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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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FLEXTRONICS INTERNATIONAL LTD.
 
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EXPLANATORY NOTE
The following is a presentation to be given by Flextronics International Ltd. (the “Company”) to certain holders of its Ordinary Shares beginning on or about June 5, 2009, regarding the Company’s proposed Option Exchange Program.

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Design. Build. Ship. Service. Design. Build. Ship. Service. Option Exchange Program - Investor Presentation Shareholder Meeting Date: Monday, July 13, 2009

 

Design Feature Proposed Program Type of Program Option for option exchange Participation All option holders eligible, except: Board members, CEO, CFO and all other Section 16 officers Employees in certain international locations Employees with options priced below $10 Price Floor $10 or 52-week high, whichever is greater Value-Neutral Aggregate value of tendered underwater options is approximately equivalent to value of newly issued options Exchange Ratios Program would have two price buckets with the following value-neutral exchange ratios (based on share price of ~$4.23): Options with prices between $10.00 and $11.99 = 1.6:1 exchange ratio Options with prices at $12 or above = 2.5:1 exchange ratio Shares Returned to Pool All of the shares recaptured as part of the exchange program would be returned to the pool and be available for future grant Assuming 100% participation, ~30MM shares would be returned to the pool ~17MM options would be re-issued at the new price Net 12.9MM shares would be recaptured, thereby reducing issued stock overhang by 1.6% from 9.9% to 8.3% Upon completion, 5MM shares from the Solectron plan would be cancelled to further reduce overhang Vesting To maximize the retention value of the exchange program, vesting of newly issued shares will be re-set to a minimum of 2 years Contractual Term New awards will have a contractual term of 7 years (not more than outstanding shares) Proposed Flextronics Exchange Program 1 2 3 4 5 6 7 8

 

Rationale EMS industry has been significantly impacted by worldwide economic downturn As a result, 100% of outstanding options granted prior to December 2008 are under water Underwater options are a "sunk" cost with no corresponding benefit or value Flextronics has implemented aggressive cost reduction initiatives across the globe Substantial headcount reductions Frozen salaries Reduced benefits Despite reduced incentives, it is critical for Flextronics to retain and motivate its top talent to successfully implement our corporate strategies Option exchange program provides benefits for both shareholders and employees Reduce overhang Minimize compensation expense Motivate employees

 

Proposed program would be compliant with U.S. ISS guidelines RiskMetrics (ISS) Criteria Flextronics Proposed Design Members of the Board of Directors and Named Executive Officers excluded Meets Criteria Exchange ratios return no more value in new awards compared to those that are tendered (per ISS methodology) Meets Criteria Contractual term of new options (assuming an option for option exchange) is not longer than term of original options Meets Criteria New award vesting is reset such that no awards are fully-vested on the date of grant Meets Criteria Rationale for exchange program is clearly defined (general market downturn is not sufficient rationale) Outlined in Proxy Statement No options are eligible to be exchanged that are below the company's 52-week high stock price as of the time the offer is made to employees Meets Criteria Although program does not meet 5% dilution (issued overhang) threshold for Singapore-based companies, the cost of re-issuing surrendered options returned to the active plan does not exceed industry limits for U.S-based companies (Shareholder Value Transfer "SVT" calculation) Modeling Estimate Meets Criteria for U.S.-Based Companies Program Design vs. RiskMetrics (ISS) Criteria

 

Appendix

 

Equity Overhang Impact Flextronics' overhang, both issued and total, upon completion of the option exchange will be below the 50th percentile of its identified peer companies Definition Issued Equity Overhang (Basic) Total options and restricted stock outstanding divided by total common shares issued and outstanding Total Equity Overhang (Basic) Total options and restricted stock outstanding plus shares available to grant divided by total common shares issued and outstanding * *Peer group: Advanced Micro Devices, Agilent Technologies, Anixter International, Applied Materials, Arrow Electronics, Avnet, Inc., Celestica, Cisco Systems, Dell, Emerson Electric, Hewlett-Packard, Honeywell International, Ingram Micro, Intel, Jabil Circuit, Micron Technology, Motorola, Seagate Technology, Sun Microsystems, Tech Data, Tyco International, United Technologies, Western Digital, Xerox

 

Comparison of Flextronics Program Versus Other Large Technology Companies That Have Been Approved Design Flextronics eBay Google Intel Motorola Meeting Date July 13, 2009 (EGM) April 29, 2009 N/A May 20, 2009 May 4, 2009 Approved by Shareholders TBD Yes N/A Yes Yes Type of Program Options for Options Options for RSUs Options for Options Options for Options Options for Options, except in certain non-US countries Participation Exclusion of Executive Officers and Board Exclusion of Named Executive Officers and Board Exclusion of CEO, two Founders and Board Exclusion of listed Executive Officers and Board Exclusion of Executive Officers, members of the Senior Leadership Team and Board Price Floor $10.00 52-Week High 52-Week High Price below 52-Week High 52-Week High 52-Week High Value-Neutral Yes 90% of FMV No Yes Yes Exchange Ratios 2 ratios 1) 1.6:1 and 2) 2.5:1 9 ratios ranging from 12:1 to 35:1 with most options being exchanged at 15:1 1:1 exchange program 11 ratios ranging from 1.7:1 to 99.6:1 with most options exchanged at a 1.9:1 ratio 4 ratios ranging from 2:1 to 77:1 with most options exchanged at a 3.5:1 ratio Shares Returned to Pool 12.9MM returned to the pool/ 5MM cancelled out of SLR plan No Not Applicable (1:1 exchange) No Yes Vesting Reset of vesting to a minimum of 2 year vest Additional 12 months vesting from what original option grants were Additional 12 months vesting from what original option grants were Complete reset to 4 year annual vest Reset of vesting to a 2 year annual vest Contractual Term 7 years Full contractual term of 10 years Same expiration date as original options Full contractual term of 7 years Reduced term of 5 years

 

Design Flextronics AMD Fairchild Semi NetApp Starbucks Meeting Date July 13, 2009 (EGM) May 7, 2009 May 6, 2009 April 21, 2009 (EGM) March 18, 2009 Approved by Shareholders TBD Yes Yes Yes Yes Type of Program Options for Options Options for Options Options for RSUs Options for RSUs Options for Options Participation Exclusion of Executive Officers and Board Exclusion of CEO, NEOs and Board Exclusion of CEO, NEOs and Board Exclusion of 16(b) Officers and Board Exclusion of CEO, broader Officer group and Board Price Floor $10.00 52-Week High 52-Week High 52-Week High Below 52-Week High 52-Week High Value-Neutral Yes Yes Yes Yes Yes Exchange Ratios 2 ratios 1) 1.6:1 and 2) 2.5:1 3.5:1 5 ratios ranging from 12.5:1 to 43:1 with most options being exchanged at a 12.5:1 ratio 5 ratios ranging from 5:1 to 25:1 with most options being exchanged at a 5:1 ratio 4 ratios ranging from 4:1 to 15.5:1 Shares Returned to Pool 12.9MM returned to the pool/ 5MM cancelled out of SLR plan No No Maximum # of shares returned to the pool of 3.5 million Yes Vesting Reset of vesting to a minimum of 2 year vest 1 year vest if options were fully vested, otherwise 2 year annual vest Reset of vesting to 4 year annual vest Fully vested shares will vest over 2 years and partially or unvested shares will vest over 4 years Reset of vesting to a minimum of 2 year annual vest Contractual Term 7 years Same expiration date as original options Full contractual term of 10 years Full contractual term of 7 years Reduced term of 7 years Comparison of Flextronics Program Versus Other Large Technology Companies That Have Been Approved

 

Thank you for your consideration Option Exchange Program