

Description

Form

File No.

Filing Date

Exhibit
No.

Filed
Herewith2.3

Sixth Amended and Restated Revolving Term Credit Agreement, dated January 14, 2011, 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 24, 2010


2.42.4

First Amendment to Sixth Amended and Restated Revolving Term Credit Agreement, dated January 14, 2011, 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, dated February 28, 2011.


Sc TO-I


005-55523


October 29, 2012


(b)(2)2.5

Amended and Restated Revolving Trade Receivables Purchase Agreement, dated as of November 4, 2011, among the Celestica Inc., Celestica LLC, Celestica Czech Republic s.r.o., Celestica Holdings Pte Ltd.,
Celestica Valencia S.A., Celestica Hong Kong Ltd., Celestica (Romania) s.r.l., Celestica Japan KK, Celestica Oregon LLC, each of the financial institutions named on Schedule I thereto and Deutsche Bank AG New York
Branch*


20-F


001-14832


March 22, 2012


2.6


124

---



Incorporated by ReferenceExhibit
Number

Description

Form

File No.

Filing Date

Exhibit
No.

Filed
Herewith2.6

First Amendment to Amended and Restated Revolving Trade Receivables Purchase Agreement














X4.

Certain Contracts:4.1

Services Agreement, dated as of January 1, 2009, between Celestica Inc. and Onex Corporation


20-F


0001-14382


March 23, 2010


4.14.2

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 January 1, 2008, between Celestica Inc., Celestica International Inc. and Elizabeth L. DelBianco


20-F


0001-14832


March 25, 2008


4.64.4

Amended and Restated Celestica Inc. Long-Term Incentive Plan


20-F


0001-14382


March 23, 2010


4.54.5

Amended & Restated Celestica Share Unit Plan


20-F


0001-14382


March 24, 2010


4.64.6

D2D Employee Share Purchase and Option Plan (1997)


F-1/A


333-8700


June 1, 1998


10.204.7

Celestica 1997 U.K. Approved Share Option Scheme


F-1


333-8700


April 29, 1998


10.194.8

1998 U.S. Executive Share Purchase and Option Plan


S-8


333-9500


October 8, 1998


4.64.9

Coattail Agreement, dated June 29, 1998, between Onex Corporation, Celestica Inc. and Montreal Trust Company of Canada.


Sc TO-I


005-55523


October 29, 2012


(d)(1)4.10

Stock Purchase Agreement, dated July 26, 2012, among Celestica (USA) Inc., The Crossbow Group, LLC and D&H Manufacturing Company














X4.11

Directors' Share Compensation Plan (2008)


Sc TO-I


005-55523


October 29, 2012


(d)(3)8.1

Subsidiaries of Registrant














X11.1

Finance Code of Professional Conduct


20-F


0001-14382


March 23, 2010


11.111.2

Business Conduct Governance Policy


20-F


0001-14382


March 23, 2010


11.212.1

Chief Executive Officer Certification














X


125

---



Incorporated by ReferenceExhibit
Number

Description

Form

File No.

Filing Date

Exhibit
No.

Filed
Herewith12.2

Chief Financial Officer Certification














X13.1

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














X15.1

Celestica Inc. Audit Committee Mandate














X15.2

Consent of KPMG LLP, Chartered Accountants














X


*Certain
confidential portions of this exhibit were omitted by means of redacting a portion of the text. This exhibit has been filed separately with the
Secretary of the Securities and Exchange Commission without redactions. Confidential treatment has been granted pursuant to our Application for an Order Granting Confidential Treatment Pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Certain
confidential portions of this exhibit were omitted by means of redacting a portion of the text. This exhibit has been filed separately
with the Secretary of the Securities and Exchange Commission without redactions pursuant to our Application for an Order Granting Confidential Treatment Pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.**Pursuant
to Commission Release No. 33-8212, this certification will be treated as "accompanying" this Annual Report on
Form 20-F and not "filed" as part of such report for purposes of Section 18 of the U.S. Exchange Act, or otherwise subject to the liability of Section 18
of the U.S. Exchange Act, and this certification will not be incorporated by reference into any filing under the U.S. Securities Act, or the U.S. Exchange Act, except to the
extent that the registrant specifically incorporates it by reference.


126

---





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 15, 2013


127

---





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 International Financial Reporting Standards. 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, 2012 based on the criteria set forth in 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, 2012, 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.

March 7,
2013

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Shareholders of
Celestica Inc.

We
have audited Celestica Inc.'s (the "Company") internal control over financial reporting as of December 31, 2012, 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 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, 2012, 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 audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of the Company and its subsidiaries as at December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, changes in equity
and cash flows for the years ended December 31, 2012, 2011 and 2010, and our report dated March 7, 2013 expressed an unqualified (unmodified) opinion on those consolidated financial
statements.

Toronto, Canada
March 7, 2013

/s/ KPMG LLP
Chartered Accountants,
Licensed Public Accountants


F-2

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Shareholders of
Celestica Inc.

We
have audited the accompanying consolidated financial statements of the Company, which comprise the consolidated balance sheets as at December 31, 2012 and 2011, the related
consolidated statements of operations, comprehensive income, changes in equity and cash flows for the years ended December 31, 2012, 2011 and 2010, and notes, comprising a summary of
significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

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 comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal
control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.

We
believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in material respects, the consolidated financial position of the
Company as at December 31, 2012 and 2011, and its consolidated results of operations and its consolidated cash flows for the years ended December 31, 2012, 2011 and 2010, in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Other Matter

We have also 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, 2012, 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 March 7, 2013 expressed an unqualified (unmodified) opinion on the effectiveness of the Company's internal control over financial reporting.

Toronto, Canada
March 7, 2013

/s/ KPMG LLP
Chartered Accountants,
Licensed Public Accountants


F-3

---





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

December 31
2011

December 31
2012AssetsCurrent assets:Cash and cash equivalents (note 20)

$
658.9

$
550.5Accounts receivable (note 4)


810.8


700.5Inventories (note 5)


880.7


745.7Income taxes receivable


9.1


13.8Assets classified as held-for-sale (note 6)


32.1


30.8Other current assets


71.0


69.4Total current assets


2,462.6


2,110.7Property, plant and equipment (note 7)


322.7


337.0Goodwill (note 8)


48.0


60.3Intangible assets (note 8)


35.5


53.0Deferred income taxes (note 19)


41.4


36.6Other non-current assets (note 9)


59.4


61.2Total assets

$
2,969.6

$
2,658.8Liabilities and EquityCurrent liabilities:Borrowings under credit facilities (note 11(a))

$


$
55.0Accounts payable


1,002.6


831.6Accrued and other current liabilities


268.7


243.7Income taxes payable (note 19)


39.0


37.8Current portion of provisions (note 10)


36.3


30.8Total current liabilities


1,346.6


1,198.9Pension and non-pension post-employment benefit obligations (note 18)


120.5


116.2Provisions and other non-current liabilities (note 10)


11.1


13.5Deferred income taxes (note 19)


27.6


13.5Total liabilities


1,505.8


1,342.1Equity:Capital stock (note 12)


3,348.0


2,774.7Treasury stock (note 12)


(37.9
)

(18.3
)Contributed surplus


369.5


653.2Deficit


(2,203.5
)

(2,097.0
)Accumulated other comprehensive income (loss) (note 13)


(12.3
)

4.1Total equity


1,463.8


1,316.7Total liabilities and equity

$
2,969.6

$
2,658.8Commitments, contingencies and guarantees (note 23)


Signed
on behalf of the Board of Directors

[Signed] William A. Etherington
                                         
                          Director

[Signed] Laurette Koellner
                                         
                          Director


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

F-4

---



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

Year ended December 312010

2011

2012Revenue

$
6,526.1

$
7,213.0

$
6,507.2Cost of sales (note 14)


6,082.0


6,721.6


6,068.8Gross profit


444.1


491.4


438.4Selling, general and administrative expenses (SG&A) (note 14)


252.1


253.4


237.0Research and development





13.8


15.2Amortization of intangible assets (note 8)


15.8


13.5


11.3Other charges (note 15)


49.9


6.5


59.5Earnings from operations


126.3


204.2


115.4Finance costs (note 16)


6.9


5.4


3.5Earnings before income taxes


119.4


198.8


111.9Income tax expense (recovery) (note 19):Current


33.4


10.3


15.5Deferred


(15.2
)

(6.6
)

(21.3
)18.2


3.7


(5.8
)Net earnings

$
101.2

$
195.1

$
117.7Basic earnings per share

$
0.44

$
0.90

$
0.56Diluted earnings per share

$
0.44

$
0.89

$
0.56Shares used in computing per share amounts (in millions):Basic


227.8


216.3


208.6Diluted (note 22)


230.1


218.3


210.5




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

F-5

---



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

Year ended December 312010

2011

2012Net earnings

$
101.2

$
195.1

$
117.7Other comprehensive income (loss), net of tax (note 13):Actuarial gains (losses) on pension and non-pension post-employment benefit plans (note 18)


(28.3
)

5.2


(11.2
)Currency translation differences for foreign operations


1.6


(1.7
)

(0.1
)Change from derivatives designated as hedges


1.8


(22.9
)

16.5Total comprehensive income

$
76.3

$
175.7

$
122.9




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

F-6

---





CELESTICA INC.        CONSOLIDATED STATEMENT OF CHANGES IN EQUITY        (in millions of U.S. dollars)

Capital stock
(note 12)

Treasury
stock
(note 12)

Contributed
surplus

Deficit

Accumulated
other
comprehensive
income (loss)(a)

Total
equityBalance  January 1, 2010

$
3,591.2

$
(0.4
)
$
222.7

$
(2,476.7
)
$
8.9

$
1,345.7Capital transactions:Issuance of capital stock


6.6














6.6Repurchase of capital stock for cancellation


(268.4
)




127.8








(140.6
)Purchase of treasury stock





(26.2
)










(26.2
)Stock-based compensation and other





10.7


19.6








30.3Reclassification of cash-settled stock-based compensation to accrued liabilities (note 12)








(9.2
)







(9.2
)Total comprehensive income:Net earnings for 2010











101.2





101.2Other comprehensive income (loss), net of tax:Actuarial losses on pension and non-pension post-employment benefit plans (note 18)











(28.3
)




(28.3
)Currency translation differences for foreign operations














1.6


1.6Change from derivatives designated as hedges














1.8


1.8Balance  December 31, 2010

$
3,329.4

$
(15.9
)
$
360.9

$
(2,403.8
)
$
12.3

$
1,282.9Capital transactions:Issuance of capital stock


18.6





(6.7
)







11.9Purchase of treasury stock





(49.4
)










(49.4
)Stock-based compensation and other





27.4


15.3








42.7Total comprehensive income:Net earnings for 2011











195.1





195.1Other comprehensive income (loss), net of tax:Actuarial gains on pension and non-pension post-employment benefit plans (note 18)











5.2





5.2Currency translation differences for foreign operations














(1.7
)

(1.7
)Change from derivatives designated as hedges














(22.9
)

(22.9
)Balance  December 31, 2011

$
3,348.0

$
(37.9
)
$
369.5

$
(2,203.5
)
$
(12.3
)
$
1,463.8Capital transactions:Issuance of capital stock


18.3





(10.8
)







7.5Repurchase of capital stock for cancellation


(591.6
)




302.0








(289.6
)Purchase of treasury stock





(21.7
)










(21.7
)Stock-based compensation and other





41.3


(4.1
)







37.2Reclassification of cash-settled stock-based compensation to accrued liabilities (note 12)








(3.4
)







(3.4
)Total comprehensive income:Net earnings for 2012











117.7





117.7Other comprehensive income (loss), net of tax:Actuarial losses on pension and non-pension post-employment benefit plans (note 18)











(11.2
)




(11.2
)Currency translation differences for foreign operations














(0.1
)

(0.1
)Change from derivatives designated as hedges














16.5


16.5Balance  December 31, 2012

$
2,774.7

$
(18.3
)
$
653.2

$
(2,097.0
)
$
4.1

$
1,316.7


(a)Accumulated
other comprehensive income (loss) is net of tax. See note 13.




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

F-7

---



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

Year ended December 312010

2011

2012Cash provided by (used in):Operating activities:Net earnings

$
101.2

$
195.1

$
117.7Adjustments for items not affecting cash:Depreciation and amortization


87.0


77.2


81.7Equity-settled stock-based compensation (note 12(b))


31.3


41.2


35.4Other charges (recoveries) (note 15)


14.8


(12.1
)

30.8Finance costs


6.9


5.4


3.5Income tax expense (recovery)


18.2


3.7


(5.8
)Other


(7.7
)

(31.3
)

(11.2
)Changes in non-cash working capital items:Accounts receivable


(111.8
)

147.0


116.7Inventories


(162.8
)

2.0


147.3Other current assets


(11.9
)

3.9


6.7Accounts payable, accrued and other current liabilities and provisions


211.4


(216.9
)

(193.1
)Non-cash working capital changes


(75.1
)

(64.0
)

77.6Income taxes paid


(10.7
)

(18.9
)

(17.3
)Net cash provided by operating activities


165.9


196.3


312.4Investing activities:Acquisitions, net of cash acquired (note 3)


(16.2
)

(80.5
)

(71.0
)Purchase of computer software and property, plant and equipment


(60.8
)

(62.3
)

(105.9
)Proceeds from sale of assets


15.9


17.1


8.9Net cash used in investing activities


(61.1
)

(125.7
)

(168.0
)Financing activities:Borrowings under credit facilities (note 11(a))








55.0Repurchase of Senior Subordinated Notes (Notes) (note 11(b))


(231.6
)




Repurchase of capital stock for cancellation (note 12(a))


(140.6
)




(289.6
)Purchase of treasury stock (note 12(b)(ii))


(26.2
)

(49.4
)

(21.7
)Issuance of capital stock (note 12(a))


4.6


11.9


7.5Finance costs paid


(15.0
)

(7.0
)

(4.0
)Other


(0.9
)




Net cash used in financing activities


(409.7
)

(44.5
)

(252.8
)Net increase (decrease) in cash and cash equivalents


(304.9
)

26.1


(108.4
)Cash and cash equivalents, beginning of year


937.7


632.8


658.9Cash and cash equivalents, end of year

$
632.8

$
658.9

$
550.5




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

F-8

---





CELESTICA INC.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS        (in millions of U.S. dollars, except per share amounts)

1.     REPORTING ENTITY:

Celestica Inc. (Celestica) is incorporated in Canada with its corporate headquarters located at 844 Don Mills Road, Toronto, Ontario,
M3C 1V7. Celestica is a publicly listed company on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

Celestica
delivers innovative supply chain solutions globally to customers in the Communications (comprised of enterprise communications and telecommunications), Consumer, Enterprise
Computing (comprised of servers and storage), and Diversified (comprised of industrial, aerospace and defense, healthcare, solar, green technology, semiconductor equipment and other) end markets. Our
product lifecycle offerings include a range of services to our customers including design, engineering services, supply chain management, new product introduction, component sourcing, electronics
manufacturing, assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and after-market repair and return services.

2.     BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES:

Statement of compliance:

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).

The
consolidated financial statements were authorized for issuance by our board of directors on March 7, 2013.

Functional and presentation currency:

The consolidated financial statements are presented in U.S. dollars, which is also our functional currency. All financial
information is presented in millions of U.S. dollars (except per share amounts).

Use of estimates and judgments:

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities. Actual results
could differ materially from those estimates and assumptions. We review our estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are
revised and may impact future periods as well.

Key sources of estimation uncertainty and judgment:We have applied significant estimates and assumptions in the following areas which we
believe could have a significant impact on our reported results and financial position: our valuations of inventory, assets held for sale and income taxes; the amount of restructuring charges or
recoveries; the measurement of the recoverable amount of our cash generating units (CGU); our valuations of financial assets and liabilities, pension and non-pension
post-employment benefit costs, stock-based compensation, provisions and contingencies; and the allocation of our purchase price and other valuations we use in our business acquisitions.
The near-term economic environment could also impact certain estimates necessary to prepare our consolidated financial statements, in particular, the recoverable amount used in our
impairment testing of our non-financial assets, the rate of return on our pension assets and the discount rates applied to our pension and non-pension
post-employment benefit liabilities.

We
have applied significant judgment to the following areas: the determination of our CGUs and whether events or changes in circumstances during the year are indicators that a review for
impairment should be conducted; and the timing of the recognition of charges associated with restructuring plans.

F-9

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

We
describe our use of judgment and estimation uncertainties in greater detail in the following accounting policies.

SIGNIFICANT ACCOUNTING POLICIES:

The accounting policies below have been applied consistently to all periods presented in these consolidated financial statements.

(a)   Basis of measurement:

The consolidated financial statements have been prepared primarily on the historical cost basis. Other measurement bases are described in the applicable notes.

(b)   Basis 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.

(c)   Business combinations:

We use the acquisition method to account for business combinations. All identifiable assets and liabilities are recorded at fair value at the acquisition date.
Obligations for contingent consideration and contingencies are also recorded at fair value on the acquisition date. We generally record subsequent changes in the fair value of contingent liabilities
from the date of acquisition to the settlement date in our consolidated statement of operations. We expense acquisition-related transaction costs as incurred in our consolidated statement
of operations.

We
use judgment to determine the purchase price allocation and estimates to value identifiable net assets, including the fair value of contingent consideration, if applicable, at the
acquisition date. We may engage independent third-parties to determine the fair value of property, plant and equipment and customer intangible assets. We use estimates to determine cash flow
projections, including the period of future benefit, and future growth and discount rates, among other factors.

(d)   Foreign currency translation:

The majority of our subsidiaries have a U.S. dollar functional currency which represents the currency of the primary economic environment in which they
operate. For these subsidiaries, we translate monetary assets and liabilities denominated in foreign currencies into U.S. dollars at the period-end exchange rates. 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 recognize foreign currency differences arising on translation in our
consolidated statement of operations.

For
foreign operations with a non-U.S. dollar functional currency, we translate assets and liabilities into U.S. dollars using the period-end
exchange rates, 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 accumulated other comprehensive income.

F-10

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

(e)   Cash and cash equivalents:

Cash and cash equivalents include cash on account and short-term investments with original maturities of three months or less. These instruments are
subject to an insignificant risk of change in fair value over their terms and, as a result, we carry cash and cash equivalents at cost.

(f)    Accounts receivable:

We initially value our accounts receivable at fair value. 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 evaluation of the customers' credit worthiness and knowledge of their financial condition. We also consider the aging
of the receivables, customer and industry concentrations, the current business environment, and historical experience.

(g)   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. We procure inventory based on specific customer orders and forecasts. We may require valuation adjustments if actual market conditions, or demand for our customers' products, are less
favorable than we had projected. The determination of net realizable value involves significant management judgment. We consider factors such as shrinkage, the aging of and future demand for the
inventory, and contractual arrangements with customers. We attempt to utilize excess inventory in other products we manufacture or return inventory to the suppliers or customers. We use estimates to
forecast future sales volume and to identify excess inventory balances. A change to these assumptions could impact our inventory valuation and impact our gross margins. To the extent circumstances
change, we may adjust our previous write-downs through our consolidated statement of operations in the period a change in estimate occurs.

(h)   Assets classified as held-for-sale:

We classify assets as held-for-sale if the carrying amount will be recovered principally through a sale transaction rather than through
their continued use. Management must be committed to the sale transaction and the asset must be immediately available for sale in its present condition. Assets classified as
held-for-sale are measured at the lower of their carrying amount or fair value less costs to sell and are no longer depreciated. The valuation of fair value less costs to sell
involves judgment by management on the probability and timing of disposition and the amount of recoveries and costs. We may engage independent third-parties to determine the estimated fair values less
costs to sell for assets available for sale. At the end of each reporting period, we evaluate the appropriateness of our estimates and assumptions. We may require adjustments to reflect actual
experience or changes in estimates.

(i)    Property, plant and equipment:

We carry property, plant and equipment at cost less accumulated depreciation and accumulated impairment losses. Cost consists of expenditures directly
attributable to the acquisition of the asset, including interest for constructing qualified long-term assets. We capitalize the cost of an asset when the economic benefits associated with
that asset are probable and when the cost can be measured reliably. We capitalize the costs of major renovations and we write-off the carrying amount of replaced assets. We expense all
other maintenance and repair costs in our consolidated statement of operations as incurred. We do not depreciate land. We recognize depreciation expense on a straight-line basis over the
estimated useful life of the asset as follows:

Buildings

25 yearsBuilding/leasehold improvements

Up to 25 years or term of leaseMachinery and equipment

3 to 7 years


F-11

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

We
estimate the useful life of property, plant and equipment based on the nature of the asset, historical experience, the terms of any related customer contract and expected changes in
technology. When components of an asset have a significantly different useful life than their primary asset, the components are accounted for and depreciated separately. We review our estimates of
residual values, useful lives and the methods of depreciation annually at each year end and, if required, adjust for these prospectively. We determine gains and losses on the disposal or retirement of
property, plant and equipment by comparing the proceeds from disposal with the carrying amount of the asset and we recognize these gains and losses in our consolidated statement of operations in the
period of disposal.

(j)    Leases:

We are the lessee of property, plant and equipment, primarily buildings and machinery. We classify leases where the risks and rewards of ownership are retained by
the lessor as operating leases. We generally treat payments made under these leases as rentals and recognize these as expenses on a straight-line basis over the term of the lease in our
consolidated statement of operations. We classify leases as finance leases if the risks and rewards of ownership have substantially transferred to us. We capitalize finance leases at the commencement
of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments and we depreciate these leases over the shorter of the useful life of the asset and
the lease term. We include the corresponding liabilities, net of finance costs, in our consolidated balance sheet. We allocate each lease payment between the liability and finance costs.

(k)   Goodwill and intangible assets:

Goodwill:

We initially measure goodwill on our consolidated balance sheet as the excess of the fair value of the consideration paid compared to
the fair value of the identifiable net assets acquired, including the fair value of any contingent consideration. Subsequently, we measure goodwill at cost less accumulated impairment losses. We do
not amortize goodwill. See note 2(l), Impairment of goodwill, intangible assets and property, plant and equipment. For purposes of impairment testing, we allocate goodwill to the CGU, or group
of CGUs, that we expect will benefit from the acquisition.

Intangible assets:

We record intangible assets on our consolidated balance sheet at fair value on the date of acquisition. We capitalize intangible assets
when the economic benefits associated with the asset are probable and when the cost can be measured reliably. We estimate the useful life of intangible assets based on the nature of the asset,
historical experience and the projected period of future economic benefits to be provided by the asset. We amortize these assets on a straight-line basis over their estimated useful lives
as follows:

Intellectual property

3 to 5 yearsOther intangible assets

4 to 10 yearsComputer software asset

1 to 10 years


Intellectual
property assets consist primarily of certain non-patented intellectual property and process technology. Other intangible assets consist primarily of customer
relationships and contract intangibles. Computer software assets consist primarily of software licenses. We review our estimates of residual values, useful lives and the methods of amortization
annually at each year end and, if required, adjust for these prospectively. We reflect changes in useful lives on a prospective basis.

F-12

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

(l)Impairment of goodwill, intangible assets and property, plant and equipment:

We review the carrying amounts of goodwill, intangible assets and property, plant and equipment for impairment on an annual basis and whenever events or changes
in circumstances (triggering events) indicate that the carrying amount of an asset or CGU may not be recoverable. If any such indication exists, we test the carrying amount of an asset or a CGU for
impairment. We define a CGU as a group of assets that cannot be tested individually and that generates cash inflows that are largely independent of the cash inflows of other assets or group of assets.
Absent triggering events during the year, we conduct our impairment assessment in the fourth quarter of the year to correspond with our planning cycle. Judgment is required in the determination of our
CGU's and whether events or changes in circumstances during the year are indicators that a review for impairment should be conducted prior to the annual assessment.

We
recognize an impairment loss when the carrying amount of an asset, CGU or group of CGUs exceeds the recoverable amount. The recoverable amount of an asset, CGU or group of CGUs is
measured as the greater of its value-in-use and its fair value less costs to sell. The process of determining the recoverable amount is subjective and requires management to
exercise significant judgment in estimating future growth and discount rates and projecting cash flows, among other factors. The process of determining fair value less costs to sell requires
valuations and use of appraisals. Where applicable, we work with independent brokers to obtain market prices to estimate our real property values. We recognize impairment losses in our consolidated
statement of operations. We first allocate impairment losses in respect of a CGU to reduce the carrying amount of goodwill and then to reduce the carrying amount of other assets in the CGU or group of
CGUs on a pro rata basis.

We
do not reverse impairment losses for goodwill in future periods. We reverse impairment losses other than for goodwill, if the losses we recognized in prior periods no longer exist or
have decreased. At each reporting date, we review for indicators that could change the estimates we used to determine the
recoverable amount. The amount of the reversal is limited to restoring the carrying amount to the amount that would have been determined, net of depreciation or amortization, had we recognized no
impairment loss in prior periods.

(m)  Provisions:

We recognize a provision for legal or constructive obligations arising from past events when the amount can be reliably estimated and it is probable that an
outflow of resources will be required to settle an obligation. The nature and type of provisions vary and management judgment is required to determine the extent of an obligation and whether the
outflow of resources is probable. At the end of each reporting period, we evaluate the appropriateness of the remaining balances. We may require adjustments to the recorded amounts to reflect actual
experience or changes in future estimates.

Restructuring:

We incur restructuring charges relating to workforce reductions, facility consolidations and costs associated with exiting businesses.
Our restructuring charges include employee severance and benefit costs, gains, losses or impairments related to owned facilities and equipment we no longer use and which are available for sale,
impairment of related intangible assets, and costs related to leased facilities and equipment we no longer use.

The
recognition of these charges requires management to make certain judgments and estimates regarding the nature, timing and amounts associated with these restructuring plans. Our major
assumptions include the timing and number of employees we will terminate, the measurement of termination costs, and the timing of disposition and estimated fair values less costs to sell for assets we
no longer use and which are available for sale. We recognize employee termination costs in the period the detailed plans are approved and when the restructuring actions have either commenced or have
been announced to employees. For owned facilities and equipment that are no longer in use and are available for sale, we recognize an impairment loss based on the fair value less costs to sell, with
fair value estimated based on market prices for similar assets. We may engage

F-13

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

independent
third-parties to determine the fair value less costs to sell for these assets. For leased facilities that we have vacated, we discount the lease obligation based on future lease payments
net of estimated sublease income. We recognize the change in provisions due to the passage of time as finance costs. To estimate future sublease income, we work with independent brokers to determine
the estimated tenant rents we can expect to realize. At the end of each reporting period, we evaluate the appropriateness of the
remaining balances. We may require adjustments to the recorded amounts to reflect actual experience or changes in future estimates.

Legal:

In the normal course of our operations, we may be subject to lawsuits, investigations and other claims, including environmental, labor,
product, customer disputes and other matters. We recognize a provision for claims based on management's estimate of the probable outcome. Judgment is required when there is a range of possible
outcomes. Management considers the degree of probability of the outcome and the ability to make a reasonable estimate of the loss. We may also use third-party lawyers in making our determination. The
filing of a suit or formal assertion of a claim does not automatically indicate that a provision may be appropriate. The amount and timing of the ultimate outcome may vary significantly from our
original estimates. Material obligations that have not been recognized as provisions, as the outcome is remote or not probable or the amount cannot be reliably estimated, are disclosed as contingent
liabilities. See note 23.

Warranty:

We offer product and service warranties to our customers. We record a provision for future warranty costs based on management's
estimate of probable claims under these warranties. Management considers the terms of the warranty, which vary by customer, product or service, the current volume of products sold or services rendered
during the warranty period, and historical experience. We review and adjust these estimates as necessary to reflect our experience and new information. The amount and aging of our provision will vary
depending on various factors including the length of the warranty offered, the remaining life of the warranty and the extent and timing of warranty claims. We have classified a portion of our warranty
provision as current and a portion as non-current.

(n)   Employee benefits:

Pension and non-pension post-employment benefits:

We classify pension and non-pension post-employment benefits as either defined contribution plans or defined
benefit plans.

Under
defined contribution plans, our obligation is to make a fixed contribution to a separate entity with no further legal or constructive obligation to pay additional amounts if the
pension plans fail to hold sufficient assets to cover the employee benefits. The related actuarial and investment risks fall on the employee. We recognize our obligations to make contributions to
defined contribution plans as employee benefit expense in our consolidated statement of operations in the period the employee services are rendered.

Defined
benefit plans are post-employment benefit plans other than defined contribution plans. Under defined benefit plans, our obligation is to provide an agreed upon
benefit to current and former employees. We remain exposed to the actuarial and investment risks for defined benefit plans. The net obligation is actuarially determined using the projected unit credit
method, based on service and management's estimates. Actuarial valuations require management to make certain judgments and estimates relating to 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. These actuarial assumptions could change from
period-to-period and actual results could differ materially from the estimates originally made by management. We evaluate our assumptions on a regular basis, taking into
consideration current market conditions and

F-14

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

historical
data. Market driven changes may affect the actual rate of return on plan assets compared to our assumptions, as well as our discount rates and other variables. Changes in assumptions could
impact our pension plan valuations and our future pension expense and funding.

Our
obligation for each defined benefit plan consists of the present value of the defined benefit obligation less the fair value of plan assets and any unrecognized past service costs or
credits, and is presented net on our consolidated balance sheet. When the actuarial calculation results in a benefit, the asset we recognize is restricted to the total of cumulative unrecognized past
service costs or credits and the present value of economic benefits available in the form of future refunds from the plan or reductions in future contributions to the plan. To calculate the present
value of economic benefits, we also consider any minimum funding requirements that apply to the plan. An economic benefit is available if it is realizable during the life of the plan, or on settlement
of the plan liabilities.

We
recognize the vested portion of past service costs or credits arising from plan amendments immediately in our consolidated statement of operations. We defer the unvested portion and
amortize it on a straight-line basis over the vesting period. We recognize actuarial gains and losses on plan assets or obligations through other comprehensive income (OCI) and directly in
deficit. Curtailment gains or losses may arise from significant changes to a plan. We offset curtailment gains or losses against any related unrecognized past service costs or credits and record any
excess gains or losses when the curtailment occurs.

Stock-based compensation:

We grant stock options, performance options, performance share units (PSUs) and restricted share units (RSUs) to employees as part of
our equity-based compensation plans. Stock options and RSUs vest in installments over the vesting period. Stock options vest 25% per year for four years. RSUs vest approximately one-third
per year for three years. PSUs vest at the end of their respective terms, generally three years, to the extent that performance conditions have been met. We treat each installment as a separate grant
in determining the compensation expense.

We
recognize the grant date fair value of options granted to employees as compensation expense, with a corresponding charge to contributed surplus in our consolidated balance sheet, over
the period the employees become entitled to the options. We adjust compensation expense to reflect the estimated number of options we expect to vest at the end of the vesting period. When options are
exercised, we credit the proceeds to capital stock. We measure the fair value of options using the Black-Scholes option pricing model. Measurement inputs include the price of our subordinate voting
shares on the grant date, the exercise price of the option, and our estimates of the following: expected price volatility of our subordinate voting shares (based on weighted average historic
volatility), weighted average expected life of the option (based on historical experience and general option holder behavior), expected dividends, and the risk-free interest rate.

The
cost we record for equity-settled RSUs, and for PSUs granted prior to 2011, is based on the market value of our subordinate voting shares at the time of grant. The cost we record for
PSUs, which vest based on a non-market performance condition, is based on our estimate of the outcome of the performance condition. We adjust the cost of PSUs as new facts and
circumstances arise; the timing of these adjustments is subject to judgment. We generally record adjustments to the cost of PSUs during the last year of the three-year term based on
management's estimate of the achievement of the performance conditions. We amortize the cost of RSUs and PSUs to compensation expense in our consolidated statement of operations, with a corresponding
charge to contributed surplus in our consolidated balance sheet, over the period the employees become entitled to the awards. Historically, we have generally settled these awards with subordinate
voting shares purchased in the open market by a trustee. We have also cash-settled certain awards which we account for as liabilities and remeasure them based on our share price at each
reporting date until the settlement date. We record the corresponding charge or recovery to compensation expense in our consolidated statement of operations.

F-15

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

We
determine the cost we record for PSUs granted in 2011 and 2012 using a Monte Carlo simulation model. The number of awards expected to be earned is factored into the grant date Monte
Carlo valuation for the award. The number of PSUs that will vest depends on the level of achievement of a market performance condition, over a three-year period, based on our total
shareholder return (TSR) relative to the TSR of a pre-defined electronics manufacturing services (EMS) competitor group. We do not adjust the grant date fair value regardless of the
eventual number of awards that are earned based on the market performance condition. We recognize compensation expense in our consolidated statement of operations on a straight-line basis
over the requisite service period and we reduce this expense for the estimated PSU awards that are not expected to vest because the employment conditions will not be satisfied.

We
grant deferred share units (DSU) to certain members of our board of directors as part of their compensation, which is comprised of an annual retainer, an annual equity award and
meeting fees. The number of DSUs we grant is determined by dividing the cash amount of the fees and retainers earned by the closing price of the subordinate voting shares on the NYSE on the last
business day of the quarter. Each DSU represents the right to receive one subordinate voting share or an equivalent value in cash when the individual ceases to serve as a director. For DSUs granted
prior to January 1, 2007, we may settle these share units with subordinate voting shares, issued from treasury or purchased in the open market, or with cash. For DSUs granted after
January 1, 2007, we may only settle these share units with subordinate voting shares purchased in the open market or with cash. We amortize the cost of DSUs to compensation expense over the
period the services are rendered.

(o)   Deferred financing costs:

Deferred financing costs consist of costs relating to our revolving credit facility which we amortize to our consolidated statement of operations on a
straight-line basis over the term of the facility. We record financing costs relating to the issuance of long-term debt as a reduction to the cost of the related debt which we
amortize to our consolidated statement of operations over the term of the related debt or when the debt is retired, if earlier.

(p)   Income taxes:

Our income tax expense for the period is comprised of current and deferred income taxes. Current taxes and deferred taxes are recognized in our consolidated
statement of operations, except to the extent that they relate to items recognized in OCI or directly in equity. In these cases, the taxes are also recognized in OCI or directly in equity,
respectively.

In
the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain until we resolve it with the relevant tax authority, which may take many
years. The final tax outcome of these matters may be different from the estimates management originally made in determining our tax provision. Management periodically evaluates the positions taken in
our tax returns with respect to situations in which applicable tax rules are subject to interpretation. We establish provisions related to tax uncertainties where appropriate based on our estimate of
the amount that ultimately will be paid to or received from tax authorities. We recognize accrued interest and penalties relating to tax uncertainties in current income tax expense. The various
judgments and estimates by management in establishing provisions related to tax uncertainties will significantly affect the amounts we recognize in our consolidated financial statements.

We
use the liability method of accounting for deferred income taxes. Under this method, we recognize deferred income tax assets and liabilities for future income tax consequences
attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective income tax bases, and on unused tax losses and tax credit
carryforwards. We measure deferred income taxes using tax rates and laws that have been enacted or substantively enacted at the reporting date and that we expect will apply when the related deferred
income tax asset is realized or the deferred income tax liability is settled. We

F-16

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

recognize
deferred income tax assets only to the extent that it is probable, based on management's estimates, that future taxable profit will be available against which the deductible temporary
differences as well as unused tax losses and tax credit carryforwards can be utilized. Estimates of future taxable profit in different tax jurisdictions are an area of estimation uncertainty. We
review our deferred income tax assets at each reporting date and reduce these to the extent it is no longer probable that we will realize the related tax benefits. We recognize the effect of a change
in income tax rates in the period of enactment or substantive enactment.

We
do not recognize deferred income taxes if they arise from the initial recognition of goodwill, or for temporary differences arising from the initial recognition of an asset or a
liability in a transaction that is not a business combination and that affects neither accounting, nor taxable profit or loss. We also do not recognize deferred income taxes on temporary differences
relating to investments in subsidiaries to the extent we are able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse
in the foreseeable future.

During
each period, we record current income tax expense or recovery based on taxable income earned or loss incurred in each tax jurisdiction where we operate, and for any adjustments to
taxes payable in respect of previous years, using tax laws that are enacted or substantively enacted at the balance sheet date.

(q)   Financial assets and financial liabilities:

We recognize financial assets and financial liabilities initially at fair value and subsequently measure these at either fair value or amortized cost based on
their classification as described below. See note 2(s), Impairment of financial assets.

Fair value through profit or loss:

Financial assets and financial liabilities, that we purchase or incur, respectively, with the intention of generating earnings in the
near term, and derivatives other than hedging instruments, are classified as fair value through profit or loss. This category includes our short-term investments in money market funds
grouped with cash equivalents, and derivative assets and derivative liabilities not qualifying for hedge accounting. We initially recognize investments in our consolidated balance sheet at fair value
and recognize subsequent changes through our consolidated statement of operations. We expense transaction costs as incurred in our consolidated statement of operations.

Held-to-maturity investments:

Securities that have fixed or determinable payments and a fixed maturity date, which we intend to and have the ability to hold to
maturity, are classified as held-to-maturity investments and include our term deposits that we group with cash equivalents. We initially recognize
held-to-maturity financial assets in our consolidated balance sheet at fair value plus directly attributable transaction costs, and subsequently measure these at amortized cost
using the effective interest rate method, less any impairment losses.

Loans and receivables:

We classify financial assets with fixed or determinable payments, such as our accounts receivable, as loans and receivables. This
category excludes any derivative assets or assets that are quoted in active markets. We initially recognize loans and receivables in our consolidated balance sheet at fair value plus directly
attributable transaction costs, and subsequently measure these at amortized cost using the effective interest rate method, less any impairment losses.

F-17

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

Other financial liabilities:

This category is for financial liabilities that are not classified as fair value through profit or loss and includes accounts payable,
the majority of our accrued liabilities and certain other provisions. We record these financial liabilities at amortized cost in the consolidated balance sheet.

Available-for-sale:

We currently do not hold any financial assets designated as available-for-sale.

(r)   Derivatives and hedge accounting:

We enter into forward exchange and option contracts to hedge the cash flow risk associated with firm purchase commitments and forecasted transactions in foreign
currencies that are considered highly probable and to hedge foreign-currency denominated balances. We use estimates to forecast future cash flows and the future financial position of net monetary
assets or liabilities denominated in foreign currencies. We apply hedge accounting to those hedge transactions that are considered effective. Management assesses the effectiveness of hedges by
comparing actual outcomes against these estimates on a regular basis. Subsequent revisions in estimates of future cash flow forecasts, if significant, may result in the discontinuation of hedge
accounting for that hedge. We do not enter into derivatives for speculative purposes.

At
the inception of a hedging relationship, we formally document our relationship between the hedging instrument and the hedged item, as well as our risk management objectives and
strategy for undertaking the various hedge transactions. Our process includes linking all derivatives to specific assets and liabilities on our consolidated balance sheet or to specific firm
commitments or forecasted transactions. We also formally assess, both at the hedge's inception and at the end of each quarter, whether the derivatives used in hedged transactions are highly effective
in offsetting changes in the cash flows of the hedged items. We record the gain or loss from these forward contracts in the same line item where the underlying exposures are recognized in our
consolidated statement of operations. For our non-designated hedges against our balance sheet exposures denominated in foreign currencies, we record the gain or loss from these forward
contracts in SG&A.

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
consolidated statement of operations.

We
measure all derivatives at fair value in our consolidated balance sheet. The majority of our derivative assets and liabilities arise from foreign currency forward contracts that we
designate as cash flow hedges. In a cash flow hedge, we defer the changes in the fair value of the hedging derivative, to the extent effective, in OCI until we recognize the asset, liability or
forecasted transactions being hedged in our consolidated statement of operations. For hedges that we discontinue before the end of the original hedge term, we amortize the unrealized hedge gain or
loss in OCI 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, we recognize the unrealized hedge gain or loss in
OCI immediately in our consolidated statement of operations. For our current cash flow hedges, the majority of the underlying expenses we hedge are included in cost of sales in our consolidated
statement of operations.

We
value our derivative assets and liabilities based on inputs that are either readily available in public markets or derived from information available in public markets. The inputs we
use include discount rates and forward exchange rates. Changes in these inputs can cause significant volatility in the fair value of our financial instruments in the short-term.

(s)   Impairment of financial assets:

We review financial assets at each reporting date and these are deemed to be impaired when objective evidence resulting from one or more events subsequent to the
initial recognition of the asset indicates the

F-18

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

estimated
future cash flows of the asset has been negatively impacted. We measure an impairment loss as the excess of the carrying amount over the fair value of the asset and we recognize this loss in
our consolidated statement of operations.

(t)    Revenue:

We derive the majority of our revenue from the sale of electronic products and services that we have manufactured or provided to customer specifications. Our
range of services includes design, engineering, fulfillment, and after-market services. We recognize revenue from the sale of products and services rendered
when all material risks and benefits associated with the products sold or services rendered have passed to the buyer and no material uncertainties remain as to the collection of our receivables. We
assume no further performance obligations after revenue has been recognized, other than our standard manufacturing or service warranties.

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 the customer.

(u)   Government grants:

We may receive government grants related to equipment purchases or other expenditures. We recognize these grants when there is reasonable assurance that we will
retain the benefits. If we receive a grant but do not have reasonable assurance that we will comply with the conditions of the grant, we will defer the grant and record a liability on our consolidated
balance sheet until the conditions are fulfilled. For grants that relate to the purchase of equipment, we reduce the cost of the asset in the period the cost is incurred or when the conditions are
fulfilled, and we calculate amortization on the net amount. For grants that relate to operating expenditures, we reduce the expense in the period the cost is incurred or when the conditions
are fulfilled.

(v)   Research and development:

We incur costs relating to research and development activities. We expense these costs as incurred in our consolidated statement of operations unless development
costs meet certain criteria for capitalization. We did not capitalize any research and development costs in 2010, 2011 or 2012.

(w)  Earnings per share (EPS):

We calculate basic EPS by dividing net earnings by the weighted average number of shares outstanding during the period. We calculate diluted EPS using the
treasury stock method, which reflects the potential dilution from equity-based awards that are issued from treasury.

(x)   Recently issued accounting pronouncements:

IFRS 7, Financial Instruments  Disclosures:

Effective 2012, we adopted the amendment issued by the IASB to IFRS 7 which requires enhanced disclosures relating to the
derecognition of financial assets that have been transferred, including quantitative and qualitative disclosures of the nature and extent of risks arising from the transfer. The adoption of this
amendment did not have a material impact on the disclosures related to our accounts receivable sales program in our consolidated financial statements.

F-19

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

In
December 2011, the IASB issued further amendments to IFRS 7 which requires new disclosures relating to the offsetting of financial assets and financial liabilities,
effective January 1, 2013. We do not expect the adoption of this amendment to have a material impact on our consolidated financial statements.

IFRS 9, Financial Instruments:

This standard replaces IAS 39,Financial Instruments: Recognition and
Measurement,in phases. IFRS 9 (2009) reflects the IASB's first phase of the project relating to the classification and measurement of financial assets. Under
IFRS 9 (2009), financial assets are classified and measured based on the business model in which they were held and the characteristics of their contractual cash flows. IFRS 9 (2010)
provides guidance on the classification and measurement of financial liabilities and the requirements of IAS 39 for the derecognition of financial assets and liabilities. In subsequent phases,
the IASB will address hedge accounting and impairment of financial assets. We will evaluate the overall impact on our consolidated financial statements when the final standard, including all phases,
is issued.

IFRS 10, Consolidated Financial Statements:

This standard is effective January 1, 2013 and replaces certain sections of IAS 27,Consolidated
And Separate Financial Statements. This standard is intended to ensure the same criteria are
applied to all types of entities when determining control for consolidated reporting. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

IFRS 11, Joint Arrangements:

This standard is effective January 1, 2013 and replaces the existing standards on joint ventures. It distinguishes joint
ventures from joint operations and establishes the accounting for interests in each of these joint arrangements. The adoption of this standard is not expected to have a material impact on our
consolidated financial statements unless we enter into such arrangements.

IFRS 12, Disclosure Of Interests In Other Entities:

This standard is effective January 1, 2013 and supplements the existing disclosure requirements about interests in subsidiaries,
joint arrangements, associates and unconsolidated structured entities, and focuses on the nature, risks and financial effects associated with such interests on financial position, financial
performance and cash flows. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

IFRS 13, Fair Value Measurement:

This standard provides extensive guidance on determining fair value for measurement or disclosure purposes. We will adopt the standard
prospectively effective January 1, 2013. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

IAS 1, Presentation Of Financial Statements (revised):

This amendment is effective January 1, 2013 and requires changes to the presentation of items in OCI. The adoption of this
amendment will not have a material impact on our consolidated financial statements.

IAS 19, Employee Benefits (revised):

This amendment is effective January 1, 2013 and requires retroactive application. It eliminates the option of deferring
actuarial gains and losses resulting from defined benefit plans (corridor approach) and requires that all past service costs and credits, whether vested or unvested, be recognized immediately in
operations. The

F-20

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

amendment
also identifies changes to the required calculation of net interest expense and requires additional disclosures about defined benefit plans and termination benefits. The adoption of this
revised standard is not expected to have a material impact on our consolidated financial statements. Upon our transition to IFRS on January 1, 2010, we elected to recognize all cumulative
actuarial gains or losses through OCI and deficit. As a result, the elimination of the corridor approach does not impact us, although we are assessing the impact of the amendment on our presentation
of cumulative actuarial gains or losses within equity. As of January 1, 2011, we had $7.6 of unrecognized past service credits that we currently amortize to operations on a
straight-line basis over the vesting period. Upon retroactive adoption of this amendment, we will decrease our post-employment benefit obligations and our deficit by $7.6 as of
January 1, 2011. We will also decrease our net earnings for 2011 by $2.8, reflecting changes in the calculation of the interest component of pension expense and the reversal of past service
credits that we retroactively recorded directly to deficit on January 1, 2011. The impact on our net earnings for 2012 is insignificant.

IAS 32, Financial Instruments  Presentation (revised):

This amendment will be effective January 1, 2014 and clarifies the requirements for offsetting financial assets and liabilities.
We do not expect the adoption of this amendment to have a material impact on our consolidated financial statements.

3.     ACQUISITIONS:

In September 2012, we completed the acquisition of D&H Manufacturing Company (D&H), a leading manufacturer of precision machined components and assemblies
based in California, U.S.A. D&H provides manufacturing and engineering services, coupled with dedicated capacity and equipment for prototype and quick-turn support, to some of the world's
leading semiconductor capital equipment manufacturers. We financed the purchase price of $71.0, net of cash acquired, from cash on hand. We do not
expect any of the goodwill will be tax deductible. We expensed acquisition-related transaction costs of $0.9 during 2012 through other charges.

In
June 2011, we acquired the semiconductor equipment contract manufacturing operations of Brooks Automation, Inc. (Brooks Automation). These operations, located in Oregon,
U.S.A. and Wuxi, China, specialize in manufacturing complex mechanical equipment and providing systems integration services to some of the world's largest semiconductor equipment manufacturers. We
financed the purchase price of $80.5, net of cash acquired, from cash on hand and $45.0 from our revolving credit facility, which we repaid in 2011. Approximately one-third of the goodwill
was tax deductible. We expensed acquisition-related transaction costs of $0.6 during 2011 through other charges.

Through
these acquisitions, we have enhanced our entry into the semiconductor capital equipment market. The D&H acquisition added precision machining capabilities to our service offering
and we have acquired engineering and technical depth that we can leverage with our existing semiconductor customers, as well as expand to other customers in our diversified markets.

In
January 2010, we completed the acquisition of Scotland-based Invec Solutions Limited, a provider of warranty management, repair and parts management services. In
August 2010, we completed the acquisition of Austrian-based Allied Panels Entwicklungs-und Produktions GmbH (Allied Panels), a medical engineering and manufacturing service
provider offering concept-to-full-production solutions in medical devices with a core focus on the diagnostic and imaging market. We paid $16.2 for these two
acquisitions which we financed from cash on hand. The majority of the goodwill was not tax deductible. The purchase price for Allied Panels was subject to adjustment for contingent consideration if
specific pre-determined financial targets were achieved through 2012. We recorded $4.5 representing the fair value of the contingent consideration at the acquisition date. We reduced the
fair value to $3.2 at December 31, 2011, thereby releasing $1.3 in 2011 through other charges. During 2012, we determined that this provision was no longer necessary and released this provision
through other charges (note 15(d)). We expensed acquisition-related transaction costs of $1.0 during 2010 through other charges.

F-21

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CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

Details
of the purchase price allocation, by year of acquisition, are as follows:

2010

2011

2012Current assets, net of cash acquired

$
14.8

$
49.9

$
21.6Property, plant and equipment and other long-term assets


0.9


1.5


15.1Customer intangible assets and computer software assets


16.1


12.5


24.0Goodwill


14.1


33.8


26.4Current liabilities


(16.7
)

(17.2
)

(4.2
)Deferred income taxes and other long-term liabilities


(13.0
)




(11.9
)$
16.2

$
80.5

$
71.0


None
of these acquisitions had a significant impact on our consolidated results of operations in the year of acquisition.

Pro forma disclosure:Revenue and earnings for each period would not have been materially different had the acquisitions occurred
at the beginning of their respective years.

4.     ACCOUNTS RECEIVABLE:

In November 2012, we entered into an agreement to sell up to $375.0 in accounts receivable on an uncommitted basis (subject to pre-determined
limits by customer) to two third-party banks. Both banks had a Standard and Poor's short-term rating of A-1 and a long-term rating of A or above at
December 31, 2012. This agreement has no fixed termination date and can be terminated at any time by us or the banks. At December 31, 2012, we had sold $50.0 of accounts receivable under
this facility (December 31, 2011  $60.0 under our prior accounts receivable sales facility). The accounts receivable sold are removed from our
consolidated balance sheet and are reflected as cash provided by operating activities in our consolidated statement of cash flows. Upon sale, we assign the rights to the accounts receivable to the
banks. We continue to collect cash from our customers and remit the cash to the banks when collected. We pay interest and fees which we record through finance costs in our consolidated statement
of operations.

5.     INVENTORIES:

Inventory is comprised of the following:

December 312011

2012Raw materials

$
654.3

$
517.1Work in progress


68.5


77.9Finished goods


157.9


150.7$
880.7

$
745.7


We
record our inventory provisions and valuation recoveries through cost of sales. We record inventory provisions to reflect changes in the value of our inventory to net realizable
value, and valuation recoveries primarily to reflect realized gains on the disposition of inventory previously written down. During 2012, we recorded net inventory provisions of $5.3
(2011  provisions of $4.5; 2010  recoveries of $5.0). We regularly review our estimates and assumptions used to value our
inventory through analysis of historical performance. During 2012, our net inventory provisions of $5.3 were comprised of new provisions of $10.9 for aged inventory, offset in part by a $5.6 credit
reflecting the improved recovery on certain inventory.

F-22

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CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

6.     ASSETS CLASSIFIED AS HELD-FOR-SALE:

As a result of previously announced restructuring actions, we reclassified certain assets as held-for-sale. At the time of
reclassification, we recorded an impairment loss, through restructuring charges, if the carrying value of those assets exceeded the fair value less estimated costs to sell. See note 15(a). We
have programs underway to sell these assets.

At
December 31, 2012, we had $30.8 (December 31, 2011  $32.1) of assets classified as held-for-sale,
primarily land, buildings and equipment in Europe and the Americas.

7.     PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are comprised of the following:

2011Cost

Accumulated
Depreciation and
Impairment

Net Book
ValueLand

$
28.1

$
7.8

$
20.3Buildings including improvements


272.9


134.6


138.3Machinery and equipment


727.1


563.0


164.1$
1,028.1

$
705.4

$
322.7




2012Cost

Accumulated
Depreciation and
Impairment

Net Book
ValueLand

$
26.8

$
7.8

$
19.0Buildings including improvements


296.4


134.2


162.2Machinery and equipment


700.0


544.2


155.8$
1,023.2

$
686.2

$
337.0


F-23

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CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

The
following table details the changes to the net book value of property, plant and equipment:

Land

Buildings
including
Improvements

Machinery
and
Equipment

TotalBalance  December 31, 2010

$
19.6

$
145.8

$
166.8

$
332.2Additions





8.4


51.9


60.3Acquisitions through business combinations





0.7


0.4


1.1Depreciation





(10.9
)

(52.8
)

(63.7
)Reclassification to assets held-for-sale and other disposals





(5.2
)

(2.1
)

(7.3
)Foreign exchange and other


0.7


(0.5
)

(0.1
)

0.1Balance  December 31, 2011


20.3


138.3


164.1


322.7Additions





36.9


60.7


97.6Acquisitions through business combinations (note 3)





0.8


14.3


15.1Depreciation





(13.5
)

(56.7
)

(70.2
)Impairment loss (note 15(b))








(2.4
)

(2.4
)Reclassification to assets held-for-sale and other disposals(1)





(0.8
)

(23.8
)

(24.6
)Foreign exchange and other


(1.3
)

0.5


(0.4
)

(1.2
)Balance  December 31, 2012

$
19.0

$
162.2

$
155.8

$
337.0


(1)Includes
$16.2 of losses primarily to write down surplus equipment related to Research In Motion Limited (RIM) that we have since sold or that is available
for sale at December 31, 2012. See note 15(a). The net book value of property, plant and equipment at December 31, 2012 included $0.4 (December 31,
2011  $0.3) of assets under finance leases.


8.     GOODWILL AND INTANGIBLE ASSETS:

Goodwill and intangible assets are comprised of the following:

2011Cost

Accumulated
Amortization
and Impairment

Net Book
ValueGoodwill

$
48.0

$


$
48.0Intellectual property

$
111.3

$
111.3

$
Other intangible assets


214.5


193.0


21.5Computer software assets


271.1


257.1


14.0$
596.9

$
561.4

$
35.5




2012Cost

Accumulated
Amortization
and Impairment

Net Book
ValueGoodwill

$
74.9

$
14.6

$
60.3Intellectual property

$
111.3

$
111.3

$
Other intangible assets


238.7


197.2


41.5Computer software assets


273.7


262.2


11.5$
623.7

$
570.7

$
53.0


F-24

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

The
following table details the changes to the net book value of goodwill and intangible assets:

Goodwill

Other
Intangible
Assets

Computer
Software
Assets

TotalBalance  December 31, 2010

$
14.6

$
15.4

$
18.2

$
48.2Additions








2.6


2.6Acquisitions through business combinations (note 3)


33.8


12.5





46.3Amortization





(6.2
)

(7.3
)

(13.5
)Other


(0.4
)

(0.2
)

0.5


(0.1
)Balance  December 31, 2011


48.0


21.5


14.0


83.5Additions








4.7


4.7Acquisitions through business combinations (note 3)


26.4


24.0





50.4Amortization





(4.1
)

(7.2
)

(11.3
)Impairment loss (note 15(b))


(14.6
)




(0.7
)

(15.3
)Other


0.5


0.1


0.7


1.3Balance  December 31, 2012

$
60.3

$
41.5

$
11.5

$
113.3


We
conduct our annual impairment assessment of goodwill and intangible assets in the fourth quarter of each year and whenever events or changes in circumstances indicate that the
carrying amount of an asset, CGU or a group of CGUs may not be recoverable. See note 15(b). In the fourth quarter of 2012, we recorded non-cash impairment charges of $14.6 against
goodwill and $0.7 against computer software assets. We measure the impairment loss as the excess of the carrying amount of an asset, CGU or a group of CGUs over the recoverable amounts. In 2011, we
recorded no impairment against goodwill or intangible assets as the recoverable amounts exceeded their carrying amounts. In 2010, we recorded non-cash impairment charges of $2.7 to write
down computer software assets in the Americas and Europe.

9.     OTHER NON-CURRENT ASSETS:

December 312011

2012Net pension assets (note 18)

$
40.5

$
42.0Land rights


9.1


12.6Other


9.8


6.6$
59.4

$
61.2


F-25

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

10.   PROVISIONS:

Our provisions include restructuring, warranty and other provisions. We have included a description of our restructuring, warranty and legal provisions in
note 2(m). We include details of our restructuring provision in note 15(a). The following chart details the changes in our provisions:

Restructuring

Warranty

Other(i)

TotalBalance  December 31, 2011

$
16.7

$
12.1

$
13.2

$
42.0Provisions


33.0


14.6


1.5


49.1Reversal of prior year provisions(iii)


(5.2
)

(4.4
)

(4.5
)

(14.1
)Payments/usage


(29.7
)

(6.0
)

(0.6
)

(36.3
)Accretion and foreign exchange





0.2





0.2Balance  December 31, 2012

$
14.8

$
16.5

$
9.6

$
40.9Current

$
14.8

$
10.6

$
5.4

$
30.8Non-current(ii)





5.9


4.2


10.1December 31, 2012

$
14.8

$
16.5

$
9.6

$
40.9


(i)Other
includes legal provisions, asset retirement obligations, and certain other provisions and liabilities, including a provision for contingent
consideration related to our Allied Panels acquisition. See note 3. We have aggregated these provisions and liabilities as a single class for disclosure purposes given the insignificance of the
individual amounts.(ii)Included
in provisions and other non-current liabilities in our consolidated balance sheet.(iii)During
2012, we reversed prior year provisions for restructuring, warranty and other provisions. We had recorded lease obligations related to a leased
facility we vacated in a prior year. In early 2012, we negotiated a settlement and released the excess restructuring provision of $2.3. We provide product and service warranties to customers. We
regularly adjust our provisions based on historical experience and as the warranties expire. We determined that the provision we had recorded for contingent consideration related to our Allied Panels
acquisition was no longer necessary and released the provision of $3.2 during 2012. See note 3.
See
note 23 regarding contingent liabilities.


11.   CREDIT FACILITIES AND LONG-TERM DEBT:

(a)   Credit facilities:

We have a $400.0 revolving credit facility that matures in January 2015. We are required to comply with certain restrictive covenants including those
relating to debt incurrence, the sale of assets, a change of control and certain financial covenants related to indebtedness, interest coverage and liquidity. We pledged certain assets as security for
borrowings under this facility. The facility includes a $25.0 swing line that provides for short-term borrowings up to a maximum of seven days. The credit facility permits us and certain
designated subsidiaries to borrow funds for general corporate purposes (including acquisitions).

Borrowings
under this facility bear interest at LIBOR or Prime rate for the period of the draw plus a margin. The terms of these draws have historically been less than 90 days. In
December 2012, we completed a substantial issuer bid (SIB) to repurchase for cancellation $175.0 of our subordinate voting shares which we funded in part through this credit facility. See
note 12. At December 31, 2012, we had drawn $55.0 under this facility. At December 31, 2011, no amounts were drawn under this facility. We were in compliance with all covenants at
December 31, 2012 and 2011. Commitment fees paid in 2012 were $2.0. At December 31, 2012, we had issued $31.1 (December 31, 2011  $27.0) of
letters of credit under this facility.

We
also have uncommitted bank overdraft facilities available for intraday and overnight operating requirements which total $70.0 at December 31, 2012. There were no amounts drawn
under these overdraft facilities at December 31, 2012 and 2011.

F-26

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

During
any period, we may borrow and repay amounts under these facilities. The amounts we borrow and repay under these facilities can vary significantly from
month-to-month depending upon our working capital and other cash requirements.

(b)   Senior Subordinated Notes:

In March 2010, we paid $231.6 to repurchase the remaining outstanding Notes and recognized a loss of $8.8 in other charges. We redeemed all of our
outstanding Notes prior to March 31, 2010.

12.   CAPITAL STOCK:

We are authorized to issue an unlimited number of subordinate voting shares, which entitle the holder to one vote per share, and an unlimited number of multiple
voting shares, which entitle the holder to 25 votes per share. The subordinate voting shares and multiple voting shares vote together as a single class on all matters submitted to a vote of
shareholders, including the election of directors, except as otherwise required by law. The holders of the subordinate voting shares and multiple voting shares 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 multiple voting share is convertible at any
time at the option of the holder thereof and automatically, under certain circumstances, into one subordinate voting share. We are also authorized to issue an unlimited number of preferred shares,
issuable in series.

(a)   Capital transactions:

During 2012, we issued 1.2 million (2011  1.9 million;
2010  0.8 million) subordinate voting shares upon the exercise of employee stock options for cash proceeds of $7.5
(2011  $11.9; 2010  $4.6). We also issued 0.8 million
(2011  0.4 million; 2010  nil) subordinate voting shares from treasury with an ascribed value of $7.7
(2011  $3.1; 2010  nil) upon the vesting of certain RSUs and DSUs. We also settled RSUs and PSUs with subordinate voting
shares purchased in the open market and with cash. Settlement of these awards is described below.

In
July 2010, we filed a Normal Course Issuer Bid (NCIB) with the TSX to repurchase, at our discretion, until the expiry of the NCIB on August 2, 2011, up to
18.0 million subordinate voting shares in the open market or as otherwise permitted, subject to the normal terms and limitations of such bids. During 2010, we paid $140.6 to repurchase for
cancellation a total of 16.1 million subordinate voting shares at a weighted average price of $8.75 per share under the NCIB. During 2011, we did not repurchase any subordinate voting shares
under the NCIB for cancellation. In February 2012, we filed an NCIB with the TSX to repurchase, at our discretion, until the earlier of February 8, 2013 or the completion of purchases
under the bid, up to 16.2 million subordinate voting shares in the open market or as otherwise permitted, subject to the normal terms and limitations of such bids. During 2012, we paid $113.8
to repurchase for cancellation a total of 13.3 million subordinate voting shares at a weighted average price of $8.52 per share under the NCIB. The maximum number of subordinate voting shares
we were permitted to repurchase for cancellation under our NCIBs was reduced by the number of subordinate voting shares purchased for equity-based compensation plans during the period of
the NCIB.

In
the fourth quarter of 2012, we launched and successfully completed an SIB pursuant to which we repurchased for cancellation $175.0 of our subordinate voting shares. The SIB was
conducted as a modified Dutch auction. We repurchased for cancellation 22.4 million subordinate voting shares at a price of $7.80 per share, representing approximately 12% of our subordinate
voting shares issued and outstanding prior to completion of the SIB. We also recorded $0.8 in costs related to the SIB. We funded the share repurchases using a combination of cash on hand and cash
from our revolving credit facility. See note 11.

F-27

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

As
at December 31, 2012, we had 163.8 million (December 31, 2011  197.6 million) issued and outstanding subordinate
voting shares and 18.9 million (December 31, 2011  18.9 million) issued and outstanding multiple voting shares.

(b)   Equity-based compensation:

Long-Term Incentive Plan (LTIP):

Under the LTIP, we may grant stock options, performance options and performance share units to eligible employees, executives and
consultants. Under the LTIP, we may issue up to 29.0 million subordinate voting shares from treasury.

Share Unit Plan (SUP):

Under the SUP, we may grant RSUs and PSUs to eligible employees. Under the SUP, we have the option to satisfy the delivery of the share
units by purchasing subordinate voting shares in the open market or by cash, rather than issuing subordinate voting shares from treasury.

We
may grant DSUs to members of our board of directors. These share units may be settled with cash or with subordinate voting shares issued from treasury or purchased in the open market,
depending on when
the DSUs were granted. As at December 31, 2012, we had 0.8 million DSUs which were outstanding and fully vested (December 31,
2011  0.9 million).

During
2012, we recognized stock-based compensation expense totaling $35.6 (2011  $44.2; 2010  $41.9) in
cost of sales and SG&A. The amount of our stock-based compensation expense varies each period, and includes mark-to-market adjustments for awards we settle in cash and plan
adjustments. The portion of our expense that relates to performance-based compensation generally varies depending on the level of achievement of pre-determined performance goals and
financial targets. Due to a prohibition on the purchase of subordinate voting shares in the open market during the SIB, we elected to cash settle certain RSUs vesting in December 2012 and
recorded a mark-to-market adjustment of $0.2 related to these awards. We also recorded mark-to-market adjustments in 2011 of $2.7 and in 2010 of $7.6.
See note 12(b)(ii) below. We amended the retirement eligibility clauses in our equity-based compensation plans in 2011 which accelerated our recognition of the related compensation expense of
$3.1 in 2012 (2011  $4.8). Our expense for 2012 also reflects higher expense reversals with respect to forfeited awards related to terminated employees.

(i)    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.

F-28

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

Stock
option transactions were as follows:

Number of
Options

Weighted Average
Exercise Price(in millions)Outstanding at January 1, 2010


11.3

$
11.20Granted


0.8

$
10.46Exercised


(0.8
)
$
6.18Forfeited/Expired


(0.8
)
$
25.38Outstanding at December 31, 2010


10.5

$
10.66Granted


0.9

$
9.78Exercised


(1.9
)
$
6.11Forfeited/Expired


(1.4
)
$
16.93Outstanding at December 31, 2011


8.1

$
10.51Granted


1.1

$
8.26Exercised


(1.2
)
$
6.14Forfeited/Expired


(2.0
)
$
15.53Outstanding at December 31, 2012


6.0

$
9.52Shares reserved for issuance upon exercise of stock options or awards (in millions)


21.5


The
following options were outstanding as at December 31, 2012:

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)$4.04  $5.77


1.3

$
4.26


6.1


0.9

$
4.32$6.05  $8.05


1.1

$
6.51


4.8


1.1

$
6.50$8.21  $9.71


0.8

$
8.25


8.9




$
9.44$9.87  $10.00


1.1

$
9.92


6.1


0.6

$
9.96$10.15  $10.20


0.5

$
10.20


7.0


0.3

$
10.20$10.62  $17.11


0.5

$
13.99


1.8


0.5

$
14.03$17.15  $19.90


0.6

$
17.28


1.1


0.6

$
17.28$10.91  $15.20


0.1

$
13.41


0.2


0.1

$
13.416.0








4.1


We
amortize the estimated fair value of options to expense over the vesting period of four years. We determined the fair value of the options using the Black-Scholes option pricing model
with the following weighted average assumptions:

Year ended
December 312010

2011

2012Risk-free interest rate


2.6
%

2.3
%

0.9
%Dividend yield








Expected volatility of the market price of our shares


53
%

52
%

53
%Expected option life (in years)


5.5


5.5


5.5Weighted-average fair value of options granted

$
5.17

$
4.86

$
3.92


F-29

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

(ii)   Restricted share units and performance share units:

We have granted RSUs and PSUs as part of our LTIP and SUP. These grants generally entitle the holder to receive one subordinate voting share or, at our
discretion, the cash equivalent of the market value of a subordinate voting share at the date of vesting. Historically, we have generally settled these awards with subordinate voting shares purchased
in the open market by a trustee. We amortize the grant date fair value of RSUs and PSUs to expense over the vesting period. The number of PSUs that will actually vest will vary from 0% to 200%
depending on the achievement of pre-determined performance goals and financial targets. The number of PSUs below represents the maximum payout at 200%. The following table outlines the RSU
and PSU transactions. As of December 31, 2012, none of the RSUs or PSUs were vested.

Number of awards (in millions)

RSUs

PSUsOutstanding at January 1, 2010


6.6


7.0Granted


1.9


1.8Settled


(3.3
)

(0.7
)Forfeited/Expired


(0.4
)

(0.4
)Outstanding at December 31, 2010


4.8


7.7Granted


2.3


2.1Settled


(3.2
)

(1.8
)Forfeited/Expired


(0.4
)

(0.6
)Outstanding at December 31, 2011


3.5


7.4Granted


2.6


2.4Settled


(1.9
)

(3.9
)Forfeited/Expired


(0.8
)

(1.1
)Outstanding at December 31, 2012


3.4


4.8


During
2012, we granted 2.4 million (2011  2.1 million) PSUs that vest based on the achievement of a market performance condition
based our TSR. See note 2(n) for a description of TSR. We estimated the grant date fair value of these PSUs using a Monte Carlo simulation model. We expect to settle these awards with
subordinate voting shares purchased in the open market by a trustee. RSUs vest approximately one-third per year for three years. PSUs vest at the end of their respective terms, generally
three years, to the extent that performance conditions have been met.

The
weighted average grant date fair value of RSUs awarded in 2012 was $8.18 per share (2011  $9.78 per share;
2010  $9.89 per share). The weighted average grant date fair value of PSUs awarded in 2012 was $9.79 per share
(2011  $13.75 per share; 2010  $10.20 per share).

From
time-to-time, we pay cash for the purchase of subordinate voting shares in the open market by a trustee to satisfy the delivery of subordinate voting shares
upon vesting of awards under our equity-based compensation plans. We classify these shares for accounting purposes as treasury stock until they are delivered pursuant to the plans. In the fourth
quarter of 2012, we entered into an Automatic Share Purchase Plan (ASPP) with a trustee for the purchase of 2.2 million subordinate voting shares in the open market to satisfy the deliveries in
respect of share unit awards vesting in the first quarter of 2013. This ASPP allowed the trustee to purchase our subordinate voting shares for such purposes at any time through January 31,
2013, including during any applicable trading blackout periods. We paid $17.9 to the trustee to fund purchases under this ASPP. During 2012 and prior to the ASPP, we also paid $3.8 for the trustee to
purchase 0.4 million subordinate voting shares for delivery under our equity-based compensation plans. During 2011 and 2010, we paid $49.4 and $26.2, respectively, for the trustee's purchase of
5.7 million and 2.8 million, respectively, of subordinate voting shares in the open market. At December 31, 2012, the trustee held 0.8 million (December 31,
2011  held 4.5 million;

F-30

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

December 31,
2010  held 1.7 million) subordinate voting shares, with a value of $6.4, and $11.9 in cash representing the estimated amount of cash
required to complete the ASPP program (December 31, 2011  value of $37.9; December 31, 2010  value of $15.9)
for delivery under our equity-based compensation plans.

We
elected to cash-settle certain awards vesting in the first quarters of 2010 and 2011 due to limitations in the number of subordinate voting shares that could be purchased
in the open market as a result of terms in our subordinated debt and a prior share buy-back program. We also elected to cash-settle certain RSUs vesting in the fourth quarter
of 2012 due to a prohibition on the purchase of subordinate voting shares in the open market during the SIB. We account for cash-settled awards as liabilities and we remeasure these based
on our share price at each reporting date until the settlement date, with a corresponding charge or recovery to compensation expense.
We recorded a mark-to-market adjustment on these cash-settled awards of $0.2 for 2012 (2011  $2.7;
2010  $7.6). When we made the decision in the fourth quarter of 2012 to settle these awards with cash, we reclassified $3.4 in 2012
(2011  nil; 2010  $9.2), representing the fair value of these awards, from contributed surplus to accrued liabilities. As
management currently intends to settle all other share unit awards with shares purchased in the open market by a trustee, we have accounted for these share unit awards as equity-settled awards.

13.   ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Year ended
December 312010

2011

2012Opening balance of foreign currency translation account

$


$
1.6

$
(0.1
)Foreign currency translation adjustments


1.6


(1.7
)

(0.1
)Closing balance


1.6


(0.1
)

(0.2
)Opening balance of unrealized net gain or loss on cash flow hedges


8.9


10.7


(12.2
)Net gain (loss) on cash flow hedges (i)


23.0


(9.7
)

16.9Reclassification of net gain on cash flow hedges to operations (ii)


(21.2
)

(13.2
)

(0.4
)Closing balance (iii)


10.7


(12.2
)

4.3Accumulated other comprehensive income (loss)

$
12.3

$
(12.3
)
$
4.1


(i)Net
of income tax expense of $0.7 for 2012 (2011  $0.7 income tax recovery;
2010  $0.8 income tax expense).(ii)Net
of income tax recovery of $0.1 for 2012 (2011  nil income tax expense or recovery;
2010  $0.6 income tax expense).(iii)Net
of income tax expense of $0.2 as of December 31, 2012 (December 31, 2011  $0.4 income tax
recovery; December 31, 2010  $0.3 income tax expense).


We expect that the majority of net gains on cash flow hedges reported in the 2012 accumulated other comprehensive income balance will be reclassified to
operations during 2013, primarily through cost of sales as the underlying expenses that are being hedged are included in cost of sales.

14.   EXPENSES BY NATURE:

We have presented our consolidated statement of operations by function. Included in our cost of sales and SG&A for the year ended December 31, 2012 were
employee-related costs of $747.7 (2011  $800.4; 2010  $758.6) including stock-based compensation of $35.6
(2011  $44.2; 2010  $41.9), freight and transportation costs of $97.4
(2011  $104.0; 2010  $89.7), depreciation expense of $70.2 (2011  $63.7;
2010  $70.5) and rental expense of $35.4 (2011  $45.3; 2010  $49.5).

F-31

---





CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

15.   OTHER CHARGES:

Year ended
December 312010

2011

2012Restructuring (a)

$
35.8

$
14.5

$
44.0Asset impairment (b)


9.1





17.7Loss on repurchase of Notes (note 11(b))


8.8





Recovery of damages (c)


(2.1
)

(5.2
)

Other (d)


(1.7
)

(2.8
)

(2.2
)$
49.9

$
6.5

$
59.5


(a)   Restructuring:

Our restructuring actions included consolidating facilities and reducing our workforce. The restructuring charges are comprised of the following:

Year ended
December 312010

2011

2012Cash charges

$
35.5

$
18.2

$
27.8Non-cash charges (recoveries)


0.3


(3.7
)

16.2$
35.8

$
14.5

$
44.0


Our
restructuring charges of $44.0 in 2012 were related to the wind down of our manufacturing services for RIM and other actions throughout our global network. We completed the
manufacturing services for RIM in Romania and Malaysia at the end of June 2012 and substantially all of the RIM manufacturing services in Mexico by the end of September 2012. In 2012, we
recorded cash charges of $27.8, primarily related to employee termination costs for our RIM operations and other actions throughout our global network. We also recorded non-cash charges of
$16.2 primarily to write down to recoverable amounts the RIM-related equipment that was no longer in use in Mexico, Romania and Malaysia. Also see the discussion on asset impairment in
note 15(b).

The
recognition of our restructuring charges required us to make certain judgments and estimates regarding the nature, timing and amounts associated with the restructuring actions. Our
major assumptions included the timing and number of employees to be terminated, the measurement of termination costs, and the timing of disposition and estimated fair values used for assets available
for sale. We developed a detailed plan and have recorded termination costs for employees with whom we have communicated. We engaged independent brokers to determine the estimated fair values less
costs to sell for assets we no longer used and which were available for sale. We recognized an impairment loss for assets whose carrying amount exceeded the fair values less costs to sell as
determined by the third-party brokers. We also recorded adjustments to reflect actual proceeds on disposition of these assets. At the end of each reporting period, we evaluate the appropriateness of
our restructuring charges and balances. Further adjustments may be required to reflect actual experience or changes in estimates.

Our
restructuring charges for 2011 and 2010 related to a previous restructuring program and included employee termination and contractual lease obligation costs. We also recorded
recoveries resulting from the sale of vacated properties and surplus equipment against our restructuring charges.

F-32

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

At
December 31, 2012, our restructuring provision was $14.8, comprised primarily of employee termination costs which we expect to pay during the first half of 2013. See
notes 2(m) and 10 for further details and description regarding our restructuring provision.

(b)   Annual impairment assessment:

We conduct our annual impairment assessment of goodwill, intangible assets and property, plant and equipment in the fourth quarter of each year and whenever
events or changes in circumstance indicate that the carrying amount of an asset, CGU or a group of CGUs may not be recoverable. We recognize an impairment loss when the carrying amount of an asset,
CGU or a group of CGUs exceeds the recoverable amount, which is measured as the greater of its value-in-use and its fair value less costs to sell.

In
the second quarter of 2012, we tested the carrying amounts of the CGUs that were impacted by the wind down of our manufacturing services for RIM in Mexico, Romania and Malaysia. We
recorded an impairment loss on the RIM-related assets that were available for sale through restructuring charges (note 15(a)). We then compared the remaining carrying amounts of
these CGUs to their recoverable amounts and determined there was no impairment to these assets that had not been recorded to restructuring charges in 2012.

In
the fourth quarter of 2012, we performed our annual impairment assessment of goodwill, intangible assets and property, plant and equipment. We recorded non-cash impairment
charges totaling $17.7, comprised of $14.6 against goodwill, $0.7 against computer software assets and $2.4 against property, plant and equipment. See notes 7 and 8. The majority of our
goodwill impairment related to the Allied Panels business we acquired in 2010. Our overall progress and the ability to ramp the healthcare business have been slower than we originally anticipated. As
a result, we recorded an impairment loss of $11.9 relating to Allied Panels.

We
determined the recoverable amount of our CGUs based on the expected value-in-use. The process of determining the recoverable amount of a CGU is subjective and
requires management to exercise significant judgment in estimating future growth and discount rates, and projecting cash flows, among other factors. The assumptions used in our impairment assessment
were determined based on past experiences adjusted for expected changes in future conditions. Our major assumptions included projections of cash flows, with primary emphasis on our 2013 plan. We also
considered our strategic plan which extends through 2015 and other updates. Both the 2013 plan and the three-year strategic plan were approved by management and presented to our board of
directors. We used cash flow projections ranging from 2 to 5 years for the impaired CGUs, in line with the
remaining useful lives of the CGUs' primary assets. We generally used our weighted-average cost of capital of approximately 13%, on a pre-tax basis, to discount our cash flows. For those
CGUs that were subject to higher risk and volatilities, we used discount rates that ranged from 20% to 28% to reflect the risk inherent in the cash flows. Where applicable, we worked with independent
brokers to obtain market prices to estimate our real property values.

We
performed a sensitivity analysis to identify the impact of changes in key assumptions, including discount rates and projected growth rates. Our CGU arising from the 2011 acquisition
of the semiconductor equipment contract manufacturing operations of Brooks Automation, which includes $33.8 of goodwill, has been impacted by the downturn in the semiconductor industry. This CGU
continues to develop business with its significant customers and we have assumed growth for this CGU in 2013 and beyond. In addition to new business, we have assumed an overall improvement in
semiconductor end market demand. Failure to realize the assumed revenues at an appropriate profit margin could result in an impairment in a future period for this CGU. For our impairment testing of
this CGU, we used a discount rate of 20%. No impairment would arise if the discount rate were to increase to 30%.

We
did not identify any other key assumptions where a reasonably possible change would result in material impairments to our other CGUs.

F-33

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

In
2011, we recorded no impairment against goodwill, intangible assets or property, plant and equipment as the recoverable amounts exceeded their carrying amounts. In 2010, we recorded
non-cash impairment charges totaling $9.1 primarily against computer software assets and property, plant and equipment in the Americas and Europe.

(c)   Recovery of damages:

In 2009, we recorded a provision related to a recovery of damages upon settlement of a class action lawsuit. Based on management's assessment of the potential
outcomes, we deemed this provision was no longer necessary and released $5.2 during 2011 (2010  release of $2.1) through other charges.

(d)   Other:

Other includes realized recoveries on certain assets that were previously written down through other charges and acquisition-related transaction costs. During
2012 and 2011, we released a portion of our provision
related to the estimated fair value of contingent consideration for our Allied Panels acquisition and recorded the recoveries through other charges. See note 3. We also recorded transaction
costs related to our acquisitions. See note 3.

16.   FINANCE COSTS:

Our finance costs for 2012 were $3.5 (2011 and 2010  $5.4 and $6.9, respectively), comprised primarily of finance costs
related to our credit facilities and our accounts receivable sales program. Our finance costs for 2010 included interest costs related to our Notes prior to their redemption in March 2010.

17.   RELATED PARTY TRANSACTIONS:

Onex Corporation (Onex) owns, directly or indirectly, all of our outstanding multiple voting shares. Accordingly, Onex has the ability to exercise a significant
influence over our business and affairs and generally has the power to determine all matters submitted to a vote of our shareholders where the subordinate voting shares and multiple voting shares vote
together as a single class. Gerald Schwartz, the Chairman of the Board, President and Chief Executive Officer of Onex, is also one of our directors, and holds, directly or indirectly, shares
representing the majority of the voting rights of Onex.

We
currently have, or had, manufacturing agreements with one or more companies related to or under the control of Onex or Gerald Schwartz. During 2012, we recorded revenue of $38.0 from
one related company. At December 31, 2012, we had $6.5 due from this related company. During 2011, we recorded revenue of $90.9 from two related companies. At December 31, 2011, we had
$15.5 due from these related companies. During 2010, we recorded revenue of $43.3 from one related company. At December 31, 2010, we had $4.9 due from this related company. All transactions
with these related companies were in the normal course of operations and were recorded at the exchange amount as agreed to by the parties based on arm's length terms.

In
January 2009, we entered into a Services Agreement with Onex for the services of Gerald Schwartz, as a director of Celestica. The initial term of this agreement was one year
and it automatically renews for successive one-year terms unless either party provides a notice of intent not to renew. Onex receives compensation under the Services Agreement in an amount
equal to $0.2 per year, payable in DSUs in equal quarterly installments in arrears.

F-34

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

Our
key management team consists of directors and senior executive officers. The aggregate compensation, representing the expenses we recognized under IFRS, for our directors and key
management team was as follows:

Year ended
December 312010

2011

2012Short-term employee benefits and costs

$
7.1

$
5.2

$
5.7Post-employment and other long-term benefits


0.4


0.6


0.4Equity-based compensation


17.0


19.5


15.5$
24.5

$
25.3

$
21.6


18.   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 and the United Kingdom participate in defined benefit plans. Defined contribution plans are offered to certain 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 taking into account actuarial assessments and other factors. Contributions made by us to support ongoing plan obligations have been included in the respective asset or
liability accounts on our consolidated balance sheet, as disclosed below. Actuarial valuations for our two largest pension plans are required every three years. The actuarial valuation for our
Canadian pension plan was completed using a measurement date of
December 2011; the next valuation will have a measurement date of December 2014. Our United Kingdom pension plan actuarial valuation was completed using a measurement date of
April 2010; the next valuation will have a measurement date of April 2013. We currently fund our non-pension post-employment benefit plans as we incur benefit
payments. Excluding our statutory plans, the most recent actuarial valuations for our largest non-pension post-employment benefit plans were completed using measurement dates
of October 2009 and January 2012. The next actuarial valuations for these plans will have measurement dates of October 2013 and January 2013, respectively. We accrue the
expected costs of providing non-pension post-employment benefits during the periods in which the employees render service.

We
used a measurement date of December 31, 2012 for the accounting valuation for pension and non-pension post-employment benefits.

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 63% to 67% (2011  60% to 68%) investment in fixed income, 30% to 37%
(2011  32% to 37%) investment in equities through mutual funds, and 1% to 2% (2011  1% to 2%) in other investments. 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.

All
of our plan assets are measured at their fair value using inputs described in the fair value hierarchy in note 20. At December 31, 2012, $196.9 (December 31,
2011  $185.9) of our plan assets were measured using level 1 inputs of the fair value hierarchy and $293.8 (December 31,
2011  $261.3) of our plan assets were measured using level 2 inputs of the fair value hierarchy. Some of the plan assets are held with counterparty

F-35

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

financial
institutions each of which had a Standard and Poor's rating of A or above at December 31, 2012. The remaining assets are held with financial institutions where ratings are not
available. For these institutions, Celestica monitors counterparty risk based on the diversification of plan assets. These plan assets are maintained in segregated accounts by a custodian that is
independent from the fund managers. We believe that the counterparty risk is low.

Plan
assets are measured at their fair values; however, the amounts we can record for defined benefit plan assets may be restricted under IFRS. A description of this restriction is in
note 2(n). Based on a review of the terms and conditions, and the statutory minimum funding requirements, of our defined benefit plans, we have determined that the present value of future
pension refunds or reductions in future contributions of our pension plans exceeded the total of the fair value of plan assets net of the present value of related obligations. This determination was
made on a plan-by-plan basis. As a result of our assessment, there were no reductions to the amounts we recorded for defined benefit plan assets as at December 31, 2011
and 2012.

The
table below presents the market value of the assets as follows:

Fair Market
Value at
December 31

Actual Asset
Allocation (%)
at December 312011

2012

2011

2012Fixed income securities

$
286.5

$
321.4


64%


65%Equities held through mutual funds


153.4


161.4


34%


33%Other


7.3


7.9


2%


2%Total

$
447.2

$
490.7


100%


100%


The
following tables provide a summary of the financial position of our pension and other benefit plans:

Pension Plans
Year ended December 31

Other Benefit Plans
Year ended December 312011

2012

2011

2012Plan assets, beginning of year

$
390.2

$
447.2

$


$
Expected return on plan assets


19.9


19.6





Actuarial gains in other comprehensive income


27.6


9.4





Employer contributions


35.7


20.7


5.2


18.4Voluntary employee contributions


0.1


0.1





Plan settlements











Benefits and expenses paid


(21.4
)

(21.9
)

(5.2
)

(18.4
)Foreign currency exchange rate changes


(4.9
)

15.6





Plan assets, end of year

$
447.2

$
490.7

$


$



F-36

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)



Pension Plans
Year ended December 31

Other Benefit Plans
Year ended December 312011

2012

2011

2012Accrued benefit obligations, beginning of year

$
420.3

$
437.0

$
78.1

$
83.5Current service cost


3.1


3.2


2.7


2.9Interest cost


21.6


20.4


4.2


4.2Voluntary employee contributions


0.1


0.1





Actuarial losses (gains) in other comprehensive income


16.8


23.4


6.2


(2.5
)Plan curtailments/settlements/amendments











16.3Benefits and expenses paid


(21.4
)

(21.9
)

(5.2
)

(18.4
)Foreign currency exchange rate changes


(3.5
)

14.8


(2.5
)

2.2Accrued benefit obligations, end of year

$
437.0

$
477.0

$
83.5

$
88.2Excess (deficiency) of plan assets over accrued benefit obligations

$
10.2

$
13.7

$
(83.5
)
$
(88.2
)Unrecognized past service credit








(6.7
)

(6.0
)Net pension benefit (cost) recognized, end of year

$
10.2

$
13.7

$
(90.2
)
$
(94.2
)


Experience
gains or losses represent the differences between the actual results and those we expected based on applying actuarial assumptions in valuing plan assets and obligations. The
following table outlines our experience gains and losses:

Pension Plans
Year ended December 31

Other Benefit Plans
Year ended December 312010

2011

2012

2010

2011

2012Experience gains on plan assets

$
15.6

$
27.6

$
9.5

$


$


$
Experience gains (losses) on plan obligations


3.8


1.0


0.3


(0.8
)

(1.6
)

12.1


The
present value of the defined benefit obligation, the fair value of plan assets and the surplus or deficit in our defined benefit pension and other benefit plans since our transition
to IFRS in 2010 are summarized as follows:

Pension Plans
December 31

Other Benefit Plans
December 312010

2011

2012

2010

2011

2012Accrued benefit obligations, end of year

$
(420.3
)
$
(437.0
)
$
(477.0
)
$
(78.1
)
$
(83.5
)
$
(88.2
)Plan assets, end of year


390.2


447.2


490.7








Excess (deficiency) of plan assets over accrued benefit obligations

$
(30.1
)
$
10.2

$
13.7

$
(78.1
)
$
(83.5
)
$
(88.2
)


F-37

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

The
following table outlines the plan balances as reported on our consolidated balance sheet:

December 31

December 312011

2012Pension
Plans

Other
Benefit Plans

Total

Pension
Plans

Other
Benefit Plans

TotalPension and non-pension post-employment benefit obligations

$
(30.3
)
$
(90.2
)
$
(120.5
)
$
(28.3
)
$
(87.9
)
$
(116.2
)Accrued liabilities














(6.3
)

(6.3
)Net pension assets (note 9)


40.5





40.5


42.0





42.0$
10.2

$
(90.2
)
$
(80.0
)
$
13.7

$
(94.2
)
$
(80.5
)


In
connection with certain restructuring actions announced prior to the end of the year, we reclassified a current portion of the accumulated post-employment benefits
totaling $6.3 to accrued liabilities on our consolidated balance sheet.

The
following table outlines the net expense recognized in our consolidated statement of operations for pension and non-pension post-employment
benefit plans:

Pension Plans
Year ended December 31

Other Benefit Plans
Year ended December 312010

2011

2012

2010

2011

2012Current service cost

$
3.0

$
3.1

$
3.2

$
2.3

$
2.7

$
2.9Interest cost


21.2


21.6


20.4


4.0


4.2


4.2Expected return on plan assets


(20.1
)

(19.9
)

(19.6
)







Amortization of past service cost (credit) and other








0.1


(0.7
)

(0.7
)

(0.9
)Curtailment loss (gain)


0.7








(1.8
)




16.34.8


4.8


4.1


3.8


6.2


22.5Defined contribution pension plan expense


9.7


9.8


10.1








Total expense for the year

$
14.5

$
14.6

$
14.2

$
3.8

$
6.2

$
22.5


We
generally record the expense for pension plans and non-pension post-employment benefits in cost of sales and SG&A expenses. Our restructuring actions during
2012 resulted in curtailment losses of $16.3, the majority of which we recorded through restructuring charges.

F-38

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

The
following table outlines the actuarial gains and losses, net of tax, recognized in OCI and directly in deficit:

Year ended December 312010

2011

2012Cumulative actuarial losses, beginning of year

$


$
28.3

$
23.1Actuarial losses (gains) recognized during the year (i)


28.3


(5.2
)

11.2Cumulative actuarial losses, end of year (ii)

$
28.3

$
23.1

$
34.3


(i)Net
of income tax recovery of $0.3 for 2012 (2011  $0.6 income tax recovery;
2010  $0.4 income tax recovery).(ii)Net
of income tax recovery of $1.3 as at December 31, 2012 (December 31, 2011  $1.0 income tax
recovery; December 31, 2010  $0.4 income tax recovery).


The following percentages and assumptions were used in measuring the plans for the year ended December 31 as follows:

Pension Plans

Other Benefit Plans2010

2011

2012

2010

2011

2012Weighted average discount rate at December 31 (i) for:Benefit obligations


5.1


4.7


4.3


5.5


5.1


4.4Net pension cost


5.7


5.1


4.7


6.4


5.5


5.1Weighted average rate of compensation increase for:Benefit obligations


3.5


3.4


3.4


4.7


4.7


4.4Net pension cost


3.5


3.5


3.4


4.7


4.7


4.2Weighted average expected long-term rate of return on plan assets (ii) for:Net pension cost


5.7


5.0


4.4








Healthcare cost trend rates:Immediate trend











7.2


7.1


6.9Ultimate trend











4.5


4.5


4.5Year the ultimate trend rate is expected to be achieved











2028


2030


2030


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.

F-39

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

Assumed
healthcare trend rates impact the amounts reported for healthcare plans. A one percentage-point increase or decrease in the assumed healthcare trend rate would have the following
effects:

Other Benefit Plans
Year ended December 312010

2011

20121% IncreaseEffect on benefit obligation

$
8.1

$
9.0

$
11.6Effect on current service cost and interest cost


0.7


0.5


0.91% DecreaseEffect on benefit obligation

$
(6.8
)
$
(7.5
)
$
(9.4
)Effect on current service cost and interest cost


(0.6
)

(0.5
)

(0.7
)


In 2012, we made contributions to the pension plans of $30.8 (2011  $45.5), of which $10.1
(2011  $9.8) was for defined contribution plans and $20.7 (2011  $35.7) was for defined benefit plans. We may, from
time-to-time, make voluntary contributions to the pension plans. In 2012, we made contributions to the non-pension post-employment benefit plans of
$18.4 (2011  $5.2) to fund benefit payments.

We
estimate our 2013 contributions to be $9.1 for defined benefit pension plans, $10.1 for defined contribution pension plans, and $9.8 for our non-pension
post-employment benefit plans.

19.   INCOME TAXES:

Year ended
December 312010

2011

2012Current income tax expense (recovery):Current year

$
17.3

$
22.7

$
21.3Adjustments for prior years, including changes to net provisions related to tax uncertainties


16.1


(12.4
)

(5.8
)33.4


10.3


15.5Deferred income tax expense (recovery):Origination and reversal of temporary differences


3.0


(7.5
)

(2.8
)Change in unrecognized tax losses and deductible temporary differences


(18.2
)

0.9


(18.5
)(15.2
)

(6.6
)

(21.3
)Income tax expense (recovery)

$
18.2

$
3.7

$
(5.8
)


F-40

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

A
reconciliation of income taxes calculated at the statutory income tax rate to the income tax expense (recovery) at the effective tax rate is as follows:

Year ended
December 312010

2011

2012Earnings before income taxes

$
119.4

$
198.8

$
111.9Income tax expense at Celestica's statutory income tax rate (i) of 26.5% (2011  28.3%; 2010  31.0%)

$
37.0

$
56.2

$
29.6Impact on income taxes from:Manufacturing and processing deduction


(0.4
)

(0.6
)

(0.5
)Foreign income taxed at lower rates


(72.7
)

(14.9
)

(47.9
)Foreign exchange


25.8


(31.4
)

19.5Goodwill write-off








2.0Other, including non-taxable and non-deductible items


46.7


(6.5
)

10.0Change in recognition of prior years' tax losses


(19.8
)

4.3


(13.7
)Change in unrecognized deductible temporary differences


(4.9
)

(6.1
)

(20.9
)Current year losses for which no deferred tax assets were recognized


6.5


2.7


16.1Income tax expense (recovery)

$
18.2

$
3.7

$
(5.8
)


(i)The
decreases in our statutory income tax rates resulted from reductions in the federal and applicable provincial Canadian tax rates.


Our effective tax rate can vary significantly period-to-period for various reasons, including the mix and volume of business in lower tax
jurisdictions in Europe and Asia, in jurisdictions with tax holidays and tax incentives, and in jurisdictions for which no deferred income tax assets have been recognized because management believed
it was not probable that future taxable profit would be available against which tax losses and deductible temporary differences could be utilized. Our effective tax rate can also vary due to the
impact of restructuring charges, foreign exchange fluctuations, operating losses and changes in our provisions related to tax uncertainties.

During
2012, as a result of our D&H acquisition, we recognized $10.4 of previously unrecognized deferred tax assets in the United States. We also recorded net income tax
recoveries arising from net changes to our provisions for certain tax uncertainties. In 2012, we commenced a corporate tax reorganization involving certain of our European subsidiaries. As a result,
we recognized $17.0 of deferred tax assets during 2012 as it became probable that the temporary differences associated with our investment in these subsidiaries would reverse in the foreseeable
future.

During
2011, we formally settled tax audits related to the years 1999 through 2008 of one of our Hong Kong subsidiaries for amounts previously accrued. We recorded an adjustment in 2010
relating to these tax audits which had the effect of increasing the effective tax rate for 2010. During 2011, we formally settled tax audits related to the years 2001 through 2006 and 2009 of one of
our Malaysian subsidiaries and released $10.0 of provisions previously recorded for Malaysian tax uncertainties. In 2011, we also recognized a deferred tax recovery in Canada for an inter-company
investment we wrote off relating to a restructured subsidiary.

F-41

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

The
movement of deferred tax assets and liabilities for the periods indicated are as follows:

Unrealized
foreign
exchange
gains

Accounting
provisions
not
currently
deductible

Pensions and
non-pension
post-retirement
benefits

Tax
losses
carried
forward

Property,
plant and
equipment
and
intangibles

Other

Reclassification
between
deferred tax
assets and
deferred tax
liabilities(i)

TotalDeferred tax assets:Balance  December 31, 2010

$
6.5

$
19.9




$
122.5

$
7.0

$
18.8

$
(132.8
)
$
41.9Credited (charged) to net earnings


(0.8
)

(2.7
)




0.6


13.5


(16.7
)




(6.1
)Effects of foreign exchange


(0.2
)







(8.4
)

(0.4
)

(1.1
)




(10.1
)Other














0.1


1.1


14.5


15.7Balance  December 31, 2011


5.5


17.2





114.7


20.2


2.1


(118.3
)

41.4Credited (charged) to net earnings


1.5


(12.0
)




0.3


3.6


11.1





4.5Charged directly to equity

















(0.6
)




(0.6
)Effects of foreign exchange











(1.0
)

0.4


0.8





0.2Other




















(8.9
)

(8.9
)Balance  December 31, 2012

$
7.0

$
5.2

$


$
114.0

$
24.2

$
13.4

$
(127.2
)
$
36.6Deferred tax liabilities:Balance  December 31, 2010

$
131.1




$
30.8







$
7.1

$
(132.8
)
$
36.2Charged (credited) to net earnings


20.7





(26.2
)







(7.2
)




(12.7
)Effects of foreign exchange


(9.9
)



















(9.9
)Other








(0.6
)







0.1


14.5


14.0Balance  December 31, 2011


141.9





4.0











(118.3
)

27.6Charged (credited) to net earnings


(17.9
)




1.1














(16.8
)Credited directly to equity








(0.2
)













(0.2
)Additions from business combinations





0.8








11.1








11.9Effects of foreign exchange


(0.1
)



















(0.1
)Other




















(8.9
)

(8.9
)Balance  December 31, 2012

$
123.9

$
0.8

$
4.9

$


$
11.1

$


$
(127.2
)
$
13.5


(i)This
reclassification reflects the offsetting of deferred tax assets and deferred tax liabilities to the extent they relate to the same taxing authorities
and there is a legally enforceable right to do so.


The amount of deductible temporary differences and unused tax losses for which no deferred tax assets have been recognized is $1,729.1 (December 31,
2011  $1,767.3). We have not recognized deferred tax assets in respect of these items because, based on management's estimates, it is not probable that future
taxable profit will be available against which we can utilize the benefits. A portion of these tax losses expires between 2013 and 2032 and a portion can be carried forward indefinitely to offset
taxable profits. The deductible temporary differences do not expire under current tax legislation.

The
aggregate amount of temporary differences associated with investments in subsidiaries for which we have not recognized deferred tax liabilities is $5.8
(December 31, 2011  $2.3).

We
have recorded net deferred tax assets of $2.8 for three of our subsidiaries which realized losses in 2012. We have recognized deferred tax assets based on our estimate of future
taxable profit that we expect the subsidiaries to achieve based on our review of their financial projections.

Certain
countries in which we do business negotiate tax incentives to attract and retain our business. Our tax expense could increase if certain tax incentives from which we benefit are
retracted. A retraction could occur if we fail to satisfy the conditions on which these tax incentives are based, if they are not renewed upon expiration, if tax rates applicable to us in such
jurisdictions are otherwise increased or due to changes in legislation or administrative practices. We believe we will comply with the conditions of the tax incentives; however, changes in our outlook
in any particular country could impact our ability to meet the conditions.

F-42

---





CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

We have been granted tax incentives, including tax holidays, for our China, Malaysia and Thailand subsidiaries. The tax benefit arising from these incentives is
approximately $15.1 or $0.07 per diluted share for 2012, $27.5 or $0.13 per diluted share for 2011, and $28.4 or $0.12 per diluted share for 2010. These tax incentives are subject to certain
conditions with which we intend to comply and they expire between 2014 and 2020.

See
note 23 regarding income tax contingencies.

20.   FINANCIAL INSTRUMENTS:

Our financial assets are comprised primarily of cash and cash equivalents, accounts receivable and derivatives used for hedging purposes. Our financial
liabilities are comprised primarily of accounts payable, certain accrued and other liabilities and provisions, and derivatives. We record the majority of our financial liabilities at amortized cost
except for derivative liabilities, which we measure at fair value. We classify our term
deposits as held-to-maturity. We record our short-term investments in money market funds at fair value, with changes recognized through our consolidated statement
of operations.

Cash
and cash equivalents are comprised of the following:

December 312011

2012Cash

$
191.7

$
265.3Cash equivalents


467.2


285.2$
658.9

$
550.5


Our
current portfolio consists of bank deposits and certain money market funds that hold primarily U.S. government securities. The majority of our cash and cash equivalents is
held with financial institutions each of which had at December 31, 2012 a Standard and Poor's short-term rating of A-1 or above.

Financial risk management objectives:

We have exposures to a variety of financial risks through our operations. We regularly monitor these risks and establish policies and
business practices to mitigate the adverse effects of these potential exposures. We have used derivative financial instruments, such as foreign currency forward contracts, 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.

(a)   Currency risk:

Due to the global nature of our operations, we are exposed to exchange rate fluctuations on our cash receipts, cash payments and balance sheet exposures
denominated in various currencies. The majority of our currency risk is driven by the operational costs incurred in local currencies by our subsidiaries. We manage our currency risk through our
hedging program using forecasts of future cash flows and balance sheet exposures denominated in foreign currencies.

Our
major currency exposures at December 31, 2012 are summarized in U.S. dollar equivalents in the following table. We have included in this table only those items that we
classify as financial assets or
liabilities and which were denominated in non-functional currencies. In accordance with the financial instruments standard, we have excluded items such as pension and
non-pension post-employment benefits and income taxes.

F-43

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

The
local currency amounts have been converted to U.S. dollar equivalents using the spot rates at December 31, 2012.

Chinese
renminbi

Malaysian
ringgit

Canadian
dollar

Mexican
peso

Thai
bahtCash and cash equivalents

$
33.9

$
2.9

$
2.6

$
3.0

$
2.3Accounts receivable


19.3





13.9





Other financial assets


1.6


0.6





0.6


0.4Accounts payable and certain accrued and other liabilities and provisions


(43.3
)

(16.9
)

(33.9
)

(16.3
)

(17.7
)Net financial assets (liabilities)

$
11.5

$
(13.4
)
$
(17.4
)
$
(12.7
)
$
(15.0
)


Foreign currency risk sensitivity analysis:

At December 31, 2012, the financial impact of a one-percentage point strengthening or weakening of the following
currencies against the U.S. dollar for our financial instruments denominated in non-functional currencies is summarized in the following table. The financial instruments impacted by
a change in exchange rates include our exposures to the above financial assets or liabilities denominated in non-functional currencies and our foreign exchange forward contracts.

Chinese
renminbi

Malaysian
ringgit

Canadian
dollar

Mexican
peso

Thai BahtIncrease
(decrease)1% StrengtheningNet earnings

$
0.5

$
(0.1
)
$
2.1

$


$
Other comprehensive income





0.8


0.5


0.2


1.01% WeakeningNet earnings


(0.4
)

0.1


(2.0
)




Other comprehensive income





(0.8
)

(0.4
)

(0.2
)

(1.0
)


(b)   Interest rate risk:

Borrowings under our revolving credit facility bear interest at LIBOR or Prime rate plus a margin. A one-percentage point increase in these rates
would increase interest expense, assuming maximum borrowings under our $400.0 revolving credit facility, by $4.0 annually. At December 31, 2012, we had drawn $55.0 under this credit facility
(December 31, 2011  undrawn).

(c)   Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss to us. We believe the credit risk of
counterparty non-performance is low. With respect to our financial market activities, we have adopted a policy of dealing only with creditworthy counterparties to mitigate the risk of
financial loss from defaults. We monitor the credit risk of the counterparties with whom we conduct business, through a combined process of credit rating reviews and portfolio reviews. To mitigate the
risk of financial loss from defaults under our foreign currency forward exchange contracts, our contracts are held by counterparty financial institutions each of which had a Standard and Poor's rating
of A-1 or above at December 31, 2012. In addition, we maintain cash and short-term investments in high quality investments or on deposit with major financial
institutions. Each financial institution with which we have our accounts receivable

F-44

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

sales
program had a Standard and Poor's short-term rating of A-1 and a long-term rating of A or above at December 31, 2012. At December 31, 2012, we
sold $50.0 of accounts receivable under this sales program.

We
also provide unsecured credit to our customers in the normal course of business. The financial instruments that potentially subject us to credit risk include our accounts receivable,
inventory on hand, and
non-cancelable purchase orders in support of customer demand. We mitigate our risk by monitoring our customers' financial condition and performing ongoing credit evaluations. In certain
instances, we may obtain letters of credit or other forms of security from our customers. We consider credit risk in determining our estimates of reserves for potential credit losses. The carrying
amount of financial assets recorded in the consolidated financial statements, net of any allowances or reserves for losses, represents our estimate of maximum exposure to credit risk.

At
December 31, 2012, less than 1% of our gross accounts receivable are over 90 days past due. Accounts receivable are net of an allowance for doubtful accounts of $1.5 at
December 31, 2012 (December 31, 2011  $2.7).

(d)   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, accrued and other current liabilities and provisions are due within 90 days. We manage liquidity risk by maintaining a portfolio of liquid funds and investments
and having access to a revolving credit facility, intraday and overnight bank overdraft facilities and an accounts receivable sales program. We believe that cash flow from operating activities,
together with cash on hand, cash from the sale of accounts receivable, and borrowings available under our revolving credit facility and intraday and overnight bank overdraft facilities are sufficient
to fund our financial obligations.

Fair values:

We used the following methods and assumptions to estimate the fair value of each class of financial instruments:

The
carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and provisions, and borrowings under our revolving credit facility
approximate the fair values of these financial instruments due to the short-term nature of these instruments. The fair values of foreign currency contracts are estimated using generally
accepted valuation models based on discounted cash flow analysis with inputs of observable market data, including currency rates and discount factors. Discount factors are adjusted by our own credit
risk or the credit risk of the counterparty, depending if the fair values are in liability or asset positions, respectively.

Fair value measurements:

In the table below, we have segregated our financial assets and liabilities that are measured at fair value, based on the inputs used
to determine fair value at the measurement date. The three levels within the fair value hierarchy, based on the reliability of inputs, are as follows:



F-45

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)



December 31, 2011

December 31, 2012Level 1

Level 2

Total

Level 1

Level 2

TotalAssets:Cash equivalents (money market funds)

$
57.3

$


$
57.3

$
2.8

$


$
2.8Derivatives  foreign currency forward contracts





2.0


2.0





6.2


6.2$
57.3

$
2.0

$
59.3

$
2.8

$
6.2

$
9.0Liabilities:Derivatives  foreign currency forward contracts

$


$
15.9

$
15.9

$


$
2.0

$
2.0


See
note 18 for the input levels used to measure the fair value of our pension assets.

Money
market funds are valued using a market approach based on the quoted market prices of identical instruments. Foreign currency forward contracts are valued using an income approach,
by comparing the current quoted market forward rates to our contract rates and discounting the values with appropriate market observable credit risk adjusted rates. We have not valued any of our
financial instruments using level 3 (unobservable) inputs. There were no transfers of fair value measurements between level 1 and level 2 of the fair value hierarchy in 2011
or 2012.

Derivatives and hedging activities:

We enter into foreign currency contracts to hedge foreign currency risks relating to cash flow and balance sheet exposures. At
December 31, 2012, we had forward exchange contracts to trade U.S. dollars in exchange for the following currencies:

Currency

Amount
of U.S. dollars

Weighted average
exchange rate
of U.S. dollars

Maximum
period in
months

Fair value
gain/(loss)Canadian dollar

$
288.2

$
1.01


9

$
(0.7
)Thai baht


118.3


0.03


15


2.1Malaysian ringgit


87.6


0.32


15


1.1Mexican peso


37.9


0.08


12


0.4British pound


68.3


1.62


4


0.1Chinese renminbi


34.1


0.16


12


0.1Euro


11.9


1.31


4


0.1Romanian leu


11.3


0.28


12


0.5Other


24.6





12


0.5Total

$
682.2







$
4.2


At
December 31, 2012, the fair value of these contracts was a net unrealized gain of $4.2 (December 31, 2011  net unrealized loss of
$13.9). At December 31, 2012, we recorded $6.2 of derivative assets in other current assets and $2.0 of derivative liabilities in accrued and other current liabilities. The unrealized gains or
losses are a result of fluctuations in foreign exchange rates between the date the currency forward contracts were entered into and the valuation date at period end. Changes in the fair value of
hedging derivatives to which we apply cash flow hedge accounting, to the extent effective, are deferred in OCI until the expenses or items being hedged are recognized in our consolidated statement of
operations. Any hedge ineffectiveness, which at December 31, 2012 was not significant, is recognized immediately in our consolidated statement of operations.

F-46

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

We
have not designated certain forward contracts to trade U.S. dollars as hedges, most significantly our Canadian dollar and British pound sterling contracts, and have marked
these contracts to market each period through our consolidated statement of operations.

21.   CAPITAL DISCLOSURES:

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 a revolving credit facility, intraday and overnight bank overdraft facilities, an accounts
receivable sales program and capital stock.

We
regularly review our borrowing capacity and make adjustments, as available, for changes in economic conditions. At December 31, 2012, we have a $400.0 revolving credit
facility. We also have access to $70.0 in intraday and overnight bank overdraft facilities, and we could sell up to $375.0 in accounts receivable on an uncommitted basis under an accounts receivable
sales program to provide short-term liquidity. At December 31, 2012, we sold $50.0 of accounts receivable and we had drawn $55.0 under our revolving credit facility. At
December 31, 2012, we also issued $31.1 of letters of credit under our revolving credit facility. Our revolving credit facility has restrictive covenants, including those relating to debt
incurrence, the sale of assets and a change of control. The facility also contains financial covenants relating to indebtedness, interest coverage and liquidity and we have pledged certain assets as
security. We closely monitor our business performance to evaluate compliance with our covenants. We continue to monitor and review the most cost-effective methods of raising capital,
taking into account these restrictions and covenants. Our revolving credit facility matures in January 2015. Our accounts receivable sales program has no fixed termination date and can be
terminated at any time by us or the banks. The amounts we may borrow and repay under these facilities can vary significantly from month-to-month depending on our working
capital and other cash requirements.

We
commenced NCIBs to repurchase shares for cancellation in July 2010 and in February 2012. We canceled 16.1 million and 13.3 million subordinate voting
shares under these NCIBs in 2010 and 2012, respectively. In October 2012, we commenced an SIB to repurchase additional shares for cancellation. We completed the SIB in December 2012 and
canceled 22.4 million subordinate voting shares. See note 12. We have not distributed, nor do we have any current plan to distribute, any dividends to our shareholders. We have
purchased, and expect to continue to purchase, subordinate voting shares from time-to-time in the open market through the trustee for delivery under our equity-based
compensation plans.

Our
strategy on capital risk management has not changed significantly since the end of 2011. Other than the restrictive covenants associated with our revolving credit facility noted
above, we are not subject to any contractual or regulatory 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 or cash flows.

22.   WEIGHTED AVERAGE NUMBER OF SHARES DILUTED (in millions):

2010

2011

2012Weighted average number of shares (basic)


227.8


216.3


208.6Dilutive effect of equity-based compensation plans


2.3


2.0


1.9Weighted average number of shares (diluted)


230.1


218.3


210.5


For
the year ended December 31, 2012, we excluded 4.5 million of equity-based awards (year ended December 31,
2011  4.5 million; year ended December 31, 2010  4.7 million) from the diluted weighted average per
share calculation as they were out-of-the-money.

F-47

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

23.   COMMITMENTS, CONTINGENCIES AND GUARANTEES:

At December 31, 2012, we have future minimum lease payments as follows:

Operating
Leases2013

$
26.72014


17.72015


8.62016


4.32017


3.0Thereafter


15.1


Our
operating leases primarily relate to premises. As at December 31, 2012, we had committed $16.3 in capital expenditures, principally for machinery and equipment to support new
customer programs.

We
have contingent liabilities in the form of letters of credit, letters of guarantee and surety 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, 2012, these contingent liabilities amounted to $43.2 (December 31,
2011  $40.9), including $31.1 of letters of credit that we issued under our revolving credit facility.

In
addition to the above guarantees, we provide routine indemnifications, the terms of which range in duration and often are not explicitly defined. These may include indemnifications
against third-party intellectual property infringement claims and third-party claims for property damage resulting from our negligence. 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.

Litigation:

In the normal course of our operations, we may 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 always possible to estimate the extent
of potential costs, if any, management believes that the ultimate resolution of such matters 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 us 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 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 added one of our directors and Onex as defendants. On
October 14, 2010, the District Court granted the defendants' motions to dismiss the consolidated amended complaint in its entirety. The plaintiffs appealed to the United States Court of
Appeals for the Second Circuit the dismissal of its claims against us, our former Chief Executive and Chief Financial Officers, but not as to the other defendants. In a summary order dated
December 29, 2011, the Court of Appeals reversed the District Court's dismissal of the consolidated amended complaint and remanded the case to the District Court for further proceedings. The
parties are

F-48

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

currently
engaged in the discovery process. Parallel class proceedings, including a claim issued in October 2011, remain against us and our former Chief Executive and Chief Financial Officers
in the Ontario Superior Court of Justice. On October 15, 2012, the Ontario Superior Court of Justice granted limited aspects of the defendants' motion to strike, which ruling is subject to
appeal, but the court has not granted leave nor certification of any actions. We believe the allegations in the 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 that it will not have a material adverse impact on our financial position or liquidity. In addition, we may incur
substantial litigation expenses in defending the claims. We have liability insurance coverage that may cover some of our litigation expenses and potential judgments or settlement costs.

Our
manufacturing facility in Miyagi, Japan was damaged as a result of a major earthquake and tsunami in March 2011. In March 2012, we settled a related insurance
claim for an amount that was consistent with our expectation.

Income taxes:

We are subject to tax audits and reviews by various tax authorities of historical information which could result in additional tax
expense in future periods relating to prior results. Reviews by tax authorities generally focus on, but are not limited to, 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 with their challenges, 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 should have been materially higher in
2001 and 2002 and materially lower in 2003 and 2004 as a result of certain inter-company transactions, with additional proposed limitations on benefits associated with favorable adjustments arising
from inter-company transactions and other adjustments. If tax authorities are successful with their challenge, we estimate that the maximum net impact for additional income taxes and interest charges
associated with the proposed limitations of the favorable adjustments could be approximately $41 million Canadian dollars (approximately $41 million at current exchange rates).

Canadian
tax authorities have taken the position that certain interest amounts deducted by one of our Canadian entities in 2002 through 2004 on historical debt instruments should be
re-characterized as capital losses. If tax authorities are successful with their challenge, we estimate that the maximum net impact for additional income taxes and interest charges could
be approximately $30.5 million Canadian dollars (approximately $30.6 at current exchange rates). We believe that our asserted position is appropriate and would be sustained upon full
examination by the tax authorities and, if necessary, upon consideration by the judicial courts. Our position is supported by our Canadian legal tax advisers.

In
connection with a tax audit in Brazil, tax authorities had taken the position that income reported by our Brazilian subsidiary in 2004 should have been materially higher as a result
of certain inter-company transactions. In June 2011, we received a ruling from the Brazilian Lower Administrative Court that was largely consistent with our original filing position. As the
ruling generally favored the taxpayer, the Brazilian tax authorities appealed the matter to a higher court. In June 2012, the Brazilian Higher Administrative Court unanimously upheld the Lower
Administrative Court decision. Although we believe it is unlikely to occur due to the recent unanimous decision by the higher court, the Brazilian tax authorities have the right to present a Special
Appeal to change the decision. We did not previously accrue for any potential adverse tax impact for the 2004 tax audit. Brazilian tax authorities are not precluded from taking similar positions in
future audits with respect to these types of transactions.

F-49

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

We
have and expect to continue to recognize the future benefit of certain Brazilian tax losses on the basis that these tax losses can and will be fully utilized in the fiscal period
ending on the date of dissolution of our Brazilian subsidiary. While our ability to do so is not certain, we believe that our interpretation of applicable Brazilian law will be sustained upon full
examination by the Brazilian tax authorities and, if necessary, upon consideration by the Brazilian judicial courts. Our position is supported by our Brazilian legal tax advisors. A change to the
benefit realizable on these Brazilian losses could increase our net deferred tax liabilities by approximately 48.8 million Brazilian reais (approximately $23.9 at current exchange rates).

The
successful pursuit of the assertions made by any taxing authority related to the above noted tax audits or others could result in our owing significant amounts of tax, interest and
possibly penalties. We believe we have substantial defenses to the asserted positions and have adequately accrued for any probable potential adverse tax impact. However, there can be no assurance as
to the final resolution of these claims and any resulting proceedings and if these claims and any ensuing proceedings are determined adversely to us, the amounts we may be required to pay could
be material.

24.   SEGMENT AND GEOGRAPHIC INFORMATION:

We are required to disclose certain information 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 reportable segment is comprised of our electronics manufacturing services business. Our chief operating decision maker is our Chief Executive Officer.

The
following table indicates revenue by end market as a percentage of total revenue. Our revenue fluctuates from period-to-period depending on numerous factors,
including but not limited to: seasonality of business, the mix and complexity of the products or services we provide, the extent, timing and rate of new program wins, follow-on business,
or losses from customers, the phasing in or out of programs, the success in the marketplace of our customers' products, and changes in customer demand. We expect that the pace of technological change,
the frequency of customers transferring business among EMS competitors and the level of outsourcing by customers (including decisions on insourcing), and the constantly changing dynamics of the global
economy will also continue to impact our business from period-to-period. Starting in 2012, we combined our enterprise communications and telecommunications end markets into one
communications end market for reporting purposes. We also combined prior period percentages.

Year ended December 312010

2011

2012Communications


37%


35%


35%Consumer


25%


25%


18%Diversified


12%


14%


20%Servers


14%


15%


15%Storage


12%


11%


12%


F-50

---



CELESTICA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in millions of U.S. dollars, except per share amounts)

The
following table details our external revenue allocated by manufacturing location among countries exceeding 10%:

Year ended December 312010

2011

2012Mexico


27%


25%


19%Thailand


21%


21%


21%China


14%


14%


17%Malaysia


11%


*


12%Romania


*


11%


*


*Less
than 10% in the period indicated


The
following table details our allocation of property, plant and equipment, intangible assets and goodwill among countries exceeding 10%:

December 312011

2012China


26%


23%Canada


13%


11%Thailand


12%


10%Mexico


12%


*United States


*


20%Malaysia


*


16%


*Less
than 10% in the period indicated


Customers:

During 2012, two customers individually represented more than 10% of total revenue. In aggregate, these customers comprised 23% of
total revenue. At December 31, 2012, one customer individually represented more than 10% of total accounts receivable.

During
2011, two customers individually represented more than 10% of total revenue. In aggregate, these customers comprised 30% of total revenue. At December 31, 2011, two
customers individually represented more than 10% of total accounts receivable.

During
2010, one customer individually comprised 20% of total revenue. At December 31, 2010, one customer individually represented more than 10% of total accounts receivable.

In
June 2012, we announced that we would wind down our manufacturing services for RIM. We completed our manufacturing services for RIM and the related transition activities by the
end of 2012. Our revenue from RIM was minimal in the fourth quarter of 2012. RIM accounted for 12% of total revenue in 2012 (2011  19%;
2010  20%).

F-51

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