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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               ----------------

                                   FORM 10-K
(Mark One)

  [X] Annual Report Pursuant to Section 13 or 15(d) of The Securities
  Exchange Act of 1934.
                 For the Fiscal Year Ended: December 31, 1999
                                      or

  [_] Transition Report Pursuant to Section 13 or 15(d) of The Securities
  Exchange Act of 1934.
                   For the transition period     from     to

                        Commission File Number: 0-25560

                               ----------------

                            ACT Manufacturing, Inc.
            (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
                Massachusetts                                    04-2777507
<S>                                            <C>
       (State or other jurisdiction of              (I.R.S. Employer Identification No.)
       incorporation or organization)
</TABLE>

<TABLE>
<CAPTION>
                2 Cabot Road                                       01749
<S>                                            <C>
            Hudson, Massachusetts                                (Zip Code)
  (Address of principal executive offices)
</TABLE>

      Registrant's telephone number, including area code: (978) 567-4000

       Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.01 par value
                               (Title of class)

  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

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [_]

  The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 24, 2000 (based on the closing sale price as quoted by
the Nasdaq National Market as of such date) was $494,950,268.

  As of March 24, 2000, 16,331,355 shares of the registrant's common stock
were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Portions of registrant's definitive proxy statement for the annual meeting
of stockholders to be held on or about May 15, 2000 to be filed pursuant to
Regulation 14A are incorporated by reference into Part III of this Form 10-K.

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                                    PART I

  Except for the historical information contained herein, the matters
discussed in this Annual Report on Form 10-K are forward-looking statements
that involve risks and uncertainties. ACT Manufacturing, Inc. makes such
forward-looking statements under the provision of the "Safe Harbor" section of
the Private Securities Litigation Reform Act of 1995. Any forward-looking
statements should be considered in light of the factors described below in
Item 7 under "Year 2000 Readiness Disclosure Statement" and "Cautionary
Statements." Actual results may vary materially from those projected,
anticipated or indicated in any forward-looking statements. In this Annual
Report on Form 10-K, the words "anticipates," "believes," "expects,"
"intends," "future," "could," "may," and similar words or expressions (as well
as other words or expressions referencing future events, conditions or
circumstances) identify forward-looking statements.

ITEM 1. BUSINESS

  ACT Manufacturing, Inc. (ACT or We) is a leading provider of value-added
electronics manufacturing services to original equipment manufacturers (OEMs)
in the networking and telecommunications, computer and industrial and medical
equipment markets. We provide OEMs with:

  . complex printed circuit board assembly, primarily utilizing advanced
    surface mount technology;

  . electro-mechanical sub-assembly;

  . total system assembly and integration; and

  . mechanical and molded cable and harness assembly.

  We target and have developed a particular expertise in serving emerging and
established OEMs who require moderate volume production runs of complex,
leading-edge commercial market applications. The multiple configurations and
high printed circuit board densities that characterize these applications
generally require technologically-advanced and flexible manufacturing as well
as a high degree of other value-added services. As an integral part of our
offerings to customers, we provide the following value-added services in all
of our service offerings:

  . new product introduction services;

  . advanced manufacturing and test engineering;

  . flexible materials management;

  . comprehensive test services;

  . product diagnostics and repair;

  . product configuration;

  . packaging;

  . order fulfillment; and

  . distribution services.

  Since 1997, we have completed four acquisitions that have enabled us to
strengthen our advanced engineering capabilities, expand our operations and
geographic presence and diversify our customer base. Prior to 1997, we
operated primarily in the northeastern United States. Through our
acquisitions, we have added facilities in California, Georgia, Mississippi,
Ireland and Mexico. Our July 1999 merger with CMC Industries, Inc. enabled us
to significantly increase our scale of operations, expand our customer base
and geographic presence, and strengthen our management and engineering
resources. In addition, the acquisition of certain inventory and fixed assets
of GSS/Array Technology, Inc. in October 1999 strengthened and expanded our
California operations and considerably enhanced our advanced engineering
capabilities, in particular those related to high-end radio frequency
applications. We expect to continue to pursue select strategic acquisitions to
enhance our growth, operations, geographic presence, engineering capabilities
and service offerings.


                                       1
<PAGE>

  We have developed strong customer relationships with a wide range of
companies in the networking and telecommunications and computer industries.
Our customer base of over 100 customers includes large, established OEMs such
as EMC Corporation, Motorola and Nortel Networks, and emerging providers of
next-generation technology products such as Convergent Networks, Efficient
Networks and Unisphere Solutions (formerly Redstone Communications). OEMs in
the networking and telecommunications segment of the electronics industry
represented approximately 66% of our net sales for fiscal 1999 while OEMs in
the computer segment accounted for approximately 25% for the same period.
These customers require our advanced engineering capabilities and other value-
added services to manufacture technologically complex products, such as
wireless and ADSL modems, Internet access switches, routers and mass storage
systems . We establish close, long-term relationships with our customers by
offering them a complete and flexible electronics manufacturing solution in
order to accelerate their time-to-market and time-to-volume production.

Recent and Pending Business and Asset Acquisitions

  On March 15, 2000, we entered into a Pre-Tender Agreement for the
acquisition of GSS Array Technology Public Company Limited (GSS Thailand), a
Thailand company publicly traded on the Stock Exchange of Thailand. Under the
terms of the agreement, GSS Thailand would be delisted from the Stock Exchange
of Thailand and we would then make a cash tender offer for all issued shares
and outstanding options of GSS Thailand for approximately $93.0 million at the
exchange rate in effect between the Thai Baht and the U.S. Dollar on March 15,
2000. We also have the option to make the cash tender offer prior to the
delisting of GSS Thailand from the Stock Exchange of Thailand. Holders of
approximately 23% of GSS Thailand's outstanding shares have agreed to tender
their issued shares and outstanding options to ACT. We expect to close the
acquisition in the third quarter of fiscal 2000, however, the acquisition is
subject to various regulatory approvals and other closing conditions. We
cannot assure you that these closing conditions will be satisfied and we
therefore may not consummate this acquisition of GSS Thailand on a timely
basis or at all.

  On October 12, 1999, we acquired certain inventory and fixed assets of
GSS/Array Technology, Inc., located in San Jose, California, for approximately
$12.9 million in cash and the assumption of $0.6 million in liabilities, which
we financed primarily through our bank credit facility. The purchase of these
assets did not constitute the acquisition of a business. GSS/Array Technology,
Inc. was a subsidiary of GSS Thailand. We assumed on-going relationships with
select GSS/Array domestic customers and hired select employees.

  On July 29, 1999, we completed our merger with CMC Industries, Inc. (CMC), a
provider of electronics manufacturing services to OEMs in the
telecommunications, computer and electronics industries. CMC operated
manufacturing facilities in Santa Clara, California, Corinth, Mississippi and
Hermosillo, Mexico. As a result of the merger, CMC became our wholly owned
subsidiary. Under the terms of the merger agreement, each share of CMC common
stock was exchanged for 0.5 of a share of our common stock and all CMC stock
options were assumed by us. We issued approximately 3.9 million shares of
common stock and reserved approximately 0.9 million shares of common stock for
future issuance under CMC's 1990 Equity Incentive Plan, pursuant to the
merger. The merger has been accounted for as a pooling of interests.

  The merger with CMC has provided us many benefits which enable us to compete
more effectively in the electronics manufacturing services industry,
including:

  . We gained the critical mass necessary to compete for the business of
    larger OEMs in the electronics industry.

  . We enhanced our customer diversity, reduced our reliance on specific
    major customers and enhanced our opportunity to sell additional value-
    added services to a larger customer base as a result of the lack of
    overlap between the ACT and CMC customer bases.

  . We expanded our geographic presence and broadened our range of cost and
    volume production capabilities through the addition of high volume, low
    cost manufacturing production facilities in Corinth, Mississippi and
    Hermosillo, Mexico and a moderate volume facility in Santa Clara,
    California.

                                       2
<PAGE>

  . We acquired significant managerial, sales and engineering resources which
    has facilitated the expansion of our manufacturing capacity and has
    strengthened our advanced engineering capabilities.

  . We acquired a procurement office in Taiwan as well as experienced
    purchasing personnel which has strengthened our component supply chains.

Services

  We utilize a business unit or cell approach to provide value-added services
to more effectively satisfy the needs of our customers. Within this
environment, we assign dedicated equipment, personnel and systems to specific
customers. Throughout the manufacturing organization, we use state-of-the-art
production performance, statistical process control and quality reporting
systems to provide accurate, timely and relevant management and customer
information.

Manufacturing of Electronic Assemblies

  We offer manufacturing capabilities for printed circuit board assembly,
electro-mechanical sub-assembly, total system assembly and integration, and
cable and harness assembly.

  Printed Circuit Board Assembly. Printed circuit boards are platforms on
which integrated circuits and other electronic components are mounted.
Semiconductor designs are complex and often require printed circuit boards
with many layers of narrow, densely-spaced wiring. Rapid technological
advances have occurred in the electronics industry in recent years that have
increased the speed and performance of components, while reducing their size.
These technological advances have caused printed circuit boards to become
smaller with components more densely attached to the board. These
technological advances have required increasingly advanced surface mount
manufacturing technologies, in addition to traditional surface mount and pin-
through-hole technology.

  In pin-through-hole production, components are attached by pins, also called
leads, inserted through and soldered to plated holes in the printed circuit
board. In traditional surface mount technology production, the leads on
integrated circuits and other electronic components are soldered to the
surface of the printed circuit board rather than inserted into holes. Surface
mount technologies can accommodate a substantially higher number of leads in a
given area than pin-through-hole production. As a result, surface mount
technologies allow the printed circuit board to interconnect a greater density
of integrated circuits. This density permits tighter component spacing and a
reduction in the printed circuit board dimensions. Additionally, surface mount
technologies allow components to be placed on both sides of the printed
circuit board, thereby permitting even greater density. The substantially
finer lead-to-lead spacing in surface mount technologies requires a
manufacturing process far more exacting than the pin-through-hole interconnect
products. An advanced surface mount technology called micro ball grid array
(BGA) allows for even greater densities than traditional surface mount
technology. The BGA assembly process uses small balls of solder, instead of
leads that could bend and break, located directly underneath the part, to
interconnect the component and circuit board. Because of their high number of
leads, most complex or very large scale integrated circuits are configured for
surface mount technologies production.

  We employ advanced surface mount technologies, primarily micro ball grid
array, in our printed circuit board assembly operations in addition to
traditional surface mount technologies. We also continue to support pin-
through-hole technology and related semi-automated and manual placement
processes for existing and new applications that require these technologies.

  We focus on low to moderate volume manufacturing of highly complex and
sophisticated printed circuit board assemblies. We manufacture these complex
assemblies on a batch basis and have developed expertise in quickly changing
equipment set-up and manufacturing capabilities in order to respond to our
customers' changing needs. We believe this capability provides our customers
with optimal flexibility in product design, while allowing for rapid
turnaround of new or highly complex but lower volume products. We also offer
our customers high volume manufacturing alternatives. In our Hermosillo,
Mexico and Corinth, Mississippi facilities,

                                       3
<PAGE>

we currently manufacture larger volume, less complex printed circuit boards
using a variety of surface mount technologies.

  As part of our comprehensive manufacturing process, we provide in-circuit,
functional and stress environmental testing services for substantially all
completed printed circuit board assemblies. In-circuit tests verify that:

  . the components have been attached properly;

  . the components meet functional standards; and

  . the electrical circuits have been completed properly.

  We perform these tests on industry standard testing equipment using
proprietary software developed either by the customer or our test engineers.
We also use specialized testing equipment designed and provided by the
customer or developed by our engineers to perform customized functional tests
designed to ensure that the printed circuit board assembly will perform its
intended functions. In addition, since defective components normally fail
after a relatively short period of use, we subject more complex printed
circuit board assemblies to controlled environmental stresses, typically
thermal or electrical stresses, based on customer requests.

  Electro-Mechanical Sub-Assembly and Total System Assembly and
Integration. We integrate components, including our printed circuit board and
cable and harness assemblies, into higher level sub-assemblies and total
system assemblies. We maintain significant systems assembly capacity to meet
the increasing demands of our customers for total system assemblies. In
addition to product assemblies, we also provide the following services to
customers seeking to integrate manufacturing and distribution services:

  . custom configuration;

  . documentation;

  . packaging; and

  . order fulfillment.

  Cable and Harness Assembly. We offer a wide range of cable and harness
assembly services for molded and mechanical applications including:

  . custom manufactured ribbon assemblies;

  . multiconductor, co-axial and fiber optic cable assemblies; and

  . discrete wire harness assemblies.

  We use advanced and diverse manufacturing processes, in-line inspection and
test and dedicated work cells to minimize work-in-process time and focus on
process efficiencies and quality. We use both automated and semi-automated
preparation and insertion equipment, as well as manual assembly techniques to
accomplish the cable and harness assembly process. We test substantially all
of our cable and harness assemblies using automated test equipment.

Value-Added Services

  Outsourcing allows OEMs to take advantage of the manufacturing expertise,
advanced technology, capital investments and overall cost benefits obtained by
electronics manufacturing services providers. In addition, OEMs outsource
their manufacturing strategies to accelerate their time-to-market and time-to-
volume production, improve inventory management and purchasing power, and
improve the overall quality of their products. In order for OEMs to fully
achieve the benefits of outsourcing, they seek a comprehensive manufacturing
solution. To meet the requirements of our OEM customers, we provide the
following value-added services across the full range of our electronics
manufacturing services:

                                       4
<PAGE>

  New Product Introduction Services. We work with potential and existing
customers as early as possible in the new product development process to
optimize their products' design for manufacturing. Our new product
introduction services include design and layout, concurrent engineering, test
development and prototype engineering. Our new product introduction services
are designed to shorten customers' product development cycles by offering full
design and development services that compliment the customers' in-house
capabilities.

  We believe that our new product introduction capabilities result in close
interaction with our customers and new business prospects which:

  . enhance responsiveness to customers;

  . enable us to stay at the forefront of technological innovations; and

  . strengthen our relationships with our existing and new customers.

  Advanced Manufacturing and Test Engineering. Our advanced manufacturing
engineers work closely with a customer's product designers at the early design
stage of a product. Our engineers:

  . evaluate the initial product design to identify potential manufacturing
    and testability issues;

  . review the layout of a board to determine if it has the optimal tool set-
    up and efficient component spacing and densities; and

  . participate in parts selection and materials utilization decisions.

  This early interaction with the customer optimizes product
manufacturability, testability, and reliability. This participation also
mitigates component availability issues which might arise during the
manufacturing cycle. Our engineers also evaluate the ongoing manufacturing
process and recommend improvements to reduce manufacturing costs or lead
times, or to increase the quality of finished assemblies. Our engineering
services help customers:

  . bring their products rapidly to the market;

  . meet the market's expectation for quality; and

  . take advantage of advances in manufacturing and testing technology and
    processes.

  Materials Management. We provide our customers optimal flexibility regarding
their production delivery and product mix requirements. We directly purchase
all or a substantial portion of the components necessary for our product
assemblies. We procure components from vendors which meet our standards for
timely delivery, high quality, cost-effectiveness, flexibility and compliance
with customer specifications. To help control inventory investment, we
generally order components only when we have a customer forecast, purchase
order or commitment to purchase the completed assemblies. We use a materials
requirements planning system to plan and procure materials. We use electronic
data interchange systems to efficiently communicate with many of our vendors.
We have recently begun using an Internet-based procurement tool and expect to
realize cost savings and efficiencies by sourcing components via the Internet.
Additionally, we use just-in-time inventory management techniques and manage
our materials pipelines and vendor base to provide our customers flexibility
to change their volume requirements within established frameworks.

  Product Diagnostics and Repair. As OEMs increasingly outsource their
manufacturing needs and divest their internal manufacturing capabilities, they
need electronics manufacturing services providers that offer product
diagnostic and repair services. If a product purchased by an OEM's customer
fails or breaks, an OEM that has outsourced its manufacturing is not likely to
have the equipment, facilities or trained personnel available to identify and
fix the problem. We use our engineering and test capabilities to provide
product diagnostic and repair for assemblies we manufacture and, in some
instances, for other products of our customers. We also offer our OEM
customers revision control, lot tracking and materials management services for
their product revisions, upgrades and repairs.

                                       5
<PAGE>

  Order Fulfillment and Distribution. To more rapidly respond to the market
demands of our customers, we offer delivery programs and capabilities designed
with the flexibility to ship products directly to an OEM's customers. Under
these programs, we package products to the customer's specification with
appropriate product documentation and manage the logistics of delivery. We
work closely with our customers to identify and offer additional services in
anticipation of future customer needs.

Suppliers

  Our OEM customers need us to:

  . assure the short and long term supply of materials and components to
    manufacture their products;

  . negotiate low prices for these materials;

  . secure the highest quality and most reliable materials;

  . assure the on-time delivery of these materials; and

  . provide them with the flexibility to change their production requirements
    on short notice.

  To compete effectively in this business environment, we have developed a
materials procurement strategy whereby we maintain strong, long-term
relationships with a limited number of suppliers who conform to our high
standards. We seek to work only with suppliers that consistently deliver the
best technology and quality materials at the lowest total cost on the shortest
and most flexible lead times. We consistently evaluate all of our suppliers'
performances and provide them with suggestions for improving our
relationships. When we do business with a supplier at our customer's
direction, we closely monitor the supplier's performance and work with both
the supplier and the customer to improve the supplier's performance when
necessary. We believe this strategy enables us to provide optimal flexibility
to our OEM customers and enables us to better satisfy their electronics
manufacturing services needs.

  Our team of materials acquisition professionals is responsible for all
materials procurement and planning. We have a strategic purchasing group that
develops our worldwide materials and commodity procurement strategy. We have
adopted a more direct supplier model that targets select high quality
suppliers from a more distributor-oriented procurement model. This strategic
group is responsible for understanding the needs of our customers and the
commodity supply market, evaluating the overall quality of suppliers and
negotiating and executing low cost commodity supply contracts with preferred
suppliers. We also have a group that focuses on the day-to-day tactical
execution of our materials procurement process to insure that material or
component costs or shortages do not prevent us from providing optimal services
to our customers. This group is responsible for proactively managing inventory
programs, evaluating day-to-day supplier performance and co-ordinating
customer plan production changes.

  We typically procure components when a purchase order or forecast is
received from a customer. Due to our utilization of just-in-time inventory
techniques, the timely availability of many components depends on our ability
to both develop accurate forecasts of customer requirements and manage our
materials supply chain. Given our direct component procurement strategy with
quality suppliers, we rely on a single or limited number of suppliers for many
proprietary and other components used in our assembly process. Although we
have strong relationships with high quality suppliers, we do not have any long
term supply agreements. Shortages of materials and components have occurred
from time to time and will likely occur in the future despite our development
of select long-term supplier relationships. In particular, we are currently
experiencing a shortage in components such as tantalum and ceramic capacitors,
flash memory and dynamic and static ram. We believe our direct procurement
strategy and the division of responsibility within our materials procurement
team enable us to better manage our supply chain in order to reduce the
occurrence and minimize the effect on our customers of materials or component
shortages.


                                       6
<PAGE>

Customers and Markets

  We serve a wide range of customers from emerging growth companies to
established multinational corporations in a variety of markets, including
networking and telecommunications, computer and industrial and medical
equipment. We currently provide services to over 100 customers worldwide.

  Customers in the networking and telecommunications segment of the
electronics industry represented approximately 66% of our net sales for fiscal
1999 while OEMs in the computer segment accounted for approximately 25% for
the same period.

  For fiscal 1999, our five largest customers accounted for approximately 52%
of our net sales. For fiscal 1999, each of Nortel Networks (formerly Bay
Networks and Aptis Communications) and S-3 Incorporated (formerly Diamond
Multimedia) accounted for 10% or more of our net sales (15% and 13%,
respectively).

  Customers representing 10% or more of our net sales in fiscal 1998 were
Nortel Networks and Micron Electronics, each with approximately 12%, as
compared to Nortel Networks with 17% of our net sales in fiscal 1997.

  The timing and level of orders from our customers varies substantially from
period to period. The historic level of net sales we have received from a
specific customer in one particular period is not necessarily indicative of
net sales we may receive from that customer in any future period. While we
focus on maintaining long term relationships with our customers, for various
reasons, including consolidation in our customers' industries, we have in the
past and will continue in the future to terminate or lose relationships with
customers. Customers may also significantly reduce the level of business they
do with us or delay the volume of manufacturing services they order from us.
Significant or numerous terminations, reductions or delays in our customers'
orders could negatively impact our operating results in future quarters. We
continue to focus on expanding and diversifying our customer base to reduce
dependence on any individual customer or market.

  In many cases, our customers utilize more than one electronics manufacturing
services provider across their product lines. Our goal is to be the primary
electronics manufacturing services provider for our customers. We seek to
manufacture the high-value, leading-edge products of our customers and target
OEMs that require moderate volume production. Our high volume, low cost
facilities enable us to offer our customers a broad range of volume production
and cost alternatives. We believe that we are advantageously positioned to be
selected to provide manufacturing and value-added services for our customers'
new product offerings due to our:

  . close interaction with the design engineering personnel of our customers
    at the product development stage;

  . prototype production experience;

  . advanced manufacturing and engineering capabilities, such as radio
    frequency capabilities; and

  . established and dependable materials pipeline.

  We generally warrant that our products will be free from defects in
workmanship for twelve months. We also pass on to our customers any warranties
provided by component manufacturers and material suppliers to the extent
permitted under our arrangements with these parties. Our warranty provides
that during the warranty period we will take action to repair or replace
failed products. We test substantially all of our assemblies prior to
shipment. In addition, our customers generally test or have tested final
products on a sample basis prior to deployment in the field. Our warranty
costs have not been material to date.

Sales and Marketing

  We develop close, long term relationships with our customers by working with
them throughout the development, manufacturing and distribution processes.
Electronics manufacturing services providers generally face a long sales cycle
and must perform satisfactorily on a trial basis prior to capturing
significant orders from

                                       7
<PAGE>

an OEM. As a result, we seek to develop these close relationships with
customers during the initial product design and development stage. We then
support our existing customer relationships through a comprehensive staff of
program managers dedicated to individual customer accounts. We assign each
customer a program manager who acts as the primary contact for the customer.
Program managers are responsible for the development of the manufacturing
relationship between our company and the customer and the assignment of our
resources to meet the customer's requirements.

  We market our services primarily through a direct sales force, and to a
lesser extent, through independent manufacturer's representatives in the
United States, Canada and Europe. As we have grown, we have increasingly
relied on and developed our direct selling organization as opposed to
utilizing independent manufacturer representatives. We divide our direct sales
organization into two operations groups. The strategic sales group focuses its
selling efforts on major multinational accounts. The core sales group focuses
on existing and new accounts within set geographic regions. We expect to
continue to expand our direct sales organization and marketing efforts in
response to increased customer opportunities in new geographic markets, our
increased critical mass and our expanded customer base.

Competition

  The electronics manufacturing services industry is highly competitive. We
compete against numerous U.S. and foreign electronics manufacturing services
providers with global operations, including Benchmark Electronics, Celestica,
Flextronics, Jabil Circuit, Plexus, Sanmina, SCI and Solectron. We also face
competition from a number of electronics manufacturing services providers that
operate on a local or regional basis. In addition, current and prospective
customers continually evaluate the merits of manufacturing products
internally. Consolidation in the electronics manufacturing services industry
results in a continually changing competitive landscape. The consolidation
trend in the industry also results in larger and more geographically diverse
competitors who have significant combined resources with which to compete
against us.

  We believe that the principal competitive factors in the segments of the
electronics manufacturing services industry in which we operate are:

  . geographic location and coverage;

  . flexibility in adapting to customers' needs;

  . manufacturing capability;

  . price;

  . service;

  . technology;

  . quality;

  . reliability; and

  . timeliness in delivering finished products.

  We believe that we have developed a particular strength relative to some of
our major competitors in the manufacturing of complex, moderate volume,
leading-edge products. Competition from existing or potential competitors
could result in reduced prices, margins and market share which would
significantly and negatively impact our operating results.

Governmental Regulation

  Our operations are subject to certain federal, state and local regulatory
requirements relating to environmental compliance and site cleanups, waste
management and health and safety matters. In particular, we are subject to
regulations promulgated by:

  . the Occupational Safety and Health Administration pertaining to health
    and safety in the workplace;

                                       8
<PAGE>

  . the Environmental Protection Agency pertaining to the use, storage,
    discharge and disposal of hazardous chemicals used in the manufacturing
    processes; and

  . corresponding state agencies.

  To date the costs of compliance and environmental remediation have not been
material to us. Nevertheless, additional or modified requirements may be
imposed in the future. If such additional or modified requirements are imposed
on us, or if conditions requiring remediation were found to exist, we may be
required to incur substantial additional expenditures.

Employees

  At December 31, 1999, we had 2,816 permanent employees. To provide
manufacturing flexibility for our customers, we utilize the services of
temporary employees to meet short-term manufacturing capacity fluctuations.
The only employees represented by a labor union are those employees in our
Mexico operations. We have never experienced a labor stoppage or strike. We
consider our relations with our employees to be good.

ITEM 2. PROPERTIES

  Our principal manufacturing facilities are located in ten facilities
containing an aggregate of approximately 1.0 million square feet. Our
significant facilities are as follows:

<TABLE>
<CAPTION>
                            Approximate                Lease
   Location                 Square Feet Leased/Owned Expiration Description
   --------                 ----------- ------------ ---------- -----------
   <S>                      <C>         <C>          <C>        <C>
   Hudson, MA..............    147,000     Leased       2007    High-End Tech. Mfg.
   Hudson, MA..............     32,000     Leased       2003    Cable Prototyping & Mfg.
   Hudson, MA..............     28,000     Leased       2003    Cable Prototyping & Mfg.
   Mansfield, MA...........     44,000     Leased       2001    Low-Moderate Volume Mfg.
   Marlborough, MA.........    126,000     Leased       2003    High-End Tech. Mfg.
   Santa Clara, CA.........     75,000     Leased       2000    Low-Moderate Volume Mfg./High-
                                                                 End Tech. Mfg.
   Lawrenceville, GA.......     62,000     Leased       2005    Low-Moderate Volume Mfg.
   Corinth, MS.............    350,000     Leased       2060    Moderate-High Volume Mfg.
   Hermosillo, Mexico......    110,000      Owned        --     Moderate-High Volume Mfg.
   Dublin, Ireland.........     45,000     Leased       2002    Low-Moderate Volume Mfg.
                             ---------
     Total.................  1,019,000
                             =========
</TABLE>

  We lease two of the Hudson facilities from Re-Act Realty Trust, a
Massachusetts nominee trust, which is controlled by John A. Pino, our Chairman
of the Board, President and Chief Executive Officer, and the beneficial
interest of which is principally owned by Mr. Pino.

  Our manufacturing facility in Corinth, Mississippi is located on 64 acres of
land. The facility and land are leased from the Industrial Development Board
of Alcorn County, Mississippi under a lease which has options to renew until
2060. We also lease 20,000 square feet of warehouse space in Corinth,
Mississippi, an international purchasing office in Taiwan and a sales and
procurement office in Huntsville, Alabama.

  We have consolidated the equipment and assets we purchased from GSS/Array
into our Santa Clara operations. Our Santa Clara facility's lease term expires
in November 2000. We have signed a lease for a new 202,000 square foot
facility in San Jose, California that is under construction. We plan to move
our existing Santa Clara operations and the equipment and assets we purchased
from GSS/Array to this new facility and expect to begin operations in this new
facility in the fourth quarter of fiscal 2000.

                                       9
<PAGE>

  All of our manufacturing facilities have been certified to the ISO 9002
international quality standard except the Corinth, Mississippi facility which
is certified to the ISO 9001 international quality standard and our newly
leased facility in Marlborough, Massachusetts, which we occupied in January
2000. We expect that this facility will be certified in the near future.

  Our Massachusetts facilities contain 14 surface mount technology lines. We
operate 16 surface mount technology lines at our Corinth, Mississippi
facility; ten at Hermosillo, Mexico; nine at Santa Clara, California; three at
Lawrenceville, Georgia; and two in the Dublin, Ireland facility.

ITEM 3. LEGAL PROCEEDINGS

  On February 27, 1998, our company and several of our officers and directors
were named as defendants in a purported securities class action lawsuit filed
in the United States District Court for the District of Massachusetts. The
plaintiffs amended the complaint on October 16, 1998. The plaintiffs purport
to represent a class of all persons who purchased or otherwise acquired our
common stock in the period from April 17, 1997 through March 31, 1998. The
amended complaint alleges, among other things, that the defendants knowingly
made misstatements to the investing public about the value of our inventory
and the nature of our accounting practices. On December 15, 1998, we filed a
motion to dismiss the case in its entirety based on the pleadings. Our motion
to dismiss was granted without prejudice on May 27, 1999 and the case was
closed by the court on June 1, 1999. On June 28, 1999, the plaintiffs filed a
motion with the court seeking permission to file a second amended complaint.
We opposed that motion. On July 13, 1999, the court denied the plaintiffs'
motion to amend, noting "final judgment having entered in the case." On July
26, 1999, the plaintiffs filed a motion with the court asking the court to
extend the 30-day period for filing an appeal of its ruling dismissing the
case. We opposed that motion as well, and the court denied the motion on
August 10, 1999. The plaintiffs have filed an appeal with the United States
Court of Appeals for the First Circuit requesting that the Court of Appeals
reverse each of the orders described above. The parties are currently briefing
the issues before the Court of Appeals. We believe the claims asserted in this
action, and the plaintiffs' pending appeal, are without merit and intend to
continue to defend ourselves vigorously in this action. We further believe
that this litigation will not have a material adverse effect on our business
and results of operations, although we cannot assure you as to the ultimate
outcome of these matters.

  In December 1993, CMC Industries retained the services of a consultant to
assist in quantifying the potential exposure to CMC in connection with clean-
up and related costs of a former manufacturing site. This site is commonly
known as the ITT Telecommunications site in Milan, Tennessee. The consultant
initially estimated that the cost to remove and dispose of the contaminated
soil would be approximately $200,000. CMC subsequently entered into a
voluntary agreement to investigate the site with the Tennessee Department of
Environment and Conservation. In addition, CMC agreed to reimburse a tenant of
the site $115,000 for expenditures previously incurred to investigate
environmental conditions at the site. CMC recorded a total provision of
$320,000 based on these estimates. In fiscal 1995, an environmental consultant
estimated that the cost of a full study combined with short and long term
remediation of the site may cost between $3.0 and $4.0 million. Subsequent
environmental studies done in fiscal 1999 have estimated such costs as between
$750,000 and $3.5 million. During CMC's fiscal 1996, the State of Tennessee's
Department of Environment and Conservation named certain potentially
responsible parties in relation to the former facility. CMC was not named as a
potentially responsible party. However, Alcatel, Inc., a potentially
responsible party named by the State of Tennessee's Department of Environment
and Conversation and a former owner of CMC, sought indemnification from CMC
under the purchase agreement by which CMC acquired the stock of one of the
operators of the facility. To date, Alcatel has not filed any legal
proceedings to enforce its indemnification claim. However, Alcatel could
initiate such proceedings and other third parties could assert claims against
us relating to remediation of the site. We have entered into an agreement with
Alcatel pursuant to which the statute of limitations on its indemnification
claim is tolled for a period of time. In the event any proceedings are
initiated

                                      10
<PAGE>

or any claim is made, we would defend ourselves vigorously but defense or
resolution of this matter could negatively impact our financial position and
results of operations.

  In connection with a fiscal 1996 staff reduction by CMC, a number of
terminated employees subsequently claimed that CMC had engaged in age
discrimination in their dismissal and sought damages of varying amounts. CMC
defended the actual and threatened claims vigorously during fiscal 1998
incurring approximately $275,000 in legal costs over the course of the year.
On August 6, 1998, a judgment was rendered in favor of one plaintiff, in the
amount of $127,000 which CMC subsequently settled for $112,000. A second
plaintiff's claim for $53,000 was filed and subsequently settled for $48,500.
The EEOC negotiated with CMC to reach a monetary settlement for other
potential claimants. Without admitting any liability, CMC entered into a
Conciliation Agreement with the EEOC and agreed to pay approximately $500,000
to settle all such claims and limit future litigation costs. As a result of
these events and the significant ongoing costs to defend these claims, in
October 1998, CMC concluded that its interest would be best served to settle
all such matters. CMC reserved $975,000 to resolve all such claims, which
represented its best estimate of funds to ultimately be paid to such
claimants. This charge was recorded in CMC's fiscal year ended July 31, 1998.

  On June 15, 1999, we received written notice from legal counsel for the
Lemelson Medical, Education & Research Foundation, Limited Partnership
alleging that we were infringing certain patents held by the Lemelson
Foundation Partnership and offering to license such patents to us. We entered
into a perpetual patent license agreement with the Lemelson Foundation
Partnership in February 2000.

  From time to time, we are also subject to claims or litigation incidental to
our business. We do not believe that any incidental claims or litigation will
have a material adverse effect on our results of operations.

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

  No matters were submitted during the fourth quarter of the fiscal year ended
December 31, 1999 to a vote of security holders of ACT, through the
solicitation of proxies or otherwise.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  Our common stock is quoted on the Nasdaq National Market under the symbol
"ACTM." The following table sets forth the high and low bid information for
the common stock as reported by Nasdaq for the periods indicated.

<TABLE>
<CAPTION>
                                                                  High     Low
                                                                 ------- -------
<S>                                                              <C>     <C>
1999
  First quarter................................................. $ 19.13 $ 12.88
  Second quarter................................................   17.25   11.88
  Third quarter.................................................   28.19   13.50
  Fourth quarter................................................   39.31   19.69
1998
  First quarter.................................................   18.06    9.50
  Second quarter................................................   13.13    6.13
  Third quarter.................................................   12.81    5.91
  Fourth quarter................................................   14.75    5.06
</TABLE>

  On March 24, 2000, the closing price of our common stock on The Nasdaq
National Market was $48.75 per share. As of March 24, 2000, there were
approximately 132 holders of record of our common stock, which does not
include stockholders for whom shares were held in a nominee or street name.

                                      11
<PAGE>

  We did not pay any cash dividends on our common stock during the periods
shown above. We presently do not anticipate paying any cash dividends in the
foreseeable future. We presently intend to retain future earnings, if any, to
finance the expansion and growth of our business. Our bank credit facility
prohibits the payment of cash dividends on our capital stock. See note 5 of
notes to our consolidated financial statements.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

  The data set forth below has been restated to give retroactive effect to the
merger of ACT Manufacturing, Inc. and CMC Industries, Inc. on July 29, 1999
which has been accounted for as a pooling of interests as described in note 1
to our consolidated financial statements. The selected consolidated financial
data set forth below for the fiscal years ended December 31, 1999, 1998 and
1997 and the consolidated balance sheet data as of December 31, 1999 and 1998
are derived from our audited consolidated financial statements, which are
included elsewhere in this Annual Report on Form 10-K. The selected
consolidated financial data for the fiscal years ended December 31, 1996 and
1995 and the consolidated balance sheet data as of December 31, 1997, 1996 and
1995 are derived from the combination of our respective audited consolidated
financial statements that are not included in this Annual Report on Form 10-K.
You should read the data set forth below in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
appearing elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                     Fiscal Year Ended December 31, (1) (2)
                                  ---------------------------------------------
                                    1999     1998     1997      1996   1995 (3)
                                  -------- -------- --------  -------- --------
                                     (in thousands, except per share data)
<S>                               <C>      <C>      <C>       <C>      <C>
Consolidated Statements of
 Operations Data:
  Net sales...................... $696,282 $592,484 $479,139  $390,611 $259,961
  Cost of goods sold.............  641,856  556,339  454,203   351,485  238,140
                                  -------- -------- --------  -------- --------
  Gross profit...................   54,426   36,145   24,936    39,126   21,821
  Selling, general and
   administrative expenses.......   29,536   27,383   24,516    18,268   13,744
  Restructuring costs............      --       --       --        792      --
  Merger costs (4)...............    5,601      --       --        --       --
                                  -------- -------- --------  -------- --------
  Operating income...............   19,289    8,762      420    20,066    8,077
  Interest and other expense,
   net...........................    5,262    3,625    4,056     2,936    1,623
                                  -------- -------- --------  -------- --------
  Income (loss) before provision
   for income taxes..............   14,027    5,137   (3,636)   17,130    6,454
  Provision (benefit) for income
   taxes.........................    7,793    2,044   (1,235)    6,868    1,948
                                  -------- -------- --------  -------- --------
  Net income (loss).............. $  6,234 $  3,093 $ (2,401) $ 10,262 $  4,506
                                  ======== ======== ========  ======== ========
Net income (loss) per common
 share:
  Basic.......................... $   0.47 $   0.24 $  (0.19) $   0.86 $   0.41
  Diluted........................ $   0.45 $   0.24 $  (0.19) $   0.84 $   0.39
Weighted-average shares
 outstanding:
  Basic..........................   13,265   12,665   12,330    11,880   11,101
  Diluted........................   13,916   12,976   12,330    12,237   11,461
<CAPTION>
                                           As of December 31, (1) (2)
                                  ---------------------------------------------
                                    1999     1998     1997      1996     1995
                                  -------- -------- --------  -------- --------
                                                 (in thousands)
<S>                               <C>      <C>      <C>       <C>      <C>
Consolidated Balance Sheet Data:
  Working capital................ $170,420 $ 86,059 $ 55,894  $ 92,005 $ 56,809
  Total assets...................  402,326  238,294  208,573   175,029  127,058
  Long-term debt, less current
   portion (5)...................   49,332   42,014    4,817    34,966    8,591
  Total debt (5).................   53,361   62,604   59,938    43,496   20,501
  Total stockholders' equity.....  178,129   91,460   84,103    78,234   64,026
</TABLE>


                                      12
<PAGE>

--------
(1) ACT prepares its consolidated financial statements on the basis of a
    fiscal year ending December 31 and CMC prepared its consolidated financial
    statements on the basis of a fiscal year ending July 31. The consolidated
    statements of operations data for each of the four years in the period
    ended December 31, 1998 (referred to as "fiscal" 1998, 1997 1996, and
    1995) reflect such information for ACT for the years then ended combined
    with such information for CMC for the years ended July 31, 1998, 1997,
    1996 and 1995. The consolidated balance sheet data as of December 31,
    1998, 1997, 1996 and 1995 reflects such information of ACT as of those
    dates combined with such information of CMC as of July 31, 1998, 1997,
    1996 and 1995. The consolidated statements of operations data and the
    consolidated balance sheet data as of December 31, 1999 reflect such
    information of ACT and CMC for the year then ended. The consolidated
    financial statements have been adjusted to reflect the conforming of CMC's
    accounting policy with that of ACT's by expensing previously capitalized
    preoperating and start-up costs associated with CMC's Mexican
    manufacturing facility. The adjustment also gives effect to the tax
    deductibility of these expenses.
(2) As a result of ACT and CMC having different fiscal years, a summary of
    CMC's condensed consolidated results of operations for the five-month
    period from August 1, 1998 through December 31, 1998 are reported
    separately, as follows:

<TABLE>
   <S>                                                              <C>
   Condensed Consolidated Statement of Operations Data (in
    thousands):
     Net sales..................................................... $122,423
     Cost of sales.................................................  119,733
                                                                    --------
     Gross profit..................................................    2,690
     Selling, general and administrative expenses..................    5,409
                                                                    --------
     Loss from operations..........................................   (2,719)
     Interest expense..............................................      691
                                                                    --------
     Loss before taxes.............................................   (3,410)
     Income tax benefit............................................   (1,279)
                                                                    --------
     Net loss...................................................... $ (2,131)
                                                                    ========
</TABLE>

  This condensed consolidated statement of operations data of CMC for the
  period August 1, 1998 through December 31, 1998 does not reflect any
  adjustment to conform CMC's accounting policy with that of ACT's with
  respect to capitalized preoperating and start-up costs associated with
  CMC's Mexican manufacturing facility. The effect of this adjustment would
  be to reduce cost of sales by $100,000 and reduce net loss by $60,000.
(3) ACT operated as an S corporation for income tax purposes from November 1,
    1987 to March 28, 1995. Accordingly, during that period, ACT had not been
    subject to federal income taxes and had been subject to certain state
    income taxes at a reduced rate. Therefore, net income for the year ended
    December 31, 1995 is presented on a pro forma basis as if ACT had been a C
    corporation for the period presented. ACT's pro forma net income per
    common share for 1995 reflects the assumed issuance of 650,000 shares that
    ACT would have needed to issue at the initial public offering price of
    ACT's common stock to fund the distribution of all previously taxed but
    undistributed S corporation earnings to ACT's stockholders through March
    28, 1995, which was approximately $7.8 million.
(4) Merger costs relating to the acquisition of CMC are comprised primarily of
    investment banking, legal, accounting, printing, integration and other
    fees and expenses directly related to the merger.
(5) Includes capital lease obligations.


                                      13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

  You should read the following discussion and analysis together with our
consolidated financial statements and related notes included elsewhere in this
Annual Report on Form 10-K. This Annual Report on Form 10-K, including the
following discussion, contains trend analysis and other forward-looking
statements within the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Any statements in this Annual Report on Form
10-K that are not statements of historical facts are forward-looking
statements. These forward-looking statements are based on a number of
assumptions and involve risks and uncertainties. Our actual results may differ
materially from those indicated in such forward-looking statements as a result
of the factors set forth elsewhere in this Annual Report on Form 10-K,
including under "Year 2000 Readiness Disclosure Statement" and "Cautionary
Statements."

Overview

  We are a leading provider of value-added electronics manufacturing services
to original equipment manufacturers (OEMs) in the networking and
telecommunications, computer and industrial and medical equipment markets. We
provide OEMs with complex printed circuit board assembly, primarily utilizing
advanced surface mount technology, electro-mechanical sub-assembly, total
system assembly and integration, and mechanical and molded cable and harness
assembly. We target and have developed a particular expertise in serving
emerging and established OEMs who require moderate volume production runs of
complex, leading-edge commercial market applications. These applications are
generally characterized by multiple configurations and high printed circuit
board densities. As a result, they generally require technologically-advanced
and flexible manufacturing as well as a high degree of other value-added
services. As an integral part of our offerings to customers, we provide the
following value-added services: new product introduction services, advanced
manufacturing and test engineering, flexible materials management,
comprehensive test services, product diagnostics and repair, packaging, order
fulfillment and distribution services.

  We currently manufacture at ten facilities having an aggregate of
approximately 1.0 million square feet. Of our leased manufacturing facilities,
five of the facilities are located in Massachusetts and one facility is
located in each of Santa Clara, California; Lawrenceville, Georgia; Corinth,
Mississippi; and Dublin, Ireland. We also own a 4.4-acre tract of land and a
110,000 square foot manufacturing facility on that property in Hermosillo,
Mexico. All of our manufacturing facilities have been certified to the ISO
9002 international quality standard, except our Corinth, Mississippi facility
which has been certified to the ISO 9001 international quality standard. We
commenced operations in a 126,000 square foot, newly leased facility in
Massachusetts in the first quarter of 2000. This new facility has not been
certified to the ISO 9001 or 9002 international quality standards, although we
expect that it will be certified in the near future. We have signed a lease
for a new 202,000 square foot facility in San Jose, California that is under
construction. We plan to move our existing Santa Clara operations and the
equipment and assets we purchased from GSS/Array to this new facility and
expect to begin operations in this new facility in the fourth quarter of
fiscal 2000. Our facilities contain 54 surface mount technology lines.

  We recognize revenue upon shipment to customers or otherwise, under certain
contracts, when title to and reward of ownership pass to the customer. We
generally do not obtain long-term purchase orders or commitments from our
customers. Instead, we work closely with our customers to anticipate delivery
dates and future volume of orders based on customer forecasts. The level and
timing of orders placed by our customers vary due to:

  . customer attempts to manage inventory;

  . changes in the customer's manufacturing strategy; and

  . variation in demand for customer products due to, among other things,
    introduction of new products, product life cycles, competitive conditions
    or industry or general economic conditions.

                                      14
<PAGE>

  We may purchase components for product assemblies based on customer
forecasts. Our policy is that customers are generally responsible for
materials and associated acquisition costs in the event of a significant
reduction, delay or cancellation of orders from the forecasted amounts.

Recent and Pending Business and Asset Acquisitions

  On March 15, 2000, we entered into a Pre-Tender Agreement for the
acquisition of GSS Array Technology Public Company Limited (GSS Thailand), a
Thailand company publicly traded on the Stock Exchange of Thailand. Under the
terms of the agreement, GSS Thailand would be delisted from the Stock Exchange
of Thailand and we would then make a cash tender offer for all issued shares
and outstanding options of GSS Thailand for approximately $93.0 million at the
exchange rate in effect between the Thai Baht and the U.S. Dollar on March 15,
2000. We also have the option to make the cash tender offer prior to the
delisting of GSS Thailand from the Stock Exchange of Thailand. Holders of
approximately 23% of GSS Thailand's outstanding shares have agreed to tender
their issued shares and outstanding options to ACT. We expect to close the
acquisition in the third quarter of fiscal 2000, however, the acquisition is
subject to various regulatory approvals and other closing conditions. We
cannot assure you that these closing conditions will be satisfied, and we
therefore may not consummate this acquisition of GSS Thailand on a timely
basis or at all.

  On October 12, 1999, we acquired certain inventory and fixed assets of
GSS/Array Technology, Inc., located in San Jose, California, for approximately
$12.9 million in cash and the assumption of $0.6 million in liabilities, which
we financed primarily from our bank credit facility. The purchase of these
assets did not constitute the acquisition of a business. GSS/Array Technology,
Inc. was a subsidiary of GSS Thailand. We have assumed on-going relationships
with select GSS/Array domestic customers and hired select employees. See note
2 of notes to our consolidated financial statements.

  On July 29, 1999, we completed our merger with CMC Industries, Inc., a
provider of electronics manufacturing services to OEMs in the
telecommunications, computer and electronics industries. CMC operated
manufacturing facilities in Santa Clara, California, Corinth, Mississippi and
Hermosillo, Mexico. As a result of the merger, CMC became our wholly owned
subsidiary. Under the terms of the merger agreement, each share of CMC common
stock was exchanged for 0.5 of a share of our common stock and all CMC stock
options were assumed by us. We issued approximately 3.9 million shares of
common stock, and reserved approximately 0.9 million shares of common stock
for future issuance under CMC's 1990 Equity Incentive Plan, pursuant to the
merger. The merger has been accounted for as a pooling of interests.
Accordingly, our consolidated financial statements for prior periods have been
restated to include the operating results and financial position of CMC at the
beginning of the earliest period presented.

  ACT prepares its consolidated financial statements on the basis of a fiscal
year ending December 31 and CMC prepared its consolidated financial statements
on the basis of a fiscal year ending July 31. The consolidated statements of
operations, comprehensive income (loss) and cash flows for the years ended
December 31, 1997 and 1998 (referred to as "fiscal" 1997 and 1998) reflect the
results of operations, comprehensive income (loss) and cash flows for ACT for
the years then ended combined with the results of operations and cash flows
for CMC for the years ended July 31, 1997 and 1998. The consolidated balance
sheet as of December 31, 1998 reflects the financial position of ACT as of
that date combined with the financial position of CMC as of July 31, 1998. The
consolidated statements of operations data, comprehensive income (loss) and
the consolidated balance sheet data as of December 31, 1999 reflect the
results of operations and financial position of ACT and CMC for the year then
ended. As a result of ACT and CMC having different fiscal years, CMC's
condensed consolidated results of operations and cash flows for the five-month
period from August 1, 1998 through December 31, 1998 are reported separately
in this Annual Report on Form 10-K. The consolidated financial statements have
been adjusted to reflect the conforming of CMC's accounting policy with that
of ACT's by expensing previously capitalized preoperating and start-up costs
associated with CMC's Mexican manufacturing facility. The adjustment also
gives effect to the tax deductibility of these expenses. See note 1 of notes
to our consolidated financial statements.

  In June 1997, we acquired substantially all of the assets and liabilities of
Electronic Systems International, located in Georgia, a provider of
electronics manufacturing services to OEMs based primarily in the southeastern

                                      15
<PAGE>

United States. We issued 186,100 shares of our common stock, valued at that
time at approximately $5.1 million, to purchase the ESI business. In 1997, we
also acquired Advanced Component Technologies Limited (formerly SignMax
Limited), located in Dublin, Ireland, a provider of electronics manufacturing
services primarily consisting of cable and harness assembly. We acquired this
business for approximately $2.0 million in cash and assumed liabilities. We
have since expanded our manufacturing facility in Ireland to include a printed
circuit board operation utilizing primarily surface mount technology. The
operating results of these acquired businesses are included from the dates of
purchase in our consolidated statement of operations for the year ended
December 31, 1997. See note 2 of notes to our consolidated financial
statements.

Results of Operations

  The following table sets forth certain consolidated statement of operations
data as a percentage of net sales for each period indicated. The table and the
discussion below should be read in conjunction with our consolidated financial
statements and the related notes appearing elsewhere in this Annual Report on
Form 10-K.

<TABLE>
<CAPTION>
                                            Fiscal Year Ended December 31,
                                           ----------------------------------
                                              1999        1998        1997
                                           ----------  ----------  ----------
<S>                                        <C>         <C>         <C>
Net sales................................       100.0%      100.0%      100.0 %
Cost of goods sold.......................        92.2        93.9        94.8
                                           ----------  ----------  ----------
Gross profit.............................         7.8         6.1         5.2
Selling, general and administrative
 expenses................................         4.2         4.6         5.1
Merger costs.............................         0.8         --          --
                                           ----------  ----------  ----------
Operating income.........................         2.8         1.5         0.1
Interest and other expense, net..........         0.8         0.6         0.9
                                           ----------  ----------  ----------
Income (loss) before provision for income
 taxes...................................         2.0         0.9        (0.8)
Provision (benefit) for income taxes.....         1.1         0.4        (0.3)
                                           ----------  ----------  ----------
Net income (loss)........................         0.9%        0.5%       (0.5)%
                                           ==========  ==========  ==========
</TABLE>

  We provide electronics manufacturing services to customers in the networking
and telecommunications, computer and industrial and medical equipment markets.
The percentage of net sales by market for fiscal 1999, 1998 and 1997 is as
follows:

<TABLE>
<CAPTION>
                                                               Percentage of
                                                                 Net Sales
                                                               ----------------
Market                                                         1999  1998  1997
------                                                         ----  ----  ----
<S>                                                            <C>   <C>   <C>
Networking and Telecommunications.............................  66%   58%   66%
Computer......................................................  25    32    23
Industrial and Medical........................................   9    10    11
                                                               ---   ---   ---
                                                               100%  100%  100%
                                                               ===   ===   ===
</TABLE>

Fiscal 1999 Compared to Fiscal 1998

  Our net sales increased $103.8 million or 17.5% to $696.3 million in fiscal
1999 from $592.5 million for fiscal 1998. The increase was attributable to an
expansion of business in our printed circuit board assembly service offering
of $102.4 million, of which approximately $7.7 million resulted from the
GSS/Array acquisition. Approximately $71.5 million of the net increase was
from new customers and the remainder was due to increased business from
existing customers.

  Net sales in the printed circuit board assembly service offering, including
value-added services such as systems integration, test, repair and order
fulfillment, as a percentage of net sales was approximately 95% and

                                      16
<PAGE>

94% in fiscal 1999 and 1998, respectively. Net sales in our cable and harness
assembly service offering accounted for approximately 5% and 6% in fiscal 1999
and 1998, respectively.

  Gross profit increased $18.3 million or 50.6% to $54.4 million in fiscal
1999 compared to $36.1 million for fiscal 1998. Gross profit as a percentage
of net sales, or gross margin, increased to 7.8% in fiscal 1999 from 6.1% in
fiscal 1998. The increase was primarily attributable to growth in sales
volume, an increase in sales with higher margins and an increase in absorption
of overhead in our Mexican facility.

  Selling, general and administrative expenses increased $2.2 million or 7.9%
to $29.5 million compared with $27.4 million for fiscal 1998. SG&A expenses as
a percentage of net sales decreased to 4.2% from 4.6% in fiscal 1998. SG&A
expenses increased primarily to support the larger revenue base and
anticipated revenue growth.

  Merger costs of $5.6 million related to the July 29, 1999 merger with CMC
Industries were recorded in fiscal 1999. These merger costs consisted
primarily of investment banking, legal, accounting, printing, integration and
other fees and expenses directly related to the merger.

  Operating income increased $10.5 million to $19.3 million, or 2.8% of net
sales, compared with operating income of $8.8 million, or 1.5% of net sales,
for fiscal 1998 as a result of the above factors.

  Interest and other expense, net increased $1.6 million to $5.3 million
compared to $3.7 million for fiscal 1998. The increase was due to higher
average working capital requirements resulting in higher average loan balances
in fiscal 1999, higher interest rates during fiscal 1999 and interest on
capital leases entered into in fiscal 1999.

  We recorded a provision for income taxes of $7.8 million and $2.0 million in
fiscal 1999 and 1998, respectively. The effective income tax rate was 55.6% in
fiscal 1999 and 39.8% in fiscal 1998. The increase in the fiscal 1999
effective income tax rate was primarily attributable to the effects of non-
deductible merger costs.

Fiscal 1998 Compared to Fiscal 1997

  Our net sales increased $113.4 million or 23.7% to $592.5 million in fiscal
1998 from $479.1 million in fiscal 1997. The increase was attributed
principally to an expansion of printed circuit board assembly business from
existing and new customers. Customers representing 10% or more of our net
sales in fiscal 1998 were Nortel Networks (12%) and Micron Electronics (12%)
as compared to Nortel Networks (17%) in fiscal 1997.

  Net sales in the printed circuit board assembly product line, including
system integration, test, repair and order fulfillment, as a percentage of net
sales was approximately 94% in each of fiscal 1998 and fiscal 1997. Net sales
in the cable and harness assembly product line accounted for approximately 6%
of net sales in each of fiscal 1998 and fiscal 1997.

  Gross profit increased $11.2 million or 45.0% to $36.1 million in fiscal
1998 compared to $24.9 million in fiscal 1997. Gross margin increased to 6.1%
in fiscal 1998 from 5.2% in fiscal 1997. Within fiscal 1998, gross margin was
5.0%, 5.7%, 6.9% and 7.0% in the first, second, third and fourth quarters.
This sequential improvement was due primarily to the positive impact of our
cost management programs and a favorable product mix offset in part by an
increase in costs of materials as a percentage of cost of goods sold in our
Mississippi operation. In addition, fiscal 1997 gross profit was impacted by a
charge relating to an inventory shortfall identified at the end of fiscal 1997
of approximately $13.1 million which was included in cost of goods sold, and
by the effect of a $989,000 write-off of certain inventory balances to cost of
goods sold.

  Selling, general and administrative expenses increased $2.9 million or 11.7%
to $27.4 million in fiscal 1998 from $24.5 million in fiscal 1997. SG&A
expenses as a percentage of net sales decreased to 4.6% in fiscal 1998 from
5.1% in fiscal 1997. SG&A expenses in fiscal 1998 included a $1.3 million
charge for defense and settlement of certain claims of age discrimination
resulting from a September 1995 workforce reduction at CMC.

                                      17
<PAGE>

Without admitting any liability, CMC agreed to enter into a Conciliation
Agreement with the EEOC to settle claims related to this matter and limit
future litigation costs. SG&A expenses in fiscal 1997 included a bad debt
reserve of $1.7 million for terminated customers and $600,000 for costs of
investigating the inventory shortfall. Although SG&A expenses decreased as a
percentage of net sales, these expenses increased in absolute dollars in
fiscal 1998 primarily due to our increase in net sales.

  Operating income increased $8.3 million to $8.8 million, or 1.5% of net
sales, in fiscal 1998, compared with operating income of $420,000 in fiscal
1997 as a result of the previously discussed factors.

  Interest and other expense, net decreased $431,000 to $3.6 million for
fiscal 1998 from $4.1 million for fiscal 1997. The decrease resulted
principally from reduced average borrowings on our credit facilities and lower
average interest rates in fiscal 1998 compared to fiscal 1997.

  We recorded a provision for income taxes of $2.0 million in fiscal 1998
compared to a benefit for income taxes of $1.2 million in fiscal 1997. The
effective income tax rate was 39.8% in fiscal 1998 and 34.0% in fiscal 1997.
The 1997 tax benefit was provided at 34% primarily due to the effects of non-
deductible expenses and the differences in pre-tax income earned in various
jurisdictions in which we do business.

CMC Results of Operations for the Five Months Ended December 31, 1998

  For the five months ended December 31, 1998, CMC generated gross profit of
$2.7 million on total net sales of $122.4 million. The gross margin of 2.2%
was lower than CMC's historical gross margin primarily because of the loss of
two customers, Micron Electronics and Global Village Communications, offset by
net sales to new customers and expanded business with existing customers at
lower margins. Gross profit was also adversely affected by increases in
manufacturing overhead costs incurred in anticipation of higher sales volumes
and inefficiencies associated with the initiation of new manufacturing
projects. The net loss for the five months ended December 31, 1998 of $2.1
million did not include any one time, non-recurring charges.

Liquidity and Capital Resources

  We had working capital of $170.4 million at December 31, 1999 compared with
$86.1 million at December 31, 1998. Operating activities used $48.9 million of
cash in fiscal 1999 compared with cash provided by operations of $11.7 million
in fiscal 1998. The primary use of cash by operating activities for fiscal
1999 was an increase in both inventory and accounts receivable, partially
offset by an increase in accounts payable. Inventory increased $89.2 million
to $171.8 million and accounts receivable increased $44.1 million to $153.4
million, while accounts payable increased $56.2 million to $153.8 million, as
of December 31, 1999. These increases in inventory and accounts payable are
the result of continued sequential quarterly revenue growth, purchasing
strategies to prevent shortages of key components and reflect inventory
requirements to support first quarter 2000 customer demand. The increase in
accounts receivable is primarily due to sales revenue generated later in the
fourth quarter of 1999 than in the fourth quarter of fiscal 1998.

  On July 29, 1999, we announced that we had executed an Amended and Restated
Credit Agreement for a new $107.0 million Senior Secured Credit Facility with
a group of banks led by The Chase Manhattan Bank as agent to replace our
previous credit facilities with the banks. This new credit facility provides
for a $7.0 million, five-year term loan and a $100.0 million five-year line of
credit, both of which are secured by substantially all of our assets. At
December 31, 1999, $41.3 million of the credit facility was utilized and an
additional $58.7 million was available for use based upon the applicable
borrowing base and the full term loan was utilized. At December 31, 1999, the
interest rate on the $7.0 million term loan was 7.89%, the rate on $17.0
million of the line of credit was 6.76% and the rate on the remainder of the
line of credit was 8.75%. The term loan amortizes at a rate of $1.0 million
per year for the first year and $1.5 million per year for years two through
five. We made $0.3 million in principal payments on the $7.0 million term loan
in fiscal 1999. The credit facility also provides for borrowings up to an
aggregate amount of $100.0 million, limited to a percentage of qualified
accounts receivable

                                      18
<PAGE>

and qualified inventory. Interest is payable monthly. For the term loan, we
may choose an interest rate of either 2.5% above the prevailing London
Interbank Offering Rate (LIBOR), or 0.5% above the prime rate as announced by
the agent. For the revolving credit facility, we may choose an interest rate
of either 2.25% above the prevailing LIBOR rate, or 0.25% above the prime rate
as announced by the agent. In addition to certain other prohibited actions,
the credit facility limits our capital expenditures and prohibits the payment
of cash dividends on our common stock. The credit facility also requires us to
maintain certain minimum fixed charge coverage ratios and maximum leverage
ratios.

  We received net proceeds of $79.9 million from the sale of our common stock
in fiscal 1999. On November 22, 1999, we sold 3,022,500 shares of our common
stock in a public offering. Net proceeds of $73.3 million from this sale were
principally used to reduce our indebtedness under our bank credit facility and
for general corporate purposes. The remaining $6.6 million of net proceeds
from the sale of our common stock were primarily the result of the exercise of
employee stock options.

  We are a party to a $17.0 million interest rate swap in order to fix the
interest rate on a portion of our outstanding borrowings under the bank credit
facility. The swap agreement provides for payments by us at a fixed rate of
interest of 6.76% and matures on October 19, 2001. The fair value of the
interest rate swap at December 31, 1999 was approximately $(56,000) since the
fixed rate of 6.76% was higher than the floating rate. The swap agreement was
terminated on March 24, 2000.

  Capital expenditures of $6.7 million for fiscal 1999 were primarily for the
acquisition of equipment related to operations.

  We lease a manufacturing facility and certain equipment and computer
software used in our manufacturing operations under capital lease agreements
that expire through 2003. During the first quarter of 1999, we refinanced
approximately $2.6 million of our then existing operating leases and
classified these leases as capital leases in the accompanying consolidated
balance sheet for fiscal 1999. The effect of this refinancing on our results
of operations will not differ materially from the previous lease financing
arrangements.

  At December 31, 1999, we had equipment lease lines of approximately $13.0
million available for purchases of manufacturing equipment, computer hardware
and software and furniture.

  We sold 575,000 shares of common stock of eOn Communications (formerly
Cortelco), a related party, for net proceeds of approximately $6.4 million in
the first quarter of 2000. The accounting for the gain on the sale of the eOn
investment will be recorded in the fiscal 2000 financial statements.

  Our need for, cost of and access to funds are dependent in the long-term on
our future operating results as well as conditions external to us. We may
require additional capital to finance further acquisitions or other
enhancements to or expansions of our manufacturing capacity. Although no
assurance can be given that any additional financing will be available on
terms satisfactory to us, we may seek additional funds from time to time
through public or private debt or equity offerings, or through further bank
borrowings or through equipment lease financing. We believe that our current
sources of liquidity are adequate to support our anticipated liquidity needs
for the next twelve months.

Newly Issued Accounting Standards

  In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," amended in June 1999 and effective for fiscal years
beginning after June 15, 2000. The new standard requires that all companies
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. Our management is currently
assessing the impact of SFAS No. 133 on our consolidated financial statements.
We will adopt this accounting standard on January 1, 2001, as required.

                                      19
<PAGE>

Year 2000 Readiness Disclosure Statement

  We have not experienced any material disruption in our operations as a
result of the Year 2000 issue, although it is possible that we could still
experience such a disruption. We incurred approximately $500,000 in costs in
assessing and correcting our internal hardware, software, equipment and
embedded technology. We used our working capital and available lease lines to
fund our Year 2000 project costs.

Cautionary Statements

  The Private Securities Litigation Reform Act of 1995 (the Act) contains
certain safe harbors regarding forward-looking statements. From time to time,
information we provide or statements made by our employees may contain
forward-looking information. Any statements in this Annual Report on Form 10-K
that are not statements of historical fact are forward-looking statements. In
some cases you can identify these statements by forward-looking words such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"should," "will," and "would" or other similar words. You should read
statements that contain these words carefully because they discuss our future,
expectations, contain projections of our future results of operations or of
our financial position or state other forward-looking information. The
following cautionary statements should be considered carefully in evaluating
our business. The factors discussed in these cautionary statements, among
other factors, provide examples of risks, uncertainties and events that could
cause our actual results to differ materially from those contained in the
forward-looking statements made in this Annual Report on Form 10-K and
presented elsewhere by management from time to time. These cautionary
statements are being made pursuant to the provisions of the Act and with the
intention of obtaining the benefits of the safe harbor provisions of the Act.

                         Risks Related to Acquisitions

We may not close the acquisition of GSS Thailand.

  The closing of the acquisition of GSS Thailand is subject to various closing
conditions including, among other things:

  . the occurrence of all necessary government approvals, filings and
    registrations;

  . the shareholders of GSS Thailand voting in favor of the delisting of the
    ordinary shares from the Stock Exchange of Thailand and the
    transferability of the outstanding options to ACT, based on ACT's
    obligation to make the tender offer;

  . GSS Thailand obtaining a waiver from the Board of Investment relating to
    its factory premises at Ayudhaya;

  . no material breach of the Pre-Tender Offer Agreement before the launching
    of the tender offer;

  . no material adverse change in the business, condition (financial or
    otherwise) or results of operation of GSS Thailand and/or reduction in
    the value and/or assets of GSS Thailand (excluding changes occasioned by
    (i) events affecting the contract electronic manufacturing industry as a
    whole and (ii) fluctuations in the Baht/U.S. dollar exchange rate), prior
    to the launch of the tender offer by ACT; and

  . no proposal or offer for a tender offer for the shares of GSS Thailand
    which is publicly announced and, in the judgment of the board of
    directors of GSS Thailand, would result in a transaction more favorable
    to the shareholders than the ACT offer, which causes GSS Thailand's board
    to withdraw or adversely modify its recommendations to the shareholders
    and optionholders for the delisting of the shares and the acceptance of
    the tender offer.

  If the Stock Exchange of Thailand accepts the delisting application of GSS
Thailand, we will be required to commence our tender offer for all issued
shares and outstanding options of GSS Thailand at the price per share set
forth in the Pre-Tender Agreement, and may not terminate our offer or lower
the purchase price based on adverse developments in the business, condition or
results of operations of GSS Thailand or otherwise. As part

                                      20
<PAGE>

of the Pre-Tender Agreement, holders of approximately 23% of GSS Thailand's
outstanding shares agreed to tender their shares and options in ACT's tender
offer. However, we cannot assure you that these closing conditions will be
satisfied or that we will consummate the acquisition of GSS Thailand on a
timely basis or at all. Even if we consummate the GSS Thailand acquisition, we
may not realize any of the anticipated benefits of the acquisition.

Additional benefits from the merger with CMC Industries may not occur.

  We completed the merger with CMC Industries with the expectation that the
merger would result in certain benefits, including:

  . the opportunity to generate revenue from new customers that require an
    electronics manufacturing services provider to have a minimum size and
    geographic coverage;

  . opportunities to increase revenues from our current customers by
    providing a lower cost alternative and a broader geographic presence;

  . operating efficiencies such as combined managerial, sales, marketing and
    technological expertise and personnel; and

  . other synergies due to the strategic fit and compatibility of the two
    companies, including their common equipment platforms and information
    systems.

  We may not realize all of the anticipated benefits of the merger.
Integrating CMC's operations and personnel with our business has been and
continues to be a complex and difficult process. Achieving the benefits of the
merger will depend upon the successful integration of CMC's business in an
efficient and timely manner. The integration of CMC with our operations could
require additional costs and expenses as well as demands on management
personnel. The diversion of the attention of our management and any
difficulties encountered in the process of combining our companies could cause
the disruption of, or a loss of momentum in, our activities.

We may fail to make additional acquisitions and may not successfully integrate
acquisitions we do make, which could impair our ability to compete and our
operating results.

  In light of the consolidation trend in our industry, we intend to pursue
selective acquisitions of additional electronics manufacturing services
providers, facilities, assets or businesses. We may compete for acquisition
opportunities with entities having significantly greater resources than us. As
a result, we may not succeed in acquiring some or all of the companies,
facilities, assets or businesses that we seek to acquire. Failure to
consummate additional acquisitions may prevent us from accumulating sufficient
critical mass required by customers in this consolidating industry. This
failure could significantly impact our ability to effectively compete in our
targeted markets and could negatively affect our results of operations.

  Moreover, acquisitions that we do complete may result in:

  . the potentially dilutive issuance of common stock or other equity
    instruments;

  . the incurrence of debt and amortization expenses related to goodwill and
    other intangible assets; or

  . the incurrence of significant costs and expenses.

  Acquisition transactions, including our pending acquisition of GSS Thailand,
also involve numerous business risks, including:

  . difficulties in assimilating the acquired operations, technologies,
    personnel and products;

  . difficulties in managing geographically dispersed and international
    operations;

  . the diversion of management's attention from other business concerns;

  . the potential disruption of our business; and

  . the potential loss of key employees.

                                      21
<PAGE>

                        Risks Related to Our Operations

Our business may suffer if the networking and telecommunications segments of
the electronics industry fail to grow and evolve.

  Our customer base has historically been concentrated in a limited number of
segments within the electronics industry. Net sales to customers within the
networking and telecommunications segments accounted for approximately 66% of
our net sales in fiscal 1999, 58% in fiscal 1998, and 66% in fiscal 1997.
Developments adverse to these industry segments could materially and
negatively impact us. These industry segments, and the electronics industry as
a whole, experience:

  . intense competition;

  . rapid technological changes resulting in short product life-cycles and
    consequent product obsolescence;

  . significant fluctuations in product demand;

  . economic cycles, including recessionary periods; and

  . consolidation.

  A recessionary period or other event leading to excess capacity affecting
one or more segments of the electronics industry we serve would likely result
in intensified price competition, reduced margins and a decrease in our net
sales.

The loss of major customers could adversely affect us.

  We depend on a small number of customers for a significant portion of our
business. Our five largest customers accounted for approximately 52% of our
net sales in fiscal 1999. For fiscal 1999, each of Nortel Networks (formerly
Bay Networks and Aptis Communications) and S-3 Incorporated (formerly Diamond
Multimedia) accounted for 10% or more of our net sales (15% and 13%,
respectively).

  Customers representing 10% or more of our net sales in fiscal 1998 were
Nortel Networks and Micron Electronics, each with approximately 12%, as
compared to Nortel Networks with 17% of our net sales in fiscal 1997. The
timing and level of orders from our customers varies substantially from period
to period. The historic level of net sales we have received from a specific
customer in one particular period is not necessarily indicative of net sales
we may receive from that customer in any future period.

  Our results may depend on our ability to diversify our customer base and
reduce our reliance on particular customers. Our major customers may not
continue to purchase products and services from us at current levels or at
all. In particular, we terminated our business with Ascend, which was acquired
by Lucent Technologies, in the fourth quarter of fiscal 1999 and we
experienced a significant decrease in sales to Micron in the third quarter of
fiscal 1998. For various reasons, including consolidation in our customers'
industries, we have in the past and will continue in the future to terminate
or lose relationships with customers. We may not be able to expand our
customer base to make up any sales shortfalls from our major customers so as
to increase overall net sales. Because certain customers represent such a
large part of our business, any of the following could negatively impact our
business:

  . the loss of one or more major customers;

  . a significant reduction or delay in purchases from any major customer;

  . discontinuance by any major customer of the sale of products we
    manufacture;

  . a reduction in demand for the products of major customers that we
    manufacture; or

  . the inability or unwillingness of a major customer to pay for products
    and services on a timely basis or at all.

                                      22
<PAGE>

Our customers do not enter into long-term purchase orders or commitments, and
cancellations, reductions or delays in customer orders would adversely affect
our profitability.

  The level and timing of orders placed by our customers vary due to:

  . customer attempts to manage inventory;

  . changes in the customers' manufacturing strategy, such as a decision by a
    customer to either diversify or consolidate the number of electronics
    manufacturing services providers used or to manufacture their products
    internally; and

  . variation in demand for customer products.

  We generally do not obtain long-term purchase orders or commitments from our
customers. Instead, we work closely with our customers to anticipate delivery
dates and future volume of orders based on customer forecasts. We rely on our
estimates of anticipated future volumes when making commitments regarding:

  . the levels of business that we will seek and accept;

  . the timing of production schedules;

  . the purchase of materials;

  . the purchase or leasing of facilities and equipment; and

  . the levels and utilization of personnel and other resources.

  Customers may cancel, reduce or delay orders that were either previously
made or anticipated for a variety of reasons. Significant or numerous
terminations, reductions or delays in our customers' orders could negatively
impact our operating results. We often purchase components for product
assemblies based on customer forecasts, at times without a written customer
commitment to pay for them. Our policy is that customers are generally
responsible for materials and associated acquisition costs in the event of a
significant reduction, delay or cancellation of orders from the forecasted
amounts. A customer's unwillingness or inability to reimburse us for materials
costs in the case of a significant variance from forecast could adversely
affect our operating results.

Increased competition may result in decreased demand or prices for our
services.

  The electronics manufacturing services industry is highly competitive. We
compete against numerous U.S. and foreign electronics manufacturing services
providers with global operations, as well as those who operate on a local or
regional basis. In addition, current and prospective customers continually
evaluate the merits of manufacturing products internally. Consolidation in the
electronics manufacturing services industry results in a continually changing
competitive landscape. The consolidation trend in the industry also results in
larger and more geographically diverse competitors who have significant
combined resources with which to compete against us. Some of our competitors
have substantially greater managerial, manufacturing, engineering, technical,
financial, systems, sales and marketing resources than we do. These
competitors may:

  . respond more quickly to new or emerging technologies;

  . have greater name recognition, critical mass and geographic and market
    presence;

  . be better able to take advantage of acquisition opportunities;

  . adapt more quickly to changes in customer requirements; and

  . devote greater resources to the development, promotion and sale of their
    services.

  We may be operating at a cost disadvantage compared to manufacturers who
have greater direct buying power from component suppliers, distributors and
raw material suppliers or who have lower cost structures. Our manufacturing
processes are generally not subject to significant proprietary protection, and
companies with greater resources or a greater geographic and market presence
may enter our market or increase their competition with us. Increased
competition from existing or potential competitors could result in price
reductions, reduced margins or loss of market share.

                                      23
<PAGE>

We may not be able to obtain raw materials or components for our assemblies on
a timely basis or at all.

  We rely on a single or limited number of third-party suppliers for many
proprietary and other components used in the assembly process. We do not have
any long-term supply agreements. Shortages of materials and components have
occurred from time to time and will likely occur in the future. In particular,
we are currently experiencing a shortage in components such as tantalum and
ceramic capacitors, flash memory, and dynamic and static ram. Raw materials or
component shortages could result in shipping delays or increased prices which
could adversely affect our ability to manufacture products for our customers
on a timely basis or at acceptable cost. Moreover, the consolidation trend in
our suppliers' industry results in changes in supply relationships and in the
price, availability and quality of components and raw materials. Due to our
utilization of just-in-time inventory techniques, the timely availability of
many components is dependent on our ability to both develop accurate forecasts
of customer requirements and manage the materials supply chain. If we fail to
do either, our operating results may suffer.

Operating in foreign countries exposes us to increased risks.

  We acquired in fiscal 1997, and then subsequently expanded in fiscal 1998,
operations in Dublin, Ireland. As a result of our merger with CMC, we acquired
operations in Hermosillo, Mexico and a procurement office in Taiwan. We may in
the future expand into other international regions. We have limited experience
in managing geographically dispersed operations and in operating in Europe,
Mexico or Asia. We also purchase a significant number of components
manufactured in foreign countries. Because of the scope of our international
operations, we are subject to the following risks which could materially
impact our results of operations:

  . economic or political instability;

  . transportation delays and interruptions;

  . foreign exchange rate fluctuations;

  . increased employee turnover and labor unrest;

  . longer payment cycles;

  . greater difficulty in collecting accounts receivable;

  . utilization of different systems and equipment;

  . difficulties in staffing and managing foreign personnel and diverse
    cultures; and

  . less developed infrastructures.

  In addition, changes in policies by the U.S. or foreign governments could
negatively affect our operating results due to:

  . increased duties;

  . increased regulatory requirements;

  . higher taxation;

  . currency conversion limitations;

  . restrictions on the transfer of funds;

  . the imposition of or increase in tariffs; or

  . limitations on imports or exports.

  Also, we could be adversely affected if our host countries revise their
current policies encouraging foreign investment or foreign trade.

                                      24
<PAGE>

Our business could suffer if we lose the services of, or fail to attract, key
personnel.

  Our future success largely depends upon the skills and efforts of John A.
Pino, Chairman of the Board, President and Chief Executive Officer, our other
key executives and our managerial, manufacturing, sales and technical
employees. With the exception of Jack O'Rear, Vice President of Operations,
and a small number of sales people, we have not entered into employment
contracts or noncompetition agreements with any of our senior management or
other key employees. We do not maintain or plan to acquire any key-man life
insurance on any of our key personnel. The loss of services of any of our
executives or other key personnel could negatively affect our business. Our
continued growth will also require us to attract, motivate, train and retain
additional skilled and experienced managerial, manufacturing, sales and
technical personnel. We face intense competition for such personnel. We may
not be able to attract, motivate and retain personnel with the skills and
experience needed to successfully manage our business and operations.

We may not be able to maintain our technological and manufacturing process
expertise.

  The markets for our manufacturing services are characterized by rapidly
changing technology and evolving process development. The continued success of
our business will depend upon our ability to:

  . maintain and enhance our technological capabilities;

  . develop and market manufacturing services which meet changing customer
    needs; and

  . successfully anticipate or respond to technological changes in
    manufacturing processes on a cost-effective and timely basis.

  Although we believe that our operations utilize the assembly and testing
technologies, equipment and processes currently required by our customers, we
cannot be certain that we will develop capabilities required by our customers
in the future. Also, the emergence of new technologies, industry standards or
customer requirements may render our equipment, inventory or processes
obsolete or noncompetitive. In addition, we may have to acquire new assembly
and testing technologies and equipment to remain competitive. The acquisition
and implementation of new technologies and equipment may require significant
expense or capital investment. Our failure to anticipate and adapt to our
customers' changing technological needs and requirements would have an adverse
effect on our business.

We may incur significant liabilities if we fail to comply with environmental
regulations.

  We are subject to environmental regulations relating to the use, storage,
discharge, site cleanup, and disposal of hazardous chemicals used in our
manufacturing processes. If we fail to comply with present and future
regulations, or are required to perform site remediation, we could be subject
to future liabilities or the suspension of production. Present and future
regulations may also:

  . restrict our ability to expand our facilities;

  . require us to acquire costly equipment; or

  . require us to incur other significant costs and expenses.

Products we manufacture may contain design or manufacturing defects which
could result in reduced demand for our services and liability claims against
us.

  We manufacture products to our customers' specifications which are highly
complex and may at times contain design or manufacturing errors or failures.
Defects have been discovered in products we manufacture in the past and,
despite our quality control and quality assurance efforts, defects may occur
in the future. Defects in the products we manufacture, whether caused by a
design, manufacturing or component failure or error, may result in delayed
shipments to customers or reduced or cancelled customer orders. If these
defects occur in large quantities or too frequently, our business reputation
may also be impaired. In addition, these defects may result in liability
claims against us.

                                      25
<PAGE>

                        Risks Related to our Expansion

Our operating results will depend on our ability to manage our growth.

  We have grown rapidly in recent years and we expect to continue to expand
our operations. This growth has placed, and will continue to place,
significant strain on our management, operations, technical, financial,
systems, sales, marketing and other resources. For example, we identified a
significant inventory shortfall occurring in the fourth quarter of fiscal 1997
that substantially adversely affected our operating results for that period.
As a result of this shortfall, we reviewed and continue to review our security
procedures and operating and financial controls. Based upon such review, we
implemented enhanced security systems and inventory work-in-process tracking
systems. These systems may not be adequate or have the intended results. We
also implemented various cost management programs to enhance our
profitability. These programs may not result in the anticipated cost savings,
however. We will have to continue to invest in both our manufacturing
infrastructure to expand capacity and our operational, financial, and
management information systems. If we fail to manage our expected growth
effectively, the quality of our services and products and our operating
results could suffer significantly.

Expansion of our operations may negatively impact our business.

  We may expand our operations by establishing or acquiring new manufacturing
facilities or by expanding capacity in our current facilities. We may expand
both in geographical areas in which we currently operate and in new
geographical areas within the United States and internationally. We have
recently begun operations in a new facility in Massachusetts and have signed a
lease for a new facility in California which is currently under construction
and which will enable us to consolidate and expand our operations. We expect
to begin operations in this new California facility in the fourth quarter of
fiscal 2000. We may not be able to find additional suitable facilities on a
timely basis or on terms satisfactory to us. Expansion of operations involves
numerous business risks, including:

  . the inability to successfully integrate additional facilities or capacity
    and to realize anticipated synergies, economies of scale or other value;

  . difficulties in the timing of expansions, including delays in the
    implementation of construction and manufacturing plans;

  . the diversion of management's attention from other business areas during
    the planning and implementation of expansions;

  . the strain placed on our operational, financial, management, technical
    and information systems and resources;

  . disruption in manufacturing operations;

  . the incurrence of significant costs and expenses; and

  . the inability to locate enough customers or employees to support the
    expansion.

  Our results of operations could be adversely affected if the revenues
associated with new or expanded facilities are not sufficient to offset the
increased expenditures associated with the expansions.

We may fail to secure necessary additional financing.

  We have made and will continue to make substantial capital expenditures to
expand our operations and remain competitive in the rapidly changing
electronics manufacturing services industry. Our future success may depend on
our ability to obtain additional financing and capital to support our
continued growth and operations. We may seek to raise capital by:

  . issuing additional common stock or other equity instruments;

  . issuing debt securities;

                                      26
<PAGE>

  . obtaining additional lease financings;

  . increasing our lines of credit; or

  . obtaining off-balance sheet financing.

  We may not be able to obtain additional capital when we want or need it, and
capital may not be available on satisfactory terms. If we issue additional
equity securities or convertible debt to raise capital, it may be dilutive to
your ownership interest. Furthermore, any additional capital may have terms
and conditions that adversely affect our business, such as financial or
operating covenants.

                       Risks Related to our Common Stock

We anticipate that our net sales and operating results will fluctuate which
could affect the trading price of our common stock.

  Our net sales and operating results have fluctuated and may continue to
fluctuate significantly from quarter to quarter. A substantial portion of our
net sales in a given quarter may depend on obtaining and fulfilling orders for
assemblies to be manufactured and shipped in the same quarter in which those
orders are received. Further, a significant portion of our net sales in a
given quarter may depend on assemblies configured, completed, packaged and
shipped in the final weeks of such quarter. In addition to the variability
resulting from the short-term nature of our customers' commitments, the
following factors may contribute to such fluctuations:

  . fluctuations in demand for our services or the products we manufacture;

  . shipment delays;

  . interruptions in manufacturing caused by earthquakes or other natural
    disasters;

  . effectiveness in controlling manufacturing costs;

  . changes in cost and availability of labor and components;

  . inefficiencies in managing inventory and accounts receivable, including
    inventory obsolescence and write-offs; and

  . the levels at which we utilize our manufacturing capacity.

  Our operating expenses are based on anticipated revenue levels and a high
percentage of our operating expenses are relatively fixed in the short term.
As a result, any unanticipated shortfall in revenue in a quarter would likely
adversely affect our operating results for that quarter. Also, changes in our
product assembly mix may cause our margins to fluctuate which could negatively
impact our results of operations for that period. Results of operations in any
period should not be considered indicative of the results to be expected for
any future period. It is likely that in one or more future periods our results
of operations will fail to meet the expectations of securities analysts or
investors, and the price of our common stock could decline significantly.

We may incur costs and liability related to potential or pending litigation.

  On February 27, 1998, our company and several of our officers and directors
were named as defendants in a purported securities class action lawsuit filed
in the United States District Court for the District of Massachusetts. The
plaintiffs amended the complaint on October 16, 1998. The plaintiffs purport
to represent a class of all persons who purchased or otherwise acquired our
common stock in the period from April 17, 1997 through March 31, 1998. The
amended complaint alleges, among other things, that the defendants knowingly
made misstatements to the investing public about the value of our inventory
and the nature of our accounting practices. On December 15, 1998, we filed a
motion to dismiss the case in its entirety based on the pleadings. Our motion
to dismiss was granted without prejudice on May 27, 1999, and the case was
closed by the court on June 1, 1999. On June 28, 1999, the plaintiffs filed a
motion with the court seeking permission to file a second amended complaint.
We opposed that motion. On July 13, 1999, the court denied the plaintiffs'
motion to amend,

                                      27
<PAGE>

noting "final judgment having entered in the case." On July 26, 1999, the
plaintiffs filed a motion with the court asking the court to extend the 30-day
period for filing an appeal of its ruling dismissing the case. We opposed that
motion as well, and the court denied the motion on August 10, 1999. The
plaintiffs have filed an appeal with the United States Court of Appeals for
the First Circuit requesting that the Court of Appeals reverse each of the
orders described above. The parties are currently briefing the issues before
the Court of Appeals. We believe the claims asserted in this action and the
plaintiffs' pending appeal are without merit and intend to continue to defend
ourselves vigorously in this action. However, a material adverse judgment in
such matter could cause our financial condition or operating results to
suffer.

  In December 1993, CMC Industries retained the services of a consultant to
assist in quantifying the potential exposure to CMC in connection with clean-
up and related costs of a former manufacturing site. This site is commonly
known as the ITT Telecommunications site in Milan, Tennessee. The consultant
initially estimated that the cost to remove and dispose of the contaminated
soil would be approximately $200,000. CMC subsequently entered into a
voluntary agreement to investigate the site with the Tennessee Department of
Environment and Conservation. In addition, CMC agreed to reimburse a tenant of
the site $115,000 for expenditures previously incurred to investigate
environmental conditions at the site. CMC recorded a total provision of
$320,000 based on these estimates. In fiscal 1995, an environmental consultant
estimated that the cost of a full study combined with short- and long-term
remediation of the site may cost between $3.0 and $4.0 million. Subsequent
environmental studies done in fiscal 1999 have estimated such costs as between
$750,000 and $3.5 million. During CMC's fiscal 1996, the State of Tennessee's
Department of Environment and Conservation named certain potentially
responsible parties in relation to the former facility. CMC was not named as a
potentially responsible party. However, Alcatel, Inc., a potentially
responsible party named by the State of Tennessee's Department of Environment
and Conservation and a former owner of CMC, sought indemnification from CMC
under the purchase agreement by which CMC acquired the stock of one of the
operators of the facility. To date, Alcatel has not filed any legal
proceedings to enforce its indemnification claim. However, Alcatel could
initiate such proceedings and other third parties could assert claims against
us relating to remediation of the site. We have entered into an agreement with
Alcatel pursuant to which the statute of limitations on its indemnification
claim is tolled for a period of time. In the event any proceedings are
initiated or any claim is made, we would defend ourselves vigorously but
defense or resolution of this matter could negatively impact our financial
position and results of operations.

John A. Pino has significant influence over our company.

  John A. Pino, Chairman of the Board, President and Chief Executive Officer,
and a number of trusts for his and his family's benefit, collectively
beneficially owns approximately 31% of our common stock. As a result, Mr. Pino
is able to exert significant influence over us through his ability to
influence the election of directors and all other matters that require action
by our stockholders. The voting power of Mr. Pino and these trusts could have
the effect of preventing or delaying a change in control of our company, which
Mr. Pino opposes even if our other stockholders believe it is in their best
interests.

The price of our common stock has been and may continue to be volatile.

  The trading price of our common stock has been and may continue to be
volatile. From October 1, 1998 through March 24, 2000, our stock price has
fluctuated between a low of $5.06 per share and a high of $49.31 per share. On
March 24, 2000, the closing price for our common stock was $48.75. The price
of our common stock may fluctuate significantly in response to a number of
events and factors relating to our company, our competitors and the market for
our services, many of which are beyond our control, such as:

  . quarterly variations in our operating results;

  . announcements of new technological innovations, equipment or service
    offerings by us or our competitors;

  . announcements of new products or enhancement by our customers;

                                      28
<PAGE>

  . changes in financial estimates and recommendations by securities
    analysts; and

  . news relating to trends in our markets.

  In addition, the stock market in general, and the market prices for
technology companies in particular, have experienced extreme volatility that
often has been unrelated to the operating performance of these companies.
These broad market and industry fluctuations may adversely affect the market
price of our common stock, regardless of our operating performance.

  Recently, when the market price of a stock has been volatile, holders of
that stock have often instituted securities class action litigation against
the company that issued the stock. We have been the subject of such a lawsuit.
If any of our stockholders brought another securities class action lawsuit
against us, we could incur substantial additional costs defending that
lawsuit. The lawsuit could also divert the time and attention of our
management and an adverse judgment could cause our financial condition or
operating results to suffer.

It may be difficult for a third party to acquire our company, and this could
depress the trading price of our common stock.

  Massachusetts corporate law and our articles of organization and by-laws
contain provisions that could have the effect of delaying, deferring or
preventing a change in control of our company or our management. These
provisions could discourage proxy contests and make it more difficult for you
and other stockholders to elect directors and take other corporate actions.
These provisions could also limit the price that investors might be willing to
pay in the future for shares of our common stock. These provisions:

  . authorize the issuance of "blank check" preferred stock, which is
    preferred stock that can be created and issued by our board of directors
    without prior stockholder approval, with rights senior to those of common
    stock;

  . provide for a staggered board of directors, so that it would take three
    successive annual meetings to replace all directors;

  . require unanimity for stockholder action by written consent; and

  . establish advance notice requirements for submitting nominations for
    election to the board of directors and for proposing matters that can be
    acted upon by stockholders at a meeting.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  We are exposed to changes in interest rates and foreign currency exchange
primarily in our cash, debt and foreign currency transactions. We do not hold
derivative financial instruments for trading or speculative purposes.

  We have a $107.0 million Senior Secured Credit Facility which bears interest
at variable interest rates. We have a $17.0 million interest rate swap
agreement which matures in October 2001 in order to reduce the impact of
fluctuating interest rates on our credit facility. This swap agreement is
classified as held for purposes other than trading. Under this swap agreement,
we have agreed with the counterpart to pay fixed rate payments on a monthly
basis, based upon an annual interest rate of 6.76%, in exchange for receiving
variable rate payments on a monthly basis, calculated on an agreed-upon
notional amount. Net interest payments or receipts from interest rate swaps
are recorded as adjustments to interest expense in our condensed consolidated
statements of operations. The swap agreement was terminated on March 24, 2000.
Our exposure related to adverse movements in interest rates is primarily
derived from the variable rate on the remainder of our credit facility. As of
December 31, 1999, $17.0 million of the outstanding balance of $41.3 million
under the credit facility was at a rate of 6.76% and the remainder of the
credit facility was at an 8.75% interest rate. Based on the portion of this
balance in excess of $17.0 million, an adverse change of one percent in the
interest rate would cause a change in interest expense of approximately
$243,000 on an annual basis.

                                      29
<PAGE>

  The foreign currencies to which we have exchange rate exposure are the Irish
punt and the Mexican peso. International operations do not currently
constitute a significant portion of our net sales or net assets. Therefore
this exposure is not considered material to us.

  Based on a hypothetical ten percent adverse movement in interest rates and
foreign currency exchange rates, the potential losses in future earnings, fair
value of the risk-sensitive financial instruments and cash flows are
immaterial. However, the actual effects of interest rates and foreign currency
exchange rates may differ materially from the hypothetical analysis.

                                      30
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

  The Company's Consolidated Financial Statements and the Independent Auditors'
Reports thereon are presented in the following pages. The Consolidated
Financial Statements filed in Item 8 are as follows:

  Independent Auditors' Report

  Report of Independent Accountants

  Report of Independent Accountants

  Consolidated Balance Sheets as of December 31, 1999 and 1998

  Consolidated Statements of Operations for the years ended December 31,
  1999, 1998 and 1997

  Consolidated Statements of Comprehensive Income (Loss) for the years ended
  December 31, 1999, 1998 and 1997

  Consolidated Statements of Stockholders' Equity for the years ended
  December 31, 1999, 1998 and 1997

  Consolidated Statements of Cash Flows for the years ended December 31,
  1999, 1998 and 1997

  Notes to Consolidated Financial Statements

                                       31
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
ACT Manufacturing, Inc.:

  We have audited the consolidated balance sheets of ACT Manufacturing, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, comprehensive income (loss),
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the consolidated financial
statement schedule listed in the index at Item 14 (a)(2). These consolidated
financial statements and consolidated financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and consolidated
financial statement schedule based on our audits. The consolidated financial
statements give retroactive effect to the merger of ACT Manufacturing, Inc.
and CMC Industries, Inc., which has been accounted for as a pooling of
interests as described in Note 1 to the consolidated financial statements. We
did not audit the balance sheet of CMC Industries, Inc. as of July 31, 1998,
or the related statements of income, stockholders' equity, and cash flows of
CMC Industries, Inc. for each of the two years in the period ended July 31,
1998, which statements reflect total assets of $93,405,000 as of July 31,
1998, and total revenues of $301,955,000 and $214,485,000 for the years ended
July 31, 1998 and 1997, respectively. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for CMC Industries, Inc. for 1998 and 1997, is
based solely on the report of such other auditors.

  We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

  In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of ACT Manufacturing, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principals generally
accepted in the United States of America. Also, in our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

Deloitte & Touche LLP

Boston, Massachusetts
February 16, 2000, except as
to Note 14 which is dated
March 15, 2000

                                      32
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of CMC Industries, Inc.

  In our opinion, the consolidated balance sheets and the related consolidated
statements of income, of changes in stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of CMC
Industries, Inc. and its subsidiaries (not presented separately herein) at
July 31, 1998, and the results of their operations and their cash flows for
each of the two years in the period ended July 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
------------------------------------------
    PricewaterhouseCoopers LLP


Memphis, Tennessee
August 21, 1998, except as to
Note 14, which is as of
October 9, 1998

                                      33
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of CMC Industries, Inc.

  In our opinion, the accompanying consolidated statements of operations, of
changes in stockholders' equity and of cash flows of CMC Industries, Inc. and
its subsidiaries (not presented separately herein) present fairly, in all
material respects, their operations and their cash flows for the five months
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

  As discussed in Note 1, CMC Industries, Inc. merged with Act Manufacturing,
Inc. on July 29, 1999. The merger was accounted for as a pooling of interests.

/s/ PricewaterhouseCoopers LLP ______
     PricewaterhouseCoopers LLP

Memphis, Tennessee
June 21, 1999, except as to
Note 13, which is as of
July 29, 1999

                                      34
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                              1999      1998
                                                            --------  --------
                                                             (in thousands,
                                                              except share
                                                                  data)
<S>                                                         <C>       <C>
                          ASSETS
Current Assets:
  Cash and cash equivalents................................ $  4,558  $ 10,670
  Accounts receivable--trade (less allowance for doubtful
   accounts of $2,939 in 1999 and $1,233 in 1998)..........  153,422   101,828
  Accounts and notes receivable from related party.........    7,408     5,678
  Inventory................................................  171,762    65,612
  Prepaid expenses and other assets........................    2,925     4,204
  Deferred tax asset.......................................    1,252       880
                                                            --------  --------
    Total current assets...................................  341,327   188,872
Property and equipment--net................................   38,047    32,279
Notes receivable--related party............................      550     1,400
Goodwill--net..............................................   10,334     6,224
Investment in related party................................    5,884     5,884
Other assets--net..........................................    6,184     3,635
                                                            --------  --------
    Total.................................................. $402,326  $238,294
                                                            ========  ========

           LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Note payable bank........................................ $    --   $ 18,111
  Current portion of long-term debt........................    1,125     1,300
  Current portion of other long-term liabilities...........    2,972     1,236
  Accounts payable.........................................  153,764    71,956
  Accrued compensation and related taxes...................    3,769     3,404
  Income tax payable.......................................    3,074       505
  Deferred taxes...........................................      253       --
  Accrued expenses and other...............................    5,950     6,301
                                                            --------  --------
    Total current liabilities..............................  170,907   102,813
Long-term debt-less current portion........................   46,933    41,756
Deferred taxes.............................................    2,735     1,173
Other long-term liabilities................................    3,622     1,092
Commitments and contingencies (Notes 12 and 13)............
Stockholders' Equity:
  Preferred stock--$.01 par value; authorized, 5,000,000
   shares; issued and outstanding, none....................      --        --
  Common stock--$.01 par value; authorized, 50,000,000
   shares; issued and outstanding, 16,465,771 shares in
   1999 and 12,835,908 shares in 1998......................      165       128
  Additional paid-in capital...............................  157,887    74,960
  Accumulated other comprehensive (loss)...................     (637)     (180)
  Retained earnings........................................   20,714    16,552
                                                            --------  --------
    Total stockholders' equity.............................  178,129    91,460
                                                            --------  --------
      Total................................................ $402,326  $238,294
                                                            ========  ========
</TABLE>

                See notes to consolidated financial statements.

                                       35
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                   1999      1998      1997
                                                 --------  --------  --------
                                                 (in thousands, except per
                                                        share data)
<S>                                              <C>       <C>       <C>
Net sales:
  Unrelated parties............................. $671,061  $566,048  $447,827
  Related parties...............................   25,221    26,436    31,312
                                                 --------  --------  --------
    Total net sales.............................  696,282   592,484   479,139
                                                 --------  --------  --------
Cost of goods sold:
  Unrelated parties.............................  618,653   532,018   425,396
  Related parties...............................   23,203    24,321    28,807
                                                 --------  --------  --------
    Total cost of goods sold....................  641,856   556,339   454,203
                                                 --------  --------  --------
Gross profit....................................   54,426    36,145    24,936
Selling, general and administrative expenses....   29,536    27,383    24,516
Merger costs....................................    5,601       --        --
                                                 --------  --------  --------
Operating income................................   19,289     8,762       420
                                                 --------  --------  --------
Other income (expense):
  Interest expense, net.........................   (5,256)   (3,718)   (4,009)
  Other, net....................................       (6)       93       (47)
                                                 --------  --------  --------
    Total.......................................   (5,262)   (3,625)   (4,056)
                                                 --------  --------  --------
Income (loss) before provision for income
 taxes..........................................   14,027     5,137    (3,636)
Provision (benefit) for income taxes............    7,793     2,044    (1,235)
                                                 --------  --------  --------
Net income (loss)............................... $  6,234  $  3,093  $ (2,401)
                                                 ========  ========  ========
Basic net income (loss) per common share........ $   0.47  $   0.24  $  (0.19)
                                                 --------  --------  --------
Diluted net income (loss) per common share...... $   0.45  $   0.24  $  (0.19)
                                                 --------  --------  --------
Weighted-average shares outstanding--basic......   13,265    12,665    12,330
                                                 --------  --------  --------
Weighted-average shares outstanding--diluted....   13,916    12,976    12,330
                                                 ========  ========  ========


                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                  Years Ended December 31, 1999, 1998 and 1997

<CAPTION>
                                                   1999      1998      1997
                                                 --------  --------  --------
                                                       (in thousands)
<S>                                              <C>       <C>       <C>
Net income (loss)............................... $  6,234  $  3,093  $ (2,401)
Other comprehensive income (loss):
  Foreign currency translation adjustment.......     (457)     (184)        4
  Minimum pension liability.....................      --        --        996
                                                 --------  --------  --------
Comprehensive income (loss)..................... $  5,777  $  2,909  $ (1,401)
                                                 ========  ========  ========
</TABLE>

                See notes to consolidated financial statements.

                                       36
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                          $.01
                          Par               Accumulated
                         Value  Additional     Other                   Total
                         Common  Paid-in   Comprehensive Retained  Stockholders'
                         Stock   Capital   Income (Loss) Earnings     Equity
                         ------ ---------- ------------- --------  -------------
                                             (in thousands)
<S>                      <C>    <C>        <C>           <C>       <C>
Balance, January 1,
 1997...................  $121   $ 63,249     $ (996)    $15,860     $ 78,234
  Net loss..............   --         --         --       (2,401)      (2,401)
  Minimum pension
   liability............   --         --         996         --           996
  Exercise of warrants..   --       1,267        --          --         1,267
  Net proceeds from sale
   of stock.............     2        376        --          --           378
  Issuance of stock for
   acquisition..........     2      5,248        --          --         5,250
  Cumulative foreign
   currency translation
   adjustments..........   --         --           4         --             4
  Income tax benefit
   from employees'
   exercise of stock
   options..............   --         375        --          --           375
                          ----   --------     ------     -------     --------
Balance, December 31,
 1997...................   125     70,515          4      13,459       84,103
  Net income............   --         --         --        3,093        3,093
  Net proceeds from sale
   of stock.............     3      4,567        --          --         4,570
  Cumulative foreign
   currency translation
   adjustments..........   --         --        (184)        --          (184)
  Cancellation of common
   stock from
   acquisition escrow...   --        (122)       --          --          (122)
                          ----   --------     ------     -------     --------
Balance, December 31,
 1998...................   128     74,960       (180)     16,552       91,460
  CMC Industries, Inc.
   and subsidiaries for
   the five months ended
   December 31, 1998:
    Net loss............   --         --         --       (2,072)      (2,072)
    Minimum pension
     liability
     adjustment.........   --         --      (1,511)        --        (1,511)
    Net proceeds from
     the sale of stock..     1        328        --          --           329
  Net income............   --         --         --        6,234        6,234
  Minimum pension
   liability
   adjustment...........   --         --       1,511         --         1,511
  Cumulative foreign
   currency translation
   adjustments..........   --         --        (457)        --          (457)
  Net proceeds from sale
   of stock.............    36     79,912        --          --        79,948
  Income tax benefit
   from employees'
   exercise of stock
   options..............   --       2,687        --          --         2,687
                          ----   --------     ------     -------     --------
Balance, December 31,
 1999...................  $165   $157,887     $ (637)    $20,714     $178,129
                          ====   ========     ======     =======     ========
</TABLE>

                See notes to consolidated financial statements.

                                       37
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                    1999      1998      1997
                                                  --------  --------  --------
                                                        (in thousands)
<S>                                               <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)............................... $  6,234  $  3,093  $ (2,401)
 Adjustments to reconcile net income (loss) to
  net cash (used for) provided by operating
  activities:
  Depreciation and amortization..................    7,541     4,884     3,587
  Deferred income taxes..........................    2,119      (764)    1,387
  Provision for doubtful accounts................    3,957     1,945     1,805
  Loss on disposal of fixed assets...............      --        132       --
  Increase (decrease) in cash from:
   Accounts receivable--trade....................  (44,086)  (26,771)  (16,932)
   Inventory.....................................  (89,158)    4,239     7,684
   Prepaid expenses and other assets.............      636    (2,632)   (2,415)
   Accounts payable..............................   56,213    17,463    10,743
   Accrued compensation and related taxes........      879      (194)      130
   Income tax refundable (payable)...............    5,256     8,922    (9,977)
   Accrued expenses and other....................    1,540     1,372       980
                                                  --------  --------  --------
    Net cash (used for) provided by operating
     activities..................................  (48,869)   11,689    (5,409)
                                                  --------  --------  --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property and equipment...........   (6,729)  (17,450)   (4,820)
 Increase in other noncurrent assets.............   (3,727)     (632)     (153)
 Proceeds from the sale of property and
  equipment......................................      --        111       --
 Acquisitions, net of cash acquired..............  (12,875)      --     (2,388)
                                                  --------  --------  --------
    Net cash used for investing activities.......  (23,439)  (17,971)   (7,361)
                                                  --------  --------  --------
CASH FLOWS FROM FINANCING ACTIVITIES:
 (Repayments) borrowings under line-of-credit
  agreements, net................................  (13,363)    4,612    15,712
 Proceeds under term loan........................    7,000       --        --
 Payments under term loan........................     (250)      --        --
 Principal payments on long-term debt............   (3,017)   (1,300)   (1,300)
 Repayments of other long-term liabilities.......     (867)     (692)   (2,337)
 Receipt of deferred revenue.....................      540       483       --
 Net proceeds from sale of stock.................   79,948     4,570     2,085
                                                  --------  --------  --------
    Net cash provided by financing activities....   69,991     7,673    14,160
                                                  --------  --------  --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
 EQUIVALENTS.....................................     (469)     (184)       42
                                                  --------  --------  --------
NET (DECREASE) INCREASE IN CASH AND CASH
 EQUIVALENTS.....................................   (1,848)    1,207     1,432
NET DECREASE IN CASH, CMC INDUSTRIES, INC. AND
 SUBSIDIARIES FOR THE FIVE MONTHS ENDED
 DECEMBER 31, 1998...............................   (4,264)      --        --
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.....   10,670     9,463     8,031
                                                  --------  --------  --------
CASH AND CASH EQUIVALENTS, END OF YEAR........... $  4,558  $ 10,670  $  9,463
                                                  ========  ========  ========
</TABLE>

                                       38
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Summary of Significant Accounting Policies

  Nature of Business--ACT Manufacturing, Inc. and Subsidiaries (the "Company"
or "ACT") provide value-added electronics manufacturing services for original
equipment manufacturers in the networking and telecommunications, computer and
industrial and medical equipment markets. The Company provides original
equipment manufacturers with complex printed circuit board assembly primarily
utilizing advanced surface mount technology, electro-mechanical subassembly,
total system assembly and integration, and mechanical and molded cable and
harness assembly.

  Principles of Consolidation and Basis of Presentation--The consolidated
financial statements include the accounts of ACT Manufacturing, Inc. and its
wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. On July 29, 1999 the Company completed a
merger with CMC Industries, Inc. ("CMC") in which CMC became a wholly owned
subsidiary of ACT Manufacturing, Inc. The merger has been accounted for as a
pooling of interests, and accordingly, the Company's consolidated financial
statements for prior periods have been restated to include the operating
results, financial position and cash flows of CMC at the beginning of the
earliest period presented. In connection with the pooling, ACT issued 0.5 of a
share of ACT common stock for each outstanding share of CMC common stock. A
total of 3.9 million shares of ACT common stock were issued in connection with
the merger, and approximately 0.9 million shares of ACT common stock were
reserved for the conversion of CMC's outstanding stock options. Approximately
$5,601,000 in merger-related costs were charged to operations in the quarter
ended September 30, 1999.

  ACT prepares its consolidated financial statements on the basis of a fiscal
year ending December 31, and CMC prepared its consolidated financial
statements on the basis of a fiscal year ending July 31. The consolidated
statements of operations, comprehensive income (loss) and cash flows for the
years ended December 31, 1998 and 1997 (herein referred to as "fiscal" 1998
and 1997) reflect the results of operations, comprehensive income (loss) and
cash flows for ACT for the years then ended combined with CMC for the years
ended July 31, 1998 and 1997, respectively. The consolidated balance sheet as
of December 31, 1998 reflects the financial position of ACT as of that date
combined with the financial position of CMC as of July 31, 1998.

  As a result of ACT and CMC having different fiscal years, CMC's condensed
consolidated results of operations for the five-month period from August 1,
1998 through December 31, 1998 are reported separately. However, this
condensed consolidated statement of operations data of CMC, presented below,
for the period August 1, 1998 through December 31, 1998 does not reflect any
adjustment to conform CMC's accounting policy with that of ACT's of expensing
previously capitalized preoperating and start-up costs associated with CMC's
Mexican manufacturing facility. The effect of such adjustment would be to
reduce cost of goods sold by $100,000 and reduce net loss by $60,000. This
adjustment also gives effect to the tax deductibility of these expenses.

                                      39
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


<TABLE>
   <S>                                                              <C>
   Condensed Consolidated Statement of Operations Data (in
    thousands):
   Net sales....................................................... $122,423
   Cost of sales...................................................  119,733
                                                                    --------
   Gross profit....................................................    2,690
   Selling, general and administrative expenses....................    5,409
                                                                    --------
   Loss from operations............................................   (2,719)
   Interest expense................................................      691
                                                                    --------
   Loss before taxes...............................................   (3,410)
   Income tax benefit..............................................   (1,279)
                                                                    --------
   Net loss........................................................ $ (2,131)
                                                                    ========
</TABLE>

  Translation of Foreign Currency--The Company translates financial statements
denominated in foreign currency by translating balance sheet accounts at the
end of period exchange rate and statement of operations accounts at the
average exchange rate for the period. Where the local currency is the
functional currency, translation gains and losses are recorded as a separate
component of stockholders' equity in accumulated other comprehensive income
(loss) and transaction gains and losses are reflected in other income (loss)
in determining net income. Where the U. S. dollar is the functional currency,
all foreign currency gains and losses are included in determining net income.

  Use of Estimates--The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates. Estimates include such
items as reserves for accounts receivable and inventory, useful lives of other
assets, goodwill, property and equipment, investment in related party and
accrued liabilities. Actual results could differ from those estimates.

  Fair Value of Financial Instruments--Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of the fair value of certain financial
instruments. The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximate fair value
because of their short-term nature. The Company's bank debt, because it
carries a variable interest rate, is stated at its approximate fair market
value.

  Derivatives--The Company has entered into an interest rate swap that
qualifies as a matched swap that is linked by designation with a balance sheet
liability and has opposite interest rate characteristics of such balance sheet
item. Matched interest rate swaps qualify for settlement accounting. Under
settlement accounting, periodic net cash settlements under the swap agreement
are recognized in income on an accrual basis. These settlements are offset
against interest expense in the consolidated statements of operations.

  Revenue Recognition--Revenue is recognized upon shipment of the product or
otherwise, under certain contracts, when title to and risks and reward of
ownership pass to the customer.

  Cash and Cash Equivalents--The Company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.

  Inventory--Inventory is stated at the lower of cost or market. Cost has been
determined using the first-in, first-out ("FIFO") method for approximately 72%
and 69% of the inventories at the end of fiscal 1999 and 1998, respectively,
with the remaining balance determined using the last-in, first-out ("LIFO")
method.

                                      40
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Property and Equipment--Purchased property and equipment is recorded at
cost. Capital lease property and equipment is recorded at the lesser of cost
or the present value of the minimum lease payments required. Depreciation and
amortization is provided using the straight-line method over the estimated
useful lives of the related assets (three to thirty years) and over the terms
of the related leases (five years).

  Goodwill--Goodwill is being amortized on a straight-line basis over a period
of ten to twenty years.

  Investment in Related Party--The carrying amount of the investment in
preferred stock of a related party is based upon the present value of expected
cash flows. See Note 11.

  Other Assets--Other assets include cash surrender value of officer's life
insurance, prepaid pension expense and noncompete agreements. The noncompete
agreements are being amortized over three to ten years.

  Warranty--The Company generally warrants that its hardware assemblies will
be free from defects in workmanship for 12 months and passes on to the
customer any warranties provided by component manufacturers and material
suppliers to the extent permitted. Warranty costs have not been material to
date.

  Income Taxes--The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes." This Statement requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of events
that have been included in the Company's consolidated financial statements or
tax returns. Deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax bases of
existing assets and liabilities, using enacted tax rates in effect in the
years in which the differences are expected to reverse.

  Stock-Based Compensation--As permitted by SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company accounts for stock option grants using
the intrinsic value method in accordance with Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."

  Net Income (Loss) Per Common Share--Basic net income (loss) per common share
is computed by dividing net income (loss) available to common stockholders by
the weighted average number of common shares outstanding for the period.
Diluted net income (loss) per common share reflects the potential dilution if
common equivalent shares outstanding (common stock options and warrants) were
exercised or converted into common stock unless the effects of such equivalent
shares were antidilutive.

                                      41
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  A reconciliation of net income (loss) per common share and the weighted
average shares used in the earnings per share ("EPS") calculations for fiscal
years 1999, 1998 and 1997 is as follows (in thousands except per share
amounts):

<TABLE>
<CAPTION>
                                              Net Income                 Per
                                                (Loss)       Shares     Share
                                              (Numerator) (Denominator) Amount
                                              ----------- ------------- ------
<S>                                           <C>         <C>           <C>
1999
Basic........................................   $ 6,234      13,265     $ 0.47
                                                =======
Effect of stock options......................                   651     $(0.02)
                                                             ------     ------
Diluted......................................   $ 6,234      13,916     $ 0.45
                                                =======      ======     ======
1998
Basic........................................   $ 3,093      12,665     $ 0.24
                                                =======
Effect of stock options......................                   311        --
                                                             ------     ------
Diluted......................................   $ 3,093      12,976     $ 0.24
                                                =======      ======     ======
1997
Basic........................................   $(2,401)     12,330     $(0.19)
                                                =======
Effect of stock options and warrants.........                   --         --
                                                             ------     ------
Diluted......................................   $(2,401)     12,330     $(0.19)
                                                =======      ======     ======
</TABLE>

  Options and warrants to purchase 228,501, 757,296 and 1,328,774 shares of
common stock were outstanding during fiscal 1999, 1998 and 1997, respectively,
but were not included in the computation of diluted EPS because of either the
net loss in fiscal 1997 or because the options' exercise prices were greater
than the average market prices of the common stock, and therefore, their
effect would be antidilutive.

  Supplemental Cash Flow Information--Selected cash payments and noncash
activities for fiscal 1999, 1998 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                           1999   1998    1997
                                                          ------ ------  ------
<S>                                                       <C>    <C>     <C>
Cash paid for interest................................... $5,176 $3,887  $3,795
Cash paid for (refunded from) income taxes...............  1,537 (7,686)  7,729
Noncash investing and financing activities:
  Assets acquired in exchange for common stock...........    --     --    5,250
  Reduction of goodwill upon cancellation of common stock
   from acquisition escrow...............................    --     122     --
  Receipt of stock as payment on account.................    --     --      441
</TABLE>

  Impairment of Long-Lived Assets--At each balance sheet date, the Company
assesses whether there has been an impairment in the value of long-lived
assets by determining whether projected undiscounted cash flows generated by
the applicable asset exceeds its net book value as of the assessment date. At
the end of fiscal 1999 and 1998, subject to changes in circumstances, there
were no impairments of the Company's assets.

  Comprehensive Income (Loss)--The Company adopted SFAS No. 130, "Reporting
Comprehensive Income" in fiscal 1998. SFAS No. 130 requires the reporting of
comprehensive income (loss), which in the case of the Company, is the
combination of reported net income, and the change in the cumulative
translation adjustment and the change in the minimum pension liability, which
is a component of stockholders' equity.

                                      42
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Recently Issued Financial Accounting Standard--In June 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," amended in June 1999 and
effective for fiscal years beginning after June 15, 2000. The new standard
requires that all companies record derivatives on the balance sheet as assets
or liabilities, measured at fair value. Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on the use
of the derivative and whether it qualifies for hedge accounting. Management is
currently assessing the impact of SFAS No. 133 on the consolidated financial
statements of the Company. The Company will adopt this accounting standard on
January 1, 2001, as required.

2. Acquisitions of Businesses and Assets

 Business Acquisitions

  Effective June 9, 1997, the Company acquired substantially all of the assets
and liabilities of Electronics Systems International ("ESI") located in
Georgia. ESI is an electronics manufacturing services provider to customers
throughout the southeastern United States. Under the terms of the purchase
agreement, the Company acquired assets and liabilities of ESI in exchange for
190,546 shares of the Company's common stock plus acquisition costs. In 1998
the Company cancelled 4,446 shares previously issued and held in escrow. The
per share market value of the Company's common stock on the date of the
purchase was $27.50.

  Effective June 10, 1997, the Company acquired substantially all of the
outstanding stock of Advanced Component Technologies Limited (formerly SignMax
Limited), a cable and harness manufacturing company based in Dublin, Ireland.
Under the terms of the purchase agreement, approximately 82% of the
outstanding common shares of Advanced Component Technologies Limited (formerly
SignMax Limited) were acquired for cash of $1,000,000 plus acquisition costs.

  Effective June 27, 1997, the Company acquired all of the outstanding stock
of SignMax America, LLC, which owned the remaining 18% of Advanced Component
Technologies Limited (formerly SignMax Limited). Under the terms of the
purchase agreement, 100% of the outstanding common shares were acquired for
cash of $460,000 and the assumption of $575,000 in notes payable.

  The ESI and SignMax transactions were accounted for as purchases in
accordance with APB Opinion No. 16, "Business Combinations," as follows (in
thousands):

<TABLE>
<S>                                                                     <C>
Details of Acquisitions:
  Cash paid, net of cash acquired...................................... $ 1,455
  Acquisition expenses.................................................     939
                                                                        -------
    Total cash paid....................................................   2,394
  Common stock issued..................................................   5,250
                                                                        -------
    Total cash paid and common stock issued............................   7,644
  Liabilities assumed..................................................   4,334
                                                                        -------
    Total purchase price of acquisitions...............................  11,978
  Fair value of assets acquired........................................   5,609
                                                                        -------
    Excess of purchase price over net assets........................... $ 6,369
                                                                        =======
</TABLE>

  The operating results of the ESI and SignMax acquired businesses from the
dates of purchase are included in the Company's Consolidated Statement of
Operations for fiscal 1997. The Consolidated Statement of Operations for
fiscal 1998 includes a full year of operations of these acquired businesses.
Pro forma information

                                      43
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

has not been provided, as the operations of the acquired businesses were not
material to the consolidated results of operations or financial position of
the Company in fiscal 1997.

  The Company attributes the goodwill to the expected ability to expand sales
in these new geographic markets, utilizing the acquired existing business
infrastructure and geographic market presence as a basis for expansion.
Accumulated amortization on these acquisitions amounted to approximately
$1,082,000 and $640,000 at the end of fiscal 1999 and 1998, respectively.

 Asset Acquisition

  Effective October 12, 1999, the Company acquired certain inventory and fixed
assets of GSS/Array Technology, Inc. located in San Jose, California, a
subsidiary of GSS Array Technology Public Company Limited, a Thailand company.
Under the terms of the purchase agreement, the Company assumed on going
relationships with select GSS/Array domestic customers.

  The Company paid approximately $12,875,000 in cash and assumed $618,000 in
liabilities in connection with this asset purchase. The fair value of the
assets purchased was approximately $8,879,000. The Company recorded $4,614,000
as the excess of the asset purchase price over the fair value of assets
purchased. The operating results following the Company's purchase of the
selected GSS/Array assets from the date of purchase are included in the
Company's Consolidated Statement of Operations for fiscal 1999.

  The Company attributes the goodwill to the expected future economic benefits
the acquisition of these assets is expected to provide. Accumulated
amortization on the acquisition of these assets amounted to approximately
$96,000 in fiscal 1999.

3. Inventory

  Inventory consisted of the following at fiscal year end 1999 and 1998 (in
thousands):

<TABLE>
<CAPTION>
                                                                  1999    1998
                                                                -------- -------
<S>                                                             <C>      <C>
Raw materials.................................................. $125,869 $50,354
Work in process................................................   42,039  12,511
Finished goods.................................................    3,854   2,747
                                                                -------- -------
  Total........................................................ $171,762 $65,612
                                                                ======== =======
</TABLE>

  The carrying value of inventory approximates replacement cost.

                                      44
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


4. Property and Equipment

  Property and equipment consisted of the following at fiscal year end 1999
and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                1999     1998
                                                               -------  -------
<S>                                                            <C>      <C>
Land.......................................................... $   798  $   798
Building......................................................   4,922    4,622
Leasehold improvements........................................  11,234    7,618
Manufacturing equipment.......................................  35,696   24,618
Office furniture and equipment................................   9,311    7,856
Vehicles......................................................     418      144
Construction-in-progress......................................   1,026    2,838
                                                               -------  -------
  Total property and equipment................................  63,405   48,494
Less accumulated depreciation and amortization................ (25,358) (16,215)
                                                               -------  -------
  Property and equipment--net................................. $38,047  $32,279
                                                               =======  =======
</TABLE>

  Included in property and equipment is a manufacturing facility and certain
equipment held under capital leases with a net carrying value of $5,745,000
and $1,615,950 at the end of fiscal 1999 and 1998, respectively.

  The Company has capitalized interest in the amount of $40,000 and $171,000
at the end of fiscal 1999 and 1998, respectively, related to the construction-
in-progress.

5. Indebtedness

  On July 29, 1999, the Company executed an Amended and Restated Credit
Agreement for a new $107.0 million Senior Secured Credit Facility ("Credit
Facility") with a group of banks led by The Chase Manhattan Bank as agent
("Agent") to replace the Company's previous credit facilities with the banks.
This new Credit Facility provides for a $7.0 million, five-year Term Loan
("Term Loan") and a $100.0 million, five-year Line of Credit ("Revolving
Credit Facility"), both of which are secured by substantially all of the
assets of the Company. The Term Loan shall amortize at a rate of $1.0 million
per year for the first year and $1.5 million per year for years two through
five. The Revolving Credit Facility provides for borrowings up to an aggregate
amount of $100.0 million, limited to a certain percentage of qualified
accounts receivable and qualified inventory. Interest is payable monthly. For
the Term Loan, the Company may choose an interest rate of either (i) 2.5%
above the prevailing London Interbank Offering Rate ("LIBOR"), or (ii) 0.5%
above the prime rate as announced by the Agent. For the Revolving Credit
Facility, the Company may choose an interest rate of either (i) 2.25% above
the prevailing LIBOR rate, or (ii) 0.25% above the prime rate as announced by
the Agent. In addition to certain other prohibited actions, the Credit
Facility limits capital expenditures by the Company and prohibits the payment
of cash dividends on the Company's common stock. The Credit Facility requires
the Company to maintain certain minimum fixed charge coverage ratios and
maximum leverage ratios. Outstanding borrowings under the Credit Facility are
secured primarily by the Company's accounts receivable, inventories, machinery
and equipment. The interest rates on the Term Loan and the Credit Facility
were 7.89% and 8.75%, respectively, at December 31, 1999. The balances
outstanding under the Term Loan and the Credit Facility at December 31, 1999
were $6.8 million and $41.3 million, respectively, and $58.7 million was
available for borrowing under the Credit Facility.

  Previously, the Company had a total credit facility at the end of fiscal
1998 of $90.0 million including a $55.0 million Senior Secured Credit Facility
("Senior Credit Facility") with a financial institution and a $35.0 million
Loan and Security Agreement with another financial institution. The Company
executed the $55.0 million Senior Credit Facility in fiscal 1998 to replace
the $50.0 million Loan and Security Agreement then outstanding.

                                      45
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The Company entered into a $17.0 million interest rate swap agreement in
fiscal 1998 simultaneous with the execution of the Senior Credit Facility. The
swap agreement provides for payments by the Company at a fixed rate of
interest of 6.76% and matures on October 19, 2001. The fair value of the
interest rate swap at December 31, 1999 was approximately $(56,000) since the
fixed rate of interest of 6.76% was higher than the floating rate.

  The aggregate annual maturities of long-term debt at the end of fiscal 1999
are as follows (in thousands):

<TABLE>
<S>                                                                      <C>
2000.................................................................... $ 1,125
2001....................................................................   1,500
2002....................................................................   1,500
2003....................................................................   1,500
2004....................................................................  42,433
</TABLE>

6. Other Long-Term Liabilities

  Other long-term liabilities consisted of the following at fiscal year end
1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                   1999   1998
                                                                  ------ ------
<S>                                                               <C>    <C>
Noncompete covenant.............................................. $  245 $  303
Deferred revenue.................................................  1,023    483
Capital leases...................................................  5,303  1,437
Other noncurrent liabilities.....................................     23    105
                                                                  ------ ------
  Total..........................................................  6,594  2,328
Less current portion.............................................  2,972  1,236
                                                                  ------ ------
  Other long-term liabilities.................................... $3,622 $1,092
                                                                  ====== ======
</TABLE>

  Noncompete Covenant--In 1993, the Company entered into an agreement with its
former sole stockholder, which provides for monthly payments over a ten-year
period, in return for a promise not to compete. The liability is recorded at
the present value of the required future payments at an interest rate of 8%.

  Deferred Revenue--The Company received grants of $540,000 and $483,000 in
fiscal 1999 and 1998, respectively, under an agreement with the Ireland
Industrial Development Agency. These payments have been recorded as deferred
revenue at the end of fiscal 1999 and 1998 since the Company will be required
to return the grants if certain conditions, including employment levels, are
not met by December 31, 2002.

  Facility and Equipment Leases--The Company leases a manufacturing facility
and certain equipment and computer software used in its manufacturing
operations under capital lease agreements that expire through 2003.

                                      46
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Other long-term liabilities at the end of fiscal 1999 are due as follows (in
thousands):

<TABLE>
<CAPTION>
                                       Noncompete Capital Deferred
                                        Covenant  Leases  Revenue  Other Total
                                       ---------- ------- -------- ----- ------
<S>                                    <C>        <C>     <C>      <C>   <C>
2000..................................    $ 86    $3,207   $  --   $--   $3,293
2001..................................      92     1,975      --     23   2,090
2002..................................     100       356    1,023   --    1,479
2003..................................     --        222      --    --      222
2004..................................     --        --       --    --      --
                                          ----    ------   ------  ----  ------
  Total...............................     278     5,760    1,023    23   7,084
Less amount representing interest.....      33       457      --    --      490
                                          ----    ------   ------  ----  ------
Present value of minimum payments.....     245     5,303    1,023    23   6,594
Less current portion..................      68     2,904      --    --    2,972
                                          ----    ------   ------  ----  ------
  Other long-term liabilities.........    $177    $2,399   $1,023  $ 23  $3,622
                                          ====    ======   ======  ====  ======
</TABLE>

7. Income Taxes

  The provisions (benefit) for income taxes for fiscal years 1999, 1998 and
1997 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                          1999   1998    1997
                                                         ------ ------  -------
   <S>                                                   <C>    <C>     <C>
   Current taxes:
     Federal............................................ $5,538 $2,221  $(2,619)
     State..............................................    926    586       (3)
                                                         ------ ------  -------
                                                          6,464  2,807   (2,622)
   Deferred taxes.......................................  1,329   (763)   1,387
                                                         ------ ------  -------
       Total............................................ $7,793 $2,044  $(1,235)
                                                         ====== ======  =======
</TABLE>

  Deferred income tax assets (liabilities) are attributable to the following
for fiscal years 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                1999     1998
                                                               -------  ------
   <S>                                                         <C>      <C>
   Accounts receivable........................................ $   918  $  460
   Inventory..................................................    (980) (2,239)
   Depreciation...............................................  (2,287) (2,231)
   Accrued liabilities........................................     868   1,568
   Pension....................................................    (576)    --
   State operating loss and credits...........................     --      367
   Minimum tax credit.........................................     --      594
   Other......................................................     321   1,188
                                                               -------  ------
     Net deferred tax liability............................... $(1,736) $ (293)
                                                               =======  ======
</TABLE>

  The net deferred tax liability is classified as follows at the end of the
fiscal years 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                               1999     1998
                                                              -------  -------
   <S>                                                        <C>      <C>
   Current asset, net........................................ $   999  $   880
   Noncurrent liability......................................  (2,735)  (1,173)
                                                              -------  -------
     Net deferred tax liability.............................. $(1,736) $  (293)
                                                              =======  =======
</TABLE>

                                      47
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  No valuation allowance is required as the deferred tax assets are expected
to be fully realized.

  A reconciliation of the expected tax rate at the U.S. statutory rate to the
effective tax rate for the fiscal years indicated is as follows:

<TABLE>
<CAPTION>
                                                                 1999  1998  1997
                                                                 ----  ----  ----
   <S>                                                           <C>   <C>   <C>
   Federal statutory rate.......................................  35%   34%  (34)%
   State income taxes, net of federal benefit...................   9     6     (6)
   Nondeductible merger costs...................................  14    --     --
   Adjustments to prior year tax liability......................  --     1     --
   Other........................................................  (2)   (1)     6
                                                                 ---   ---   ----
     Effective rate.............................................  56%   40%  (34)%
                                                                 ===   ===   ====
</TABLE>

  For state income tax purposes, the Company has utilized all net operating
loss carryforwards as of fiscal year end 1999.

8. Capital Stock

 Stock Option Plans

  The Company has the 1995 Stock Plan, which provides for the grant of
incentive and nonqualified stock options to purchase up to an aggregate of
2,250,000 shares. The Company has a 1995 Non-Employee Director Stock Option
Plan that provides for the grant of options to purchase a maximum of 100,000
shares to nonemployee directors of the Company. The Company also has the 1993
Incentive Stock Option Plan under which options for up to 690,664 shares of
common stock may be granted at an exercise price not less than fair market
value at the date of grant. CMC's 1990 Equity Incentive Plan provides for the
granting of options to purchase a maximum of 950,052 shares. Options granted
under CMC's 1990 Equity Incentive Plan were converted to ACT options in
conjunction with the pooling. Such activity is incorporated in the activity
below. Stock option activity for the fiscal years indicated was as follows:

<TABLE>
<CAPTION>
                                                       Weighted-    Weighted-
                                          Number of     Average      Average
                                           Options   Exercise Price Fair Value
                                          ---------  -------------- ----------
   <S>                                    <C>        <C>            <C>
   Outstanding at Beginning of Fiscal
    1997.................................   810,008      $ 8.18
     Granted.............................   772,750       22.97       $13.42
     Exercised...........................   (85,435)       9.57
     Forfeited...........................  (168,551)      20.31
                                          ---------      ------
   Outstanding at End of Fiscal 1997..... 1,328,772       15.06
     Granted............................. 1,246,750       12.92         6.95
     Exercised...........................   (42,290)       8.08
     Forfeited...........................  (571,578)      23.67
                                          ---------      ------
   Outstanding at End of Fiscal 1998..... 1,961,654       11.38
     Net CMC activity August 1 to
      December 31, 1998..................    47,630       11.33
     Granted.............................   498,000       16.91        12.95
     Exercised...........................  (491,455)      11.84
     Forfeited...........................  (255,839)      13.52
                                          ---------      ------
   Outstanding at End of Fiscal 1999..... 1,759,990      $12.11
                                          =========      ======
</TABLE>

                                      48
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


<TABLE>
<CAPTION>
                     Options Outstanding              Options Exercisable
               ------------------------------- ---------------------------------
                              Weighted Average
   Number of      Range of     Remaining Life  Weighted-Average Number Currently
    Options    Exercise Price    (In Years)     Exercise Price    Exercisable
   ---------   -------------- ---------------- ---------------- ----------------
   <S>         <C>            <C>              <C>              <C>
      50,267    $ 0.48-$0.84          2             $ 0.60           50,267
      49,266       3.70-3.96          4               3.88           49,266
     448,069       5.45-8.00          7               7.07          246,589
     302,060      8.75-12.25          7              11.08          127,552
     711,828     13.64-20.25          8              16.35          162,179
     198,500     20.74-27.13          9              22.23           11,085
   ---------                                                        -------
   1,759,990                                                        646,938
   =========                                                        =======
</TABLE>

  The options generally vest over three- to five-year periods.

  The Company has reserved shares for future grants of common stock for
issuance pursuant to the 1993 Incentive Stock Option Plan, 1995 Non-Employee
Director Stock Option Plan, the 1995 Stock Plan and the 1990 Equity Incentive
Plan for 450,800, 66,000, 1,012,600 and 209,400 shares, respectively.

  In January 1998 the Board of Directors approved a vote to reprice 516,500
employee stock options. The options were originally issued between March 1997
and October 1997 and had original grant prices ranging between $14.44 and
$39.25. The grant price for these options was lowered to $13.94, which
reflects the market value of the stock as of the reprice date. The repriced
options continue to vest according to the original grant date. No compensation
expense was required to be recorded in the Consolidated Statements of
Operations.

  As described in Note 1, the Company uses the intrinsic value method to
measure compensation expense associated with grants of stock options to
employees. Had the Company used the fair value method to measure compensation
for grants made after fiscal 1995, (including the repricing described above)
pro forma net income (loss) and net income (loss) per share for fiscal years
indicated would have been as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                         1999   1998    1997
                                                        ------ ------  -------
   <S>                                                  <C>    <C>     <C>
   Net income (loss)................................... $4,167 $ (966) $(5,432)
                                                        ====== ======  =======
   Diluted earnings (loss) per common share............ $ 0.30 $(0.07) $ (0.43)
                                                        ====== ======  =======
</TABLE>

  The fair value of options on their grant date was measured using the
Black/Scholes option-pricing model. Key assumptions used to apply this pricing
model for the fiscal years indicated are as follows:

<TABLE>
<CAPTION>
                                                 1999       1998       1997
                                               ---------  ---------  ---------
   <S>                                         <C>        <C>        <C>
   Risk-free interest rate....................       5.9%       5.5%       6.0%
   Expected life of option grants............. 3-5 years  3-5 years  3-5 years
   Expected volatility of underlying stock....        98%       102%        82%
</TABLE>

  It should be noted that the option-pricing model used was designed to value
readily tradable stock options with relatively short lives. The options
granted to employees are not tradable and have contractual lives of up to ten
years. However, management believes that the assumptions used to value the
options and the model applied yield a reasonable estimate of the fair value of
the grants made under the circumstances.

                                      49
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Private Placement

  In 1998, CMC issued 250,000 shares of stock to two members of the board of
directors in a private placement. Proceeds from the issuance totaled
$3,620,000. The purchase price equaled the fair market value of the stock
issued.

 Capitalization

  On May 16, 1996, CMC issued 218,018 shares of common stock with detachable
warrants that entitle the holders to purchase 84,481 shares of common stock at
a price of $15.00 per share. The total proceeds for the shares and warrants
issued were $2,464,000 and $44,000, respectively. Due to the Company meeting
specified levels of financial performance, the warrants were called during
fiscal 1997. Total proceeds from the exercise of the warrants were $1,267,000.

 Stock Purchase Plan

  On November 15, 1996, CMC's stockholders approved the Employee Stock
Purchase Plan ("ESPP"). The ESPP allowed eligible employees the right to
purchase common stock on a semi-annual basis at the lower of 85% of the market
price at the beginning or end of each offering period. This plan was
terminated as a result of the merger of ACT and CMC on July 29, 1999.

 Common Stock and Stock Option Plan Amendments

  On July 29, 1999, the Company's shareholders approved an amendment to the
Restated Articles of Organization of ACT Manufacturing, Inc. to increase the
number of authorized shares of the Company's common stock, $0.01 par value,
from 30,000,000 to 50,000,000.

  Also on July 29, 1999, the Company's shareholders approved an amendment to
the 1995 Stock Plan increasing the aggregate number of shares which may be
issued from 1,250,000 to 2,250,000 shares.

9. Employee Benefit Plans

 Retirement Benefits

  In 1999, the Company adopted SFAS No. 132, "Employers' Disclosures about
Pension and Other Postretirement Benefits." The provisions of SFAS No. 132
provide new disclosure requirements for pensions and other postretirement
benefit plans, but do not change the measurement or recognition of these
plans. SFAS 132 standardizes the disclosure requirements for pensions and
other postretirment benefits to the extent practicable and requires additional
information on the changes in benefit obligations and fair values of plan
assets.

  CMC maintains a defined benefit pension plan (the "Pension Plan") which
covers certain hourly employees at one plant. Retirement benefits under the
Pension Plan are based on an employee's length of service and a benefit
formula based on year of hire. The benefit formula does not include a
provision for increases in further compensation levels. Contributions to the
Pension Plan are primarily based on the projected unit actuarial cost method.
The Pension Plan's assets consist principally of short-term U.S. government
instruments and pooled fixed income, debt and equity investment funds with
several financial institutions. Effective June 1, 1994, the Company terminated
the future service payments for employees; accordingly, salary increase
assumptions are not applicable.

                                      50
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The components of net periodic pension cost and related assumptions for
fiscal years 1999, 1998 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                            1999   1998   1997
                                                            -----  -----  -----
<S>                                                         <C>    <C>    <C>
Service cost............................................... $ --   $ --   $ --
Interest cost..............................................   642    612    582
Return on plan assets......................................  (688)  (671)  (785)
Net amortization and deferral..............................   157    157    270
                                                            -----  -----  -----
Net periodic pension expense............................... $ 111  $  98  $  67
                                                            =====  =====  =====
Discount rate..............................................  8.00%  8.25%  8.25%
Long-term rate of return...................................  9.00%  8.00%  8.25%
</TABLE>

  The following table sets forth changes in the projected benefit obligation
and changes in the value of Plan assets at fiscal year end (in thousands):

<TABLE>
<CAPTION>
                                                                  1999    1998
                                                                 ------  ------
<S>                                                              <C>     <C>
Changes in projected benefit obligation:
Benefit obligation at beginning of year......................... $7,712  $7,238
CMC net activity August 1 to December 31, 1998..................  1,731     --
Service cost....................................................    --      --
Interest cost...................................................    642     612
Benefits paid...................................................   (754)   (678)
Loss due to census changes......................................    --      540
Revaluation gain................................................   (972)    --
                                                                 ------  ------
  Benefit obligation at end of year............................. $8,359  $7,712
                                                                 ======  ======
Changes in plan assets:
Fair value of plan assets at beginning of year.................. $7,881  $7,375
CMC net activity August 1 to December 31, 1998..................    (36)    --
Actual return on plan assets....................................    949     671
Employer contributions..........................................    394     513
Benefits paid...................................................   (754)   (678)
                                                                 ------  ------
  Fair value of plan assets at end of year...................... $8,434  $7,881
                                                                 ======  ======
Funded status................................................... $   75  $  169
Unrecognized loss...............................................  1,368   1,261
                                                                 ------  ------
  Prepaid pension cost.......................................... $1,443  $1,430
                                                                 ======  ======
</TABLE>

  Under SFAS No. 87, the portion of deferred gains and losses in excess of 10%
of the projected benefit obligation is amortized as a component of net
periodic pension cost. If amortization is required, the period used is the
average remaining service period of active employees, which was approximately
12.39 years as of December 31, 1999.

 Savings Plans

  During fiscal 1994, the Company adopted a savings plan for its employees
pursuant to Section 401(k) of the Internal Revenue Code. Substantially all
employees are eligible to participate, and the plan allows a deferral ranging
from a minimum of 1% to the maximum percentage of compensation permitted by
law. Company

                                      51
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

contributions to the plan are at the discretion of the Board of Directors.
Contributions to the Plan were $0, $0 and $50,000, in fiscal 1999, 1998 and
1997, respectively.

  CMC had a profit sharing savings plan (the "Savings Plan") for employees of
CMC. Under the terms of the Savings Plan, employees may contribute from 2% to
16% of compensation and an additional elective amount. Effective June 30,
1994, the Company terminated matching employee contributions. The Company may
also elect to make an additional discretionary profit sharing contribution.
Effective January 1, 1996, the Savings Plan eligibility requirements were
amended to include all full-time employees with one hour of service. The
Company recorded no contributions in fiscal 1999, 1998 and 1997.

 Medical Care and Disability Benefit Plans

  The Company is self-insured with respect to certain medical care and
disability benefit plans for a percentage of its employees. The costs for such
plans are charged against earnings in the period incurred. The liability for
healthcare claims was $605,000 and $661,000 at fiscal year end 1999 and 1998
respectively, and the related expense incurred was $4,774,000, $4,265,000 and
$4,897,000 for fiscal 1999, 1998 and 1997, respectively. The Company does not
provide benefits under these plans to retired employees.

10. Major Customers and Operating Data

  Sales to Nortel Networks (formerly Bay Networks and Aptis Communication) and
S-3 Corporation (formerly Diamond Multimedia) were 15% and 13%, respectively,
of the Company's fiscal 1999 net sales. In fiscal 1998, sales to Nortel
Networks and Micron Electronics were each approximately 12% of the Company's
net sales. In fiscal 1997 Nortel Networks accounted for approximately 17% of
the Company's net sales. All such sales relate to the printed circuit board
assembly service offering of the Company's business.

  The Company operates as a single segment within the electronics
manufacturing services industry. A summary of the net sales for the Company's
principal service offerings for fiscal 1999, 1998 and 1997 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                       1999     1998     1997
                                                     -------- -------- --------
<S>                                                  <C>      <C>      <C>
Printed Circuit Boards.............................. $658,749 $556,348 $450,467
Cable and Harness...................................   37,533   36,136   28,672
                                                     -------- -------- --------
                                                     $696,282 $592,484 $479,139
                                                     ======== ======== ========
</TABLE>

11. Transactions With Related Parties

  The Company leases certain facilities and equipment from a realty trust
controlled by its principal stockholder under leases that expire in fiscal
2003. These commitments are included in Note 12. The Company pays all
operating costs of the building. Total payments to the realty trust were
approximately $388,000, $388,000 and $364,000 in fiscal 1999, 1998 and 1997,
respectively.

  In fiscal 1993, the Company entered into a ten-year agreement with one of
its directors for future consulting services. Payments under the agreement
were approximately $302,000, $280,000 and $259,000 in fiscal 1999, 1998 and
1997, respectively. Future commitments under this agreement are approximately
$326,000 in fiscal 2000, $352,000 in fiscal 2001, $380,000 in fiscal 2002 and
$233,000 in fiscal 2003. The agreement expires in fiscal 2003. A noncompete
agreement was also entered into with the same individual (see Notes 1 and 6).
Payments under this agreement were $79,000, $73,000 and $68,000 in fiscal
1999, 1998 and 1997, respectively, with future payments totaling $279,000. All
of these payments were charged to the statement of operations in the year they
were incurred.

                                      52
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  In August 1993, CMC transferred certain assets and related liabilities
associated with its telephone business to Cortelco Systems Holding Corporation
("Cortelco"). Under a manufacturing services agreement which expired in fiscal
1998, CMC provided manufacturing services to Cortelco on a turnkey basis with
prices based on cost plus 8% for telephone products and cost plus 10% for
telecommunications systems products. Included in net sales for fiscal 1999,
1998 and 1997 were sales to Cortelco totaling $25,221,000, $26,436,000 and
$31,312,000, respectively. Total cost of sales for the same periods relating
to these sales to Cortelco were $23,203,000, $24,321,000 and $28,807,000,
respectively. CMC continues to provide services to Cortelco with prices
negotiated on a per contract basis.

  In July of 1998, CMC converted certain accounts receivable from Cortelco
totaling $2,000,000 into a note receivable. Under the terms of the note,
Cortelco agrees to pay the balance over a three-year term with monthly
payments of $50,000 plus interest. Interest accrues on the note at a rate of
9.0% per annum. CMC continues to provide credit for manufacturing services
sold to Cortelco in the form of trade receivables.

  In connection with the August 1993 transfer of assets and related
liabilities to Cortelco, CMC received preferred stock in Cortelco. The
Cortelco preferred stock was non-voting, had a liquidation preference of
$12.50 per share and entitled the Company to dividends which were non-
cumulative until August 1995 and thereafter cumulative at $0.75 per share for
each year in which Cortelco earned net income of $2.0 million or more. The
Company could, subject to certain restrictions, require Cortelco to redeem the
preferred stock, on a pro rata basis, over a five-year period beginning August
1999. The Company recorded the preferred stock at fair value, $5,884,000 in
1995, based on the discounted cash flow of the redemption requirements. The
excess cost basis of the net assets over the fair value of the preferred
shares received was recorded as a distribution of capital to CMC's
stockholders.

  In March 1999, the Company consented to a restructuring of certain assets of
Cortelco. In connection with this restructuring, Cortelco distributed common
stock of Cortelco Systems, Inc. to its stockholders on a pro rata basis.
Pursuant to this distribution, CMC received its pro rata share which was equal
to 6,125,302 shares of common stock of Cortelco Systems.

  During the fourth quarter of 1999, Cortelco Systems effected a 1-for-10
reverse stock split. The Company's investment in Cortelco was 612,530 shares
as a result of this stock split. Also in the fourth quarter of 1999, Cortelco
Systems changed its corporate name to eOn Communications Corporation ("eOn")
and filed a Form S-1 for the initial public offering of common stock.

  On February 4, 2000, eOn completed an initial public offering of its common
stock and the Company sold 575,000 shares of common stock in eOn for
approximately $6.4 million. The accounting for the gain on the sale of the eOn
investment will be recorded in the fiscal 2000 financial statements.

                                      53
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


12. Operating Lease Commitments

  The Company leases various plant and office equipment under noncancelable
operating leases expiring through 2007. Rent expense in fiscal 1999, 1998 and
1997 was approximately $17,628,000, $14,276,000 and $9,361,000, respectively.
The future minimum rental payments under these leases over the next five years
are approximately as follows (in thousands):

<TABLE>
<CAPTION>
                                                  Related-
                                                    Party       Other
                                                 Commitments Commitments  Total
                                                 ----------- ----------- -------
<S>                                              <C>         <C>         <C>
2000............................................   $  364      $19,109   $19,473
2001............................................      364       14,605    14,969
2002............................................      364       10,795    11,159
2003............................................      196        8,045     8,241
2004............................................      --         3,420     3,420
                                                   ------      -------   -------
  Total.........................................   $1,288      $55,974   $57,262
                                                   ======      =======   =======
</TABLE>

  The Company has equipment lease lines of approximately $13.0 million
available for purchases of manufacturing equipment, computer hardware and
software and furniture.

13. Contingencies

  On June 15, 1999, we received written notice from legal counsel for the
Lemelson Medical, Education & Research Foundation, Limited Partnership
alleging that we were infringing certain patents held by the Lemelson
Foundation Partnership and offering to license such patents to us. We entered
into a perpetual patent license agreement with the Lemelson Foundation
Partnership in February 2000.

  On February 27, 1998, the Company and several of the Company's officers and
directors were named as defendants in a purported securities class action
lawsuit filed in the United States District Court for the District of
Massachusetts. The plaintiffs amended the complaint on October 16, 1998. The
plaintiffs purport to represent a class of all persons who purchased or
otherwise acquired our common stock in the period from April 17, 1997 through
March 31, 1998. The amended complaint alleges, among other things, that the
defendants knowingly made misstatements to the investing public about the
value of the Company's inventory and the nature of its accounting practices.
On December 15, 1998, the Company filed a motion to dismiss the case in its
entirety based on the pleadings. The Company's motion to dismiss the purported
securities class action lawsuit was granted without prejudice on May 27, 1999
and the case was closed by the court on June 1, 1999. On June 29, 1999, the
plaintiffs filed a motion with the court seeking permission to file a second
amended complaint. The Company opposed that motion. On July 13, 1999, the
court denied the plaintiffs' motion to amend, noting "final judgment having
entered in the case." On July 26, 1999, the plaintiffs filed a motion with the
court asking the court to extend the 30-day period for filing an appeal of its
ruling dismissing the case. The Company opposed that motion as well, and the
court denied the motion on August 10, 1999. The plaintiffs have filed an
appeal with the United States Court of Appeals for the First Circuit
requesting that the Court of Appeals reverse each of the orders described
above. The parties are currently briefing the issues before the Court of
Appeals. The Company believes the claims asserted in this action, and the
plaintiffs' pending appeal, are without merit and intends to continue to
defend itself vigorously in this action. The Company further believes that
this litigation will not have a material adverse effect on the Company's
business and results of operations, although the Company cannot assure you as
to the ultimate outcome of these matters.

  In December 1993, CMC Industries retained the services of a consultant to
assist in quantifying the potential exposure to CMC in connection with clean-
up and related costs of a former manufacturing site. This site is

                                      54
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

commonly known as the ITT Telecommunications site in Milan, Tennessee. The
consultant initially estimated that the cost to remove and dispose of the
contaminated soil would be approximately $200,000. CMC subsequently entered
into a voluntary agreement to investigate the site with the Tennessee
Department of Environment and Conservation. In addition, CMC agreed to
reimburse a tenant of the site $115,000 for expenditures previously incurred
to investigate environmental conditions at the site. CMC recorded a total
provision of $320,000 based on these estimates. In fiscal 1995, an
environmental consultant estimated that the cost of a full study combined with
short- and long-term remediation of the site may cost between $3.0 and $4.0
million. Subsequent environmental studies done in 1999 have estimated such
costs as between $750,000 and $3.5 million. During CMC's fiscal 1996, the
State of Tennessee's Department of Environment and Conservation named certain
potentially responsible parties in relation to the former facility. CMC was
not named as a potentially responsible party. However, Alcatel, Inc., a
potentially responsible party named by the State of Tennessee's Department of
Environment and Conversation and a former owner of CMC, sought indemnification
from CMC under the purchase agreement by which CMC acquired the stock of one
of the operators of the facility. To date, Alcatel has not filed any legal
proceedings to enforce its indemnification claim. However, Alcatel could
initiate such proceedings and other third parties could assert claims against
us relating to remediation of the site. We have entered into an agreement with
Alcatel pursuant to which the statute of limitations on its indemnification
claim is tolled for a period of time. In the event any proceedings are
initiated or any claims made, the Company would defend itself vigorously but
defense or resolution of this matter could negatively impact the Company's
financial position and results of operations.

  In connection with a fiscal 1996 staff reduction by CMC, a number of
terminated employees subsequently claimed that CMC had engaged in age
discrimination in their dismissal and sought damages of varying amounts. CMC
defended the actual and threatened claims vigorously during fiscal 1998
incurring approximately $275,000 in legal costs over the course of the year.
On August 6, 1998, a judgment was rendered in favor of one plaintiff, in the
amount of $127,000 which CMC subsequently settled for $112,000. A second
plaintiff's claim for $53,000 was filed and subsequently settled for $48,500.
The Equal Employment Opportunity Commission ("EEOC") negotiated with CMC to
reach a monetary settlement for other potential claimants. Without admitting
any liability, CMC entered into a Conciliation Agreement with the EEOC and
agreed to pay approximately $500,000 to settle all such claims and limit
future litigation costs. As a result of these events and the significant
ongoing costs to defend these claims, in October 1998, CMC concluded that its
interest would be best served to settle all such matters. CMC reserved
$975,000 to resolve all such claims, which represented its best estimate of
funds to ultimately be paid to such claimants. This charge was recorded in
CMC's fiscal year ended July 31, 1998.

  From time to time, the Company is also subject to claims or litigation
incidental to its business. The Company does not believe that any incidental
claims or litigation will have a material adverse effect on its results of
operations.

14. Subsequent Event

  On March 15, 2000, the Company signed a pre-tender agreement (the
"Agreement") to acquire GSS Array Technology Public Company Limited ("GSS
Thailand"). As part of the Agreement, certain of GSS Thailand's principal
shareholders have agreed to tender all their issued shares and outstanding
options to the Company. GSS Thailand is a Thai-based contract electronics
manufacturing company and is listed on the Stock Exchange of Thailand. The
acquisition is subject to various closing conditions and is expected to close
in the third quarter of fiscal 2000.

  Under the terms of the Agreement, GSS Thailand would be delisted from the
Stock Exchange of Thailand and ACT would make a cash tender offer for all
issued shares and outstanding options of GSS Thailand for

                                      55
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

approximately $93.0 million in cash. Upon the closing of the acquisition, ACT
would assume on-going relationships with GSS Thailand customers and will
retain certain GSS Thailand management to support this additional operation.

15. Selected Quarterly Financial Data (unaudited):

  Summarized quarterly financial data are as follows (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
                                                      1999 Quarters
                                           ------------------------------------
                                            First    Second   Third     Fourth
                                           -------- -------- --------  --------
<S>                                        <C>      <C>      <C>       <C>
Net sales................................. $145,947 $157,519 $180,105  $212,711
Gross profit..............................   10,436   11,060   14,822    18,108
Net income (loss).........................    1,850    1,028   (1,748)    5,104
Earnings (loss) per share:
  Basic...................................     0.14     0.08    (0.13)     0.35
  Diluted.................................     0.14     0.08    (0.13)     0.33
<CAPTION>
                                                      1998 Quarters
                                           ------------------------------------
                                            First    Second   Third     Fourth
                                           -------- -------- --------  --------
<S>                                        <C>      <C>      <C>       <C>
Net sales................................. $151,569 $162,604 $137,452  $140,859
Gross profit..............................    7,530    9,182    9,529     9,904
Net income................................      164    1,130    1,219       580
Earnings per share:
  Basic...................................     0.01     0.09     0.10      0.05
  Diluted.................................     0.01     0.09     0.09      0.04
</TABLE>

  The Company's third quarter fiscal 1999 net loss includes $5,601,000 of non-
tax deductible merger costs incurred in connection with the Company's merger
with CMC.

                                   * * * * *

                                      56
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

  Not applicable.

                                   PART III

  Anything herein to the contrary notwithstanding, in no event are the
sections entitled "Stock Performance Graph" and "Compensation Committee and
Stock Option Committee Report on Executive Compensation" to be incorporated by
reference herein from the Company's definitive proxy statement for the
Company's 2000 Annual Meeting of Stockholders which will be filed with the
Commission within 120 days after the close of the fiscal year (the "Definitive
Proxy Statement").

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

  Certain information concerning the directors of the Company is incorporated
by reference herein from the information contained under the heading "Election
of Directors" in the Company's Definitive Proxy Statement.

  Certain information concerning directors and executive officers of the
Company is incorporated by reference herein from the information contained
under the heading "Occupations of Directors and Executive Officers" in the
Company's Definitive Proxy Statement.

  The information concerning compliance with Section 16(a) of the Exchange Act
required under this item is incorporated herein by reference from the
information contained under the heading "Section 16 Reporting" in the
Company's Definitive Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

  Certain information concerning executive compensation is incorporated by
reference herein from the information contained under the heading
"Compensation and Other Information Concerning Directors and Executive
Officers" in the Company's Definitive Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  Certain information concerning security ownership of certain beneficial
owners and management is incorporated by reference herein from the information
contained under the heading "Securities Ownership of Certain Beneficial Owners
and Management" in the Company's Definitive Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Certain information concerning certain relationships and related
transactions is incorporated by reference herein from the information
contained under the heading "Certain Relationships and Related Transactions"
in the Company's Definitive Proxy Statement.

                                      57
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Index To Consolidated Financial Statements

  The following Consolidated Financial Statements of the Registrant are filed
as part of this report:
    Independent Auditors' Report
    Report of Independent Accountants
    Report of Independent Accountants
    Consolidated Balance Sheets as of December 31, 1999 and 1998
    Consolidated Statements of Operations for the years ended December 31,
    1999, 1998 and 1997. Consolidated Statements of Comprehensive Income
    (Loss) for the years ended December 31, 1999, 1998 and 1997
    Consolidated Statements of Stockholders' Equity for the years ended
    December 31, 1999, 1998 and 1997
    Consolidated Statements of Cash Flows for the years ended December 31,
    1999, 1998 and 1997
    Notes to Consolidated Financial Statements

(a)(2) Index to Consolidated Financial Statement Schedules

  The following Consolidated Financial Statement Schedule of the Registrant is
filed as part of this report:

<TABLE>
<CAPTION>
                                                                    Page
                                                                    ----
     <S>                                                            <C>
     Schedule II -- Valuation and Qualifying Accounts and Reserves  S-1
</TABLE>

  Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
accompanying consolidated financial statements or Notes thereto.

(a)(3) Index to Exhibits

<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <C>         <S>
      3.1(1)   --Second Restated Articles of Organization of the Company.

      3.2(2)   --Amended and Restated By-Laws of the Company.

      3.3(7)   --Articles of Amendment to the Second Restated Articles of
                Organization of the Company.

      4.1(2)   --Specimen certificate representing the Common Stock.

      4.2      --Second Restated Articles of Organization of the Company (see
                Exhibit 3.1).

      4.3      --Amended and Restated By-Laws of the Company (see Exhibit 3.2).

      4.4      --Articles of Amendment to the Second Restated Articles of
                Organization of the Company (see Exhibit 3.3).

     10.1(2)   --1995 Non-Employee Director Stock Option Plan.

     10.2(2)   --Stock Option Plan dated April 15, 1993.

     10.3(2)   --Stock Option Plan of Automated Component Technologies, Inc.
                dated April 15, 1993.

     10.4(2)   --Registration Rights Agreement dated February 8, 1995 by and
                among the Company, John A. Pino and certain other stockholders
                named therein.

     10.5(2)   --Lease dated April 1, 1985 between Re-Act Realty Trust and the
                Company, as amended by the First Amendment thereto dated
                October 25, 1988, the Second Amendment thereto dated August 4,
                1993 and the Third Amendment thereto dated February 7, 1995

</TABLE>

                                      58
<PAGE>

<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <C>         <S>
    10.6(2)    --Lease dated October 1, 1988 between Re-Act Realty Trust, as
                amended by the First Amendment thereto dated August 4, 1993 and
                the Second Amendment thereto dated February 7, 1995.

    10.7(2)    --Stock Purchase Agreement dated as of January 1, 1993 between
                Donald G. Polich, John A. Pino, the Company and Automated
                Component Technologies, Inc., as amended by the First Amendment
                dated February 8, 1995.

    10.8(2)    --Consulting Agreement dated as of August 4, 1993 between the
                Company and Re-Act Consulting as amended by the First Amendment
                thereto dated February 8, 1995.
    10.9(2)    --Consulting Agreement dated as of August 4, 1993 between
                Automated Component Technologies, Inc. and Re-Act Consulting as
                amended by the First Amendment thereto dated February 8, 1995.
    10.10(2)   --Noncompetition Agreement dated as of January 1, 1993 between
                the Company, John A. Pino and Donald G. Polich.
    10.11(2)   --Noncompetition Agreement dated as of January 1, 1993 between
                Automated Component Technologies, Inc., John A. Pino and Donald
                G. Polich as amended by the First Amendment thereto dated
                February 8, 1995.
    10.12(2)   --Letter Agreement dated as of January 1, 1993 from the Company
                and Automated Component Technologies, Inc. to Donald G. Polich,
                as amended by the First Amendment thereto dated February 8,
                1995.
    10.13(3)   --Lease dated January 31, 1996 between Mansfield/Forbes Ltd.
                Partnership and the Company.
    10.14(4)   --Split-Dollar Life Insurance Agreement Dated September 5, 1996
                by and between the John A. Pino and Janet M. Pino Family
                Maintenance Trust and the Company.
    10.15(5)   --Lease Agreement dated May 26, 1998 between Highwoods/Forsyth
                Limited Partnership and ACT Manufacturing, Inc.
    10.16(6)   --Share Pledge Agreement dated October 14, 1998 between the
                Company and The Chase Manhattan Bank, as agent.
    10.17(6)   --ISDA Master Agreement dated October 14, 1998 between the
                Company and The Chase Manhattan Bank.
    10.18(6)   --Stock Purchase Agreement dated October 13, 1998 between the
                Company and Advanced Component Technologies Limited.
    10.19(6)   --Subordinated Loan Agreement dated October 13, 1998 between the
                Company and Advanced Component Technologies Limited.
    10.20(6)   --Restated Second Amendment to Agreement of Lease dated November
                6, 1998 between the Company and John A. Pino, Trustee of Re-Act
                Realty Trust.
    10.21(6)   --Restated Lease Amendment and Third Amendment to Agreement of
                Lease dated November 6, 1998 between the Company and John A.
                Pino, Trustee of Re-Act Realty Trust.
    10.22(6)   --Letter Agreement dated October 14, 1998 between the Company
                and BancBoston Leasing.
    10.23(6)   --Letter Agreement dated October 14, 1998 between the Company
                and Citizens Leasing.
    10.24(8)   --Development Agreement dated August 18, 1997 between Citiwest
                Limited, SignMax Limited and ACT Manufacturing, Inc.
    10.25(8)   --Option Agreement dated August 18, 1997 between Citiwest
                Limited, SignMax Limited and ACT Manufacturing, Inc.
    10.26(8)   --Lease Agreement dated August 18, 1997 between Irish Life
                Assurance PLC, SignMax Limited and ACT Manufacturing, Inc.
</TABLE>

                                       59
<PAGE>

<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <C>         <S>
    10.27(8)   --Agreement dated May 25, 1998 between Industrial Development
                Agency (Ireland) and Advanced Component Technologies Limited.
    10.28(8)   --Master Lease Agreement dated February 22, 1999 between Heller
                Financial Leasing, Inc. and the Company.
    10.29(8)   --Lease Agreement dated February 26, 1999 between Amplicon, Inc.
                and the Company.
    10.30(9)   --Global Master Rental Agreement dated May 1, 1998 between the
                Company and Comdisco, Inc.
    10.31(7)   --Amended and Restated 1995 Stock Plan.
    10.32(7)   --Amended and Restated 1990 Equity Incentive Plan (assumed from
                CMC Industries, Inc.)
    10.33(10)  --Amended and Restated Credit Agreement dated July 29, 1999
                between the Company, CMC Industries, Inc., ACT Manufacturing
                Securities Corporation and The Chase Manhattan Bank, as agent.
    10.34(10)  --Revolving Credit Note from the Company and CMC Industries,
                Inc. in favor of National Bank of Canada.
    10.35(10)  --Revolving Credit Note from the Company and CMC Industries,
                Inc. in favor of The Chase Manhattan Bank.
    10.36(10)  --Revolving Credit Note from the Company and CMC Industries,
                Inc. in favor of Firstar Bank, N.A.
    10.37(10)  --Revolving Credit Note from the Company and CMC Industries,
                Inc. in favor of IBJ Whitehall Business Credit Corporation.
    10.38(10)  --Revolving Credit Note from the Company and CMC Industries,
                Inc. in favor of The Provident Bank.
    10.39(10)  --Revolving Credit Note from the Company and CMC Industries,
                Inc. in favor of Sovereign Bank.
    10.40(10)  --Term Note from the Company and CMC Industries, Inc. in favor
                of National Bank of Canada.
    10.41(10)  --Term Note from the Company and CMC Industries, Inc. in favor
                of The Chase Manhattan Bank.
    10.42(10)  --Term Note from the Company and CMC Industries, Inc. in favor
                of Firstar Bank, N.A.
    10.43(10)  --Term Note from the Company and CMC Industries, Inc. in favor
                of IBJ Whitehall Business Credit Corporation.
    10.44(10)  --Term Note from the Company and CMC Industries, Inc. in favor
                of The Provident Bank.
    10.45(10)  --Term Note from the Company and CMC Industries, Inc. in favor
                of Sovereign Bank.
    10.46(10)  --Amended and Restated Security Agreement dated July 29, 1999
                between the Company, CMC Industries, Inc., ACT Manufacturing
                Securities Corporation and The Chase Manhattan Bank, as agent.
    10.47(10)  --Amended and Restated Pledge Agreement dated July 29, 1999
                between the Company, CMC Industries, Inc. and The Chase
                Manhattan Bank, as agent.
    10.48(10)  --Mexican Stock Pledge Agreement dated July 29, 1999 between the
                Company, CMC Industries, Inc., and The Chase Manhattan Bank, as
                agent.
    10.49(11)  --Employment Agreement dated as of July 29, 1999 between the
                Company and Jack O'Rear.
    10.50*     --Lease Agreement dated February 22, 1999 between the Company
                and American Technologies Credit, Inc.
    10.51*     --Master Lease Agreement dated April 30, 1999 between the
                Company and General Electric Capital Corporation.
    10.52*     --Second Assignment of Sublease dated December 17, 1999 between
                the Company and Mack Technologies, Inc.
</TABLE>

                                       60
<PAGE>

<TABLE>
<CAPTION>
   Exhibit No.                          Description
   -----------                          -----------
   <C>         <S>
    10.53*     --Sublease Agreement dated October 16, 1992 between Loral
                Infrared & Imaging Systems, Inc. and Stratus Computer, Inc.
    10.54*     --Lease dated March 15, 2000 between the Company and Mission
                West Properties, L.P.
    11.1*      --Statement re: computation of earnings per share.
    21.1(11)   --Subsidiaries of Registrant.
    23.1*      --Consent of Deloitte & Touche LLP.
    24.1       --Power of Attorney (see Page 62 of this Form 10-K).
    27.1*      --Financial Data Schedule--Fiscal Year 1999.
</TABLE>
--------
 (1) Incorporated herein by reference to the exhibits to the Company's Annual
     Report on Form 10-K for the year ended December 31, 1995.
 (2) Incorporated herein by reference to the exhibits to the Company's
     Registration Statement on Form S-1 (File No. 33-89532), as amended.
 (3) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended June 30, 1996.
 (4) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended September 30, 1996.
 (5) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended June 30, 1998.
 (6) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended September 30, 1998.
 (7) Incorporated herein by reference to the exhibits to the Company's
     Registration Statement on Form S-8 (File No. 333-84231).
 (8) Incorporated herein by reference to the exhibits to the Company's Annual
     Report on Form 10-K for the year ended December 31, 1998.
 (9) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended March 31, 1999.
(10) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended June 30, 1999.
(11) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended September 30, 1999.
  * Filed herewith.

  (b) REPORTS ON FORM 8-K

  Not applicable.

  (c) EXHIBITS

  The Company hereby files as part of this Annual Report on Form 10-K the
exhibits listed in Item 14(a)(3) above. Exhibits which are incorporated herein
by reference can be inspected and copied at the public reference facilities
maintained by the Commission, 450 Fifth Street, NW, Room 1024, Washington,
D.C. and at the Commission's regional offices at 219 South Dearborn Street,
Room 1204, Chicago, Illinois; 26 Federal Plaza, Room 1102, New York, New York
and 5757 Wilshire Boulevard, Suite 1710, Los Angeles, California. Copies of
such material can also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed rates.

  (d) FINANCIAL STATEMENT SCHEDULES

  The Company hereby files as part of this Annual Report on Form 10-K the
consolidated financial statement schedules listed in Item 14(a)(2) above.

                                      61
<PAGE>

                                  SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          ACT Manufacturing, Inc.

Date:  March 28, 2000                               /s/ John A. Pino
                                          By: _________________________________
                                                      John A. Pino
                                              President and Chief Executive
                                                         Officer

                               POWER OF ATTORNEY

  KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John A. Pino and Jeffrey B. Lavin, jointly and
severally, his attorney-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Annual Report on
Form 10-K and to file same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
              Signature                          Title                      Date
              ---------                          -----                      ----
<S>                                    <C>                        <C>
           /s/ John A. Pino            President, Chief Executive      March 28, 2000
 _____________________________________  Officer and Director
             John A. Pino               (Principal Executive
                                        Officer)
         /s/ Jeffrey B. Lavin          Vice President of Finance       March 28, 2000
 _____________________________________  and Chief Financial
           Jeffrey B. Lavin             Officer (Principal
                                        Financial and Accounting
                                        Officer)
         /s/ Edward T. Cuddy           Director                        March 28, 2000
 _____________________________________
            Edward T. Cuddy
         /s/ Bruce R. Gardner          Director                        March 28, 2000
 _____________________________________
           Bruce R. Gardner
         /s/ Frederick Gibbs           Director                        March 28, 2000
 _____________________________________
            Frederick Gibbs
           /s/ David S. Lee            Director                        March 28, 2000
 _____________________________________
             David S. Lee
         /s/ Donald G. Polich          Director                        March 28, 2000
 _____________________________________
           Donald G. Polich
</TABLE>

                                      62
<PAGE>

                                  SCHEDULE II

                            ACT MANUFACTURING, INC.

                 Valuation and Qualifying Accounts and Reserves
              For the years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                           Additions
                                Balance    Charged to                 Balance
                              at Beginning Costs and  Deductions and  at End
                               of Period    Expenses   Adjustments   of Period
                              ------------ ---------- -------------- ---------
                                               (in thousands)
<S>                           <C>          <C>        <C>            <C>
ALLOWANCE FOR DOUBTFUL
 ACCOUNTS:
For the year ended December
 31, 1997....................    $ 751       $1,805       $ 451       $ 2,105
For the year ended December
 31, 1998....................    2,105        1,945       2,817         1,233
For the year ended December
 31, 1999....................    1,233        3,957       2,251         2,939

INVENTORY RESERVE:
For the year ended December
 31, 1997....................    5,859        1,181       4,296         2,744
For the year ended December
 31, 1998....................    2,744          845         946         2,643
For the year ended December
 31, 1999....................    2,643          204         675         2,172
</TABLE>

                                      S-1