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~~PAGE~~UNITED ~~--------~~STATES SECURITIES ~~PART~~AND IEXCHANGE ~~FINANCIAL INFORMATION....................................... 3 ITEM 1: FINANCIAL STATEMENTS........................................ 3 1.A Consolidated Balance Sheets as of June 30~~COMMISSION Washington, ~~2001 and December 31, 2000 3 1~~D.~~B Consolidated Statements of Operations for the three months and six months ended June 30, 2001 and 2000............... 4 1.~~C ~~Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2001 and 2000~~.~~.....................................................~~ 5 1.D Consolidated Statements of Cash Flows for the three months and six months ended June 30, 2001 and 2000............... 6 1.E Notes to Consolidated Financial Statements.................. 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 10 PART II OTHER INFORMATION........................................... 15 ITEM 1: LEGAL PROCEEDINGS........................................... 15 ITEM 2: CHANGES IN SECURITIES....................................... 15 ITEM 3: DEFAULTS UPON SENIOR SECURITIES............................. 15 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 15 ITEM 5: OTHER INFORMATION........................................... 15 ITEM 6: EXHIBITS AND REPORTS FILED ON FORM 6-K...................... 15 SIGNATURES............................................................. 1620549

~~2001~~FORM 2000 (UNAUDITED) (AUDITED) ----------- ---------- ASSETS: Current assets: Cash and cash equivalents............................... $ 3,306 $ 2,623 Accounts receivable, net of allowance for doubtful accounts of $5,289 (2000-$5,289)...................... 34,635 84,067 Due from affliates and other receivables................ 12,733 8,768 Other receivables....................................... 7,572 3,354 ---------- ---------- Total current assets...................................... 58,246 98,812 Restricted cash........................................... 93,831 111,453 Capitalized financing costs, net of accumulated amortization of $6~~,987 (2000~~-$5,664).................... 9,750 11,073 Property and equipment, net............................... 959,608 1,001,246 ---------- ---------- Total assets.............................................. $1,121,435 $1,222,584 ========== ========== LIABILITIES: Current liabilities: Accrued construction costs.............................. $ 21,138 $ 49,139 Accounts payable........................................ 9,234 22,246 Accrued liabilities..................................... 21,273 14,331 Interest rate collars................................... 390 -- Deferred revenue........................................ 78,412 59,371 Income taxes payable.................................... 4,018 3,766 ---------- ---------- 134,465 148,853 8 1/4% senior notes, due 2008, net of unamortized discount of $3,843 (2000-$4,134) 426,157 425,861 Other long-term debt...................................... 72,000 93,000 Deferred revenue and other................................ 209,603 210,158 Deferred taxes............................................ 3,298 3,358 ---------- ---------- Total liabilities......................................... $ 845,523 $ 881,230 ========== ========== SHAREHOLDER'S EQUITY: Class B common shares, $.0001 par value................... 64 64 Additional paid-in capital................................ 545,967 544,697 Accumulated other comprehensive income - foreign currency translation............................................. (756) (418) Accumulated deficit....................................... (269,363) (202,989) ---------- ---------- Total shareholder's equity................................ 275,912 341,354 ---------- ---------- Total liabilities and shareholder's equity................ $1,121,435 $1,222,584 ========== ==========K

~~THREE~~REPORT ~~MONTHS~~OF ~~ENDED~~FOREIGN ~~SIX~~PRIVATE ~~MONTHS~~ISSUER ~~ENDED~~PURSUANT ~~JUNE~~TO RULE ~~30, JUNE 30, --------------------------- --------------------------- 2001 2000 2001 2000~~ 13(~~UNAUDITED~~) ~~(UNAUDITED) (UNAUDITED) (UNAUDITED)~~ ------------ ------------ ------------ ------------ REVENUES................................... $ 23,557 $ 21,646 $ 45,178 $ 39,264 EXPENSES Operations and maintenance cost (including non-cash compensation expense of $150, $335, $300, $1,166)... 8,107 8,900 15,506 16~~,973~~ ~~Sales~~OR ~~and marketing~~ 15(~~including non-cash compensation expense of $113, $158, $226, $523~~)~~............................ 2,828 2,787 5,324 6,937 General and administrative (including non~~-cash compensation expense of $372, $651, $744, $2,282).................... 10,965 7,936 20,068 15,136 Depreciation and amortization............ 18,601 19,446 37,227 39,161 ------------ ------------ ------------ ------------ 40,501 39,069 78,125 78,207 OPERATING LOSS............................. (16~~,944)~~ ~~(17,423)~~UNDER ~~(32,947)~~THE ~~(38,943)~~SECURITIES EXCHANGE ~~INTEREST~~ACT ~~EXPENSE...........................~~OF 10,971 13,036 22,348 26,059 INTEREST INCOME............................ 1,182 1,803 2,536 3,477 ------------ ------------ ------------ ------------ LOSS BEFORE INCOME TAXES................... (26,733) (28,656) (52,759) (61,525) PROVISION FOR INCOME TAXES................. 18 37 465 130 ------------ ------------ ------------ ------------ NET LOSS APPLICABLE TO COMMON SHAREHOLDERS............................. $ (26,751) $ (28,693) $ (53,224) $ (61,655) ============ ============ ============ ============ Basic and diluted loss per common share.... $ (0.04) $ (0.05) $ (0.08) $ (0.10) Weighted average common shares outstanding.............................. 635,796,338 635,796,338 635,796,338 635,796,3381934

~~THREE~~For ~~MONTHS~~the ~~ENDED~~quarter ~~SIX~~ended ~~MONTHS ENDED JUNE~~ September 30, ~~JUNE 30,~~ 2001 2000 2001 2000 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ----------- ----------- NET LOSS......................................... $(26,751) $(28,693) $(53,224) $(61,655) Foreign currency translation adjustment.......... 357 89 52 89 Loss on derivatives--effect of adoption.......... -- -- (94) -- Loss on derivatives--change in fair value........ (44) -- (296) -- -------- -------- -------- -------- COMPREHENSIVE LOSS............................... $(26,438) $(28,604) $(53,562) $(61,566) ======== ======== ======== ========

JUNE 30, JUNE 30, 2001 2000 (UNAUDITED) (UNAUDITED) ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss applicable to common shareholders................ $(53,224) $(61,655) Adjustments to reconcile net loss to net cash provided by / (used in) operating activities: Amortization of financing costs......................... 1,323 1,169 Provision for doubtful accounts......................... -- (996) Senior debt discount.................................... 296 295 Non-cash stock compensation............................. 1,270 4,252 Depreciation............................................ 37,227 39,161 Loss on disposal of fixed assets........................ -- 84 Deferred taxes.......................................... 2 34 Add / (deduct) net changes in assets and liabilities: Accounts receivable................................... 49,434 5,481 Due from affiliate.................................... -- 950 Prepaid expenses and other assets..................... (4,220) (275) Accounts payable and accrued liabilities.............. (6,072) 6,592 Income taxes payable.................................. 252 (82) Due to affiliate...................................... (3,965) (166) Deferred revenue and other............................ 18,486 55,125 -------- -------- Net cash provided by operating acilivities.......... 40,809 49,969 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Financing costs incurred.................................. -- (2,802) Capital contribution from FLAG ~~Telecom Holdings Ltd....... -- 25,000 Payment of dividend.......................................~~ LIMITED (~~13,150)~~Exact --name ~~Repayment~~ of ~~long-term~~registrant ~~debt...............................~~as ~~(21,000)~~specified ~~(40,000) Decrease / (increase)~~ in ~~restricted~~its ~~cash.................. 17,622 (24,741~~charter) -------- -------- Net cash used in financing activities............... (16,528) (42,543) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for construction................................ (22,000) (2,344) (Purchase) / disposal of fixed assets, net................ (1,594) (4,711) Proceeds from disposal of assets.......................... -- 33 -------- -------- Net cash used in investing activities............... (23,594) (7,022) -------- -------- NET INCREASE IN CASH........................................ 687 404 Effect of foreign currency movements...................... (4) (12) CASH, beginning of period................................... 2,623 1,213 CASH, end of period......................................... $ 3,306 $ 1,605 ======== ======== SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING ACTIVITIES: Increase in construction in progress...................... $ -- $ -- Decrease in accrued construction costs.................... (22,000) (2,344) -------- -------- Cash incurred for construction in progress................ $(22,000) $ (2,344) ======== ======== SUPPLEMENTAL INFORMATION DISCLOSURE OF CASH FLOW INFORMATION: Interest paid............................................. $ 20,729 $ 24,729 ======== ======== Taxes paid................................................ $ -- $ 100 ======== ========

CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F

Form 20-F /x/ Form 40-F / /

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12-2(b) under the Securities Exchange Act of 1934

Yes / / No /x/

This report ("Quarterly Report") sets forth certain information regarding the financial condition and results of operations of FLAG Limited, a Bermuda company for the fiscal quarter ended September 30, 2001. This Quarterly Report contains a review of our unaudited financial information and analysis for this quarter, as well as certain other information.

The following unaudited condensed financial statements, in the opinion of our management, reflect all adjustments necessary for a fair presentation of the financial position, the results of operations and cash flows for the periods presented.

FLAG LIMITED
FORM 6-K
INDEX

		Page
PART I	FINANCIAL INFORMATION	3
ITEM 1:	FINANCIAL STATEMENTS	3
1.A	Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000	3
1.B	Consolidated Statements of Operations for the three months and nine months ended September 30, 2001 and 2000	4
1.C	Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2001 and 2000	5
1.D	Consolidated Statements of Cash Flows for the three months and nine months ended September 30, 2001 and 2000	6
1.E	Notes to Consolidated Financial Statements	7
ITEM 2:	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	10
PART II	OTHER INFORMATION	16
ITEM 1:	LEGAL PROCEEDINGS	16
ITEM 2:	CHANGES IN SECURITIES	16
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	16
ITEM 4:	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.	16
ITEM 5:	OTHER INFORMATION	16
ITEM 6:	EXHIBITS AND REPORTS FILED ON FORM 6-K	16
SIGNATURES		17

PART I
ITEM 1.A

FLAG LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(Expressed in thousands of dollars except share and per share amounts)

			September 30, 2001 (UNAUDITED)			December 31, 2000 (AUDITED)
ASSETS:
	Current assets:
		Cash and cash equivalents	$	1,928		$	2,623
		Accounts receivable, net of allowance for doubtful accounts of $5,289 (2000 — $5,289)		34,394			84,067
		Due from affiliates and other receivables		28,040			8,768
		Other receivables		6,899			3,354

	Total current assets			71,261			98,812
	Restricted cash			51,775			111,453
	Capitalized financing costs, net of accumulated amortization of $7,648 (2000 — $5,664)			9,089			11,073
	Property and equipment, net			957,349			1,001,246

	Total Assets		$	1,089,474		$	1,222,584

LIABILITIES:
	Current liabilities:
		Accrued construction costs	$	13,321		$	49,139
		Accounts payable		9,097			22,246
		Accrued liabilities		19,424			14,331
		Interest rate collars		469			—
		Deferred revenue		73,759			59,371
		Income taxes payable		4,218			3,766

	Total current liabilities			120,288			148,853
	8¹/4% senior notes, due 2008, net of unamortized discount of $3,695 (2000 — $4,134)			426,305			425,861
	Other long-term debt			68,500			93,000
	Deferred revenue and other			219,275			210,158
	Deferred taxes			3,070			3,358

	Total Liabilities			837,438			881,230

SHAREHOLDERS' EQUITY:
	Class B common shares, $.0001 par value			64			64
	Additional paid-in capital			546,302			544,697
	Accumulated other comprehensive income — foreign currency translation			(853	)		(418	)
	Accumulated deficit			(293,477	)		(202,989	)

	Total Shareholders' Equity			252,036			341,354

	Total liabilities and shareholders' equity		$	1,089,474		$	1,222,584

PART I
ITEM 1.B

FLAG LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
(Expressed in thousands of dollars except share and per share amounts)

		Three months ended September 30,						Nine months ended September 30,
		2001 (UNAUDITED)			2000 (UNAUDITED)			2001 (UNAUDITED)			2000 (UNAUDITED)
REVENUES			27,697			23,566			72,875			62,830
SALES AND OTHER OPERATING COSTS
	Operations and maintenance cost (including non-cash compensation expense of $106, $339, $407, $1,506)		8,702			7,585			24,208			24,558
	Sales and marketing (including non-cash compensation expense of $53, $160, $279, $683)		1,965			3,091			7,289			10,028
	General and administrative (including non-cash compensation expense of $174, $658, $918, $2,929)		11,971			8,183			32,039			23,319
	Depreciation and amortization		19,061			18,697			56,288			57,858

			41,699			37,556			119,824			115,763
OPERATING LOSS			(14,002	)		(13,990	)		(46,949	)		(52,933	)
INTEREST EXPENSE			10,861			12,339			33,209			38,398
INTEREST INCOME			704			2,470			3,240			5,947

LOSS BEFORE INCOME TAXES			(24,159	)		(23,859	)		(76,918	)		(85,384	)
PROVISION FOR INCOME TAXES			(50	)		(187	)		415			(56	)

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS		$	(24,110	)	$	(23,672	)	$	(77,334	)	$	(85,328	)

Basic and diluted loss per common share		$	(0.04	)	$	(0.04	)	$	(0.12	)	$	(0.13	)
Weighted average common shares outstanding			635,796,338			635,796,338			635,796,338			635,796,338

PART I
ITEM 1.C

FLAG LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
(Expressed in thousands of dollars)

	Three months ended September 30,				Nine months ended September 30,
	2001 (UNAUDITED)		2000 (UNAUDITED)		2001 (UNAUDITED)		2000 (UNAUDITED)
NET LOSS	(24,110	)	(23,672	)	(77,334	)	(85,328	)
Foreign currency translation adjustment	(19	)	142		33		232
Loss on derivatives — effect of adoption	—		—		(94	)	—
Loss on derivatives — change in fair value	(172	)	—		(468	)	—

COMPREHENSIVE LOSS	(24,301	)	(23,530	)	(77,863	)	(85,096	)

PART I
ITEM 1.D

FLAG LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Expressed in thousands of dollars)

					September 30, 2001 (UNAUDITED)			September 30, 2000 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss applicable to common shareholders				$	(77,334	)		(85,328	)
	Adjustments to reconcile net loss to net cash provided by / (used in) operating activities:
		Amortization of financing costs				1,984			1,844
		Provision for doubtful accounts				—			(996	)
		Senior debt discount				444			443
		Non-cash stock compensation				1,604			5,409
		Depreciation				56,288			57,858
		Loss on disposal of fixed assets				—			91
		Deferred taxes				(248	)		(152	)
		Add / (deduct) net changes in assets and liabilities:
			Accounts receivable			49,673			20,968
			Due from affiliate			(28,040	)		950
			Prepaid expenses and other assets			(3,546	)		(4,619	)
			Accounts payable and accrued liabilities			(8,053	)		(4,084	)
			Income taxes payable			452			(89	)
			Due to affiliate			8,768			(3,024	)
			Deferred revenue and other			23,505			82,327

				Net cash provided by operating acitivities		25,497			71,598

CASH FLOWS FROM FINANCING ACTIVITIES:
		Financing costs incurred				—			(2,826	)
		Capital contribution from FLAG Telecom Holdings Ltd				—			25,000
		Payment of dividend				(13,150	)		—
		Repayment of long-term debt				(24,500	)		(65,000	)
		Decrease / (increase) in restricted cash				59,678			(19,010	)

				Net cash used in financing activities		22,028			(61,836	)

CASH FLOWS FROM INVESTING ACTIVITIES:
		Cash paid for construction				(29,817	)		(2,344	)
		(Purchase) / disposal of fixed assets, net				(18,398	)		(5,385	)
		Proceeds from disposal of assets				—			33

				Net cash used in investing activities		(48,215	)		(7,696	)

NET INCREASE / (DECREASE) IN CASH						(689	)		2,066
		Effect of foreign currency movements				(5	)		(19	)
CASH, beginning of period						2,623			1,213

CASH, end of period					$	1,927			3,260

SUPPLEMENTAL INFORMATION ON INVESTING ACTIVITIES:
		Decrease in accrued construction costs				(29,817	)		(2,344	)

		Cash incurred for construction in progress			$	(29,817	)	$	(2,344	)

SUPPLEMENTAL INFORMATION DISCLOSURE OF CASH FLOW INFORMATION:
		Interest expense for period			$	33,209		$	38,398
		Amortization of financing costs				(2,428	)		(2,288	)
		Decrease (increase) in accrued interest payable				10,266			11,413

		Interest paid			$	41,047		$	47,523

		Taxes paid			$	—		$	—

PART I
ITEM 1.E

FLAG LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000

1. BACKGROUND AND ORGANISATION

FLAG Limited is a facilities-based provider of telecommunications capacity to licensed international carriers through its ownership of an independent, privately-owned digital fiberoptic undersea cable system, the FLAG Europe-Asia ("FEA") cable system. The FEA cable system links the telecommunications markets of Western Europe and Japan through the Middle East, India, Southeast Asia and China (the "FLAG Route"). The FEA cable system, which was placed in commercial service on November 22, 1997, cost approximately $1.6 billion to construct and consists of over 28,000 kilometers of fiberoptic cable.

On February 26, 1999, we were part of a reorganization whereby FLAG Telecom Holdings Limited ("FLAG Telecom"), a Bermuda company, became the holding company of the FLAG Telecom group of companies. Pursuant to this reorganization, all of our Class A common shares were converted to Class B common shares, which were subsequently re-classified as Ordinary Shares and our shareholders transferred to FLAG Telecom 418,259,608 Ordinary Shares in exchange for an equal number of shares in FLAG Telecom. As a result of this reorganization, FLAG Telecom held 66% of our outstanding share capital with the balance of 34% being held by Bell Atlantic Network Systems Company ("Bell Atlantic"). On January 4, 2000, Bell Atlantic exchanged its remaining FLAG Limited shares for an equal number of shares in FLAG Telecom.

Risks and Other Important Factors

Our operations and ability to grow may be affected by risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. Such factors include, but are not limited to: our ability to deploy sophisticated technologies on a global basis, our ability to upgrade and expand our network and respond to customer demands and industry changes, regulatory enactments and changes, competition and pricing pressure, rapid technological change, adverse foreign economic or political events and other factors that are discussed in our Registration Statement and subsequent periodic filings filed with the Securities and Exchange Commission.

2. BASIS OF PREPARATION

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of U.S. generally accepted accounting principles ("US GAAP") and include our accounts and those of our wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the results of operations for the three months and nine months ended September 30, 2001 and 2000, the balance sheets as of September 30, 2001 and December 31, 2000, and the cash flows for the nine months ended September 30, 2001 and 2000. Our accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2000. The results of operations for any interim period are not necessarily indicative of results for the full year.

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 REVENUE RECOGNITION

Capacity

Capacity contracts are accounted for as leases. Capacity contracts that do not qualify for sales-type lease accounting are accounted for as operating leases and revenue is recognized over the term of the lease. In compliance with FASB Interpretation No. 43, "Real Estate Sales, an Interpretation of FASB Statement No. 66," capacity contracts are deemed not to be sales of real estate and, therefore, are not accounted for as sales-type leases. We have recorded only operating leases for capacity transactions for the periods presented.

Payments received from customers before the relevant criteria for revenue recognition are satisfied are included in deferred revenue.

In exchange for construction costs incurred by suppliers, we have granted credits to suppliers for future capacity. In addition, certain customers have committed to purchase capacity at a future date under signed capacity credit agreements. Amounts received under these agreements and the capacity credits granted to suppliers are recorded at fair value as deferred revenue until the date the credits are utilized, at which time the deferred revenue is recognized as earned. Amounts receivable under these capacity agreements are reflected within accounts receivable in the accompanying balance sheets.

Operations and Maintenance

Standby maintenance charges are invoiced separately from capacity sales. Revenues relating to standby maintenance are recognized over the period the service is provided. Deferred revenue also includes amounts invoiced for standby maintenance which are applicable to future periods.

3.2 DIRECT COSTS RELATED TO REVENUE

Capacity

Costs of the system relating to capacity contracts accounted for as operating leases are recorded in property and equipment and are depreciated over the remaining economic life of the network.

Operations and Maintenance Costs

Operations and maintenance costs are expensed over the period to which the expenditure relates.

3.3 PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of accumulated depreciation. Capitalized costs include costs incurred under the FEA cable system construction contract, engineering and consulting fees, legal fees related to obtaining landing right licenses, interest costs, costs for the route surveys, indirect costs associated with the cable system and other costs necessary for developing the cable system. Depreciation is taken on a straight-line basis over the estimated useful lives of the property and equipment as follows:

Computer equipment		3 years
Fixtures and fittings		5 years
Leasehold improvements		Remaining lease term
Motor vehicles		5 years
Cable systems		15 years

The estimated useful life of the cable system is determined based on the estimated period over which it will generate revenue.

3.4 IMPAIRMENT OF LONG LIVED ASSETS

We periodically review events and changes in circumstances to determine whether the recoverability of the carrying value of long lived assets should be reassessed. Should events or circumstances indicate that the carrying value may not be recoverable based on undiscounted future cash flows, we would recognize an impairment loss measured by the difference between the fair value and the carrying value of long lived assets.

3.5 NET LOSS PER COMMON SHARE

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares and common share equivalents outstanding during the period. For the three month periods ended September 30, 2001 and 2000 presented, no potentially dilutive securities have been included in the calculation of diluted net loss per share amounts as they would be antidilutive in periods in which a loss has been reported.

3.6 RESTRICTED CASH

We designate funds held by a collateral trustee, in escrow or legally designated for specific projects or commitments by bank agreements, as long term restricted cash.

4. ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARD No. 133

Effective January 1, 2001, we adopted Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and 138, which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or a liability measured at its fair value. The statement also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows gains and losses on a derivative to offset related results on the hedged item in the income statement, and requires that a company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

The following effects were recorded in the accompanying condensed consolidated financial statements as a result of the adoption of SFAS No. 133:

•: Our interest rate collars are accounted for as effective cash flow hedges and, accordingly, upon adoption of SFAS No. 133 their fair values were recorded as liabilities in the balance sheet, with the corresponding effect of adoption recorded directly to accumulated other comprehensive income. A loss of $172 was recorded during the period.

PART I
ITEM 2

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

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. Forward-looking statements made in this report on Form 6-K are as of the date of filing with the Securities and Exchange Commission (the "SEC") and should not be relied upon as of any subsequent date. We expressly disclaim any obligation to update information presented herein, except as may otherwise be required by law. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those discussed elsewhere in this report and in other documents we file from time to time with the SEC, including our Annual Report on Form 20-F for the fiscal year ended December 31, 2000.

QUARTER ENDED SEPTEMBER 30, 2001 COMPARED WITH THE QUARTER ENDED SEPTEMBER 30, 2000

RESULTS OF OPERATIONS

REVENUES

Total revenue for the quarter ended September 30, 2001, increased to $27.7 million as compared to $23.6 million for the quarter ended September 30, 2000. This increase is primarily due to the amortization of increased cumulative capacity sales and increased operations and maintenance revenue from the FEA cable system.

Revenue recognized from the sale of capacity increased to $15.3 million for the quarter ended September 30, 2001, as compared to $13.2 million during the quarter ended September 30, 2000. This increase is primarily due to increased cumulative sales, being recognized over the life of the FEA cable system.

Revenue recognized from operations and maintenance increased to $12.4 million for the quarter ended September 30, 2001, as compared to $10.4 million for the quarter ended September 30, 2000, reflecting the increased cumulative sales and activated capacity on the FEA cable system.

OPERATING EXPENSES

During the quarter ended September 30, 2001, operations and maintenance costs increased to $8.7 million, as compared to $7.6 million for the quarter ended September 30, 2000. Operations and maintenance expenses relate primarily to the provision of standby maintenance under maintenance agreements as well as direct costs associated with operations and maintenance activities. Our agreements with the third party providers of operations and maintenance services allow for activity based variations in our expense which are reflected in the increase in this expense for the quarter.

During the quarter ended September 30, 2001, sales and marketing costs decreased to $2.0 million, compared to $3.1 million incurred during the quarter ended September 30, 2000. Sales and marketing costs are comprised of all sales and marketing activities that we have directly undertaken.

During the quarter ended September 30, 2001, general and administrative expenses increased to $12.0 million, as compared to $8.2 million during the quarter ended September 30, 2000. This increase is comprised principally of increased personnel costs and increased general overheads resulting from operational activity.

For the quarter ended September 30, 2001, we recorded $19.1 million in respect of depreciation compared to $18.7 million for depreciation recorded in the quarter ended September 30, 2000.

Costs for the quarter ended September 30, 2001 include charges for non-cash stock compensation expense of $0.3 million in respect of certain awards under FLAG Telecom's long-term incentive plan. These charges are required under US GAAP and have no effect on our cash flows.

INTEREST EXPENSE AND INTEREST INCOME

Interest expense on borrowings for the quarter ended September 30, 2001 is $10.9 million compared to $12.3 million during the quarter ended September 30, 2000. The decrease in interest expense of $1.4 million is attributable to a reduction in our bank borrowings during the period. See also "Liquidity and Capital Resources."

Interest income of $0.7 million was earned during the quarter ended September 30, 2001 compared to $2.5 million earned during the quarter ended September 30, 2000. The interest income was earned on cash balances, short-term investments and cash held by a collateral trustee or in escrow arising from ongoing business operations.

PROVISION FOR TAXES

The provision for taxes was $(0.05) million for the quarter ended September 30, 2001 compared to $(0.2) million for the quarter ended September 30, 2000. The tax provisions for both quarters consist of taxes on income derived from capacity sales and standby maintenance revenue from customers in certain jurisdictions along the FLAG route where we are deemed to have a taxable presence or are otherwise subject to tax. At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda. In the event that such taxes are levied in the future, we have received an undertaking from the Bermuda Government exempting us from all such taxes until March 28, 2016.

NET LOSS AND LOSS PER COMMON SHARE

For the quarter ended September 30, 2001, we recorded a net loss of $24.1 million compared to a net loss of $23.7 million for the quarter ended September 30, 2000.

Loss per common share was $0.04 for the quarter ended September 30, 2001 compared to the same loss per common share of $0.04 for the quarter ended June 30, 2000.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2000

RESULTS OF OPERATIONS

REVENUES

Total revenue for the nine months ended September 30, 2001, increased to $72.9 million as compared to $62.8 million for the nine months ended September 30, 2000. This increase is primarily

due to the amortization of increased cumulative capacity sales and increased operations and maintenance revenue from the FEA cable system.

Revenue recognized from the sale of capacity increased to $36.8 million for the nine months ended September 30, 2001, as compared to $32.9 million during the nine months ended September 30, 2000. This increase is primarily due to increased cumulative sales, being recognized over the life of the FEA cable system.

Revenue recognized from operations and maintenance increased to $36.1 million for the nine months ended September 30, 2001, as compared to $29.9 million for the nine months ended September 30, 2000, reflecting the increased cumulative sales and activated capacity on the FEA cable system.

OPERATING EXPENSES

During the nine months ended September 30, 2001, operations and maintenance costs decreased to $24.2 million, as compared to $24.6 million for the nine months ended September 30, 2000. Operations and maintenance expenses relate primarily to the provision of standby maintenance under maintenance agreements as well as direct costs associated with operations and maintenance activities. Our agreements with the third party providers of operations and maintenance services allow for activity based variations in our expense which are reflected in the reduction in this expense for the nine months.

During the nine months ended September 30, 2001, sales and marketing costs decreased to $7.3 million, as compared to $10.0 million incurred during the nine months ended September 30, 2000. Sales and marketing costs are comprised of all sales and marketing activities that we have directly undertaken. This decrease is due to the inclusion of non-recurring commission costs incurred in the first quarter of 2000.

During the nine months ended September 30, 2001, general and administrative expenses increased to $32.0 million, as compared to $23.3 million during the nine months ended September 30, 2000. This increase is comprised principally of increased personnel costs and increased general overheads resulting from operational activity.

For the nine months ended September 30, 2001, we recorded $56.3 million in respect of depreciation compared to $57.9 million for depreciation recorded in the nine months ended September 30, 2000.

Costs for the nine months ended September 30, 2001 include charges for non-cash stock compensation expense of $1.6 million in respect of certain awards under FLAG Telecom's long-term incentive plan. These charges are required under US GAAP and have no effect on our cash flows.

INTEREST EXPENSE AND INTEREST INCOME

Interest expense on borrowings for the nine months ended September 30, 2001 is $33.2 million compared to $38.4 million during the nine months ended September 30, 2000. This is attributable to a reduction in our bank borrowings during the period. See also "Liquidity and Capital Resources."

Interest income of $3.2 million was earned during the nine months ended September 30, 2001 compared to $5.9 million earned during the nine months ended September 30, 2000. The interest income was earned on cash balances, short term investments and cash held by a collateral trustee or in escrow arising from ongoing business operations.

PROVISION FOR TAXES

The provision for taxes was $0.4 million for the nine months ended September 30, 2001 compared to $(0.06) million for the nine months ended September 30, 2000. The tax provisions for both periods consist of taxes on income derived from capacity sales and standby maintenance revenue from customers in certain jurisdictions along the FLAG route where we are deemed to have a taxable presence or is otherwise subject to tax. At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda. In the event that such taxes are levied in the future, we have received an undertaking from the Bermuda Government exempting us from all such taxes until March 28, 2016.

NET LOSS AND LOSS PER COMMON SHARE

For the nine months ended September 30, 2001, we recorded a net loss of $77.3 million compared to a net loss of $85.3 million for the nine months ended September 30, 2000.

Loss per common share was $0.12 for the nine months ended September 30, 2001 compared to a loss per common share of $0.13 for the nine months ended September 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

On February 16, 2000, we amended our existing credit facilities to consist of a $150.0 million six-year term loan facility ($68.5 million of which remained outstanding at September 30, 2001 and $93.0 million of which was outstanding at December 31, 2000) and a $10.0 million revolving credit facility (none of which was outstanding at September 30, 2001 or December 31, 2000). Dresdner Kleinwort Benson and Barclays Capital acted as joint lead arrangers. These facilities bear interest at a rate of 225 basis points over LIBOR for the first six months and thereafter at a rate of between 150 and 250 basis points over LIBOR, depending on the credit rating of our 8¹/4% Senior Notes. The current interest rate is 200 basis points over LIBOR. The facilities are secured by a pledge by FLAG Telecom of all of our capital stock and by assignment of our contracts and a security interest in our bank accounts and intangible property. In connection with this amendment, we paid fees and expenses to the joint lead arrangers totaling approximately $3.3 million.

At the end of March 1998, we entered into two interest rate swap agreements to manage our exposure to interest rate fluctuations on our credit facilities. Under the swap agreements, we paid a fixed rate of 5.6% on a notional amount of $60.0 million and a fixed rate of 5.79% on a notional amount of $100.0 million and the swap counterparty paid the floating rate based on LIBOR. One swap agreement terminated in January 2000 and the other swap agreement terminated in July 2000. In August 2000 we entered into an interest rate collar transaction for an initial notional amount of $60.0 million, reducing in increments to $20.0 million in the final quarter of 2001. The transaction terminates on April 30, 2002. The collar is comprised of a LIBOR cap at 8% and a floor of 5.85%. We recognize the net cash amount received or paid on interest rate hedging instruments as an adjustment to interest cost on the related debt.

We believe that we will have no need for additional borrowing facilities in the foreseeable future. We intend to finance our future operations through proceeds from the sale or lease of capacity, revenues from operations and maintenance, investment income on cash and investment balances, borrowings under the revolving credit facility and available funds in reserve account.

As of September 30, 2001, we had net current liabilities of $49.0 million compared to net current liabilities of $50.0 at December 31, 2000. The working capital deficit was primarily a result of the current accounts payable to the contractors which is classified as a current liability but for which the amounts held in escrow are classified as a non-current asset and are hence excluded from the measure of working capital.

Total cash provided by operating activities and used in investing activities during the nine months ended September 30, 2001 was $25.5 million and $(48.2) million respectively. As of September 30, 2001, total cash had decreased to $53.7 million from $114.1 million at December 31, 2000, primarily due to the repayment of long term debt and additional construction costs.

Total cash provided by operations and used in investing activities during the nine months ended September 30, 2000 was $71.6 million and $(7.7) million respectively. These expenditures were funded from cash held as restricted cash.

IMPACT OF THE INTRODUCTION AND ADOPTION OF THE EURO

On January 1, 1999, eleven of the 15 member countries of the European established fixed conversion rates between their existing sovereign currencies and a new currency called the "Euro". These countries adopted the Euro as their common legal currency on that date. The Euro trades on currency exchanges and is available for non-cash transactions. Until January 1, 2002, the existing sovereign currencies will remain legal tender in these countries. On January 1, 2002, the Euro is scheduled to replace the sovereign legal currencies of these countries.

We have operations within the European Union including some of the countries that have adopted the Euro. We continue to evaluate the impact the Euro will have on our continuing business operations within the overall scope of managing currency risk. However, we do not expect the introduction of the Euro to have a material effect on our consolidated financial position or competitive position.

INFLATION

In our management's view, inflation in operating, maintenance and general and administrative costs will not have a material effect on our financial position over the long term.

PART II
ITEM 1: LEGAL PROCEEDINGS

We are involved in litigation from time to time in the ordinary course of business. In our management's opinion, the litigation in which we are currently involved, individually and in the aggregate, is not material to us.

ITEM 2: CHANGES IN SECURITIES

Not Applicable.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

Not Applicable.

ITEM 5: OTHER INFORMATION

Not Applicable.

ITEM 6: EXHIBITS AND REPORTS FILED ON FORM 6-K

Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 14th day of November 2001.

FLAG LIMITED

By:

/s/ NOEL DINSMORE

Noel Dinsmore
Chief Financial Officer

QuickLinks

FLAG LIMITED FORM 6-K INDEX
FLAG LIMITED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000 (Expressed in thousands of dollars except share and per share amounts)
FLAG LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (Expressed in thousands of dollars except share and per share amounts)
FLAG LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (Expressed in thousands of dollars)
FLAG LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (Expressed in thousands of dollars)
FLAG LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNATURES

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