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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, 2000
                                      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 Code)
       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. [X]

  The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 22, 2001 (based on the closing sale price as quoted by
the Nasdaq National Market as of such date) was $141,592,661.

  As of March 22, 2001, 17,057,857 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, 2001 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 "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

  We are a leading global provider of value-added electronics manufacturing
services (or EMS) to original equipment manufacturers (or OEMs) in the
networking and telecommunications, high-end computer and industrial and
medical equipment markets. We provide OEMs with:

  . total system assembly and integration;

  . electro-mechanical sub-assembly;

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

  . mechanical and molded cable and harness assembly.

  We target and have developed a particular expertise in serving both
established and emerging 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 processes 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;

  . packaging;

  . order fulfillment; and

  . distribution services.

  We conduct our North American operations primarily through our facilities in
the United States and Mexico and our international operations through ACT
Manufacturing France, ACT Manufacturing Thailand and ACT Manufacturing
Ireland.

  Since June 1999, 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. Through these
acquisitions, we have added facilities in California, Mississippi, France,
Mexico and Thailand. Our August 2000 acquisitions of GSS Array Technology
Public Company Limited (referred to as "GSS Thailand" or "ACT Manufacturing
Thailand") and Bull Electronics Angers S.A. (referred to as "BEA" or "ACT
Manufacturing France"), as well as our July 1999 merger with CMC Industries,
Inc. (referred to as "CMC"), have 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

                                       2
<PAGE>

GSS/Array Technology, Inc. (referred to as "GSS/Array") 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 other select
strategic acquisitions to enhance our growth, operations, geographic presence,
engineering capabilities and service offerings.

  We have developed strong customer relationships with a wide range of
companies in the networking and telecommunications and high-end computer
industries. Our customer base of over 150 customers includes large,
established OEMs such as Alcatel, EMC, Emerson Electric and Nortel Networks,
and emerging providers of next-generation technology products such as
Efficient Networks, Metro-Optix and Unisphere Solutions (Siemens). OEMs in the
networking and telecommunications segment of the electronics industry
represented approximately 69% of our net sales for fiscal 2000, while OEMs in
the high-end computer segment accounted for approximately 18% of our net sales
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, telecommunications and
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 Business and Asset Acquisitions

  On February 9, 2001, we entered into a non-binding agreement in principle
with Fisher-Rosemount Systems, the process management division of Emerson
Electric. As proposed, we will purchase the Leicester, England manufacturing
business of Fisher-Rosemount Systems and we will expand our customer
relationship with Fisher-Rosemount Systems. We expect to close this
transaction in the second quarter of 2001. However, the transaction remains
subject to a definitive agreement and various other conditions. We cannot
assure you that a definitive agreement will be reached or that any or all of
various other conditions will be satisfied. We therefore may not consummate
the arrangement with Fisher-Rosemount Systems on a timely basis or at all.

  On August 31, 2000, we purchased all of the issued shares of BEA. ACT
Manufacturing France provides value-added EMS to OEMs, including complex
printed circuit board and box-build systems assembly as well as associated
end-to-end value-added services. ACT Manufacturing France owns and operates an
approximately 230,000 square foot manufacturing facility in Angers, France. In
the four months ended December 31, 2000, the period since the date of
acquisition, the top three customers of ACT Manufacturing France were EMC,
NetGem and Groupe Bull.

  On August 2, 2000, we purchased 99.02% of the issued shares and outstanding
options of GSS Thailand. ACT Manufacturing Thailand operates a 240,000 square
foot manufacturing facility in Thailand and has a procurement office in
Singapore. The Thai operation provides value-added EMS to OEMs, including the
manufacturing of complex printed circuit board assemblies, electro-mechanical
sub-assembly, and total system assembly and integration. The Singapore
operation serves as an international purchasing operation. In the period from
August 2, 2000, the date of acquisition, through November 24, 2000, their
fiscal year end, the top three customers of ACT Manufacturing Thailand were
Spectrian, Cidco and Rosemount (Emerson). Robert E. Zinn, the former Chief
Executive Officer of GSS Thailand, has become our Executive Vice President of
European and Asian Pacific Operations, and James Menges, the former President
of GSS Thailand, has become our Senior Vice President of Operations for Asia.

  The acquisitions of ACT Manufacturing France and ACT Manufacturing Thailand
significantly increased our scale of operations, enhanced our customer
diversity, expanded our presence in Asia and Europe, increased our
manufacturing capabilities and capacity, and strengthened our managerial and
engineering resources, thereby enabling us to better compete for the business
of larger OEMs in the electronics industry.

  On October 12, 1999, we acquired certain inventory and fixed assets of
GSS/Array located in San Jose, California. GSS/Array was a subsidiary of GSS
Thailand. We also assumed on-going relationships with select

                                       3
<PAGE>

GSS/Array domestic customers and hired select employees. The GSS/Array asset
acquisition expanded our operations in northern California and also
considerably enhanced our advanced engineering capabilities, in particular our
radio frequency capabilities.

  On July 29, 1999, we completed our merger with CMC, a provider of EMS to
OEMs in the telecommunications, computer and electronics industries. As a
result of the merger, CMC became our wholly owned subsidiary. The merger with
CMC has provided us many benefits which enable us to compete more effectively
in the EMS industry, including:

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

  . enhanced customer diversity, reducing our reliance on specific major
    customers and enhancing 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;

  . expanded geographic presence and broadened 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;

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

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

Our 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 total system assembly and
integration, electro-mechanical sub-assembly, printed circuit board assembly,
and cable and harness assembly.

  Total System Assembly and Integration and Electro-Mechanical Sub-
Assembly. 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 activities:

  . custom configuration;

  . documentation;

  . packaging; and

  . order fulfillment.

  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 requiring
increasingly advanced surface mount manufacturing technologies, in addition to
traditional surface mount and pin-through-hole technology.


                                       4
<PAGE>

  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 to permit 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 BGA, 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 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 Mexico, Mississippi and Thailand
facilities, 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.

  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

                                       5
<PAGE>

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
EMS 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 EMS:

  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 complement the customers' in-house
capabilities.

  We believe that our new product introduction capabilities result in close
interactions 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
    manufacturability 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 enhances 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 seek to
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 use an Internet-based procurement tool to source components via the
Internet. Additionally, we use just-in-time inventory management techniques
and in-house stores programs and manage our materials pipelines

                                       6
<PAGE>

and vendor base to provide our customers flexibility to change their volume
requirements within established frameworks.

  Product Diagnostics and Repair. As OEMs outsource their manufacturing needs
and divest their internal manufacturing capabilities, they need EMS 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 the
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.

  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.

Our 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 high quality and 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 with suppliers that consistently deliver the best
technology and quality materials at low total cost on short and 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 EMS 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 attempt 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

                                       7
<PAGE>

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. 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.

Our 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, high-end computer and industrial and
medical equipment. We currently provide services to over 150 customers
worldwide.

  Customers in the networking and telecommunications segment of the
electronics industry represented approximately 69% and 66% of our net sales
for fiscal 2000 and 1999, respectively, while OEMs in the high-end computer
segment accounted for approximately 18% and 25%, respectively, for each of the
same periods.

  For fiscal 2000 and 1999, our five largest customers accounted for
approximately 57% and 52%, respectively, of our net sales. For fiscal 2000,
Efficient Networks, EMC and Nortel Networks accounted for approximately 17%,
14% and 12% of our net sales, respectively. For fiscal 1999, Nortel Networks
and S-3 Incorporated (formerly Diamond Multimedia) accounted for 15% and 13%
of our net sales, respectively. We terminated our business with S-3
Incorporated in March 2000.

  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 EMS provider across their
product lines. Our goal is to be the primary EMS 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.

                                       8
<PAGE>

Sales and Marketing

  We develop close, long-term relationships with our customers by working with
them throughout the development, manufacturing and distribution processes. EMS
providers generally face a long sales cycle and must perform satisfactorily on
a trial basis prior to capturing significant orders from 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 representatives in the United
States, Asia, 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 expect to continue to expand our
direct sales organization and marketing efforts in response to new customer
opportunities, our increased operations and our expanded customer base.

Competition

  The EMS industry is highly competitive. We compete against numerous EMS
providers with global operations, including Benchmark Electronics, Celestica,
Flextronics, Jabil Circuit, Plexus, Sanmina, SCI and Solectron. We also face
competition from a number of EMS 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 EMS 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 EMS
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 in the U.S. 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;

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<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.

  Our operations in France are subject to certain regulatory requirements
relating to environmental compliance, waste management and health and safety
matters. In this respect, ACT Manufacturing France is subject to the law no.
76-663 of 19 July 1976 concerning activities listed for environmental
protection purposes. Our activities on-site are therefore subject to a site
permit which was issued on October 8, 1998 by the local representative of the
French government.

  Our operations in Thailand are also subject to certain governmental
regulations relating to environmental compliance and health and safety
matters. ACT Manufacturing Thailand holds a number of licenses and
certificates issued from the relevant Thai government agencies related to such
regulations.

  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, 2000, we had approximately 8,800 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 labor unions are those employees in our
Mexico operations and a portion of our French employees, although
substantially all of the employees of ACT Manufacturing France are represented
by a workers council. We have never experienced a labor stoppage or strike. We
consider our relations with our employees to be good.

                                      10
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ITEM 2. PROPERTIES

  Our manufacturing facilities are located in eleven facilities containing an
aggregate of approximately 1.5 million square feet. Our significant facilities
are as follows:

<TABLE>
<CAPTION>
                                 Approximate                Lease
   Location                      Square Feet Leased/Owned Expiration          Description
   --------                      ----------- ------------ ----------          -----------
   <C>                           <C>         <C>          <C>        <S>
   Hudson, MA..................     150,000     Leased       2007    Low-Moderate Volume Mfg.
                                                                     High-End Tech. Mfg.
   Hudson, MA (2 buildings)....      56,000     Leased       2003    Cable Assembly,
                                                                     Prototyping & Mfg.
   Marlborough, MA.............     126,000     Leased       2006    Low-Moderate Volume Mfg.
                                                                     Moderate-High Volume
                                                                     Mfg.
   Santa Clara, CA.............      75,000     Leased       2010    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.
   Dublin, Ireland.............      55,000     Leased       2022    Low-Moderate Volume Mfg.
                                                                     Cable Assembly
   Angers, France..............     230,000      Owned       --      Low-Moderate Volume Mfg.
                                                                     High-End Tech. Mfg.
   Thailand....................     240,000      Owned       --      Low-Moderate Volume Mfg.
                                                                     Moderate-High Volume
                                                                     Mfg. High-End Tech. Mfg.
   Hermosillo, Mexico..........     110,000      Owned       --      Moderate-High Volume
                                                                     Mfg.
                                  ---------
   Total.......................   1,454,000
                                  =========
</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, international purchasing offices in Taiwan and Singapore 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
on October 31, 2010. We have signed a lease for a new 200,000 square foot
facility in San Jose, California that is under construction. We plan to move
our existing Santa Clara operations and equipment to this new facility and
expect to begin operating in this new facility in fiscal 2001. We plan on
subletting the Santa Clara facility once we move into our new facility in San
Jose. We have signed a lease for an additional 130,000 square foot building
that is under construction and is adjacent to our facility in Hermosillo,
Mexico. We have also signed a lease for a 100,000 square foot new products
introduction, prototype and manufacturing facility in Dallas, Texas. We expect
to begin operating in both new facilities in fiscal 2001.

  All of our manufacturing facilities have been certified to the ISO 9002
international quality standard except the Corinth, Mississippi facility which
is certified to both the ISO 9001 international quality standard and the TL
9000 international quality standard in the telecommunications industry.

  As of December 31, 2000, we operated 107 surface mount technology lines
located in the Americas (68), Europe (13) and Asia (26).


                                      11
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

  In December 1993, CMC 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. Environmental studies done in fiscal 1999 have
estimated assessment and remediation costs at between $750,000 and $3.5
million. CMC has not been named as a potentially responsible party. However,
Alcatel, Inc., a potentially responsible party named by the Tennessee
Department of Environment and Conservation, 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 have a negative impact on our
financial position and results of operations.

  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 existing 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, 2000 to a vote of security holders of ACT, through the
solicitation of proxies or otherwise.

                                      12
<PAGE>

                                    PART II

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 sales information for
the common stock as reported by Nasdaq for the periods indicated.

<TABLE>
<CAPTION>
                                                                    High   Low
                                                                   ------ ------
<S>                                                                <C>    <C>
2000
  First quarter................................................... $57.38 $29.75
  Second quarter..................................................  56.25  23.13
  Third quarter...................................................  72.25  32.00
  Fourth quarter..................................................  58.75  12.44
1999
  First quarter...................................................  19.25  12.88
  Second quarter..................................................  17.50  11.88
  Third quarter...................................................  28.38  13.50
  Fourth quarter..................................................  39.50  24.50
</TABLE>

  On March 22, 2001, the closing price of our common stock on the Nasdaq
National Market was $12.06 per share. As of March 22, 2001, there were
approximately 78 holders of record of our common stock, which does not include
stockholders for whom shares were held in a nominee or street name.

  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 primary bank credit
facility prohibits the payment of cash dividends on our capital stock. See
note 5 of notes to our consolidated financial statements.

                                      13
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

  The selected consolidated financial data set forth below for the fiscal
years ended December 31, 2000, 1999 and 1998 and the consolidated balance
sheet data as of December 31, 2000 and 1999 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, 1997 and 1996 and the consolidated balance sheet data
as of December 31, 1998, 1997 and 1996 are derived from our audited
consolidated financial statements that are not included in this Annual Report
on Form 10-K. The fiscal 2000 consolidated statement of operations data
includes four months of operations of ACT Manufacturing Thailand and ACT
Manufacturing France which were both acquired in August 2000. The consolidated
balance sheet data as of December 31, 2000 includes ACT Manufacturing Thailand
and ACT Manufacturing France. 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,
                              -------------------------------------------------
                                 2000      1999   1998(1)(2) 1997(1)   1996(1)
                              ---------- -------- ---------- --------  --------
                                   (in thousands, except per share data)
<S>                           <C>        <C>      <C>        <C>       <C>
Consolidated Statement of
 Operations Data:
  Net sales.................. $1,370,597 $696,282  $592,484  $479,139  $390,611
  Cost of goods sold.........  1,254,077  641,856   556,339   454,203   351,485
                              ---------- --------  --------  --------  --------
    Gross profit.............    116,520   54,426    36,145    24,936    39,126
  Selling, general and
   administrative expenses...     46,373   28,945    26,931    24,225    18,268
  Amortization of goodwill...      5,675      591       452       291       --
  Restructuring costs........        --       --        --        --        792
  Merger costs (3)...........        --     5,601       --        --        --
                              ---------- --------  --------  --------  --------
    Operating income.........     64,472   19,289     8,762       420    20,066
  Interest and other expense,
   net.......................     17,456    5,262     3,625     4,056     2,936
                              ---------- --------  --------  --------  --------
    Income (loss) before
     provision for income
     taxes...................     47,016   14,027     5,137   (3,636)    17,130
  Provision (benefit) for
   income taxes..............     18,077    7,793     2,044    (1,235)    6,868
                              ---------- --------  --------  --------  --------
    Net income (loss)........ $   28,939 $  6,234  $  3,093  $ (2,401) $ 10,262
                              ========== ========  ========  ========  ========
Net income (loss) per common
 share:
  Basic...................... $     1.72 $   0.47  $   0.24  $  (0.19) $   0.86
  Diluted.................... $     1.62 $   0.45  $   0.24  $  (0.19) $   0.84
Weighted-average shares
 outstanding:
  Basic......................     16,808   13,265    12,665    12,330    11,880
  Diluted....................     17,885   13,916    12,976    12,330    12,237

<CAPTION>
                                             As of December 31,
                              -------------------------------------------------
                                 2000      1999   1998(1)(2) 1997(1)   1996(1)
                              ---------- -------- ---------- --------  --------
                                               (in thousands)
<S>                           <C>        <C>      <C>        <C>       <C>
Consolidated Balance Sheet
 Data:
  Working capital............ $  350,857 $170,420  $ 86,059  $ 55,894  $ 92,005
  Total assets...............  1,067,803  402,326   238,294   208,573   175,029
  Long-term debt, less
   current portion...........    358,271   49,332    42,014     4,817    34,966
  Total debt (4).............    388,174   53,361    62,604    59,938    43,496
  Total stockholders'
   equity....................    220,244  178,129    91,460    84,103    78,234
</TABLE>
--------
(1)  Prior to our merger with CMC on July 29, 1999, CMC prepared its
     consolidated financial statements on the basis of a fiscal year ending
     July 31. The consolidated statement of operations data for each of the
     three years in the period ended December 31, 1998 (referred to as
     "fiscal" 1998, 1997 and 1996) reflect such

                                      14
<PAGE>

   information for ACT for the years then ended combined with such information
   for CMC for the years ended July 31, 1998, 1997 and 1996. The consolidated
   balance sheet data as of December 31, 1998, 1997 and 1996 reflects such
   information of ACT as of those dates combined with such information of CMC
   as of July 31, 1998, 1997 and 1996. The merger with CMC has been accounted
   for as a pooling of interests as described in note 1 to our consolidated
   financial statements appearing in this Annual Report on Form 10-K.
(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 is reported
    separately, as follows:

<TABLE>
   <S>                                                              <C>
   Condensed Consolidated Statement of Operations Data (in
    thousands):
     Net sales..................................................... $122,423
     Cost of sales.................................................  119,633
                                                                    --------
       Gross profit................................................    2,790
     Selling, general and administrative expenses..................    5,410
                                                                    --------
       Loss from operations........................................   (2,620)
     Interest expense..............................................      691
                                                                    --------
       Loss before taxes...........................................   (3,311)
     Income tax benefit............................................   (1,239)
                                                                    --------
       Net loss.................................................... $ (2,072)
                                                                    ========
</TABLE>

(3) 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.

(4) Total debt consists of the current and long-term portions of bank debt,
    capital leases and convertible subordinated notes.

                                      15
<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 "Cautionary Statements."

Overview

  We are a leading global provider of value-added EMS to OEMs in the
networking and telecommunications, high-end computer and industrial and
medical equipment markets. We provide OEMs with total system assembly and
integration, electro-mechanical sub-assembly, complex printed circuit board
assembly, primarily utilizing advanced surface mount technology, and
mechanical and molded cable and harness assembly. We target and have developed
a particular expertise in serving both established and emerging 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
processes 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.

  Several customers have recently indicated the possibility of an economic
downturn in their industries, including the networking and telecommunications
market. Since customers in the networking and telecommunications segment of
the electronics industry represent a large portion of our net sales,
developments adverse to this segment of the industry could materially and
negatively impact us. 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.

  We currently manufacture at eleven facilities having an aggregate of
approximately 1.5 million square feet. Of our leased manufacturing facilities,
four 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, a 240,000 square foot manufacturing facility in Thailand, and an
approximately 230,000 square foot manufacturing facility in Angers, France.
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 both the ISO 9001 international quality standard and the
TL 9000 international quality standard in the telecommunications industry. We
have signed a lease for a new 200,000 square foot facility in San Jose,
California that is under construction. We plan to move our existing Santa
Clara operations and equipment to this new facility. We expect to begin
operating in this new facility in fiscal 2001. We have signed a lease for an
additional 130,000 square foot building that is under construction and is
adjacent to our facility in Hermosillo, Mexico. We have also signed a lease
for a 100,000 square foot new products introduction, prototype and
manufacturing facility in Dallas, Texas. We expect to begin operating in both
new facilities in fiscal 2001. Our facilities contained 107 surface mount
technology lines as of December 31, 2000.

  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

                                      16
<PAGE>

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.

Recent Business and Asset Acquisitions

  On August 31, 2000, we purchased all of the issued shares of BEA for a
purchase price of approximately $56.6 million, plus a working capital
adjustment based on the August 31, 2000 closing balance sheet of BEA of
approximately $43.2 million. As of December 31, 2000, approximately $34.5
million of the working capital adjustment had been paid, while the remaining
$8.7 million was paid in the first quarter of fiscal 2001. ACT Manufacturing
France provides value-added EMS to OEMs, including complex printed circuit
board and box-build systems assembly as well as associated end-to-end value-
added services. ACT Manufacturing France owns and operates an approximately
230,000 square foot manufacturing facility in Angers, France. In the four
months ended December 31, 2000, the period since the date of acquisition, the
top three customers of ACT Manufacturing France were EMC, NetGem and Groupe
Bull.

  On August 2, 2000, we purchased 99.02% of the issued shares and outstanding
options of GSS Thailand for a purchase price of approximately $86.7 million.
ACT Manufacturing Thailand operates a 240,000 square foot manufacturing
facility in Thailand and has a procurement office in Singapore. The Thai
operation provides value-added EMS to OEMs, including the manufacturing of
complex printed circuit board assemblies, electro-mechanical sub-assembly, and
total system assembly and integration. In the period from August 2, 2000, the
date of acquisition, through November 24, 2000, their fiscal year end, the top
three customers of ACT Manufacturing Thailand were Spectrian, Cidco and
Rosemount (Emerson).

  The GSS Thailand and BEA acquisitions have both been accounted for under the
purchase method of accounting, and accordingly, the results of operations of
ACT Manufacturing Thailand and ACT Manufacturing France have been included in
our consolidated financial statements from the respective date of acquisition.
ACT Manufacturing Thailand will maintain its November 24 fiscal year end.
Accordingly, approximately four months (August-November 2000) of its
operations are included in our fiscal 2000 actual results. ACT Manufacturing
France's fiscal year end is December 31. Accordingly, four months (September-
December 2000) of its operations are included in our fiscal 2000 actual
results. The respective purchase prices have been allocated to the net assets
acquired based upon their fair values. For both the ACT Manufacturing Thailand
and ACT Manufacturing France acquisitions, the purchase price exceeded the
respective fair value of the assets acquired and liabilities assumed resulting
in goodwill being recorded. Such goodwill is being amortized over its
estimated useful life of ten years.

  On October 12, 1999, we acquired certain inventory and fixed assets of
GSS/Array located in San Jose, California, for approximately $12.9 million in
cash and the assumption of $0.6 million in liabilities. The purchase of these
assets did not constitute the acquisition of a business. GSS/Array 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, a provider of EMS 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.

  Prior to the merger, CMC prepared its consolidated financial statements on
the basis of a fiscal year ending July 31. The consolidated statements of
income and cash flows for the year ended December 31, 1998 (referred

                                      17
<PAGE>

to as "fiscal" 1998) reflect the results of operations and cash flows for ACT
for the year then ended combined with the results of operations and cash flows
for CMC for the year ended July 31, 1998. The consolidated statements of
income and cash flows for the years ended December 31, 2000 and 1999 and the
consolidated balance sheets as of December 31, 2000 and 1999 reflect the
results of operations, cash flows and financial position of ACT and CMC for
the periods 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 as a line item within the consolidated statement of stockholders'
equity.

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,
                                           ----------------------------------
                                              2000        1999        1998
                                           ----------  ----------  ----------
<S>                                        <C>         <C>         <C>
Net sales.................................      100.0%      100.0%      100.0%
Cost of goods sold........................       91.5        92.2        93.9
                                           ----------  ----------  ----------
  Gross profit............................        8.5         7.8         6.1
Selling, general and administrative
 expenses.................................        3.4         4.1         4.5
Amortization of goodwill..................        0.4         0.1         0.1
Merger costs..............................        --          0.8         --
                                           ----------  ----------  ----------
  Operating income........................        4.7         2.8         1.5
Interest and other expense, net...........        1.3         0.8         0.6
                                           ----------  ----------  ----------
  Income before provision for income
   taxes..................................        3.4         2.0         0.9
Provision for income taxes................        1.3         1.1         0.4
                                           ----------  ----------  ----------
  Net income..............................        2.1%        0.9%        0.5%
                                           ==========  ==========  ==========
</TABLE>

  We provide EMS to customers in the networking and telecommunications, high-
end computer and industrial and medical equipment markets. The percentage of
net sales by market for fiscal 2000, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                              Percentage of Net Sales
                                          ------------------------------------
                                           Fiscal Year Ended December 31,
                                          ------------------------------------
Market                                       2000         1999         1998
------                                    ----------   ----------   ----------
<S>                                       <C>          <C>          <C>
Networking and Telecommunications........         69%          66%          58%
High-End Computer........................         18           25           32
Industrial and Medical...................         13            9           10
                                          ----------   ----------   ----------
                                                 100%         100%         100%
                                          ==========   ==========   ==========
</TABLE>

Fiscal 2000 Compared to Fiscal 1999

  Our net sales increased $674.3 million or 96.8% to $1.37 billion in fiscal
2000 compared with $696.3 million in fiscal 1999. The increase was
attributable to a net expansion of $393.2 million in our pre-existing
operations, primarily from our North American operations, the inclusion of ACT
Manufacturing France net sales of $196.3 million for four months of operations
following its acquisition on August 31, 2000, and the inclusion of ACT
Manufacturing Thailand net sales of $84.8 million for approximately four
months of operations following its acquisition on August 2, 2000.

  Net sales in the systems and printed circuit board assembly service
offerings (including value-added services such as new product introduction,
engineering, test, repair and order fulfillment) as a percentage of net sales
was approximately 97% in fiscal 2000 compared to approximately 95% in fiscal
1999. Net sales in the cable and

                                      18
<PAGE>

harness assembly service offering accounted for approximately 3% of net sales
in fiscal 2000 compared to approximately 5% in fiscal 1999.

  Gross profit increased $62.1 million or 114.1% to $116.5 million in fiscal
2000 compared with $54.4 million in fiscal 1999. Gross profit as a percentage
of net sales (or gross margin) increased to 8.5% in fiscal 2000 from 7.8% in
fiscal 1999. In fiscal 2000, gross margin was 8.2% for North American
operations and 9.5% for international operations. Our gross margin increase
was primarily attributable to the growth in our sales volume, an increase in
sales with higher margins and higher margins at our ACT Manufacturing Thailand
and ACT Manufacturing France operations.

  Selling, general and administrative (or SG&A) expenses increased $17.4
million or 60.2% to $46.4 million, or 3.4% of net sales, in fiscal 2000
compared with $28.9 million, or 4.1% of net sales, in fiscal 1999. Although
SG&A expenses decreased as a percentage of net sales while sales volume
increased, these expenses increased in absolute dollars primarily due to the
inclusion of expenses of ACT Manufacturing France and ACT Manufacturing
Thailand, additional spending in corporate infrastructure to support our
global operations and increased personnel and professional costs reflecting
our expanded operations.

  Amortization of goodwill increased $5.1 million to $5.7 million in fiscal
2000 compared to $0.6 million in fiscal 1999. The increase is due to the
additional goodwill amortization resulting primarily from the purchases of ACT
Manufacturing Thailand and ACT Manufacturing France in fiscal 2000 and, to a
lesser extent, a full year of amortization on the GSS/Array acquisition.

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

  Operating income increased $45.2 million to $64.5 million, or 4.7% of net
sales, in fiscal 2000 compared with operating income of $19.3 million, or 2.8%
of net sales, in fiscal 1999 as a result of the above factors.

  Interest and other expense, net increased 231.7% to $17.5 million in fiscal
2000 compared to $5.3 million in fiscal 1999. This increase is due to the
issuance of $100.0 million in convertible subordinated notes in the second
quarter of fiscal 2000 in order to execute the ACT Manufacturing Thailand
acquisition, resulting in interest expense of $5.4 million, which includes
amortization of debt issue costs, offset in part by $2.5 million of interest
income earned on the reinvestment of the proceeds we received in connection
with the issuance of these notes. In addition, a $75.0 million term loan was
drawn in the third quarter of fiscal 2000 in order to finance the acquisition
of ACT Manufacturing France, which resulted in interest expense of $2.5
million. We also incurred $10.1 million of interest expense on our revolving
credit facility in fiscal 2000 compared with $3.8 million in fiscal 1999.

  We recorded a provision for income taxes of $18.1 million and $7.8 million
in fiscal 2000 and 1999, respectively. The effective income tax rate was 38%
in fiscal 2000 and 56% in fiscal 1999. The difference between the fiscal 2000
and fiscal 1999 effective income tax rates was primarily attributable to the
effects of non-deductible merger costs incurred in fiscal 1999 and, to a
lesser extent, the inclusion for a portion of fiscal 2000 of ACT Manufacturing
Thailand which is not subject to Thai income tax due to a "tax holiday" as
well as lower effective state tax rates. In Thailand, we currently operate
under a "tax holiday" that will expire in 2002 unless it is renewed. Upon the
expiration of the "tax holiday," we will become subject to taxation at a rate
of 30% per annum in Thailand. The rate at which income taxes will be provided
in future periods will depend on taxable income by tax jurisdiction. We have
not provided income tax expense on ACT Manufacturing Thailand's earnings in
fiscal 2000 as we consider those earnings permanently invested.

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

                                      19
<PAGE>

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 our systems and printed circuit board assembly service
offerings, including value-added services, as a percentage of net sales was
approximately 95% and 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 $2.0 million or 7.5%
to $28.9 million compared with $26.9 million for fiscal 1998. SG&A expenses as
a percentage of net sales decreased to 4.1% in fiscal 1999 from 4.5% 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
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. Amortization of goodwill amounted
to $0.6 million in fiscal 1999 and $0.5 million in 1998.

  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 56% in
fiscal 1999 and 40% in fiscal 1998. The increase in the fiscal 1999 effective
income tax rate was primarily attributable to the effects of non-deductible
merger costs.

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
$2.8 million on net sales of $122.4 million. The gross margin of 2.3% 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.

                                      20
<PAGE>

Quarterly Results of Operations

  The following table sets forth, for the periods presented, certain data from
our consolidated statements of income. In the opinion of our management, the
unaudited quarterly consolidated statement of income data have been prepared
on substantially the same basis as our audited consolidated financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information
for the periods presented. This information should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in
this Annual Report on Form 10-K. The operating results in any quarter are not
necessarily indicative of the results that may be expected for any future
period.

  The consolidated operating results for the three-month period ended
September 30, 2000 include the results of operations for ACT Manufacturing
Thailand for the period August 2, the date of its acquisition, through August
24, 2000, the end of the third quarter of its fiscal 2000, and the results of
operations for ACT Manufacturing France for the one month period ended
September 30, 2000. The consolidated operating results for the three-month
period ended December 31, 2000 include the results of operations for ACT
Manufacturing France for the three months then ended and the results of
operations for ACT Manufacturing Thailand for the period August 25 through
November 24, 2000, its fiscal year end.

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

<TABLE>
<CAPTION>
                                                  Fiscal 2000 Quarters
                                           ------------------------------------
                                            First    Second   Third     Fourth
                                           -------- -------- --------  --------
<S>                                        <C>      <C>      <C>       <C>
Net sales................................. $229,088 $252,970 $368,515  $520,024
Gross profit..............................   19,999   22,691   33,312    40,518
Net income................................ $  6,150 $  7,028 $  8,200  $  7,561
                                           ======== ======== ========  ========
Net income per share:
  Basic................................... $   0.37 $   0.42 $   0.48  $   0.44
  Diluted................................. $   0.35 $   0.40 $   0.45  $   0.43

<CAPTION>
                                                  Fiscal 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
                                           ======== ======== ========  ========
Net income (loss) per share:
  Basic................................... $   0.14 $   0.08 $  (0.13) $   0.35
  Diluted................................. $   0.14 $   0.08 $  (0.13) $   0.33
</TABLE>

  Our third and fourth quarter fiscal 2000 net income reflects amortization of
goodwill related to the acquisitions of ACT Manufacturing France and ACT
Manufacturing Thailand of $1.2 million and $3.5 million, respectively. Our
third quarter fiscal 1999 net loss includes $5.6 million of non-tax deductible
merger costs incurred in connection with our merger with CMC.

Liquidity and Capital Resources

  We had working capital of $350.9 million at December 31, 2000 compared with
$170.4 million at December 31, 1999. Operating activities used $62.2 million
of cash in fiscal 2000 compared with cash used for operations of $48.9 million
in fiscal 1999. The primary uses of cash for operating activities in fiscal
2000 were increases in both inventory and accounts receivable. Inventory
increased $229.6 million to $401.3 million at December 31, 2000 from $171.8
million at December 31, 1999, of which $137.0 million is related to the
acquisitions of ACT Manufacturing France and ACT Manufacturing Thailand and
the remainder of which is primarily the result of supply chain conditions in
the electronics component market. Accounts receivable

                                      21
<PAGE>

increased $194.4 million to $355.3 million at December 31, 2000 from $160.8
million at December 31, 1999, of which $92.4 million is related to the
acquisitions of ACT Manufacturing France and ACT Manufacturing Thailand and
the remainder of which is due to our overall net sales growth, and
specifically to a large volume of sales occurring during the latter part of
the fourth quarter.

  These cash uses were offset, in part, by an increase in accounts payable, a
$50.0 million advance from a major customer and $28.9 million in net income
from operations for fiscal 2000. Accounts payable increased $183.6 million to
$337.4 million at December 31, 2000 from $153.8 million at December 31, 1999,
of which $127.3 million is related to the acquisitions of ACT Manufacturing
France and ACT Manufacturing Thailand and the remainder of which is reflective
of our inventory build-up attributable to revenue growth. In the second fiscal
quarter of 2000, a major customer advanced us $50.0 million to strengthen our
materials procurement capabilities and enhance the services we provide to this
customer. This advance is unsecured and non-interest bearing. The advance will
be repaid primarily through the offset against future invoices billed to the
customer beginning after April 1, 2001.

  On June 29, 2000, we revised our senior credit arrangements with a syndicate
of financial institutions led by The Chase Manhattan Bank, as administrative
agent, to increase our previous credit facilities. Our credit facility with
these lenders is secured by substantially all of our assets and certain of our
subsidiaries' assets. The Credit Agreement provides that the lenders will make
available to us up to $150.0 million of revolving loans (up to $20.0 million
of which we may use in a variety of currencies, and the balance of which we
may use in U.S. dollars) and up to $100.0 million of term loans ($75.0 million
of which we used to acquire ACT Manufacturing France and $25.0 million of
which we used to refinance a portion of the debt of ACT Manufacturing
Thailand). On December 27, 2000, we entered into an amendment to our Credit
Agreement, which makes available additional five-year term loans in the
aggregate amount of up to $100.0 million, subject to certain conditions. If
drawn, the term loan provides for repayment of substantially all of the
principal amount on June 28, 2006.

  At December 31, 2000, $140.0 million of the Credit Agreement was utilized
for revolving loans, $1.7 million was utilized for letters of credit and an
additional $8.3 million was available for use based upon the applicable
borrowing base. At December 31, 2000, $90.0 million of the revolving loans was
at an interest rate of 9.22% and the remaining $50.0 million was at an
interest rate of 9.17%. At December 31, 2000, $97.0 million was outstanding on
the initial term loan, of which $72.8 million was at an interest rate of 9.14%
and the remaining $24.2 million was at an interest rate of 11.0%.

  In April and May 2000, we received net proceeds of approximately $95.4
million from the sale of 7% convertible subordinated notes due April 15, 2007
in a private placement. A shelf registration statement was subsequently filed
in connection with these convertible subordinated notes. Interest payments are
due on these convertible subordinated notes on April 15 and October 15 of each
year. The proceeds of this convertible debt offering were used to fund the
acquisition of ACT Manufacturing Thailand. Prior to the acquisition, the net
proceeds of this offering were invested in short-term, interest-bearing,
investment grade securities. We recorded approximately $5.4 million in
interest expense incurred on the notes in fiscal 2000, which includes
amortization of debt issue costs, which was offset in part by $2.5 million of
interest income earned on the reinvestment of the proceeds from the
convertible subordinated notes during the same period.

  On August 2, 2000, we purchased 99.02% of the issued shares and outstanding
options of GSS Thailand for approximately $86.7 million. On November 24, 2000,
ACT Manufacturing Thailand had working capital credit facilities with various
financial institutions aggregating $34.1 million at interest rates ranging
from LIBOR plus 3% to LIBOR plus 4%. At its fiscal 2000 year end, $30.2
million was outstanding at interest rates ranging from 9.2% to 10.8%.

  ACT Manufacturing Thailand also has a loan outstanding denominated in Thai
baht. At its fiscal 2000 year end, the outstanding balance was baht 150.8
million ($3.6 million). The Thai baht loan requires monthly principal payments
of baht 4.6 million ($104,900) with the final payment due July 2003. Interest
on the Thai baht loan is payable monthly at a floating rate which equaled
7.75% at its fiscal 2000 year end.


                                      22
<PAGE>

  The ACT Manufacturing Thailand credit facilities and baht loan are secured
by a pledge of ACT Manufacturing Thailand's fixed deposits and by a mortgage
of its land, buildings, machinery and equipment. ACT Manufacturing Thailand's
debt to equity ratio exceeded that permitted under the working capital credit
facilities above, as well as the Thai baht loan above; however, the lenders
have given ACT Manufacturing Thailand a waiver of this covenant default
through March 31, 2002.

  ACT Manufacturing Thailand also had a loan outstanding in the amount of
$10.5 million throughout most of fiscal 2000 at an interest rate of LIBOR plus
3%. This loan was repaid in full in December 2000.

  We are currently in discussions with the financial institutions providing
credit facilities to ACT Manufacturing Thailand to renegotiate or refinance
the Thailand credit facilities.

  On August 31, 2000, we purchased all of the issued shares of BEA for
approximately $56.6 million, plus a working capital adjustment of
approximately $43.2 million based on the August 31, 2000 closing balance sheet
of BEA. As of December 31, 2000, approximately $34.5 million of the working
capital adjustment had been paid, while the remaining $8.7 million was paid in
the first quarter of fiscal 2001.

  On November 2, 2000, ACT Manufacturing France entered into a new credit
agreement with a syndicate of financial institutions led by Societe Generale.
The credit agreement provides that the lenders will make available to ACT
Manufacturing France up to approximately $16.2 million of revolving loans. The
credit agreement is unsecured and interest is payable monthly at an interest
rate based on the rates in the Eurocurrency market. As of December 31, 2000,
the outstanding balance was approximately $10.9 million and was at an interest
rate of 7.5%. The same credit agreement provides ACT Manufacturing France with
a credit line in the amount of approximately $9.8 million for sales of
accounts receivable, none of which was outstanding at December 31, 2000. In
addition, ACT Manufacturing France has a capital lease line of approximately
$7.4 million, of which approximately $3.3 million was utilized at December 31,
2000.

  We sold 575,000 shares of common stock of eOn Communications (formerly
Cortelco Systems), a related party, for net proceeds of approximately $6.4
million in the first quarter of 2000. We recognized a net gain on the eOn
investment of approximately $0.6 million, net of investment writedown, in
fiscal 2000.

  Capital expenditures of approximately $9.4 million in fiscal 2000 were
primarily for the acquisition of equipment and leasehold improvements related
to operations.

  We lease manufacturing facilities and certain equipment and computer
software used in our manufacturing operations under capital and operating
lease agreements that expire through 2007. As of December 31, 2000, we had
equipment lease lines of approximately $19.3 million available under capital
and operating leases for purchases of manufacturing equipment, computer
hardware and software and furniture. We have operating lease commitments of
$33.9 million, $30.5 million, $27.8 million, $19.9 million and $15.2 million
for fiscal 2001, 2002, 2003, 2004 and 2005, respectively.

  ACT Manufacturing France uses derivative financial instruments to hedge
certain non-functional currency-denominated assets and liabilities that are
primarily short-term trade accounts payable and receivable balances.
Derivative financial instruments are also used to hedge unrecognized but
firmly committed foreign-currency-denominated revenues and expenses. In all
cases, the maturities of hedging instruments does not usually exceed three to
four months. These instruments may involve elements of credit and market risk
in excess of the amounts recognized in the consolidated financial statements.
We monitor our positions and the credit quality of counterparties, consisting
primarily of major financial institutions, and do not anticipate
nonperformance by any counterparty.

  As discussed in Recently Issued Financial Accounting Standards below,
effective January 1, 2001, we adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities." To the extent we enter into hedges that are effective, changes in
derivative fair values

                                      23
<PAGE>

will either be recognized in earnings as offsets to the changes in fair value
of related hedged assets, liabilities and unrecognized firmly committed
transactions (fair value hedging relationships), or for forecasted
transactions, deferred and recorded as a component of other accumulated
comprehensive income until the hedged transactions occur and are recognized in
earnings (cash flow hedging relationships). Amounts credited or charged to
other accumulated comprehensive income are expected to be reclassified to
earnings when the transactions occur and affect earnings.

  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 as well as to
finance working capital requirements. 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 financings.

Recently Issued Financial Accounting Standards

  As discussed in note 1 to our consolidated financial statements, in June
1998, the Financial Accounting Standards Board (the FASB) issued SFAS No. 133,
subsequently amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 requires
us to record all derivatives on the balance sheet at fair value. To the extent
that the hedge is effective, changes in derivative fair values will either be
recognized in earnings as offsets to the changes in fair value of related
hedged assets, liabilities and unrecognized firmly committed transactions
(fair value hedging relationships), or for forecasted transactions, deferred
and recorded as a component of other accumulated comprehensive income until
the hedged transactions occur and are recognized in earnings (cash flow
hedging relationships). There may be an impact on earnings to the extent that
the hedging relationship is not 100% effective. If hedges do not qualify for
hedge accounting under SFAS No. 133 or if we elect not to designate a
derivative as a hedge under SFAS No. 133, then the derivative fair value
changes are recognized directly in earnings.

  We have adopted SFAS No. 133 and the corresponding amendments under SFAS No.
138 on January 1, 2001, as required. SFAS No. 133, as amended, is not expected
to have a material impact on our consolidated results of operations, financial
position or cash flows.

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements.
SAB No. 101 requires companies to report any changes in revenue recognition as
a cumulative effect from a change in accounting principles at the time of
adoption. We adopted SAB No. 101 on October 1, 2000, as required, and have
concluded that SAB No. 101 did not have any effect on our revenue recognition
policies and practices.

  In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS
No. 140 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. Under SFAS
No. 140, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. SFAS No. 140 also provides
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS No. 140 is effective for certain
transactions and certain disclosures in the fiscal year ending December 31,
2001. We are currently evaluating the impact of SFAS No. 140 on our financial
statements and related disclosures, but as of December 31, 2000, did not
expect that any impact would be material.


                                      24
<PAGE>

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 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 69% of
our net sales in fiscal 2000, 66% in fiscal 1999 and 58% in fiscal 1998.
Several customers have recently indicated the possibility of an economic
downturn in their industries, including the networking and telecommunications
market. 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 57% and 52%
of our net sales for fiscal 2000 and 1999, respectively.

  For fiscal 2000, Efficient Networks, EMC and Nortel Networks accounted for
approximately 17%, 14% and 12% of our net sales, respectively. For fiscal
1999, Nortel Networks and S-3 Incorporated (formerly Diamond Multimedia)
accounted for 15% and 13% of our net sales, respectively. 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

                                      25
<PAGE>

at all. In particular, we terminated our business with S-3 Incorporated in
March 2000, and we terminated our business with Ascend, which was acquired by
Lucent Technologies, in the fourth quarter of fiscal 1999. 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 customer;

  . 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.

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 EMS providers
    used or to manufacture their products internally;

  . variation in demand for customer products; and

  . cyclical downturns in customers' industries.

  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. 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 EMS industry is highly competitive. We compete against numerous EMS
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
EMS 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;


                                      26
<PAGE>

  . 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.

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. Raw materials
or component shortages can result in shipping delays and 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 have operations in France, Ireland, Mexico and Thailand and procurement
offices in Taiwan and Singapore. We expect to 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 regulatory requirements;

  . higher taxation;

  . currency conversion limitations;

  . restrictions on the transfer of funds;


                                      27
<PAGE>

  . the imposition of or increase in tariffs and duties; 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. In Thailand,
we currently operate under a "tax holiday" that will expire in 2002 unless it
is renewed. Upon the expiration of the "tax holiday," we will become subject
to taxation at a rate of 30% per annum in Thailand.

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, Executive Vice President of
Operations for the Americas, Robert E. Zinn, Executive Vice President of
European and Asian Pacific Operations and James Menges, Senior Vice President
of Operations for Asia, 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. We are currently
searching for a chief financial officer. Our continued growth will also
require us to attract, motivate, train and retain additional skilled and
experienced managerial, manufacturing, financial, 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.


                                      28
<PAGE>

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 manufactured 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.

We anticipate that our net sales and operating results will fluctuate which
could affect our operating results in a given quarter.

  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 aggregate 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.

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

  In December 1993, CMC 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. Environmental studies done in fiscal 1999 have estimated
assessment and remediation costs at between $750,000 and $3.5 million. CMC has
not been named as a potentially responsible party. However, Alcatel, Inc., a
potentially responsible party named by the Tennessee Department of Environment
and Conservation, 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

                                      29
<PAGE>

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 have a negative
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 own approximately 30% 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.

          Risks Related to our Recent Acquisitions and our Expansion

We may not realize the expected benefits from the ACT Manufacturing Thailand
and ACT Manufacturing France acquisitions and their integration will divert
management's attention from our day-to-day operations.

  We completed the acquisitions of ACT Manufacturing Thailand and ACT
Manufacturing France with the expectation that the acquisitions will result in
certain benefits, including, without limitation:

  . cost savings related to redundant activities;

  . increased scale of operations and operating efficiencies;

  . revenue enhancements as well as geographic and customer diversity;

  . management and engineering enhancements; and

  . other synergies.

  We may not realize any of the anticipated benefits of the acquisitions.
Integrating the acquired operations and personnel is a complex and difficult
process and achieving the benefits of the acquisitions will depend in large
part upon the successful integration of the acquired businesses in an
efficient and timely manner. The diversion of the attention of our management
and any difficulties and related costs encountered in the process of combining
the operations of ACT, ACT Manufacturing France and ACT Manufacturing Thailand
could cause the disruption of, or a loss of momentum in, our activities. The
inability to successfully integrate the operations and personnel of ACT
Manufacturing Thailand and ACT Manufacturing France, or any significant delay
in achieving integration, could have a material adverse effect on our
business, financial condition and results of operations.

The ACT Manufacturing Thailand and ACT Manufacturing France acquisitions may
result in loss of customers, employees and suppliers.

  The completion of the acquisitions could cause certain of our or ACT
Manufacturing Thailand's or ACT Manufacturing France's customers to either
seek alternative sources of product supply and service, or delay or change
orders for products or services due to uncertainty over the integration of ACT
Manufacturing Thailand and ACT Manufacturing France. As a result, we may
experience some customer attrition. For the same reason, we may also see
certain suppliers ending their relationship with us. Difficulties in combining
operations, including the uncertainty related to organizational changes, could
also negatively affect employee morale and result in the loss of key employees
as a result of the acquisitions. Any steps taken by us to counter such
increased customer, supplier and employee attrition may not be effective.
Failure by us to control attrition could have a material adverse effect on our
business and results of operations.


                                      30
<PAGE>

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

  In light of the consolidation trend in our industry, we intend to pursue
selective acquisitions of additional facilities, assets, businesses or
companies. 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 companies, facilities, assets or businesses that we seek
to acquire, including the Leicester, England manufacturing business of Fisher-
Rosemount Systems. 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;

  . the incurrence of significant costs and expenses; or

  . the potentially dilutive impact on our earnings per share.

  Acquisition transactions also involve numerous business risks, including:

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

  . difficulties in managing geographically dispersed and international
    operations;

  . difficulties in assimilating diverse financial reporting and management
    information systems;

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

  . the potential disruption of our business; and

  . the potential loss of key employees, customers or suppliers.

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. As our growth continues, we
will have to review and revise our security procedures and operating and
financial controls both domestically and internationally. We will have to
continue to invest in both our manufacturing infrastructure to expand capacity
and our operational, financial, and management information systems. We are
currently in the process of converting to a new global enterprise resource
planning system, which we currently plan to implement in all facilities, both
domestic and international, by the end of fiscal 2002. If we fail to
adequately manage the conversion to the new system, our operating results and
financial condition could be harmed. In addition, 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 acquired
operations in France and Thailand in August 2000, began operations in an
additional facility in Massachusetts in January 2000 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 fiscal 2001. We have
signed a lease for an additional 130,000 square foot building that is under
construction and is adjacent to our facility in Mexico. We have also signed a
lease for a 100,000 square foot new products introduction, prototype and
manufacturing facility in Dallas, Texas. We expect to begin operating in both
new

                                      31
<PAGE>

facilities in fiscal 2001. We may not be able to find additional suitable
facilities on a timely basis or on terms satisfactory to us. Moreover,
expanding existing and establishing new 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 and new facilities, 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 and new facilities;

  . 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 or new facility.

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 new facility or the expansion.

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 EMS
industry. Our future success depends in part 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;

  . 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. Furthermore, any
additional capital may have terms and conditions that adversely affect our
business, such as financial or operating covenants.

The significant amount of our indebtedness after the acquisitions of ACT
Manufacturing Thailand and ACT Manufacturing France could adversely affect our
financial health.

  Our total senior debt as of December 31, 2000 was approximately $288.2
million. As of December 31, 2000, we also had $100.0 million of convertible
subordinated notes outstanding. Our leverage could have important adverse
consequences. For example, it could:

  . make it more difficult for us to satisfy our obligations with respect to
    the convertible subordinated notes or our other indebtedness;

  . increase our vulnerability to general adverse economic and industry
    conditions;

  . limit our ability to fund future working capital, capital expenditures,
    acquisitions and other general corporate requirements;

  . limit our flexibility in planning for, or reacting to, changes in our
    business and industry; and

  . limit our ability to borrow additional funds.

Any additional borrowings would further increase the amount of our leverage
and the associated risks.

                                      32
<PAGE>

We will require a significant amount of cash to service our indebtedness.

  Our ability to service our indebtedness and to fund planned capital
expenditures, development and operating costs will depend on our ability to
generate cash in the future through sales of our services. Our available
liquidity may not be sufficient to service our indebtedness, including the
convertible subordinated notes, or to fund our other cash needs. We may need
to refinance all or a portion of our indebtedness, including the convertible
subordinated notes, on or before maturity but we may not be able to do so on
satisfactory terms, or at all. Without sufficient funds to service our
indebtedness, we would have serious liquidity constraints and would need to
seek additional financing from other sources, which may not be available on
satisfactory terms.

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 January 1, 1999 through March 22, 2001, our stock price has
fluctuated between a low of $10.44 per share and a high of $72.25 per share.
On March 22, 2001, the closing price for our common stock was $12.06 per
share. 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 sales forecasts or results by our
    customers;

  . 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.

  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, our articles of organization and by-laws and
the indenture related to our convertible subordinated notes 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;

  . 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; and

  . provide for change of control payments.

                                      33
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  We have a $150.0 million revolving loan which bears interest at variable
interest rates. We also have a $97.0 million term loan with an interest rate
based on either the Prime Rate or the Eurocurrency Rate. The effective
interest rate that the lenders will charge us under the term loan will vary
depending upon our financial condition. On November 24, 2000 (ACT
Manufacturing Thailand's fiscal year end), ACT Manufacturing Thailand had
credit facilities, substantially all of which are denominated in U.S. dollars,
aggregating $34.1 million which bear interest at variable rates. ACT
Manufacturing France also has an approximately $16.2 million revolving credit
facility which bears interest at variable rates based on the rates in the
Eurocurrency market. Our exposure related to adverse movements in interest
rates is primarily derived from the variable rate on our revolving and term
loans and other credit facilities. At December 31, 2000, $90.0 million of the
outstanding balance on the revolving loan was at an interest rate of 9.22% and
the remaining $50.0 million was at an interest rate of 9.17%. At December 31,
2000, the outstanding balance under the term loan was $97.0 million, of which
$72.8 million was at an interest rate of 9.14% and the remaining $24.2 million
was at an interest rate of 11.0%. At November 24, 2000, $30.2 million was
outstanding under the ACT Manufacturing Thailand credit facilities at interest
rates ranging from 9.2% to 10.8% and at December 31, 2000, $10.9 million was
outstanding under the ACT Manufacturing France credit facilities at an
interest rate of 7.5%. An adverse change of one percent in the interest rate
would cause a change in interest expense of approximately $2.8 million on an
annual basis based on fiscal year end balances outstanding.

  Substantially all of the business of our Mexico and Thailand operations are
conducted in U.S. dollar denominated transactions. The functional currency of
ACT Manufacturing France is the French franc, although some of that business
is conducted in Euro and other currency denominated transactions. The
functional currency of our operations in Ireland is the Irish punt, however,
these operations do not represent a significant portion of our net sales or
expenses. Expenses for our French and Irish operations are also paid in French
francs and Euros, and Irish punts, respectively. Although the functional
currency of our foreign operations, other than France and Ireland, is the U.S.
dollar, some of the expenses of our Thailand and Mexico operations are
denominated in Thai baht and Mexican pesos, respectively. We also operate
international purchasing offices in Singapore and Taiwan, where expenses are
paid in Singapore and Taiwan dollars, respectively.

  SFAS No. 107 requires disclosure about fair value of financial instruments.
Financial instruments consist of cash equivalents, accounts and notes
receivable, accounts payable and certain other short-term liabilities, and
current and long-term debt obligations. The fair value of these financial
instruments approximates their carrying amount, except for the 7% convertible
subordinated notes, at December 31, 2000. The fair market value of the
convertible subordinated notes was $57.4 million with a carrying amount of
$100.0 million.

  ACT Manufacturing France uses foreign exchange and option contracts to hedge
certain foreign currency denominated inventory purchase commitments and firmly
committed foreign currency revenues. Contracts are for periods consistent with
the terms of the underlying transactions, generally one to four months.
At December 31, 2000, the fair value of these contracts exceeded their
carrying value by approximately $3.2 million.

  In fiscal 1999, international operations did not represent a significant
portion of our net sales or net assets. Therefore, that exposure was not
considered material to us. We were exposed to changes in interest rates on our
$107.0 million credit facility in fiscal 1999 which, except for $17.0 million,
bore interest at variable rates. At that time, an adverse change of one
percent in the interest rate would have caused a change in interest expense of
approximately $243,000 on an annual basis based on December 31, 1999 balances
outstanding.


                                      34
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

  Our 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, 2000 and 1999

  Consolidated Statements of Income for the years ended December 31, 2000,
  1999 and 1998

  Consolidated Statements of Stockholders' Equity for the years ended
  December 31, 2000, 1999 and 1998

  Consolidated Statements of Cash Flows for the years ended December 31,
  2000, 1999 and 1998

  Notes to Consolidated Financial Statements

                                       35
<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, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. 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. on July 29,
1999, 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
statements of operations, stockholders' equity, and cash flows of CMC
Industries, Inc. for the year ended July 31, 1998 and the five months in the
period ended December 31, 1998, which statements reflect total revenues of
$301,955,000 and $122,423,000 for the year ended July 31, 1998 and the five
months in the period ended December 31, 1998, respectively. Those statements
were audited by other auditors whose reports have been furnished to us, and
our opinion, insofar as it relates to the amounts included for CMC Industries,
Inc. for 1998, is based solely on the reports 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 reports 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, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles 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.

/s/ Deloitte & Touche LLP

Boston, Massachusetts
March 12, 2001

                                      36
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

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

  In our opinion, the consolidated statements of income, 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 year 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 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.

/s/ PricewaterhouseCoopers LLP ______
      PricewaterhouseCoopers LLP


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

                                      37
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

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

  In our opinion, the 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

                                      38
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                             2000       1999
                                                          ----------  --------
                                                            (in thousands,
                                                                except
                                                              share data)
<S>                                                       <C>         <C>
                         ASSETS
Current Assets:
  Cash and cash equivalents.............................. $   48,298  $  4,558
  Accounts receivable--trade (less allowance for doubtful
   accounts of $10,078 in 2000 and $2,939 in 1999).......    351,925   153,422
  Accounts and notes receivable from related party.......      3,331     7,408
  Inventory..............................................    401,325   171,762
  Prepaid expenses and other assets......................     11,646     2,925
  Deferred tax asset.....................................      8,258     1,252
                                                          ----------  --------
    Total current assets.................................    824,783   341,327
Property and equipment--net..............................     77,888    38,047
Deferred tax asset.......................................      1,647       --
Goodwill--net............................................    144,250    10,334
Other assets--net........................................     19,235    12,618
                                                          ----------  --------
    Total................................................ $1,067,803  $402,326
                                                          ==========  ========
          LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Notes payable bank..................................... $   10,863  $    --
  Current portion of long-term debt......................     15,627     1,125
  Current portion of other long-term liabilities.........      3,481     2,972
  Accounts payable.......................................    337,407   153,764
  Advance from customer..................................     50,000       --
  Due to Bull SA.........................................      8,711       --
  Accrued compensation and related taxes.................      5,906     3,769
  Income tax payable.....................................      9,969     3,074
  Deferred taxes.........................................         45       253
  Accrued expenses and other.............................     31,917     5,950
                                                          ----------  --------
    Total current liabilities............................    473,926   170,907
Long-term debt-less current portion......................    255,517    46,933
Deferred taxes...........................................      8,143     2,735
Other long-term liabilities..............................      9,973     3,622
Convertible subordinated notes...........................    100,000       --
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, 100,000,000
   shares; issued and outstanding, 17,040,142 shares in
   2000 and 16,465,771 shares in 1999....................        170       165
  Additional paid-in capital.............................    171,220   157,887
  Accumulated other comprehensive loss...................       (799)     (637)
  Retained earnings......................................     49,653    20,714
                                                          ----------  --------
    Total stockholders' equity...........................    220,244   178,129
                                                          ----------  --------
      Total.............................................. $1,067,803  $402,326
                                                          ==========  ========
</TABLE>

                See notes to consolidated financial statements.

                                       39
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

                  Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                   2000       1999      1998
                                                ----------  --------  --------
                                                 (in thousands, except per
                                                        share data)
<S>                                             <C>         <C>       <C>
Net sales:
  Unrelated parties............................ $1,362,940  $671,061  $566,048
  Related parties..............................      7,657    25,221    26,436
                                                ----------  --------  --------
    Total net sales............................  1,370,597   696,282   592,484
                                                ----------  --------  --------
Cost of goods sold:
  Unrelated parties............................  1,249,065   618,653   532,018
  Related parties..............................      5,012    23,203    24,321
                                                ----------  --------  --------
    Total cost of goods sold...................  1,254,077   641,856   556,339
                                                ----------  --------  --------
Gross profit...................................    116,520    54,426    36,145
Selling, general and administrative expenses...     46,373    28,945    26,931
Amortization of goodwill.......................      5,675       591       452
Merger costs...................................        --      5,601       --
                                                ----------  --------  --------
Operating income...............................     64,472    19,289     8,762
                                                ----------  --------  --------
Other income (expense):
  Interest expense, net........................    (17,816)   (5,256)   (3,718)
  Other, net...................................        360        (6)       93
                                                ----------  --------  --------
    Total......................................    (17,456)   (5,262)   (3,625)
                                                ----------  --------  --------
Income before provision for income taxes.......     47,016    14,027     5,137
Provision for income taxes.....................     18,077     7,793     2,044
                                                ----------  --------  --------
Net income..................................... $   28,939  $  6,234  $  3,093
                                                ==========  ========  ========
Basic net income per common share.............. $     1.72  $   0.47  $   0.24
                                                ==========  ========  ========
Diluted net income per common share............ $     1.62  $   0.45  $   0.24
                                                ==========  ========  ========
Weighted-average shares outstanding--basic.....     16,808    13,265    12,665
                                                ----------  --------  --------
Weighted-average shares outstanding--diluted...     17,885    13,916    12,976
                                                ==========  ========  ========
</TABLE>

                See notes to consolidated financial statements.

                                       40
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

          Years Ended December 31, 2000, 1999 and 1998 (in thousands)

<TABLE>
<CAPTION>
                           $.01
                           Par               Accumulated
                          Value  Additional     Other                   Total
                          Common  Paid-in   Comprehensive Retained  Stockholders'
                          Stock   Capital      (Loss)     Earnings     Equity
                          ------ ---------- ------------- --------  -------------
<S>                       <C>    <C>        <C>           <C>       <C>
Balance, January 1,
 1998....................  $125   $ 70,515     $    4     $13,459     $ 84,103
 Net proceeds from sale
  of stock...............     3      4,567        --          --         4,570
 Cancellation of common
  stock from acquisition
  escrow.................   --        (122)       --          --          (122)
 Comprehensive income:
  Net income.............   --         --         --        3,093        3,093
  Other comprehensive
   income-cumulative
   foreign currency
   translation
   adjustments...........   --         --        (184)        --          (184)
                                                                      --------
 Comprehensive income....   --         --         --          --         2,909
                           ----   --------     ------     -------     --------
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 proceeds from sale
  of stock...............    36     79,912        --          --        79,948
 Income tax benefit from
  employees' exercise of
  stock options..........   --       2,687        --          --         2,687
 Minimum pension
  liability adjustment...   --         --       1,511         --         1,511
 Comprehensive income:
  Net income.............   --         --         --        6,234        6,234
  Other comprehensive
   income--
  Cumulative foreign
   translation
   adjustments ..........   --         --        (457)        --          (457)
                                                                      --------
 Comprehensive income....   --         --         --          --         5,777
                           ----   --------     ------     -------     --------
Balance, December 31,
 1999....................   165    157,887       (637)     20,714      178,129
 Net proceeds from the
  sale of stock..........     5      6,096        --          --         6,101
 Non-cash stock
  compensation...........   --          69        --          --            69
 Income tax benefit from
  employees' exercise of
  stock options..........   --       7,168        --          --         7,168
 Comprehensive income:
  Net income.............   --         --         --       28,939       28,939
  Other comprehensive
   income--
  Minimum pension
   liability adjustment
   ......................   --         --      (2,598)        --        (2,598)
  Cumulative foreign
   translation
   adjustments...........   --         --       2,436         --         2,436
                                                                      --------
 Comprehensive income....   --         --         --          --        29,075
                           ----   --------     ------     -------     --------
Balance, December 31,
 2000....................  $170   $171,220     $ (799)    $49,653     $220,244
                           ====   ========     ======     =======     ========
</TABLE>

                See notes to consolidated financial statements.

                                       41
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

          Years Ended December 31, 2000, 1999 and 1998 (in thousands)

<TABLE>
<CAPTION>
                                                    2000       1999     1998
                                                  ---------  --------  -------
<S>                                               <C>        <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income...................................... $  28,939  $  6,234  $ 3,093
 Adjustments to reconcile net income to net cash
  (used for) provided by operating activities:
  Depreciation and amortization..................    15,917     7,541    4,884
  Deferred income taxes..........................      (802)    2,119     (764)
  Provision for doubtful accounts................     4,887     3,957    1,945
  Gain on investment in affiliate, net...........      (609)      --       --
  Non-cash stock compensation....................        69       --       --
  Loss on disposal of fixed assets...............       367       --       132
  Increase (decrease) in cash from:
   Accounts receivable--trade....................  (141,709)  (44,086) (26,771)
   Inventory.....................................   (85,207)  (89,158)   4,239
   Prepaid expenses and other assets.............       629       636   (2,632)
   Accounts payable..............................    40,308    56,213   17,463
   Advance from customer.........................    50,000       --       --
   Accrued expenses and other....................    25,007     7,675   10,100
                                                  ---------  --------  -------
    Net cash (used for) provided by operating
     activities..................................   (62,204)  (48,869)  11,689
                                                  ---------  --------  -------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property and equipment...........    (9,367)   (6,729) (17,450)
 Proceeds from the sale of investment in
  affiliate .....................................     6,417       --       --
 Increase in other noncurrent assets.............    (5,916)   (3,135)    (182)
 Proceeds from the sale of property and
  equipment......................................       --        --       111
 Acquisitions, net of cash acquired..............  (170,573)  (12,875)     --
                                                  ---------  --------  -------
    Net cash used for investing activities.......  (179,439)  (22,739) (17,521)
                                                  ---------  --------  -------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Borrowings (repayments) under line-of-credit
  agreements, net................................   109,555   (13,363)   4,612
 Proceeds from the sale of convertible
  subordinated notes.............................   100,000       --       --
 Proceeds under term loan........................   100,325     7,000      --
 Payments under term loan........................   (20,250)     (250)     --
 Debt issue costs................................    (9,200)     (700)    (450)
 Principal payments on long-term debt............       --     (3,017)  (1,300)
 Changes in other long-term liabilities--net.....    (4,231)     (867)    (692)
 Receipt of deferred revenue.....................       --        540      483
    Net proceeds from sale of stock..............     6,101    79,948    4,570
                                                  ---------  --------  -------
    Net cash provided by financing activities....   282,300    69,291    7,223
                                                  ---------  --------  -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
 EQUIVALENTS.....................................     3,083       469     (184)
                                                  ---------  --------  -------
NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS.....................................    43,740    (1,848)   1,207
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.....     4,558    10,670    9,463
                                                  ---------  --------  -------
CASH AND CASH EQUIVALENTS, END OF YEAR........... $  48,298  $  4,558  $10,670
                                                  =========  ========  =======
</TABLE>

                See notes to consolidated financial statements.

                                       42
<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, high-end
computer and industrial and medical equipment markets. The Company provides
original equipment manufacturers with total system assembly and integration,
electro-mechanical subassembly, complex printed circuit board assembly
primarily utilizing advanced surface mount technology, 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
$5.6 million 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, stockholders' equity and cash flows for the year
ended December 31, 1998 (herein referred to as "fiscal" 1998) reflect the
results of operations, stockholders' equity and cash flows for ACT for the
year then ended combined with CMC for the year ended 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.

<TABLE>
   <S>                                                               <C>
   Condensed Consolidated Statement of Operations Data (in
    thousands):
   Net sales.......................................................  $122,423
   Cost of sales...................................................   119,633
                                                                     --------
    Gross profit...................................................     2,790
   Selling, general and administrative expenses....................     5,410
                                                                     --------
    Loss from operations...........................................    (2,620)
   Interest expense................................................       691
                                                                     --------
    Loss before taxes..............................................    (3,311)
   Income tax benefit..............................................    (1,239)
                                                                     --------
    Net loss.......................................................  $ (2,072)
                                                                     ========
</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 income 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.

                                      43
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  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.

  Futures and Forward Contracts--Gains and losses on foreign currency exchange
and option contracts that qualify as hedges are deferred and recognized as an
adjustment of the carrying amount of the hedged asset or liability, or
identifiable foreign currency firm commitment.

  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. Certain of the Company's bank debt,
because it carries a variable interest rate, is stated at its approximate fair
market value. The fair value of the Company's 7% convertible subordinated
notes approximates $57.4 million.

  The Company uses foreign exchange and option contracts to hedge certain
foreign currency denominated inventory purchase commitments and firmly
committed foreign currency revenues. Contracts are for periods consistent with
the terms of the underlying transactions, generally one to four months. At
December 31, 2000, the Company had $88.0 million in open option contracts and
$77.0 million in foreign exchange forward contracts.

  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 69%
and 72% of the inventories at the end of fiscal 2000 and 1999, respectively,
with the remaining balance determined using the last-in, first-out ("LIFO")
method or weighted average method.

  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 of
fixed assets is provided using the straight-line method over the following
estimated useful lives:

<TABLE>
   <S>                                                               <C>
   Building......................................................... 30 years
   Leasehold Improvements........................................... lease term
   Computer Equipment............................................... 3-5 years
   Machinery & Equipment............................................ 5-7 years
   Furniture & Fixtures............................................. 5-7 years
   Motor Vehicles................................................... 5 years
</TABLE>

  Goodwill--Goodwill is being amortized on a straight-line basis over a period
of ten to twenty years. At the end of fiscal 2000 and 1999, the accumulated
amortization of goodwill was $7.2 million and $1.5 million, respectively.

  Other Assets--Other assets primarily include deferred financing costs and
prepaid licenses which are being amortized over five to seven years.


                                      44
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

  A reconciliation of net income per common share and the weighted average
shares used in the earnings per share ("EPS") calculations for fiscal years
2000, 1999 and 1998 is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                          Per
                                               Net Income     Shares     Share
                                               (Numerator) (Denominator) Amount
                                               ----------- ------------- ------
<S>                                            <C>         <C>           <C>
2000
Basic.........................................   $28,939      16,808     $ 1.72
                                                 =======
Effect of stock options.......................                 1,077      (0.10)
                                                              ------     ------
Diluted.......................................   $28,939      17,885     $ 1.62
                                                 =======      ======     ======
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
                                                 =======      ======     ======
</TABLE>

  Options to purchase 514,000, 229,000, and 757,000 shares of common stock
were outstanding during fiscal 2000, 1999 and 1998, respectively, but were not
included in the computation of diluted EPS because the options' exercise
prices were greater than the average market prices of the common stock, and
therefore, their effect would be antidilutive. Similarly, 2.3 million shares
related to the assumed conversion of the 7% convertible subordinated notes
were also excluded as this effect would be antidilutive.

                                      45
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Supplemental Cash Flow Information--Selected cash payments and noncash
activities for fiscal 2000, 1999 and 1998 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                          2000    1999   1998
                                                         ------- ------ ------
<S>                                                      <C>     <C>    <C>
Cash paid for interest.................................. $16,112 $5,176 $3,887
Cash paid for (refunded from) income taxes..............   5,428  1,537 (7,686)
Noncash investing and financing activities:
  Reduction of goodwill upon cancellation of common
   stock from acquisition escrow........................     --     --     122
  Capital lease obligations.............................   6,668    --     --
</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 each of fiscal 2000 and 1999, 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 changes in the cumulative
translation adjustment, the fair market value of investments, and the minimum
pension liability, which is a component of stockholders' equity.

  Recently Issued Financial Accounting Standards--In June 1998, the Financial
Accounting Standards Board (the FASB) issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," subsequently amended by SFAS
No. 137 and SFAS No. 138. SFAS No. 133 requires the Company to record all
derivatives on the balance sheet at fair value. To the extent that the hedge
is effective, changes in derivative fair values will either be recognized in
earnings as offsets to the changes in fair value of related hedged assets,
liabilities and unrecognized firmly committed transactions (fair value hedging
relationships), or for forecasted transactions, deferred and recorded as a
component of other accumulated comprehensive income until the hedged
transactions occur and are recognized in earnings (cash flow hedging
relationships). There may be an impact on earnings to the extent that the
hedging relationship is not 100% effective. If hedges do not qualify for hedge
accounting under SFAS No. 133 or if the Company elects not to designate a
derivative as a hedge under SFAS No. 133, then the derivative fair value
changes are recognized directly in earnings.

  The Company's France subsidiary uses derivative financial instruments to
hedge certain non-functional currency-denominated assets and liabilities that
are primarily short-term trade accounts payable and receivable balances.
Derivative financial instruments are also used to hedge unrecognized but
firmly committed foreign-currency-denominated revenues and expenses. In all
cases, the maturities of hedging instruments does not usually exceed three to
four months. These instruments may involve elements of credit and market risk
in excess of the amounts recognized in the financial statements. The Company
monitors its positions and the credit quality of counterparties, consisting
primarily of major financial institutions, and does not anticipate
nonperformance by any counterparty.

  The Company adopted SFAS No. 133 and the corresponding amendments under SFAS
No. 138 on January 1, 2001, as required. SFAS No. 133, as amended, is not
expected to have a material impact on the Company's consolidated results of
operations, financial position or cash flows.

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on applying

                                      46
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

generally accepted accounting principles to revenue recognition issues in
financial statements. SAB No. 101 requires companies to report any changes in
revenue recognition as a cumulative effect from a change in accounting
principles at the time of adoption. The Company adopted SAB No. 101 on October
1, 2000, as required, and has concluded that SAB No. 101 did not have any
effect on the Company's revenue recognition policies and practices.

  In September 2000, FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
140 provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Under SFAS No. 140, after
a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes
liabilities when extinguished. SFAS No. 140 also provides standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. SFAS No. 140 is effective for certain
transactions and certain disclosures in the fiscal year ending December 31,
2001. The Company is currently evaluating the impact of SFAS No. 140 on its
financial statements and related disclosures, but does not expect that any
impact will be material.

2. Acquisitions of Businesses and Assets

 Business Acquisitions

  On August 2, 2000, the Company purchased 99.02% of the issued shares and
outstanding options of GSS Array Technology Public Company Limited ("GSS
Thailand" or "ACT Manufacturing Thailand") for a purchase price of
approximately $86.7 million. On August 31, 2000, the Company purchased all of
the issued shares of Bull Electronics Angers S.A. ("BEA" or "ACT Manufacturing
France") for a purchase price of approximately $99.8 million, of which $91.1
million was paid during 2000 and the remaining $8.7 million was paid in the
first quarter of 2001.

  The GSS Thailand and BEA acquisitions have both been accounted for under the
purchase method of accounting, and accordingly, the results of operations of
ACT Manufacturing Thailand and ACT Manufacturing France have been included in
our consolidated financial statements from the respective dates of
acquisition. ACT Manufacturing Thailand will maintain its November 24 fiscal
year end and its financial position at November 24, 2000 is included in the
Company's fiscal 2000 year end consolidated balance sheet; accordingly,
approximately four months (August-November 2000) of its operations are
included in the Company's fiscal 2000 actual results. ACT Manufacturing France
will maintain its December 31 fiscal year end; accordingly, four months
(September-December 2000) of its operations are included in the Company's
fiscal 2000 actual results. The respective purchase prices have been allocated
to the net assets acquired based upon their fair values. For both the GSS
Thailand and BEA acquisitions, the purchase price exceeded the respective fair
value of the assets acquired and liabilities assumed resulting in goodwill
being recorded. Such goodwill is being amortized over its estimated useful
life of ten years.

                                      47
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Below are tables of the purchase price and purchase price allocation for ACT
Manufacturing Thailand and ACT Manufacturing France as of December 31, 2000.
The purchase price and purchase price allocations are subject to change.

<TABLE>
<CAPTION>
                                                ACT           ACT
                                           Manufacturing Manufacturing
                                             Thailand       France      Total
                                           ------------- ------------- --------
<S>                                        <C>           <C>           <C>
Purchase price (in thousands):
  Cash paid at closing....................    $86,692      $ 56,600    $143,292
  Working capital adjustment..............        --         43,211      43,211
  Transaction costs.......................      4,222         3,648       7,870
                                              -------      --------    --------
    Total purchase price..................    $90,914      $103,459    $194,373
                                              =======      ========    ========
Purchase price allocation (in thousands):
  Fair value of net assets acquired.......    $(8,131)     $ 64,046    $ 55,915
  Goodwill and other intangibles..........     99,045        39,413     138,458
                                              -------      --------    --------
    Total purchase price allocation.......    $90,914      $103,459    $194,373
                                              =======      ========    ========
</TABLE>

  The working capital adjustment represents additional purchase price based on
BEA's closing balance sheet. Goodwill and other intangibles includes the value
of workforce-in-place, amounting to $350,000 for ACT Manufacturing Thailand
and $1.3 million for ACT Manufacturing France.

  The following unaudited supplemental pro forma condensed combined financial
information is provided to reflect net sales, net income (loss) and diluted
net income (loss) per common share as if the consummation of the ACT
Manufacturing Thailand and ACT Manufacturing France acquisitions had taken
place at the beginning of each period presented below.

<TABLE>
<CAPTION>
                                             For the Year      For the Year
                                                 Ended             Ended
                                           December 31, 2000 December 31, 1999
                                           ----------------- -----------------
                                             (in thousands, except per share
                                                          data)
                                                       (unaudited)
<S>                                        <C>               <C>
Net sales.................................    $1,706,342        $1,159,585
Net income (loss).........................    $   14,444        $  (21,989)
                                              ==========        ==========
Diluted net income (loss) per common
 share....................................    $     0.81        $    (1.66)
                                              ==========        ==========
</TABLE>

 Asset Acquisition

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

  The Company paid approximately $12.9 million in cash and assumed $618,000 in
liabilities in connection with this asset purchase. The fair value of the
assets purchased was approximately $8.4 million. The Company recorded $5.1
million 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. Such goodwill
is being amortized over its estimated useful life of ten years.

                                      48
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


3. Inventory

  Inventory consisted of the following at fiscal year end 2000 and 1999 (in
thousands):

<TABLE>
<CAPTION>
                                                                 2000     1999
                                                               -------- --------
<S>                                                            <C>      <C>
Raw materials................................................. $327,046 $125,869
Work in process...............................................   58,236   42,039
Finished goods................................................   16,043    3,854
                                                               -------- --------
  Total....................................................... $401,325 $171,762
                                                               ======== ========
</TABLE>

  The carrying value of inventory approximates replacement cost.

4. Property and Equipment

  Property and equipment consisted of the following at fiscal year end 2000
and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                               2000      1999
                                                             --------  --------
<S>                                                          <C>       <C>
Land........................................................ $ 14,592  $    798
Building....................................................   10,384     4,922
Leasehold improvements......................................   15,400    11,234
Manufacturing equipment.....................................   76,765    35,696
Office furniture and equipment..............................   13,441     9,311
Vehicles....................................................      893       418
Construction-in-progress....................................    5,876     1,026
                                                             --------  --------
  Total property and equipment..............................  137,351    63,405
Less accumulated depreciation and amortization..............  (59,463)  (25,358)
                                                             --------  --------
  Property and equipment--net............................... $ 77,888  $ 38,047
                                                             ========  ========
</TABLE>

  Included in property and equipment are manufacturing facilities and certain
equipment held under capital leases with a net carrying value of $7.7 million
and $5.7 million at the end of fiscal 2000 and 1999, respectively.

  The Company has capitalized interest in the amount of $160,000 and $40,000
at the end of fiscal 2000 and 1999, respectively, related to the construction-
in-progress.

5. Indebtedness

  On June 29, 2000, the Company revised its senior credit arrangements with a
syndicate of financial institutions led by The Chase Manhattan Bank as
administrative agent, to increase the Company's previous credit facility. The
Company's Credit Agreement with these lenders ("Credit Agreement") provides
that the lenders will make available to the Company up to $150.0 million of
revolving loans (up to $20.0 million of which the Company may use in a variety
of currencies, and the balance of which the Company may use in U.S. dollars)
and up to $100.0 million of term loans.

  The revolving loans are subject to a borrowing base formula, under which the
Company may borrow up to specified percentages of the value of various
categories of its assets, including qualified accounts receivable, inventory,
machinery and equipment. Interest is payable either monthly or quarterly, at
the election of the Company, at an interest rate based on either the prime
rate of The Chase Manhattan Bank or the prevailing rates in the Eurocurrency
market. The Company must repay all revolving loans by June 28, 2005. The
Company is required to repay all term loans in quarterly installments from
December 31, 2000 through June 28, 2005.

                                      49
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  On December 27, 2000, we entered into an amendment to our Credit Agreement
which makes available additional five year term loans in the aggregate amount
of up to $100.0 million, subject to certain conditions. If drawn, the term
loan provides for repayment of substantially all of the principal amount on
June 28, 2006.

  The Credit Agreement requires the Company to meet certain financial
conditions, including net worth and the ratio of total debt, senior secured
debt and interest and other fixed charges, to earnings. The credit facility is
secured by substantially all of the assets of the Company and certain of its
subsidiaries. In addition, the Credit Agreement limits the Company's ability,
among other things, to incur debt, grant liens, dispose of its properties, pay
dividends, make capital expenditures or investments or enter into mergers or
acquisitions.

  At December 31, 2000, $140.0 million of the Credit Agreement was utilized
for revolving loans, $1.7 million was utilized for letters of credit and an
additional $8.3 million was available for use based upon the applicable
borrowing base. At December 31, 2000, $90.0 million of the revolving loan was
at an interest rate of 9.22% and the remaining $50.0 million was at an
interest rate of 9.17%. At December 31, 2000, $97.0 million was outstanding on
the term loan. At December 31, 2000, $72.8 million of the term loan was at an
interest rate of 9.14% and the remaining $24.2 million was at an interest rate
of 11.0%.

  On November 24, 2000, ACT Manufacturing Thailand had working capital credit
facilities with various financial institutions aggregating $34.1 million at
interest rates ranging from LIBOR plus 3% to LIBOR plus 4%. At its fiscal 2000
year end, $30.2 million was outstanding at interest rates ranging from 9.2% to
10.8%.

  ACT Manufacturing Thailand also has a loan outstanding denominated in Thai
baht. At its fiscal 2000 year end, the outstanding balance was baht 150.8
million ($3.6 million). The Thai baht loan requires monthly principal payments
of baht 4.6 million ($104,900) with the final payment due July 2003. Interest
on the Thai baht loan is payable monthly at a floating rate which equaled
7.75% at its fiscal 2000 year end.

  The ACT Manufacturing Thailand credit facilities and Thai baht loan are
secured by a pledge of ACT Manufacturing Thailand's fixed deposits and by a
mortgage of its land, buildings, machinery and equipment. ACT Manufacturing
Thailand's debt to equity ratio exceeded that permitted under the working
capital credit facilities above, as well as the Thai baht loan above; however,
the lenders have given ACT Manufacturing Thailand a waiver of this covenant
default through March 31, 2002.

  On November 2, 2000, ACT Manufacturing France entered into a new Credit
Agreement with a syndicate of financial institutions led by Societe Generale.
The Credit Agreement provides that the lenders will make available to ACT
Manufacturing France up to approximately $16.2 million of revolving loans. The
Credit Agreement is unsecured and interest is payable monthly at an interest
rate based on the rates in the Eurocurrency market. As of December 31, 2000,
the outstanding balance was approximately $10.9 million and was at an interest
rate of 7.5%. The same credit agreement provides ACT Manufacturing France with
a credit line in the amount of approximately $9.8 million for sales of
accounts receivable, none of which was outstanding at December 31, 2000. In
addition, ACT Manufacturing France has a capital lease line of approximately
$7.4 million, of which approximately $3.3 million was utilized at December 31,
2000.

  Prior to the June 29, 2000 Credit Agreement, the Company was party to a
credit agreement dated July 29, 1999 which provided for a $107.0 million
senior secured credit facility with a group of banks led by The Chase
Manhattan Bank as agent. This credit facility provided for a $7.0 million,
five-year Term Loan and a $100.0 million, five-year line of credit, both of
which were secured by substantially all of the assets of the Company.

  The Company entered into a $17.0 million interest rate swap agreement in
fiscal 1998 which provided for payments by the Company at a fixed rate of
interest of 6.76%. 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 interest rate swap agreement was settled in
full in fiscal 2000.

                                      50
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The aggregate annual maturities of long-term debt at the end of fiscal 2000
are as follows (in thousands):

<TABLE>
   <S>                                                                  <C>
   2001................................................................ $ 26,490
   2002................................................................   49,507
   2003................................................................   23,510
   2004................................................................   27,500
   2005................................................................  155,000
   Thereafter..........................................................  100,000
                                                                        --------
     Total............................................................. $382,007
                                                                        ========
</TABLE>

 Convertible Subordinated Notes

  In April and May 2000, the Company received net proceeds of approximately
$95.4 million from the sale of 7% Convertible Subordinated Notes due April 15,
2007 (the "Notes") in a private placement. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all the
Company's existing and future senior indebtedness. Interest payments are due
on the Notes on April 15 and October 15 of each year. The proceeds of this
convertible debt offering were used to fund the acquisition of ACT
Manufacturing Thailand (see Note 2). Until allocated for specific use, the net
proceeds from this offering were invested in short-term, interest-bearing,
investment grade securities. The Notes were subsequently registered on a
Registration Statement on Form S-3, File No. 333-41406, effective August 4,
2000.

6. Other Long-Term Liabilities

  Other long-term liabilities consisted of the following at fiscal year end
2000 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                                   2000   1999
                                                                  ------ ------
   <S>                                                            <C>    <C>
   Noncompete covenant........................................... $  160 $  245
   Deferred revenue..............................................    752  1,023
   Capital leases................................................  6,167  5,303
   Other noncurrent liabilities..................................  6,375     23
                                                                  ------ ------
     Total....................................................... 13,454  6,594
   Less current portion..........................................  3,481  2,972
                                                                  ------ ------
     Other long-term liabilities................................. $9,973 $3,622
                                                                  ====== ======
</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 $0 and $540,000 in fiscal
2000 and 1999, respectively, under an agreement with the Ireland Industrial
Development Agency. These payments have been recorded as deferred revenue at
the end of fiscal 2000 and 1999 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 manufacturing facilities
and certain equipment and computer software used in its manufacturing
operations under capital lease agreements that expire through 2004.

                                      51
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Other long-term liabilities at the end of fiscal 2000 are due as follows (in
thousands):

<TABLE>
<CAPTION>
                                      Noncompete Capital Deferred
                                       Covenant  Leases  Revenue  Other  Total
                                      ---------- ------- -------- ------ ------
<S>                                   <C>        <C>     <C>      <C>    <C>
2001.................................    $ 93    $3,815    $--    $  --  $3,908
2002.................................     100     1,360     752      --   2,212
2003.................................     --      1,079     --       --   1,079
2004.................................     --        729     --       --     729
2005.................................     --        --      --     6,375  6,375
                                         ----    ------    ----   ------ ------
  Total..............................     193     6,983     752    6,375 14,303
Less amount representing interest....      33       816     --       --     849
                                         ----    ------    ----   ------ ------
Present value of minimum payments....     160     6,167     752    6,375 13,454
Less current portion.................      68     3,413     --       --   3,481
                                         ----    ------    ----   ------ ------
  Other long-term liabilities........    $ 92    $2,754    $752   $6,375 $9,973
                                         ====    ======    ====   ====== ======
</TABLE>

7. Income Taxes

  Income before provision for income taxes for fiscal years 2000, 1999 and
1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                         2000    1999     1998
                                                        ------- -------  ------
   <S>                                                  <C>     <C>      <C>
   Domestic............................................ $30,814 $15,100  $6,040
   Foreign.............................................  16,202  (1,073)   (903)
                                                        ------- -------  ------
   Total............................................... $47,016 $14,027  $5,137
                                                        ======= =======  ======
</TABLE>

  The provision (benefit) for income taxes for fiscal years 2000, 1999 and
1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                        2000     1999    1998
                                                       -------  ------  -------
   <S>                                                 <C>      <C>     <C>
   Current taxes:
     Federal.......................................... $11,610  $5,538  $ 2,221
     State............................................   2,312     926      586
     Foreign..........................................   5,265     --       --
                                                       -------  ------  -------
                                                        19,187   6,464    2,807
   Deferred taxes:
     Federal..........................................  (2,043)   (763)   1,387
     State............................................    (213)  2,092   (2,150)
     Foreign..........................................   1,146     --       --
                                                       -------  ------  -------
                                                        (1,110)  1,329     (763)
       Total.......................................... $18,077  $7,793  $ 2,044
                                                       =======  ======  =======
</TABLE>

                                      52
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Deferred income tax assets (liabilities) are attributable to the following
for fiscal years 2000 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                               2000     1999
                                                              -------  -------
   <S>                                                        <C>      <C>
   Accounts receivable....................................... $ 1,918  $   918
   Inventory.................................................     (92)    (980)
   Depreciation..............................................  (1,962)  (2,287)
   Accrued liabilities.......................................   1,054      868
   Pension...................................................    (700)    (576)
   Foreign...................................................   1,198      --
   Other.....................................................     301      321
                                                              -------  -------
     Net deferred income tax asset (liability)............... $ 1,717  $(1,736)
                                                              =======  =======

  The net deferred income tax asset (liability) is classified as follows at
the end of the fiscal years 2000 and 1999 (in thousands):

<CAPTION>
                                                               2000     1999
                                                              -------  -------
   <S>                                                        <C>      <C>
   Current asset............................................. $ 8,258  $ 1,252
   Long term asset...........................................   1,647      --
   Current liability.........................................     (45)    (253)
   Long term liability.......................................  (8,143)  (2,735)
                                                              -------  -------
                                                              $ 1,717  $(1,736)
                                                              =======  =======
</TABLE>

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

  The Company has not provided income tax expense of approximately $1.4
million on ACT Manufacturing Thailand's earnings in fiscal 2000 as those
earnings are considered permanently invested.

  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>
                                                                  2000  1999  1998
                                                                  ----  ----  ----
   <S>                                                            <C>   <C>   <C>
   Federal statutory rate........................................  35%   35%   34%
   State income taxes, net of federal benefit....................   3     9     6
   Nondeductible merger costs....................................  --    14    --
   Adjustments to prior year tax liability.......................  --    --     1
   Goodwill......................................................   1    --    --
   Foreign.......................................................  (2)   --    --
   Other.........................................................   1    (2)   (1)
                                                                  ---   ---   ---
     Effective rate..............................................  38%   56%   40%
                                                                  ===   ===   ===
</TABLE>

8. Capital Stock

 Stock Option Plans

  The Company has a 1995 Stock Plan, which provides for the grant of incentive
and nonqualified stock options to purchase up to an aggregate of 2.25 million
shares. The Company has a 1995 Non-Employee Director

                                      53
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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-
                                                             Average   Average
                                                 Number of  Exercise    Fair
                                                  Options     Price     Value
                                                 ---------  --------- ---------
<S>                                              <C>        <C>       <C>
Outstanding at Beginning of Fiscal 1998......... 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
  Granted....................................... 1,079,499     39.95    29.31
  Exercised.....................................  (583,286)    10.49
  Forfeited.....................................  (225,980)    14.91
                                                 ---------
Outstanding at End of Fiscal 2000............... 2,030,223   $ 26.72
                                                 =========   =======
</TABLE>

<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>
      33,600    $       0.48          2             $ 0.48           33,600
      38,266      3.70- 3.96          2               4.76           38,266
     215,040      7.88- 8.00          8              12.83          114,421
     181,394      8.75-12.25          7              11.20           98,846
     378,923     13.94-19.50          8              11.28          132,747
     179,000     20.74-26.75          8              22.02           41,950
     807,000     27.13-39.88         10              27.13            3,600
     197,000           52.00         10              52.00              --
   ---------                                                        -------
   2,030,223                                                        463,430
   =========                                                        =======
</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, 56,000, 226,400 and 227,580 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

                                      54
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 Income.

  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 diluted net income (loss) per share for fiscal
years indicated would have been as follows (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                          2000    1999   1998
                                                         ------- ------ ------
   <S>                                                   <C>     <C>    <C>
   Net income (loss).................................... $25,881 $4,167 $ (966)
                                                         ======= ====== ======
   Diluted net income (loss) per common share........... $  1.45 $ 0.30 $(0.07)
                                                         ======= ====== ======
</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>
                                                 2000       1999       1998
                                               ---------  ---------  ---------
   <S>                                         <C>        <C>        <C>
   Risk-free interest rate....................       4.4%       5.9%       5.5%
   Expected life of option grants............. 3-5 years  3-5 years  3-5 years
   Expected volatility of underlying stock....        93%        98%       102%
</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.

 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 $3.6
million. The purchase price equaled the fair market value of the stock issued.

 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 May 15, 2000, the Company's shareholders approved an amendment to the
Second 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 50.0 million to 100.0 million.

  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 30.0 million to 50.0 million.

                                      55
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  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 1.25 million to 2.25 million shares.

9. Employee Benefit Plans

 Retirement Benefits

  In fiscal 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 No. 132 standardizes the disclosure requirements for pensions and
other postretirement 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.

  The components of net periodic pension cost and related assumptions for
fiscal years 2000, 1999 and 1998 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                            2000   1999   1998
                                                            -----  -----  -----
   <S>                                                      <C>    <C>    <C>
   Service cost............................................ $ --   $ --   $ --
   Interest cost...........................................   637    642    612
   Return on plan assets...................................   208   (688)  (671)
   Net amortization and deferral...........................  (896)   157    157
                                                            -----  -----  -----
   Net periodic pension (income) expense................... $ (51) $ 111  $  98
                                                            =====  =====  =====
   Discount rate...........................................  7.50%  8.00%  8.25%
   Long-term rate of return................................  9.00%  9.00%  8.00%
</TABLE>

                                      56
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  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>
                                                                 2000    1999
                                                                ------  -------
<S>                                                             <C>     <C>
Changes in projected benefit obligation:
Benefit obligation at beginning of year........................ $8,359  $ 7,712
CMC net activity August 1 to December 31, 1998.................    --     1,731
Service cost...................................................    --       --
Interest cost..................................................    637      642
Benefits paid..................................................   (605)    (754)
Revaluation loss (gain)........................................    335     (972)
                                                                ------  -------
  Benefit obligation at end of year............................ $8,726  $ 8,359
                                                                ======  =======
Changes in plan assets:
Fair value of plan assets at beginning of year................. $8,434  $ 7,881
CMC net activity August 1 to December 31, 1998.................    --       (36)
Actual return on plan assets...................................   (208)     949
Employer contributions.........................................    303      394
Benefits paid..................................................   (605)    (754)
                                                                ------  -------
  Fair value of plan assets at end of year..................... $7,924  $ 8,434
                                                                ======  =======
Funded status.................................................. $ (802) $    75
                                                                ======  =======
Reconciliation of Funded Status:
Funded status.................................................. $ (802) $    75
Unrecognized loss..............................................  2,598    1,368
                                                                ------  -------
Prepaid pension cost prior to additional liability.............  1,796    1,443
Additional liability........................................... (2,598)     --
                                                                ------  -------
  (Accrued) prepaid pension cost............................... $ (802) $ 1,443
                                                                ======  =======
</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 years as of December 31, 2000.

  ACT Manufacturing France maintains various pre-retirement plans that offer
indemnities to certain eligible employees who cease working prior to the legal
retirement age. The employer and the French government pay these indemnities
jointly. The Company's liability for such payments was $3.8 million at
December 31, 2000. There was no expense for these plans in fiscal 2000. ACT
Manufacturing France also maintains a pension plan in accordance with certain
collective bargaining agreements. The payments are based on an employee's
length of service, compensation and job grade. The Company's liability for
such payments was $1.7 million at December 31, 2000. The expense for this
pension plan was $38,000 in fiscal 2000.

 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 contributions to the plan are at the discretion of the Board of
Directors. The Company made no contributions to the Plan in fiscal 2000, 1999
and 1998.

  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.

                                      57
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 2000,
1999 and 1998.

 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 $1.1 million and $605,000 at fiscal year end 2000 and
1999, respectively, and the related expense incurred was $7.7 million, $4.8
million, and $4.3 million for fiscal 2000, 1999 and 1998, respectively. The
Company does not provide benefits under these plans to retired employees.

10. Major Customers and Segment Reporting

 Customers

  In fiscal 2000, Efficient Networks, EMC and Nortel Networks accounted for
approximately 17%, 14% and 12%, respectively, of the Company's net sales.
Sales to Nortel Networks 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. All such sales relate to the
printed circuit board assembly service offering of the Company's business.

 Segment Reporting

  Management operates the Company in two segments, North America and
International. The chief decision maker regularly evaluates the operations
management team on their ability to generate sales and gross profit in these
two segments. Selling, general and administration functions, as well as the
treasury operations, are administered on a global basis and these expenses,
including interest, are currently recorded where disbursed. As such, the
Company does not currently allocate these expenses across its two segments.

  A summary of the Company's operating results and assets, by segment, for
fiscal years 2000, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                     2000      1999      1998
                                                  ---------- --------  --------
<S>                                               <C>        <C>       <C>
Net Sales
  North America.................................. $1,075,799 $686,220  $586,916
  International..................................    294,798   10,062     5,568
                                                  ---------- --------  --------
    Total........................................ $1,370,597 $696,282  $592,484
                                                  ========== ========  ========
Gross Profit
  North America.................................. $   88,367 $ 54,896  $ 37,350
  International..................................     28,153     (470)   (1,205)
                                                  ---------- --------  --------
    Total........................................    116,520   54,426    36,145
Corporate Expenses...............................     87,581   48,192    33,052
                                                  ---------- --------  --------
Net Income....................................... $   28,939 $  6,234  $  3,093
                                                  ========== ========  ========
Segment Assets
  North America.................................. $  667,043 $393,560  $230,262
  International..................................    400,760    8,766     8,032
                                                  ---------- --------  --------
    Total........................................ $1,067,803 $402,326  $238,294
                                                  ========== ========  ========
</TABLE>

                                      58
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  A summary of the net sales for the Company's principal service offerings for
fiscal 2000, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                      2000      1999     1998
                                                   ---------- -------- --------
<S>                                                <C>        <C>      <C>
Systems and printed circuit boards................ $1,324,648 $658,749 $556,348
Cable and harness.................................     45,949   37,533   36,136
                                                   ---------- -------- --------
                                                   $1,370,597 $696,282 $592,484
                                                   ========== ======== ========
</TABLE>

 Geographic Information

  The Company operates manufacturing facilities in the United States, Mexico,
Ireland, France and Thailand. Geographic data for net sales and long-lived
assets (which consist mainly of property, plant and equipment and intangibles)
were as follows for the periods set forth below (in thousands):

<TABLE>
<CAPTION>
                                                       2000      1999     1998
                                                    ---------- -------- --------
<S>                                                 <C>        <C>      <C>
Net Sales
  North America.................................... $1,075,799 $686,220 $586,916
  Europe...........................................    209,976   10,062    5,568
  Asia.............................................     84,822      --       --
                                                    ---------- -------- --------
    Total.......................................... $1,370,597 $696,282 $592,484
                                                    ========== ======== ========
Long-Lived Assets
  North America.................................... $   63,951 $ 51,492 $ 38,335
  Europe...........................................     64,077    3,073    3,803
  Asia.............................................    113,270      --       --
                                                    ---------- -------- --------
    Total.......................................... $  241,298 $ 54,565 $ 42,138
                                                    ========== ======== ========
</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 in each of fiscal 2000, 1999 and 1998.

  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 $326,000, $302,000 and $280,000 in fiscal 2000, 1999 and
1998, respectively. Future commitments under this agreement are approximately
$352,000 in fiscal 2001, $381,000 in fiscal 2002 and $232,000 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 $85,000, $79,000 and $73,000 in fiscal 2000, 1999 and 1998,
respectively, with future payments totaling $193,000. All of these payments
were charged to the statement of income in the year they were incurred.

  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 that 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 2000,
1999 and 1998 were sales to Cortelco totaling $7.7 million, $25.2 million and
$26.4 million, respectively. Total cost of sales for the same periods relating
to these sales to Cortelco were $5.0 million,

                                      59
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

$23.2 million and $24.3 million, 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 $2.0 million 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, $5.9 million 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 6.1 million 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 gain of $0.6 million, net of investment
writedown, on the eOn investment has been recorded in the fiscal 2000
financial statements.

12. Operating Lease Commitments

  The Company leases various plant and office equipment under noncancelable
operating leases expiring through 2010. Rent expense in fiscal 2000, 1999 and
1998 was approximately $29.9 million, $17.6 million and $14.3 million,
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>
2001...........................................    $364      $ 33,497   $ 33,861
2002...........................................     364        30,144     30,508
2003...........................................     196        27,612     27,808
2004...........................................     --         19,931     19,931
2005...........................................     --         15,185     15,185
                                                   ----      --------   --------
  Total........................................    $924      $126,369   $127,293
                                                   ====      ========   ========
</TABLE>

                                      60
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  As of December 31, 2000, the Company had equipment lease lines of
approximately $19.3 million available for purchases of manufacturing
equipment, computer hardware and software and furniture.

13. Contingencies

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

  In December 1993, CMC 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. Environmental studies done in 1999 have estimated
assessment and remediation costs at between $750,000 and $3.5 million. CMC has
not been 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, 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 the Company relating to
remediation of the site. The Company has 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 have a negative impact on 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. 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.

                                   * * * * *

                                      61
<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," "Compensation Committee and Stock
Option Committee Report on Executive Compensation" and "Audit Committee
Report" to be incorporated by reference herein from the Company's definitive
proxy statement for the Company's 2001 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.

                                      62
<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, 2000 and 1999

    Consolidated Statements of Income for the years ended December 31,
    2000, 1999 and 1998

    Consolidated Statements of Stockholders' Equity for the years ended
    December 31, 2000, 1999 and 1998

    Consolidated Statements of Cash Flows for the years ended December 31,
    2000, 1999 and 1998

    Notes to Consolidated Financial Statements

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

  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.
    3.4(13)    --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).
    4.5        --Articles of Amendment to the Second Restated Articles of
                Organization of the Company (see Exhibit 3.4).
               --Indenture for the 7% Convertible Subordinated Notes due April
    4.6(13)    15, 2007.
   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.
</TABLE>

                                      63
<PAGE>

<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <C>         <S>
   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.
   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.
</TABLE>

                                       64
<PAGE>

<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <C>         <S>
   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.
   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 Security 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)   --Amended and Restated Pledge Agreement dated July 29, 1999
                between the Company, CMC Industries, Inc. and The Chase
                Manhattan Bank, as agent.
   10.35(10)   --Mexican Stock Pledge Agreement dated July 29, 1999 between the
                Company, CMC Industries, Inc., and The Chase Manhattan Bank, as
                agent.
   10.36(11)   --Employment Agreement dated as of July 29, 1999 between the
                Company and Jack O'Rear.
   10.37(12)   --Lease Agreement dated February 22, 1999 between the Company
                and American Technologies Credit, Inc.
   10.38(12)   --Master Lease Agreement dated April 30, 1999 between the
                Company and General Electric Capital Corporation.
   10.39(12)   --Second Assignment of Sublease dated December 17, 1999 between
                the Company and Mack Technologies, Inc.
   10.40(12)   --Sublease Agreement dated October 16, 1992 between Loral
                Infrared & Imaging Systems, Inc. and Stratus Computer, Inc.
   10.41(12)   --Lease dated March 15, 2000 between the Company and Mission
                West Properties, L.P.
   10.42(13)   --Credit Agreement among ACT Manufacturing, Inc., The Several
                Lenders from Time to Time Parties Thereto, Credit Suisse First
                Boston as Syndication Agent, Societe Generale as Documentation
                Agent and The Chase Manhattan Bank as Administrative Agent
                dated as of June 29, 2000.
   10.43(14)   --Guarantee and Collateral Agreement among ACT Manufacturing,
                Inc., Certain of its Subsidiaries and The Chase Manhattan Bank
                dated as of June 29, 2000.
   10.44(14)   --Form of Term Note.
   10.45(14)   --Form of Multi-Currency Revolving Credit Note.
   10.46(14)   --Form of U.S. Dollar Revolving Credit Note.
   10.47(14)   --Master Equipment Lease Agreement No. 35018 between Fleet
                Capital Corporation and ACT Manufacturing, Inc. dated June 6,
                2000.
   10.48(15)   --First Amendment to Credit Agreement dated September 26, 2000
                among the Company, The Several Lenders from Time to Time
                Parties, Thereto Credit Suisse First Boston as Syndication
                Agent, Societe Generale as Documentation Agent and The Chase
                Manhattan Bank as Administrative Agent.
</TABLE>

                                       65
<PAGE>

<TABLE>
<CAPTION>
   Exhibit No.                            Description
   -----------                            -----------
   <C>         <S>
   10.49(15)   --Assumption Agreement to the Credit Agreement dated August 31,
                2000 made by ACT Manufacturing US Holding LLC.
   10.50(15)   --Employment Agreement between the Company and Robert Zinn dated
                August 2, 2000.
   10.51*      --Second Amendment to Credit Agreement dated December 27, 2000
                among the Company, The Several Lenders from Time to Time
                Parties, Thereto Credit Suisse First Boston as Syndication
                Agent, Societe Generale as Documentation Agent and The Chase
                Manhattan Bank as Administrative Agent.
   10.52*      --Lease dated September 14, 2000 between Industrial Developments
                International (Texas), L.P. and the Company.
   10.53*      --Lease dated March 15, 2001 between Fraccionadora Dinamica del
                Pacifico S.A. de C.V. and CMC Industrias Hermosillo S.A. de
                C.V.
   21.1(15)    --Subsidiaries of Registrant.
   23.1*       --Consent of Deloitte & Touche LLP.
   24.1        --Power of Attorney (see Page 68 of this Form 10-K).
</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.
(12) Incorporated herein by reference to the exhibits to the Company's Annual
     Report on Form 10-K for the year ended December 31, 1999.
(13) Incorporated herein by reference to the exhibits to the Company's
     Registration Statement on Form S-3 dated July 14, 2000 (File No. 333-
     41406).
(14) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended June 30, 2000.
(15) Incorporated herein by reference to the exhibits to the Company's
     Quarterly Report on Form 10-Q for the period ended September 30, 2000.
  * Filed herewith.

  (b) REPORTS ON FORM 8-K

  Not applicable.

  (c) EXHIBITS

                                      66
<PAGE>

  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 SCHEDULE

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

                                      67
<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 30, 2001
                                                     /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 Christopher L. Gorgone,
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 30, 2001
______________________________________  Officer and Director
             John A. Pino               (Principal Executive
                                        Officer)

      /s/ Christopher L. Gorgone       Interim Chief Financial      March 30, 2001
______________________________________  Officer, Vice President
        Christopher L. Gorgone          of Administration,
                                        Treasurer and Clerk
                                        (Principal Financial and
                                        Accounting Officer)

         /s/ Edward T. Cuddy           Director                     March 30, 2001
______________________________________
           Edward T. Cuddy

         /s/ Bruce R. Gardner          Director                     March 30, 2001
______________________________________
           Bruce R. Gardner

         /s/ Frederick Gibbs           Director                     March 30, 2001
______________________________________
           Frederick Gibbs

           /s/ David S. Lee            Director                     March 30, 2001
______________________________________
             David S. Lee

         /s/ Donald G. Polich          Director                     March 30, 2001
______________________________________
           Donald G. Polich
</TABLE>


                                      68
<PAGE>

                                  SCHEDULE II

                            ACT MANUFACTURING, INC.

                 Valuation and Qualifying Accounts and Reserves
              For the years ended December 31, 2000, 1999 and 1998

<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,
 1998.............................   $ 2,105     $ 1,945      $ 2,817      $ 1,233
For the year ended December 31,
 1999.............................     1,233       3,957        2,251        2,939
For the year ended December 31,
 2000(1)..........................     2,939      12,026        4,887       10,078

INVENTORY RESERVE:
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
For the year ended December 31,
 2000(2)...............................2,172.     15,281        4,882       12,571
</TABLE>
--------
(1) Amounts purchased via acquisitions of $7,191,000 are included in additions.
(2) Amounts purchased via acquisitions of $9,232,000 are included in additions.


                                       69