http://www.mitel.com

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

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

                For the quarterly period ended September 29, 2000

                                       OR

            [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                          Commission file number 1-8139

                                MITEL CORPORATION

             (Exact name of registrant as specified in its charter)

                 CANADA                                 NONE

     (State or other jurisdiction of              (I.R.S. Employer
      incorporation or organization)             Identification No.)

            350 Legget Drive
            P.O. Box 13089
            Kanata, Ontario, Canada                    K2K 2W7

         (Address of principal                     (Postal Code)
           executive offices)

       Registrant's telephone number, including area code: (613) 592-2122

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes  (X)     No  ( )

The number of common shares outstanding as at November 6, 2000 was 127,724,688.


                                       1
<PAGE>

                                MITEL CORPORATION

                                      INDEX

PART I. FINANCIAL INFORMATION (Unaudited)

ITEM 1. FINANCIAL STATEMENTS

              Consolidated Balance Sheets -
              September 29, 2000 and March 31, 2000 .......................... 3

              Consolidated Statements of Retained Earnings -
              Three months ended September 29, 2000 and September 24, 1999 ... 4
              Six months ended September 29, 2000 and September 24, 1999 ..... 4

              Consolidated Statements of Income -
              Three months ended September 29, 2000 and September 24, 1999 ... 5
              Six months ended September 29, 2000 and September 24, 1999 ..... 5

              Consolidated Statements of Cash Flows -
              Six months ended September 29, 2000 and September 24, 1999 ..... 6

              Notes to the Consolidated Financial Statements ................. 7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS .................................17

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
         MARKET RISK .........................................................25

PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K ....................................26


                                       2
<PAGE>

                                Mitel Corporation
                     (incorporated under the laws of Canada)
                           CONSOLIDATED BALANCE SHEETS
                        (in millions of Canadian dollars)
                                   (Unaudited)

                                                       Sept. 29,       March 31,
                                                         2000            2000
                                                       ---------      ----------
ASSETS

Current assets:
  Cash and cash equivalents                           $    227.6     $    195.5
  Short-term investments                                     2.4           32.9
  Accounts receivable                                      288.4          288.2
  Inventories (note 4)                                     190.1          187.7
  Prepaid expenses and other                                35.2           37.2
  Future income tax assets                                   5.7            9.5
                                                      ----------     ----------
                                                           749.4          751.0

Long-term receivables (note 5)                              22.6           21.7
Fixed assets (note 6)                                      439.2          457.4
Goodwill and acquired intangible assets (note 7)           262.7            3.0
Patents, trademarks and other (note 8)                       9.4           11.3
                                                      ----------     ----------
                                                      $  1,483.3     $  1,244.4
                                                      ==========     ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued liabilities (note 9)   $    189.6     $    215.4
  Income and other taxes payable                             9.3           26.2
  Future income tax liabilities                              6.6           11.7
  Deferred revenue                                          39.9           44.1
  Current portion of long-term debt                         30.3           57.9
                                                      ----------     ----------
                                                           275.7          355.3
Long-term debt                                             208.9          217.5
Pension liability                                           16.8           13.4
Future income tax liabilities                               23.6           27.2
                                                      ----------     ----------
                                                           525.0          613.4
                                                      ----------     ----------
Shareholders' equity:
  Capital stock (note 10)
     Preferred shares                                       36.9           37.0
     Common shares                                         634.0          325.6
  Contributed surplus                                        9.2            9.2
  Retained earnings                                        288.4          262.6
  Translation account (note 11)                            (10.2)          (3.4)
                                                      ----------     ----------
                                                           958.3          631.0
                                                      ----------     ----------
                                                      $  1,483.3     $  1,244.4
                                                      ==========     ==========

        (See accompanying notes to the consolidated financial statements)


                                       3
<PAGE>

                                Mitel Corporation
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                        (in millions of Canadian dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                       Three Months Ended        Six Months Ended
                                                                    Sept. 29,     Sept. 24,    Sept. 29,    Sept. 24,
                                                                       2000         1999         2000         1999
                                                                       ----         ----         ----         ----

<S>                                                                  <C>          <C>          <C>          <C>
Retained earnings, beginning of period (as
  previously reported)                                               $  283.3     $  212.3     $  267.4     $  218.4

Change in accounting policy for income taxes (note 2)                      --           --         (4.8)          --
                                                                     --------     --------     --------     --------
Retained earnings, beginning of period (as restated)                    283.3        212.3        262.6        218.4

Net income for the period                                                 6.6         12.5         28.1          7.9
                                                                     --------     --------     --------     --------
                                                                        289.9        224.8        290.7        226.3

Cost of common share issue (note 10)                                     (0.7)          --         (0.7)          --

Cost of common share repurchase (note 10)                                  --         (1.5)          --         (2.2)

Dividends on preferred shares (note 10)                                  (0.8)        (0.8)        (1.6)        (1.6)
                                                                     --------     --------     --------     --------
Retained earnings, end of period                                     $  288.4     $  222.5     $  288.4     $  222.5
                                                                     ========     ========     ========     ========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       4
<PAGE>

                                Mitel Corporation
                        CONSOLIDATED STATEMENTS OF INCOME
           (in millions of Canadian dollars, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended         Six Months Ended
                                                   Sept. 29,   Sept. 24,    Sept. 29,   Sept. 24,
                                                     2000        1999         2000        1999
                                                   ---------   ---------    ---------   ---------
<S>                                                <C>         <C>          <C>         <C>
Revenue                                            $   359.8   $   348.8    $   688.6   $   660.0
                                                   ---------   ---------    ---------   ---------
Cost of sales:
  Cost of sales other than amortization                169.4       166.8        319.8       318.0
  Amortization of manufacturing assets                  15.5        17.4         32.5        34.9
                                                   ---------   ---------    ---------   ---------
                                                       184.9       184.2        352.3       352.9
                                                   ---------   ---------    ---------   ---------
Gross margin                                           174.9       164.6        336.3       307.1
                                                   ---------   ---------    ---------   ---------
Expenses:
  Selling and administrative                            85.1        88.0        172.8       173.4
  Research and development (net) (note 13)              45.9        33.7         85.6        72.5
  Amortization of acquired intangibles                  23.9        15.2         27.1        32.3
                                                   ---------   ---------    ---------   ---------
                                                       154.9       136.9        285.5       278.2
                                                   ---------   ---------    ---------   ---------
Operating income                                        20.0        27.7         50.8        28.9
Interest income                                          3.4         1.7          6.4         3.6
Interest expense                                        (4.8)       (5.2)       (10.1       (10.4)
Debt issue costs                                          --          --         (0.6          --
                                                   ---------   ---------    ---------   ---------
Income before income taxes                              18.6        24.2         46.5        22.1
Income tax expense                                      12.0        11.7         18.4        14.2
                                                  ---------   ---------    ---------   ---------
Net income for the period                          $     6.6   $    12.5    $    28.1   $     7.9
                                                   =========   =========    =========   =========
Net income attributable to common shareholders
  after preferred share dividends                  $     5.8   $    11.7    $    26.5   $     6.3
                                                   =========   =========    =========   =========
Net income per common share (note 3 & 10):
    Basic                                          $    0.05   $    0.10    $    0.23   $    0.05
                                                   =========   =========    =========   =========
    Fully diluted                                  $    0.05   $    0.10    $    0.22   $    0.05
                                                   =========   =========    =========   =========
Weighted average number of common shares
  outstanding (millions):
    Basic                                              121.3       114.9        117.7       115.6
                                                   =========   =========    =========   =========
    Fully diluted                                      122.6       121.1        120.8       116.0
                                                   =========   =========    =========   =========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       5
<PAGE>

                                Mitel Corporation
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (in millions of Canadian dollars)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          Six Months Ended
                                                                        Sept. 29,    Sept. 24,
                                                                          2000         1999
                                                                        ---------    ---------
<S>                                                                      <C>          <C>
CASH PROVIDED BY (USED IN)

Operating activities:
  Net income for the period                                              $  28.1      $   7.9
  Amortization of capital and other assets                                  83.4         84.4
  Investment tax credits                                                     5.2          4.5
  Loss (gain) on sale of capital assets                                      2.4         (0.1)
  Future income taxes                                                       (3.4)        (2.8)
  Change in pension liability                                                0.3          0.6
  (Increase) decrease in working capital (note 17)                         (45.8)         5.6
                                                                         -------      -------
    Total                                                                   70.2        100.1
                                                                         -------      -------
Investing activities:
  Change in short-term investments                                          39.3        (27.8)
  Additions to capital and other assets                                    (44.0)       (28.1)
  Proceeds from disposal of capital assets                                   1.1          0.1
  Acquisitions (notes 14 and 17)                                            10.3            -
  Net change in non-cash balances related to investing activities           (3.6)        (7.8)
                                                                         -------      -------
     Total                                                                   3.1        (63.6)
                                                                         -------      -------
Financing activities:
  Repayment of long-term debt                                              (27.1)        (5.3)
  Repayment of capital lease liabilities                                   (19.3)       (16.4)
  Dividends on preferred shares                                             (1.6)        (1.6)
  Issue of common shares - net (note 10)                                     7.0          0.3
  Repurchase of common and preferred shares (note 10)                       (0.1)       (26.1)
  Net change in non-cash balances related to financing activities              -         (0.1)
                                                                         -------      -------
     Total                                                                 (41.1)       (49.2)
                                                                         -------      -------
Effect of currency translation on cash                                      (0.1)        (0.6)
                                                                         -------      -------
Increase (decrease) in cash and cash equivalents                            32.1        (13.3)
Cash and cash equivalents, beginning of period                             195.5        125.3
                                                                         -------      -------
Cash and cash equivalents, end of period                                 $ 227.6      $ 112.0
                                                                         -------      -------
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       6
<PAGE>

                                MITEL CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
           (in millions of Canadian dollars, except per share amounts)
                                   (Unaudited)

1.    In  the  opinion  of  Management,  the  unaudited  consolidated  financial
      statements  reflect  all  adjustments,  which  consist  only of normal and
      recurring adjustments,  necessary to present fairly the financial position
      at  September  29, 2000 and the results of  operations  and the changes in
      financial position for the three and six month periods ended September 29,
      2000 and  September 24, 1999, in  accordance  with  accounting  principles
      generally accepted in Canada. (See also Note 16).

      These  financial  statements  should  be  read  in  conjunction  with  the
      financial  statements and notes thereto  contained in the Company's Annual
      Report  on Form 10-K for the year  ended  March 31,  2000.  The  Company's
      fiscal year-end is the last Friday in March.

      Due to the cyclical nature of the business,  the results of operations for
      the periods presented are not necessarily  indicative of the results to be
      expected for the full year.

2.    Change in accounting policies

a)    Income taxes

      In the first  quarter  ended June 30,  2000,  the Company  adopted the new
      recommendations  of Section  3465 of the  Canadian  Institute of Chartered
      Accountants   ("CICA")   Handbook  "Income  Taxes"  and  has  applied  the
      provisions   retroactively  without  restatement  of  the  prior  periods'
      financial statements. The adoption of this recommendation has no impact on
      the results of operations  in Fiscal 2001.  The  cumulative  adjustment to
      opening  retained  earnings  was a  reduction  of $4.8 as a result  of the
      change in accounting policy. In addition, current future income tax assets
      increased by $9.5; current income taxes payable decreased by $5.4; current
      future income tax  liabilities  increased by $5.3;  and  long-term  future
      income tax liabilities increased by $14.4.

      The new recommendations  require the Company and its subsidiaries to adopt
      the liability  method of accounting  for income taxes.  Under this method,
      future  income  tax  assets  and  liabilities  are  determined   based  on
      differences between the tax and accounting bases of assets and liabilities
      as well as for the benefit of losses  available  to be carried  forward to
      future  years for tax  purposes  that are  likely to be  realized.  Future
      income tax assets and  liabilities  are measured  using  enacted tax rates
      expected  to apply  to  taxable  income  in the  years in which  temporary
      differences  are expected to be recovered  or settled.  Future  income tax
      assets are evaluated and if  realization  is not  considered  "more likely
      than not", then a valuation allowance is recorded.  For fiscal years prior
      to the adoption of the new  recommendations,  income taxes were  accounted
      for using the deferred tax allocation  method,  under which the income tax
      provision is based on the income reported in the accounts.

b)    Employee future benefits

      In the first quarter ended June 30, 2000, the Company also adopted the new
      CICA recommendations for employee future benefits.  Under these new rules,
      the  costs of  retirement  benefits,  other  than  pensions,  and  certain
      post-employment  benefits  are  recognized  over the  period  in which the
      employees   render   services   in  return  for  those   benefits.   Other
      post-employment  benefits are  recognized  when the event  triggering  the
      obligation  occurs.  The  adoption  of the new  CICA  recommendations  for
      employee  future  benefits  resulted  in  no  significant  impact  on  the
      Company's financial position or results of operations.

3.    Supplementary income information

      As a supplementary  measure to assess  financial  performance,  management
      utilizes  Adjusted  Net Income and  Adjusted  Net Income per common  share
      which exclude the impact of amortization of acquired intangibles,  special
      charges (net) and non-cash  debt issue costs  expensed on an early


                                       7
<PAGE>

      partial  debt  repayment.  The Adjusted Net Income and Adjusted Net Income
      per common share are as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended         Six Months Ended
                                                       Sept. 29,    Sept. 24,    Sept. 29,    Sept. 24,
                                                         2000         1999          2000        1999
                                                       ---------    ---------    ---------    ---------
<S>                                                    <C>          <C>          <C>          <C>
      Net income for the period as reported            $    6.6     $    12.5    $    28.1    $     7.9

      Adjusted Net Income, as adjusted for:
        Amortization of acquired intangibles               23.9          15.2         27.1         32.3
        Debt issue costs                                     --            --          0.6           --
                                                       ---------    ---------    ---------    ---------
      Adjusted Net Income for the period               $    30.5    $    27.7    $    55.8    $    40.2
                                                       =========    =========    =========    =========
      Adjusted Net Income per common share (after
        preferred share dividends) - basic             $    0.24    $    0.23    $    0.46    $    0.33
                                                       =========    =========    =========    =========
</TABLE>

4.      Inventories:

                                                         Sept. 29,     March 31,
                                                           2000          2000
                                                         ---------     ---------
      Raw materials                                      $   54.3      $   53.5
      Work-in-process                                        74.2          68.3
      Finished goods                                         61.6          65.9
                                                         ========      ========
                                                         $  190.1      $  187.7
                                                         ========      ========

5.    Long-term receivables

                                                         Sept. 29,     March 31,
                                                           2000          2000
                                                         ---------     ---------
      Investment tax credits recoverable                 $    7.8      $    7.8
      Promissory note, bearing interest at 8%,
      payable annually, due in June 2004 and
      against which a first deed on real
      property was pledged as security                        6.8           6.1
      Other long-term receivables                             8.0           7.8
                                                         --------      --------
                                                         $   22.6      $   21.7
                                                         ========      ========

6.    Fixed assets:

                                                         Sept. 29,     March 31,
                                                           2000          2000
                                                         ---------     ---------
      Cost                                               $  849.9      $  826.9
      Accumulated amortization                             (410.7)       (369.5)
                                                         ========      ========
                                                         $  439.2      $  457.4
                                                         ========      ========


                                       8
<PAGE>

7.    Acquired intangible assets

                                                         Sept. 29,     March 31,
                                                           2000          2000
                                                         ---------     ---------
      Cost:
        In-process technology                            $    5.9      $    5.2
        Developed technology                                 30.6          23.7
        Customer base and work force                          3.1          11.6
        Goodwill                                            247.1           6.3
                                                         --------      --------
                                                            286.7          46.8
                                                         --------      --------
      Less accumulated amortization:
        In-process technology                                 0.5           4.7
        Developed technology                                  2.6          22.4
        Customer base and work force                          0.4          10.9
        Goodwill                                             20.5           5.8
                                                         --------      --------
                                                             24.0          43.8
                                                         --------      --------
                                                         $  262.7      $    3.0
                                                         ========      ========

      Fully  amortized  acquired  intangibles  of $46.8  were  removed  from the
      accounts of the Company at September 29, 2000.

      On July 28, 2000, the Company purchased  completed and in-process research
      and development (R&D), an assembled work-force and goodwill,  amounting to
      $285.4 in connection with the acquisition of Vertex Networks, Incorporated
      ("Vertex") (see also note 14).

8.    Patents, trademarks and other

                                                         Sept. 29,     March 31,
                                                           2000          2000
                                                         ---------     ---------
      Cost:
        Patents, trademarks and other                    $   16.5      $   16.3
        Deferred debt issue costs                             7.5           8.5
                                                         --------      --------
                                                             24.0          24.8
                                                         --------      --------
      Less accumulated amortization:
        Patents and trademarks                               10.5           9.7
        Deferred debt issue costs                             4.1           3.8
                                                         --------      --------
                                                             14.6          13.5
                                                         ========      ========
                                                         $    9.4      $   11.3
                                                         ========      ========

9.    Accounts payable and accrued liabilities

                                                         Sept. 29,     March 31,
                                                           2000          2000
                                                         ---------     ---------

      Trade payables                                     $   52.9      $   68.5
      Employee-related payables                              30.0          34.9
      Other accrued liabilities                             106.7         112.0
                                                         --------      --------
                                                         $  189.6      $  215.4
                                                         ========      ========


                                       9
<PAGE>

10.   Capital stock:

      a)                                                Sept. 29,     March 31,
                                                          2000          2000
                                                       -----------   -----------
      Shares outstanding:
        Preferred shares - R&D Series                    1,605,300     1,607,900
        Common shares                                  125,998,788   113,997,734

      There were 2,600 preferred  shares  repurchased for cash  consideration of
      $0.1 during the six months ended September 29, 2000.

      An analysis  of the changes in the number of common  shares and the amount
      of share  capital  for the six months  ended  September  29,  2000,  is as
      follows:

                                                              Number      Amount
                                                            -----------   ------
      Balance, beginning of period                          113,997,734   $325.6
      Shares issued relating to acquisitions
       (see also note 14)                                    10,997,968    300.7
      Exercise of employee stock options                      1,003,086      7.7
                                                            ===========   ======
      Balance, end of period                                125,998,788   $634.0
                                                            ===========   ======

      On June 5, 2000,  the Company  announced  its  intention  to continue  its
      normal  course  issuer bid program for up to  5,706,196  common  shares (5
      percent of  114,123,921  common shares issued and  outstanding  at May 30,
      2000) between June 9, 2000 and June 8, 2001. All  repurchased  shares will
      be cancelled.  In the six month period ended September 29, 2000, no shares
      were repurchased under the normal course issuer bid.

      b)    A summary of the Company's stock option activity is as follows:

                                                            Six Months Ended
                                                         Sept. 29,     Sept. 24,
                                                           2000          1999
                                                        ----------    ----------
      Outstanding options:
      Balance, beginning of period                      9,017,262     5,918,988
      Granted                                           1,255,400     3,586,467
      Exercised                                        (1,003,086)      (57,600)
                                                         (406,164)   (2,215,850)
                                                       ==========    ==========
      Balance, end of period                            8,863,412     7,232,005
                                                       ==========    ==========

      Available for grant at September 29, 2000 were 5,842,012 (March 31, 2000 -
      6,691,248) common shares. The exercise prices on stock options outstanding
      range from $1.10 to $38.23 per share with  exercise  periods  extending to
      January, 2008.

      c)    The net income per common share figures were calculated based on net
            income after the  deduction of preferred  share  dividends and using
            the weighted monthly average number of shares outstanding during the
            respective  periods.  The calculation of fully diluted  earnings per
            share  assumes  that,  if  a  dilutive   effect  is  produced,   all
            outstanding options had been exercised at the later of the beginning
            of the fiscal  year and the  option  issue  date,  and  includes  an
            allowance  for  imputed   earnings  net  of  tax  derived  from  the
            investment  of funds  that would have been  received.  In  addition,
            fully diluted earnings per share calculation  includes common shares
            issued with restrictions (see also note 14).


                                       10
<PAGE>

11.   The following table summarizes changes in the translation account:

<TABLE>
<CAPTION>
                                                         Three Months Ended         Six Months Ended
                                                       Sept. 29,    Sept. 24,    Sept. 29,    Sept. 24,
                                                         2000         1999          2000        1999
                                                       ---------    ---------    ---------    ---------
<S>                                                     <C>           <C>          <C>          <C>
      Balance, beginning of period                      $ (13.5)      $  0.7       $ (3.4)      $ 28.2
      Increase (decrease):
        Movements in exchange rates -
          United Kingdom Pound Sterling                     1.5         12.1        (15.7)        (4.9)
          United States Dollar                              6.2          3.1         11.9         (5.7)
          Swedish Krona                                    (1.7)         0.5         (1.8)        (0.7)
          Other currencies                                 (2.7)         2.5         (1.2)         2.0
      Reduction of net investments in subsidiaries           --         (0.3)          --         (0.3)
                                                        -------       ------      -------       ------
      Balance, end of period                            $ (10.2)      $ 18.6      $ (10.2)      $ 18.6
                                                        =======       ======      =======       ======
</TABLE>

12.   The Company has not declared or paid any  dividends on its common  shares.
      During the second  quarter,  a $0.50 per share  dividend  was declared and
      paid on the preferred shares.

13.   Research and Development

      The research  and  development  expenses  were net of $3.5 and $6.9 in R&D
      government assistance, including ITCs, for the three and six month periods
      ended September 29, 2000,  respectively  (three months ended September 24,
      1999 - $6.0; six months ended September 24, 1999 - $7.2).

14.   Acquisition

      On  July  28,  2000,  the  Company  acquired   privately-held   Vertex,  a
      California-based fabless semiconductor company providing silicon solutions
      for the enterprise  switching and wide area network access markets.  Mitel
      acquired Vertex in a share  transaction for approximately 11 million newly
      issued common shares valued at $300.7. Approximately 1.1 million shares or
      10  percent  of the  issued  shares  were  placed in escrow for a two-year
      period to indemnify  the Company for  representations  made by Vertex.  In
      addition,  approximately 535 thousand issued shares are subject to certain
      restrictions  over a two-year period.  The fair value of the consideration
      was based on the average  closing price of the Company's  common shares on
      the  Toronto  Stock  Exchange   shortly  before  and  after  the  date  of
      acquisition.  The acquisition was accounted for by the purchase accounting
      method. The purchase price allocation was based on preliminary fair values
      assigned to net assets as  determined  by an  independent  valuation  firm
      using standard valuation techniques.  The purchase price allocation is not
      complete and, accordingly,  this allocation may be adjusted  subsequently.
      An amount of $285.4 was  allocated  to  intangible  assets  which  include
      completed and in-process  research and  development  and other  intangible
      assets.  The  difference  between the purchase price and the fair value of
      the  identifiable  net assets  amounted to $247.1,  which was  recorded as
      goodwill.  The  identifiable   intangible  assets  and  the  goodwill  are
      amortized over a two year period.  The  allocation to net assets  included
      $8.6 in respect of acquisition costs and costs to integrate the operations
      of the acquired  company.  As at  September  29,  2000,  the  liability in
      respect of acquisition and integration costs was $7.7.


                                       11
<PAGE>

      The purchase transaction is summarized as follows:

      Net assets acquired, at approximate fair value:

      Current assets                                                    $ 29.9
      Capital assets                                                       2.3
      Goodwill and acquired intangible assets                            285.4
                                                                       -------
      Total assets                                                       317.6

      Current liabilities                                                (16.9)
                                                                       -------

      Total net assets                                                 $ 300.7
                                                                      ========

      Common share consideration                                       $ 300.7
                                                                      ========

      Unaudited Pro Forma  financial  information  for the acquisition as if the
      business  had been  acquired at the  beginning of each  respective  fiscal
      period is presented as follows:

                                                        Six Months Ended
                                                    Sept. 29,       Sept. 24,
                                                      2000            1999
                                                    ---------       ---------
      Revenue                                       $  694.0        $  662.2

      Net loss                                      $  (53.4)       $  (70.7)

      Net loss attributable to common
        shareholders after preferred dividends      $  (55.0)       $  (72.3)

      Net loss per common share:
        Basic and fully diluted                     $  (0.44)       $  (0.58)

      Weighted average number of common shares
        Outstanding (millions):
        Basic                                          123.9           125.0
        Fully diluted                                  128.0           127.0

      The unaudited Pro Forma information does not include the operating savings
      or synergies as a result of the combined operations.

15.   Information on business segments

      The Company's reportable business segments include the Mitel Semiconductor
      ("Semiconductor")  group and the Mitel Communications  Systems ("Systems")
      group.  Reportable  segments  are  business  units  that  offer  different
      products  and  services  and  are  managed  separately  because  of  their
      different manufacturing and distribution processes.

      The  Company  evaluates  the  performance  of each  business  segment  and
      allocates resources based on operating income from continuing  operations,
      which excludes any intersegment sales of


                                       12
<PAGE>

      products  and   services.   Mitel  does  not  allocate   amortization   of
      intangibles,  special charges, interest income, interest expense or income
      taxes to its  reportable  segments.  In  addition,  total  assets  are not
      allocated to each  segment;  however,  depreciation  of capital  assets is
      allocated  to the  segments  based  on the  asset  usage.  The  accounting
      policies of the reportable segments are the same as those described in the
      summary of significant accounting policies.

<TABLE>
<CAPTION>
                                                                        Unallocated
Three Months Ended September 29, 2000        Semiconductor   Systems       Costs        Total
                                             -------------   -------    -----------    -------
<S>                                            <C>           <C>          <C>          <C>
Total external sales revenue                   $  194.3      $ 165.5      $    --      $ 359.8
Amortization of buildings and equipment            22.7          5.2           --         27.9
Amortization of acquired intangibles                 --           --         23.9         23.9
Segment's operating income                         40.2          3.7        (23.9)        20.0

                                                                        Unallocated
Three Months Ended September 24, 1999        Semiconductor   Systems       Costs        Total
                                             -------------   -------    -----------    -------
Total external sales revenue                   $  139.4      $ 209.4      $    --      $ 348.8
Amortization of buildings and equipment            20.4          4.4           --         24.8
Amortization of acquired intangibles                 --           --         15.2         15.2
Segment's operating income                         16.6         26.3        (15.2)        27.7

                                                                        Unallocated
Six Months Ended September 29, 2000          Semiconductor   Systems       Costs        Total
                                             -------------   -------    -----------    -------
Total external sales revenue                   $  378.1      $ 310.5      $    --      $ 688.6
Amortization of buildings and equipment            44.1         11.1           --         55.2
Amortization of acquired intangibles                 --           --         27.1         27.1
Segment's operating income (loss)                  84.7         (6.8)       (27.1)        50.8

                                                                        Unallocated
Six Months Ended September 24, 1999          Semiconductor   Systems       Costs        Total
                                             -------------   -------    -----------    -------
Total external sales revenue                   $  264.6      $ 395.4      $    --      $ 660.0
Amortization of buildings and equipment            40.5          8.9           --         49.4
Amortization of acquired intangibles                 --           --         32.3         32.3
Segment's operating income                         21.7         39.5        (32.3)        28.9
</TABLE>

16.   United States accounting principles

      The  consolidated  financial  statements  have been prepared in accordance
      with accounting  principles  generally accepted in Canada (Canadian GAAP),
      which, in the case of the Company,  conform in all material  respects with
      those in the United States (U.S.  GAAP) and with the  requirements  of the
      Securities and Exchange  Commission  (SEC),  except as fully  described in
      Note 23 to the consolidated financial statements as at March 31, 2000, and
      as explained below:

      Under  Canadian  GAAP,  the fair  value of the  share  consideration  in a
      business  combination  is based on the quoted  market  value of the shares
      shortly before and after the date of acquisition.  Under US GAAP, the fair
      value of the share  consideration  is based on the quoted  market value of
      the shares  shortly before and after the first date on which the number of
      shares  becomes fixed without  subsequent  revision.  This can result in a
      difference  in the fair  value of the  purchase  price  and the  resulting
      valuation of goodwill at the time of the  purchase  and in the  subsequent
      amortization of the goodwill.


                                       13
<PAGE>

      Accordingly,  for the purpose of reporting  under U.S. GAAP, the aggregate
      purchase  price of Vertex  was  $312.0,  which  was  based on the  average
      closing price of the Company's common shares on the Toronto Stock Exchange
      on or about June 6, 2000 (the date of the announcement of the transaction)
      (see also note 14).

      Under U.S. GAAP, a stock option  compensation  expense must be recorded in
      the Company's  results of operations when the terms of a previously  fixed
      stock  option  are  modified.  Under  Canadian  GAAP,  there  is  no  such
      requirement.

      The  following  table  reconciles  the  net  income  as  reported  on  the
      consolidated statements of income to the net income (loss) that would have
      been  reported had the  financial  statements  been prepared in accordance
      with U.S. GAAP and the requirements of the SEC:

<TABLE>
<CAPTION>

                                                                    Three Months Ended          Six Months Ended
                                                                 Sept. 29,     Sept. 24,     Sept. 29,    Sept. 24,
                                                                    2000          1999         2000          1999
                                                                ------------- ------------- ------------ -------------
       Net income for the period in accordance with Canadian
<S>                                                              <C>             <C>          <C>          <C>
       GAAP                                                      $       6.6     $    12.5    $    28.1    $      7.9

       Acquirer's redundancy provisions                                  0.8            --          1.3            --
       Write-off of acquired in-process technology                      (5.9)           --         (5.9)           --
       Amortization of acquired in-process technology                    0.5           1.4          1.0           3.2
       Amortization of incremental acquired goodwill                    (0.9)           --         (0.9)           --
       Stock option compensation expense                                (1.7)           --         (1.7)           --
       Effect of deferral accounting related to foreign
       exchange contracts                                                2.3           6.0          9.9           6.9
       Translation of foreign currency denominated debt                 (3.2)         (0.4)        (6.7)          4.8
                                                                 -----------     ---------    ----------   ----------

       U.S. GAAP and SEC requirements:
       Net income (loss) for the period                                 (1.5)         19.5         25.1          22.8
       Less: dividends on cumulative preferred shares                   (0.8)         (0.8)        (1.6)         (1.6)
       Net income (loss) attributable to common shareholders     $      (2.3)    $    18.7    $    23.5    $     21.2
                                                                 ===========     =========    =========    ==========

       Net income (loss) per common share:

          Basic                                                  $    (0.02)     $    0.16    $    0.20    $     0.18
                                                                 ===========     =========    =========    ==========

          Diluted                                                $    (0.02)     $    0.16    $    0.19    $     0.18
                                                                 ===========     =========    =========    ==========

       Weighted average shares for basic EPS (millions)                121.3         114.9        117.7         115.6
       Weighted average issued shares subject to
         restrictions (millions)                                         1.1            --          0.6            --
       Weighted average shares on conversion of stock
         options (millions)                                              4.7           1.8          4.5           1.3
                                                                 -----------     ---------    ----------    ---------
       Adjusted weighted average shares and share
         equivalents (millions)                                        127.1         116.7        122.8         116.9
                                                                 ===========     =========    ==========    =========
</TABLE>

      The following options were excluded in the computation of diluted earnings
      per share because the options'  exercise price exceeded the average market
      price  of  the  common  shares  and,   therefore,   the  effect  would  be
      antidilutive:


                                       14
<PAGE>


      i)    All options  outstanding  for the three months ended  September  29,
            2000.

      ii)   Options  outstanding  for the six months ended September 29, 2000 to
            purchase  189,500  shares of  common  stock at an  average  price of
            $34.64 per share.

      iii)  Options outstanding for the three months ended September 24, 1999 to
            purchase  1,054,000  shares of common  stock at an average  price of
            $18.05 per share.

      iv)   Options  outstanding  for the six months ended September 24, 1999 to
            purchase  2,188,867  shares of common  stock at an average  price of
            $13.87 per share.

      US GAAP net income (loss) included  foreign exchange gains of $0.4 for the
      three  months ended  September  29, 2000 and $4.1 for the six months ended
      September  29, 2000 (three  months ended  September  24, 1999 - $5.6;  six
      months ended September 24, 1999 - $11.7).

      The components of comprehensive income were as follows:

<TABLE>
<CAPTION>
                                                                  Three Months Ended        Six Months Ended
                                                                Sept. 29,   Sept. 24,     Sept. 29,   Sept. 24,
                                                                  2000         1999         2000          1999
                                                                ---------   ---------     ---------   ---------
      <S>                                                         <C>        <C>           <C>           <C>
      Comprehensive income (loss) for the period:
       Net income (loss) for the period                           $ (1.5)    $   19.5      $  25.1       $ 22.8
       Other comprehensive income (loss) -
         Foreign currency adjustment                                 3.3         17.9         (6.8)        (9.6)
                                                                --------    ---------     --------    ---------
      Comprehensive income for the period                         $  1.8     $   37.4      $  18.3       $ 13.2
                                                                ========    =========     ========    =========
</TABLE>

      Balance  sheet items,  which vary,  in  conformity  with U.S. GAAP and SEC
      requirements:

                                                           Sept. 29,   March 31,
                                                             2000        2000
                                                           ---------   ---------
      Fixed assets                                        $   428.6    $  445.6
      Acquired intangible assets                          $   262.9    $    2.5
      Patents, trademarks and other                       $    11.0    $   11.3
      Accounts payable and accrued liabilities            $   184.7    $  217.0
      Shareholders' equity:
        Redeemable preferred shares                       $    34.1    $   34.2
        Common shares                                     $ 1,083.8    $  763.1
        Contributed surplus                               $       -    $      -
        Accumulated other comprehensive loss              $   (10.2)   $   (3.4)
        Deficit                                           $  (153.3)   $ (176.8)

      The Financial Accounting Standards Board has issued Statement of Financial
      Accounting  Standards No. 133,  Accounting for Derivative  Instruments and
      Hedging  Activities ("SFAS 133") which will be effective for the Company's
      March 31, 2002 year end.  The Company has not  determined  the impact,  if
      any, of this pronouncement on its consolidated financial statements.

      In  December  1999,  the SEC issued  Staff  Accounting  Bulletin  No. 101,
      "Revenue Recognition in Financial  Statements" ("SAB 101"), which provides
      guidance on the  recognition,  presentation  and  disclosure of revenue in
      financial  statements  filed  with the SEC.  SAB 101  outlines  the  basic
      criteria  that  must be met in order to  recognize  revenue  and  provides
      guidance for disclosures related to revenue recognition policies. Although
      the  Company is still in the process of  assessing  the impact of adopting
      SAB 101 on its financial position and results of operations in Fiscal 2001
      and  thereafter,  management  does not expect the  effect,  if any,  to be
      material.


                                       15
<PAGE>

17.   Consolidated statements of cash flows

      a)    Net change in non-cash working capital balances related to operating
            activities:

                                                           Six Months Ended
                                                       Sept. 29,      Sept. 24,
                                                         2000           1999
                                                       ---------      ---------
      Net change in non-cash  working  capital
      balances  related to operating
      activities:
      Accounts receivable                                  $ 4.7         $ 20.2
      Inventories                                           (1.2)           0.3
      Accounts payable and accrued liabilities             (43.8)         (12.2)
      Deferred revenue                                      (3.5)          (1.6)
      Other                                                 (2.0)          (1.1)
                                                       ---------      ---------
                                                          $(45.8)         $ 5.6
                                                       =========      ==========
      b)    Acquisitions:

      The following  table  summarizes  the Company's  cash flows from investing
      activities  resulting from acquisitions (there were no acquisitions in the
      comparative period):

                                                                   Six Months
                                                                      Ended
                                                                 Sept. 29, 2000
                                                                ---------------
      Vertex:
        Cash acquired                                                $    11.1
        Net assets acquired other than cash                              289.6
                                                                     ----------
        Total purchase price                                             300.7
        Less: cash acquired                                              (11.1)
        Less: non-cash consideration paid                               (300.7)
                                                                     ----------
      Cash acquired for Vertex                                            11.1
      Less: cash paid for other acquisitions                              (0.8)
                                                                     ==========
      Cash acquired net of cash paid                                  $   10.3
                                                                     ==========

18.   Subsequent event

      On November 3, 2000,  the Company  announced  that its Board of  Directors
      intends  to  separate  Mitel's  Systems  segment  from  the  Semiconductor
      segment.  The  mechanism  or  method  to  effect  the  separation  of  the
      businesses  has  not yet  been  determined.  The  impact,  if any,  on the
      Company's financial position or results of operations cannot be determined
      at this time.

19.   Comparative figures

      Certain of the 2000 comparative  figures have been reclassified to conform
      to the presentation adopted in 2001.


                                       16
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF  OPERATIONS  (in  millions  of  Canadian  dollars,  except  per share
        amounts)

Headquartered  near the  capital  city of  Ottawa in  Canada,  Mitel is a global
provider of semiconductors and  communications  systems for converging voice and
data networks in a rapidly evolving Internet  economy.  Mitel employs some 6,000
people worldwide.

The  following  discussion  and analysis  explains  trends in Mitel's  financial
condition and results of operations for the three and six months ended September
29, 2000 compared with the  corresponding  periods in the previous  year, and is
intended to help  shareholders and other readers  understand the dynamics of the
Company's business and the key factors  underlying its financial  results.  This
discussion  should  be read  in  conjunction  with  the  consolidated  financial
statements and notes thereto included  elsewhere in this Form 10-Q, and with the
Company's audited  consolidated  financial  statements and notes thereto for the
fiscal year ended March 31, 2000.

RECENT SIGNIFICANT EVENTS

Separation of the Semiconductor and Systems Businesses

On November 3, 2000, the Company  announced that its Board of Directors  intends
to separate Mitel's Systems segment from its high-growth  Semiconductor segment.
The mechanism or method to effect the  separation of the  businesses has not yet
been  determined.  The impact,  if any, on the Company's  financial  position or
results of  operations  cannot be  determined  at this time.  The  decision  was
developed in response to increasing  differences in customer  types,  technology
roadmaps,  investment requirements and, most importantly,  the competitive needs
of the two  businesses.  Management  believes this  decision will  eliminate any
confusion and uncertainty  among the largest customers of one segment who happen
to be the largest  competitors of the other segment.  The Company's objective is
optimizing  the business  prospects for each division  and,  hence,  shareholder
value.

Acquisition of Vertex Networks, Incorporated

On July 28,  2000,  the Company  acquired  100  percent of the capital  stock of
privately-held Vertex Networks, Incorporated ("Vertex"), for total consideration
of  approximately  11 million  common  shares  newly issued by Mitel with a fair
value of $300.7.  The  acquisition  was  accounted  for by the purchase  method.
Accordingly,  Vertex's  results  from  operations  have  been  included  in  the
consolidated accounts of the Company from the date of acquisition.

Vertex is a fabless  semiconductor  company providing  high-performance  network
packet  processing,  switching and routing silicon  solutions for the enterprise
and wide  area  network  ("WAN")  access  markets.  Vertex  provides  integrated
circuits for Layer 3 Internet  Protocol  ("IP") routing  switches and developing
chipsets,  reference  designs,  and software for  intelligent  packet  switching
applications.  Vertex's products encompass Quality of Service ("QoS")-enabled IP
switching for enterprise communications, WAN traffic concentration, and fiber to
the home  ("FTTH")  markets.  Vertex,  which was  founded  in 1995,  is based in
Irvine,  California,  United  States,  and  has  design  centers  in  San  Jose,
California,  and Taiwan. Vertex employed  approximately 75 people as at the date
of acquisition.

Management  believes  the  acquisition  of Vertex  will allow Mitel to enter the
packet processing and switch fabric market to offer system-wide,  IP-based,  QoS
for  convergent  networks.  QoS is a term  that  qualifies  certain  performance
attributes  of voice  transmission  over IP  networks,  and  usually  refers  to
measures of delay,  latency and jitter.  Mitel's  focus will be to deliver  wire
speed  non-blocking  scalability  for the edge of WANs,  providing  the  maximum
packet-switching  throughput  required by systems designers and their customers.
Management  believes the approach will introduce Local Area Network


                                       17
<PAGE>

("LAN") cost  structures  into WAN  applications  to provide a more  competitive
solution that accommodates diverse switching  technologies in use at the edge of
the network.

Common Share Repurchase Program

On June 5, 2000, the Company announced its Board of Directors had authorized the
continuation  of its normal  course  issuer  bid  program  to  repurchase  up to
5,706,196  common shares,  representing  5 percent of 114,123,921  common shares
issued and  outstanding  at May 18, 2000.  The purchases  will take place on the
open  market  through  the  stock  exchanges  of New  York  and  Toronto  over a
twelve-month  period beginning on June 9, 2000 and ending on June 8, 2001, or on
such  earlier date as the Company may  complete  its  purchases  pursuant to the
notice of  intention to make a normal  course  issuer bid filed with The Toronto
Stock Exchange.  The Company,  which intends to cancel the  repurchased  shares,
believes that at present no director,  senior  officer or insider of the Company
intends to sell any common  shares  under this  program.  No common  shares were
repurchased  under this program  during the period from June 9, 2000 to November
9, 2000.

RESULTS OF OPERATIONS

Mitel operates through two reportable  business  segments - Mitel  Semiconductor
("Semiconductor") and Mitel Communications Systems ("Systems").  Mitel sells its
products  through both direct and  indirect  channels of  distribution.  Factors
affecting the choice of distribution,  among others,  include end-customer type,
the level of  product  complexity  and  integration  requirements,  the stage of
product  introduction,  geographic presence and location of markets,  and volume
levels.

Semiconductor   provides   specialty    microelectronic    solutions   for   the
communications  and  medical   marketplaces.   In  the  communications   market,
Semiconductor  specializes  in  broadband  connectivity  solutions  over  wired,
wireless and optical media.  Mitel's  medical  applications-specific  integrated
circuits  ("ASICs")  provide  solutions for applications  such as pacemakers and
hearing aids and portable instruments.

Systems  provides  enterprises  with  voice  and  data  communications  systems;
complete  private  networks  including  remote  teleworking  solutions;  unified
messaging and call-center  applications;  computer telephony integration ("CTI")
systems and applications;  and it also supplies competitive carriers with public
network access products.

Consolidated Summary

Revenue, based on the geographic location of Mitel's customers,  was distributed
as follows:

<TABLE>
<CAPTION>

                                      Six Months Ended      % of      Six Months Ended      % of
(millions of Canadian dollars)         Sept. 29, 2000       Total      Sept. 24, 1999       Total
                                      ----------------      -----     ----------------      -----
<S>                                           <C>             <C>             <C>             <C>
United States                                 $ 314.9         46%             $ 302.1         46%
Europe                                          235.7         34                215.3         33
Asia/Pacific                                     95.2         14                 72.6         11
Canada                                           29.1          4                 36.3          5
Other Regions                                    13.7          2                 33.7          5
                                      ----------------      -----     ----------------      -----
Total                                         $ 688.6        100%             $ 660.0         100%
                                      ================     ======     ================      =====
</TABLE>

For the three months  ended  September  29,  2000,  the net movement in exchange
rates from Fiscal 2000 negatively  impacted total revenue by 4 percent  ($12.8).
For the six months ended  September 29, 2000, the net movement in exchange rates
from Fiscal 2000  negatively  impacted total revenue by 3 percent


                                       18
<PAGE>

($19.2).  The  negative  foreign  exchange  impacts  were  primarily a result of
changes in the UK pound sterling  exchange rate,  partially offset by changes in
the U.S. dollar exchange rate.

Total second quarter  revenue grew by 3 percent  compared to the same quarter of
last year.  Mitel's revenue growth was driven by strong  Semiconductor  sales in
high growth areas such as broadband networking, wireless and digital television.
The semiconductor sales growth rate of 39 percent, however, was mostly offset by
lower sales in the Systems business. Management believes the Systems business is
experiencing  industry-wide  effects of reduced  capital  spending by enterprise
customers.  Adjusted Net Income (see below) for the quarter was $30.5,  or $0.24
per share,  compared to $27.7, or $0.23 per share, for the comparable  period in
Fiscal  2000.  The  increase  in  Adjusted  Net  Income  from  a  year  ago  was
attributable   to  higher   Semiconductor   sales  and  improved   manufacturing
efficiencies  in the Company's  semiconductor  fabs,  which more than offset the
weaker operating performance in the Systems business.

Including  amortization of intangibles (see below) of $23.9,  Mitel recorded net
income of $6.6 in the second  quarter  of Fiscal  2001,  or $0.05 per share,  as
against $12.5,  or $0.10 per share, in the second quarter of Fiscal 2000. In the
second quarter of Fiscal 2000,  amortization of acquired intangibles amounted to
$15.2.  Net  income for the first  half of Fiscal  2001 was $28.1,  or $0.23 per
share,  after  deducting  amortization  of acquired  intangibles of $27.1.  This
compares to $7.9,  or $0.05 per share,  for the first half of Fiscal  2000.  The
amortization  of  acquired  intangibles  amounted to $32.3 for the first half of
Fiscal 2000.

Adjusted Net Income excludes the impact of amortization of acquired intangibles,
special charges (net),  non-cash debt issue and other costs expensed on an early
partial debt repayment and  discontinued  operations.  Although not a substitute
for net income or net income per common share,  management utilizes Adjusted Net
Income and Adjusted Net Income per common  share as a  supplementary  measure to
assess financial performance.

<TABLE>
<CAPTION>
                                                                        Six Months Ended
                                                                     Sept. 29,     Sept. 24,
(millions of Canadian dollars, except per share amounts)               2000           1999
                                                                     ---------     ---------
<S>                                                                     <C>           <C>
Consolidated revenue                                                    $688.6        $660.0
  Semiconductor segment revenue                                         $378.1        $264.6
  Systems segment revenue                                               $310.5        $395.4

Operating income                                                        $ 50.8        $ 28.9
  Semiconductor segment operating income                                $ 84.7        $ 21.7
  Systems segment operating income (loss)                               $ (6.8)       $ 39.5
  Unallocated costs - amortization of acquired intangibles              $ 27.1        $ 32.3

Net income                                                              $ 28.1        $  7.9
Net income per common share                                             $ 0.23        $ 0.05

Adjusted net income                                                     $ 55.8        $ 40.2
Adjusted net income per common share                                    $ 0.46        $ 0.33
Weighted average common shares outstanding                               117.7         115.6
</TABLE>

Net income and cash flows for each  period,  as  determined  by U.S.  accounting
principles,  are detailed and discussed in note 16 to the consolidated financial
statements included elsewhere in this Form 10-Q.


                                       19
<PAGE>

Business Segment Review

Mitel Semiconductor

Semiconductor  second  quarter  revenue of $194.3  increased  by 39 percent from
Fiscal  2000's  second  quarter and,  sequentially,  by 6 percent from the first
quarter of this fiscal year.  In proportion to total company sales in the second
quarter of Fiscal 2001,  Semiconductor revenue increased by 14 percentage points
from the  corresponding  period of last year to  represent  54  percent of total
company sales.  Year to date,  Semiconductor  revenue of $378.1  increased by 43
percent over last year's same period to account for 55 percent of total  company
sales in the first half of Fiscal 2001.

The industry is experiencing  intense demand by end customers as a result of the
expansion and convergence of the network infrastructure.  It is this demand that
in turn drives the sales  growth for Mitel's  broadband  networking  components.
Digital  Television  components  are also in  demand  as  manufacturers  move to
address  the  market  growth  in  advanced  media   applications  and  products.
Management  believes  that this trend will  continue  through  Fiscal  2001 with
double-digit growth over Fiscal 2000.

Semiconductor's  second quarter  operating  income increased by 142 percent from
Fiscal 2000's  second  quarter to $40.2 and by 290 percent to $84.7 on a year to
date basis. This  profitability  improvement  resulted from higher sales volumes
combined with improved manufacturing  efficiencies in the division's fabrication
facilities.  In recent quarters,  a continuing focus on improving  manufacturing
yields and optimizing fab utilization has had a significant and favorable impact
on the division's operating margins.

Mitel Communications Systems

Systems  revenue of $165.5  decreased by 21 percent  from the second  quarter of
last year but,  sequentially,  increased by 14 percent from the first quarter of
this fiscal year.  Systems  revenue  accounted  for 46 percent of total  company
revenue in the second quarter and represented a decrease of 14 percentage points
in the Company's sales mix from the second quarter of last year. Compared to the
first half of Fiscal 2000,  Systems  revenue for the six months ended  September
29, 2000 decreased by 21 percent to $310.5.

The revenue  decrease in the quarter and year to date  periods  compared to last
fiscal year was  principally  due to  industry-wide  market  softness  while end
customers  delayed  capital  spending  on systems and  applications.  Management
believes  recent  industry  announcements  regarding  new  voice  communications
systems  moving to an IP platform have resulted in certain  customers  deferring
capital spending in order to acquire the advanced  functionality afforded by the
new IP  platforms in the future.  Selling  activity has started to show signs of
recovery as evidenced by the sales  improvement  over the first  quarter of this
fiscal  year.  However,  it is expected  that the revenue in Fiscal 2001 will be
below  the sales  levels  of Fiscal  2000  which  partially  benefited  from the
market's  pre-Year 2000 issue capital  spending.  Management  believes the sales
will increase  beyond Fiscal 2001 when Mitel's Voice over IP ("VoIP")  platforms
are likely to reach market acceptance and begin to ramp up.

As a result of reduced sales volume,  Systems  operating income decreased from a
record high of $26.3 in the second quarter of Fiscal 2000 to $3.7 this year. The
second quarter  profit reduced the Systems  operating loss to $6.8 for the first
half  of  Fiscal  2001,  as  against  an  operating  income  of  $39.5  for  the
corresponding period of last year. During the quarter, the division continued to
make significant  investments in research and development,  principally directed
toward networked IP communications systems and applications.


                                       20
<PAGE>

GROSS MARGIN

As a percentage of total revenue, total gross margin was 49 percent for both the
three and six month  periods  ended  September  29,  2000.  This  represents  an
improvement of 2 percentage points over each of the two respective  periods last
year. The improvement was due to higher sales volumes of semiconductor products,
a  favorable  semiconductor  sales  mix  and  positive  manufacturing  variances
resulting from improved semiconductor  manufacturing utilization.  These factors
combined to more than offset the negative impacts of lower systems sales.

OPERATING EXPENSES

Selling and Administrative ("S&A")

S&A expenses in the second  quarter of Fiscal 2001 were $85.1,  or 24 percent of
sales, compared with $88.0, or 25 percent of sales, for the comparable period in
Fiscal 2000.  Sequentially  from the first quarter of this fiscal year, S&A as a
percentage of sales decreased by 3 percentage points. Year to date, S&A expenses
were 25 percent  of sales and 1  percentage  point  lower than the first half of
Fiscal 2000. The improvement was due primarily to lower  compensation  costs and
discretionary  spending in the Systems business. In addition,  during the second
quarter  of last  fiscal  year,  the  Company  had  made  significant  marketing
investments  to  promote  the  product  portfolio  of  its  advanced   messaging
applications and ISDN PBX products.

Research and Development ("R&D")

R&D expenses amounted to $45.9, or 13 percent of revenue,  for the quarter ended
September  29, 2000.  This compares to $33.7,  or 10 percent of revenue,  in the
corresponding  period of Fiscal 2000.  Year to date,  R&D  expenses  amounted to
$85.6 or 12 percent of sales and 1  percentage  point higher than the first half
of  Fiscal  2000.  The  increase  was  attributable  to  higher  investments  in
Semiconductor R&D programs and the impact of consolidating the R&D activities of
Vertex,  which was acquired on July 28, 2000.  The second quarter amount was net
of $3.5 (2000 - $6.0) in R&D government assistance,  including ITCs. The year to
date  amount  was net of $6.9  (2000 -  $7.2)  in R & D  government  assistance,
including ITC's.

Mitel's  R&D   spending   is  directed   toward   investments   in   high-growth
communications market segments. The Semiconductor R&D programs primarily consist
of  developing  intellectual  property  in the areas of IC process  development,
communications ICs,  optoelectronic  components,  SLI or "System-On-A-Chip",  as
well as low power and high  voltage  semiconductors.  Systems R&D  programs  are
primarily directed at advancing call processing for enterprises on an IP centric
platform,  the development of a series of desktop  devices and network  gateways
for both TDM and IP to provide enhanced access to converged networks.

Amortization of Acquired Intangibles

Amortization of acquired  intangibles  increased in the second quarter of Fiscal
2001 to $23.9 from $15.2 for the comparable period in Fiscal 2000. Year to date,
acquired intangibles amortization amounted to $27.1 as compared to $32.3 for the
first six months of Fiscal 2000. The Fiscal 2000 amounts  included  amortization
related to Fiscal 1998  acquisitions  that were fully  written off by the end of
last  year.  The  Fiscal  2001  amounts  included  amortization  related  to the
acquisition of Vertex on July 28, 2000. Total intangible  assets acquired in the
second  quarter of Fiscal 2001  amounted to $285.4 and will be amortized  over a
two-year period.


                                       21
<PAGE>

INTEREST INCOME AND EXPENSE

Interest  income was $3.4 and $6.4 for the three and six months ended  September
29, 2000, up from $1.7 and $3.6 recorded in the respective corresponding periods
of Fiscal 2000, due to higher average cash balances.  Interest  expense was $4.8
and $10.1 for the three and six months ended  September 29, 2000, down from $5.2
and $10.4 in the respective  corresponding periods of Fiscal 2000, mainly due to
long-term  debt  repayments  in the  second  half of  Fiscal  2000 and the first
quarter of Fiscal 2001.

INCOME TAXES

Effective  for Fiscal  2001,  new rules were  applied for  corporate  income tax
accounting  which require Mitel to apply the  "liability"  method instead of the
"deferral"  method.  Under the new standard,  tax assets and liabilities must be
measured  using  income tax rates and  applying  tax laws which are  expected to
apply to taxable  income in periods in which the tax assets or  liabilities  are
expected to be realized or settled.  The impact of this change on the Company is
described in Note 2 to the unaudited  consolidated  financial statements for the
three and six months ended September 29, 2000.

Income tax expense  for the three and six months  ended  September  29, 2000 was
$12.0 and $18.4,  respectively,  compared to $11.7 and $14.2 for the  comparable
periods in Fiscal  2000.  The  effective  income tax rate,  as a  percentage  of
pre-tax income and before the effect of  amortization  of acquired  intangibles,
was 28 percent  for the second  quarter of Fiscal 2001 as compared to 30 percent
for the  corresponding  period in Fiscal 2000.  Year to date,  the effective tax
rate was 25 percent as compared to 26 percent for the first half of Fiscal 2000,
as a result of higher income in the U.S. and in Europe.  The lower effective tax
rate in  Fiscal  2001  was  mainly  due to lower  income  generated  in  Canada,
partially  offset  by higher  Semiconductor  income in  Europe.  The  sequential
increase  from the effective tax rate of 21 percent in the first quarter of this
fiscal  year was  principally  due to  higher  second  quarter  earnings  in the
European operations.

BACKLOG

As orders are frequently booked and shipped within the same fiscal month,  order
backlog is not necessarily  indicative of a sales outlook for the month, quarter
or year.  This is most  true for  Systems  since  manufacturing  lead  times for
semiconductor  products  are  generally  longer  because  of the  nature  of the
production  process.  At September 29, 2000, order backlog was $312.5, down from
$322.8 at the end of the first  quarter  of  Fiscal  2001 and up from  $280.0 at
March 31,  2000.  The  increase in backlog  from the  beginning  of the year was
attributable  to  higher  semiconductor  orders,  principally  in the  areas  of
broadband networking.  Most of the backlog is scheduled for delivery in the next
twelve months.

LIQUIDITY AND CAPITAL RESOURCES

At September 29, 2000, cash, cash equivalents and short-term investment balances
totaled $230.0, up from $228.4 at March 31, 2000, and up from $165.9 at June 30,
2000.

Cash flow from  operations  before working  capital  changes  amounted to $116.0
during the first half of Fiscal  2001  compared to $94.5 in Fiscal  2000.  Since
March 31, 2000,  Mitel's  working  capital,  as  reflected  in the  consolidated
statements of cash flows,  increased by $45.8 mostly due to lower  payables that
were paid down from the higher year-end  balances.  Mitel maintains a minimum of
critical  inventory  to  ensure  continuity  of  supply  for  its  manufacturing
requirements.  Most of the  security  supply  inventory  is  carried  at Mitel's
semiconductor plants.

Fixed asset and other  additions were $44.0 during the first half of Fiscal 2001
compared  with  $28.1 in the  corresponding  period  of Fiscal  2000,  excluding
additions  of $4.6  and  $8.7  financed  by  capital  lease  for each of the two
respective   periods.   The  additions  were  primarily  related  to  continuing
improvements  to


                                       22
<PAGE>

Mitel's   information   technology   resources  as  well  as  for  Semiconductor
manufacturing  capacity and design tools.  Cash flow from  investing  activities
also included cash acquired from the Vertex acquisition in the amount of $11.1.

On February  12,  1998,  Mitel  entered  into two term loans,  respectively  the
AXELsSM*  Series B loan and the Tranche A Term Loan,  with a syndicate  of banks
led by Goldman,  Sachs Credit  Partners  L.P. as the  syndication  agent and the
Canadian Imperial Bank of Commerce as the administrative agent. The principal of
the AXELs  Series B loan is payable in four  quarterly  installments  commencing
March 2003.  The  principal  of the Tranche A Term Loan was fully repaid in June
2000 as a result of a  mandatory  prepayment  required  to be made from  Mitel's
defined excess cash flow in Fiscal 2000 (see below).

The  remaining  AXELs Series B loan bears  interest at a variable  interest rate
based on the lower of a defined  base rate or the  London  Inter Bank Offer Rate
("LIBOR")  plus a premium.  Mitel  entered into an interest rate swap to fix the
effective interest rate on a portion of the term loan.  Management believes that
the interest rate swap is  considered  to be an effective  hedge of the variable
interest  rates on the  term  loan.  Mitel is  subject  to  certain  restrictive
covenants and commitments and is required to maintain  certain  financial ratios
for the purpose of ensuring the Company's  ability to meet its obligations under
the credit agreement.  The term loan is subject to mandatory  prepayments out of
certain insurance proceeds, defined excess cash flow generated by Mitel, and the
proceeds of certain asset sales (other than inventory), equity offerings or debt
issuances  by  Mitel.  Mandatory  prepayments  range  from  50% to  100%  of the
applicable net cash proceeds.  Prior to February 2003, mandatory prepayments are
restricted  to paying down the amounts,  if any, that are drawn on the revolving
credit facility. Management believes Mitel is in compliance with the obligations
and restrictive covenants under the credit agreement.

Long-term debt decreased principally due to the mandatory prepayment,  mentioned
above, in the amount of $27.1 against the syndicated term loans.  Long-term debt
also  decreased  due to scheduled  repayments  of $19.3  against  capital  lease
liabilities.

In the quarter ended September 29, 2000,  approximately 11 million common shares
valued at $300.7 were issued by the Company to acquire all of the capital  stock
of Vertex.  Approximately  1.1 million shares or 10 percent of the issued shares
were  placed in escrow  for a  two-year  period to  indemnify  the  Company  for
representations  made by Vertex. In addition,  approximately 535 thousand issued
shares are subject to certain restrictions over a two-year period.

On June 5, 2000,  Mitel  announced  its intention to make a normal course issuer
bid for up to 5,706,196  common shares (5 percent of  114,123,921  common shares
issued and outstanding at May 30, 2000).  These purchases will take place on the
open  market  through  the  stock  exchanges  of New  York  and  Toronto  over a
twelve-month  period which commenced on June 9, 2000 and ends on June 8, 2001 or
on such earlier date as the Company may complete its  purchases  pursuant to the
normal course issuer bid filed with the Toronto Stock Exchange.  All repurchased
shares will be cancelled. As at November 9, 2000, no shares were purchased under
the normal course issuer bid.

As at September  29, 2000,  Mitel's  capitalization  was comprised of 21 percent
debt, 3 percent preferred equity, and 76 percent common equity. This compares to
27 percent debt, 4 percent preferred equity, and 69 percent common equity at the
end of Fiscal 2000.

In addition to cash,  cash  equivalent  and  short-term  investment  balances of
$230.0 as at September 29, 2000,  Mitel has an unused  revolving credit facility
of approximately $110.6 (U.S.$73.4).  Management believes Mitel is in a position
to meet all  foreseeable  business cash  requirements  and debt service from its
cash  balances  on  hand,  existing  financing  facilities  and cash  flow  from
operations.


                                       23
<PAGE>

OTHER

Foreign Currency Translation

Management periodically evaluates the financial and operational  independence of
its  foreign  operations  and the  resulting  accounting  classification  of the
foreign subsidiaries as self-sustaining enterprises. Should a foreign subsidiary
cease to be classified as  self-sustaining,  then translation gains or losses on
consolidating the foreign subsidiary's  financial statements would be charged to
operating  income instead of a separate  component of shareholders'  equity.  At
September 29, 2000, the  translation  account balance was in a debit position of
$10.2 as compared to a debit  position  of $3.4 at the end of Fiscal  2000.  The
increase in the debit was due to a stronger  Canadian dollar as measured against
other currencies, principally the U.K. pound sterling.

Recently Issued Accounting Standards

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting Standards No. 133, Accounting for Derivative  Instruments and Hedging
Activities ("SFAS 133") which will be effective for the Company's March 31, 2002
year  end.  The  Company  has  not  determined  the  impact,  if  any,  of  this
pronouncement on its consolidated financial statements.

In December 1999,  the SEC issued Staff  Accounting  Bulletin No. 101,  "Revenue
Recognition in Financial Statements" ("SAB 101"), which provides guidance on the
recognition,  presentation  and  disclosure  of revenue in financial  statements
filed with the SEC.  SAB 101  outlines  the basic  criteria  that must be met in
order to recognize  revenue and provides  guidance  for  disclosures  related to
revenue  recognition  policies.  Although the Company is still in the process of
assessing the impact of adopting SAB 101 on its  financial  position and results
of  operations  in Fiscal 2001 and  thereafter,  management  does not expect the
effect, if any, to be material.

Forward Looking Statements

Certain  statements  in this  management's  discussion  and analysis  constitute
forward-looking  statements.  Such forward-looking  statements involve known and
unknown  risks,  uncertainties,  and other  factors  which may cause the  actual
results,  performance  or  achievements  of Mitel,  or industry  results,  to be
materially  different  from any future  results,  performance,  or  achievements
expressed   or  implied  by  such   forward-looking   statements.   Such  risks,
uncertainties  and assumptions  include,  among others,  the following:  general
economic and business  conditions;  demographic  changes;  import protection and
regulation;   rapid  technology  development  and  changes;  timing  of  product
introductions;  the mix of  products/services;  industry  competition,  industry
capacity  and other  industry  trends;  and the  ability of Mitel to attract and
retain key employees.

SM* AXEL is a registered service mark of Goldman, Sachs and Co.


                                       24
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

Market  risk  represents  the risk of loss  that may  impact  Mitel's  financial
statements  due to adverse  changes in  financial  markets.  Mitel is exposed to
market risk from changes in interest rates and foreign exchange rates. To manage
these risks,  Mitel uses certain  derivative  financial  instruments,  including
interest rate swaps,  forward  contracts and other  derivative  instruments from
time to time, that have been authorized pursuant to board-approved  policies and
procedures.  Mitel does not hold or issue  financial  instruments for trading or
speculative purposes.

Mitel currently uses forward  contracts and foreign  currency  options to reduce
the exposure to foreign  exchange risk. The most  significant  foreign  exchange
exposures for Mitel relate to the U.S. dollar, U.K. pound sterling and the Euro.
As at September 29, 2000,  there were no material  changes in information  about
market risks as disclosed in the  Company's  Form 10-K for the fiscal year ended
March 31, 2000.


                                       25
<PAGE>

PART II - OTHER INFORMATION

ITEM 4. Submission of Matters to a Vote of Security Holders

The Annual  Meeting of  Shareholders  was held on July 20,  2000 at the  Chateau
Laurier Hotel, Ottawa, Canada. At the Annual Meeting, the following matters were
presented to shareholders for approval:

Motion 1:  In respect of electing eleven directors to the Board;
Motion 2:  In respect of appointing Ernst & Young LLP as the Company's auditors;

The results of matters submitted to a vote of shareholders were as follows:

Motion 1:                      Shares
For                        70,861,950
Withheld                       35,788

Motion 2:                      Shares
For                        70,861,950
Withheld                       62,668

The following eleven  directors were re-elected at the 2000 Annual Meeting:  Mr.
Andre Borrel,  Mr.  Jean-Jacques  Carrier,  Mr. Anthony L. Craig,  Mr. Hubert T.
Lacroix,  Mr. Kirk Mandy,  Mr. Donald G. McIntyre,  Mr. Donald W. Paterson,  Dr.
Henry Simon,  Dr. Semir D. Sirazi,  Dr. Peter Van Cuylenburg and Mr. Jonathan I.
Wener. Mr. Kent H.E. Plumley was appointed on August 22, 2000.

ITEM 6. Reports on Form 8-K

a) Reports on Form 8-K

The  Company  filed a  Current  Report  on Form 8-K in the  three  months  ended
September  29,  2000.  The  Report was dated  July 28,  2000 and  related to the
acquisition of  privately-held  Vertex  Networks,  Incorporated.  The report was
amended  by a Current  Report on Form  8-K/A  dated  July 28,  2000 and filed on
October 11, 2000,  that included the pro forma and other  financial  information
with respect to the acquisition.

                                    SIGNATURE

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

                                                MITEL CORPORATION
                                                -----------------

November 9, 2000                                JEAN-JACQUES CARRIER
----------------                                ---------------------
Date                                            Jean-Jacques Carrier
                                                Senior Vice President of Finance
                                                 and Chief Financial Officer


                                       26