<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION


                             WASHINGTON, DC 20549
                             --------------------
                                   FORM 10-Q

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

                 For the Quarterly Period Ended June 30, 2001

                                      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)


         Massachusetts                                       04-2777507
         --------------------------------------------------------------
(State or other jurisdiction of incorporation           (IRS Employer ID. No.)
                             or organization)


    2 Cabot Road, Hudson, Massachusetts                               01749
    -----------------------------------------------------------------------
   (Address of principal executive offices)                       (zip code)

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

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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

         Common Stock          17,074,403 Shares
         ------------          -----------------

          (Class)         (Outstanding on August 2, 2001)

                                       1
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
                               INDEX TO FORM 10-Q

                                                                           Page
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited):

          Condensed Consolidated Statements of Operations for the
          three months and six months ended June 30, 2001 and 2000.........  3

          Condensed Consolidated Balance Sheets as of June 30,
          2001 and December 31, 2000.......................................  4

          Condensed Consolidated Statements of Cash Flows for the
          six months ended June 30, 2001 and 2000..........................  5

          Notes to Unaudited Condensed Consolidated
          Financial Statements.............................................  6

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.............................. 14

Item 3.   Quantitative and Qualitative Disclosures about
          Market Risk...................................................... 28

PART II. OTHER INFORMATION

Item 4.   Submission of Matters to a Vote of Security Holders.............. 29

Item 6.   Exhibits and Reports on Form 8-K................................. 30

          Signatures....................................................... 31

          Exhibit Index.................................................... 32

                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per share data - Unaudited)

<TABLE>
<CAPTION>

                                                   Three Months Ended June 30,        Six Months Ended June 30,
                                                   ---------------------------        -------------------------
                                                        2001              2000             2001            2000
                                                        ----              ----             ----            ----
<S>                                               <C>               <C>              <C>             <C>
Net sales                                           $344,925         $ 252,970        $ 790,181       $ 482,058
Cost of goods sold                                   322,210           230,279          734,908         439,368
Special charges                                        6,847                 -            6,847               -
                                                    --------         ---------        ---------       ---------
Gross profit                                          15,868            22,691           48,426          42,690

Selling, general and administrative expenses          12,206             8,162           26,250          17,249
Amortization of goodwill                               3,692               236            7,382             472
Special charges                                        6,540                 -            6,540               -
                                                    --------         ---------        ---------       ---------
Operating (loss) income                               (6,570)           14,293            8,254          24,969

Interest and other expense, net                       (6,620)           (2,772)         (14,652)         (3,365)
                                                    --------         ---------        ---------       ---------
(Loss) income before provision for income taxes      (13,190)           11,521           (6,398)         21,604

Income tax (benefit) expense                          (5,144)            4,493           (3,106)          8,426
                                                    --------         ---------        ---------       ---------
Net (loss) income                                   $ (8,046)        $   7,028        $  (3,292)      $  13,178
                                                    ========         =========        =========       =========

Basic net (loss) income per common share            $  (0.47)        $    0.42        $   (0.19)      $    0.79
Diluted net (loss) income per common share          $  (0.47)        $    0.40        $   (0.19)      $    0.74

Weighted average shares outstanding -- basic          17,072            16,716           17,060          16,631
Weighted average shares outstanding -- diluted        17,072            17,745           17,060          17,755
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       3
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                    June 30,    December 31,
                                                                                                      2001         2000
                                                                                                     ------        -----
                                                                                                   (Unaudited)

<S>                                                                                                    <C>        <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents..........................................................................  $ 19,853   $   48,298
  Accounts receivable - trade, net...................................................................   251,717      351,925
  Accounts and notes receivable from related party...................................................     3,044        3,331
  Inventory..........................................................................................   276,491      401,325
  Deferred tax assets................................................................................     7,940        8,258
  Prepaid taxes......................................................................................     7,800        2,506
  Prepaid expenses and other assets..................................................................    13,723        9,140
                                                                                                       --------   ----------

    Total current assets.............................................................................   580,568      824,783
                                                                                                       --------   ----------

PROPERTY AND EQUIPMENT--Net..........................................................................    75,763       77,888
DEFERRED TAX ASSET...................................................................................     1,647        1,647
GOODWILL--Net........................................................................................   136,923      144,250
OTHER ASSETS--Net....................................................................................    18,294       19,235
                                                                                                       --------   ----------

TOTAL................................................................................................  $813,195   $1,067,803
                                                                                                       ========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes payable bank.................................................................................  $ 13,121   $   10,863
  Current portion of long-term debt..................................................................    19,925       15,627
  Current portion of other long-term liabilities.....................................................     1,573        3,481
  Accounts payable...................................................................................   196,753      337,407
  Advance from customer..............................................................................       ---       50,000
  Due to Bull SA.....................................................................................       ---        8,711
  Accrued compensation and related taxes.............................................................     2,960        5,906
  Income tax payable.................................................................................       ---        9,969
  Deferred tax liabilities...........................................................................       ---           45
  Accrued expenses and other.........................................................................    22,265       31,917
                                                                                                       --------   ----------

    Total current liabilities........................................................................   256,597      473,926
                                                                                                       --------   ----------

LONG-TERM DEBT--less current portion.................................................................   227,701      255,517
DEFERRED TAXES.......................................................................................     7,955        8,143
OTHER LONG-TERM LIABILITES...........................................................................     8,225        9,973
CONVERTIBLE SUBORDINATED NOTES.......................................................................   100,000      100,000

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
  Preferred stock....................................................................................       ---          ---
  Common stock.......................................................................................       171          170
  Additional paid-in capital.........................................................................   171,503      171,220
  Accumulated other comprehensive loss...............................................................    (5,318)        (799)
  Retained earnings..................................................................................    46,361       49,653
                                                                                                       --------   ----------
    Total stockholders' equity.......................................................................   212,717      220,244
                                                                                                       --------   ----------
TOTAL................................................................................................  $813,195   $1,067,803
                                                                                                       ========   ==========

</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       4
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (IN THOUSANDS - UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                   Six Months Ended
                                                                                                        June 30,
                                                                                                     2001        2000
                                                                                                     ----        ----

<S>                                                                                                 <C>         <C>
Cash flows from operating activities:
  Net income (loss)...............................................................................  $  (3,292)  $ 13,178
  Adjustments to reconcile net income to net cash
  provided by (used for) operating activities:
    Depreciation and amortization.................................................................     15,147      4,603
    Deferred income taxes.........................................................................         85        ---
    Gain on the sale of investment in affiliate...................................................        ---       (894)
    Loss on disposal of fixed assets..............................................................        384        ---
  Increase (decrease) in cash from:
    Accounts receivable...........................................................................    100,495    (47,062)
    Inventory.....................................................................................    124,834    (36,323)
    Prepaid expenses and other assets.............................................................     (9,877)    (6,671)
    Accounts payable..............................................................................   (140,654)   (28,933)
    Advance from customer.........................................................................    (50,000)    50,000
    Accrued expenses and other....................................................................    (22,570)     4,852
                                                                                                    ---------   --------

  Net cash provided by (used for) operating activities                                                 14,552    (47,250)

Cash flows from investing activities:
  Acquisition of property and equipment...........................................................     (5,413)    (3,834)
  Proceeds from the sale of investment in affiliate...............................................        ---      6,417
  Decrease (increase) in other assets.............................................................        889    (12,828)
  Final cash settlement to Bull S.A. of 2000 acquisition..........................................     (8,711)       ---
                                                                                                    ---------   --------

Net cash used for investing
 activities.......................................................................................    (13,235)   (10,245)

Cash flows from financing activities:
  Net (repayments) borrowings under line-of-credit
   agreements.....................................................................................    (16,742)    81,224
  Proceeds from sale of convertible subordinated notes............................................        ---    100,000
  Principal payments on term loans, net...........................................................     (6,879)    (6,750)
  Decrease in other liabilities...................................................................     (4,023)      (759)
  Net proceeds from exercise of stock options.....................................................        284      3,273
                                                                                                    ---------   --------

Net cash (used for) provided by financing
 activities.......................................................................................    (27,360)   176,988

Effect of exchange rate changes on cash
 and cash equivalents.............................................................................     (2,402)       336
                                                                                                    ---------   --------

Net (decrease) increase in cash and
 cash equivalents.................................................................................    (28,445)   119,829
Cash and cash equivalents, beginning
 of period........................................................................................     48,298      4,558
                                                                                                    ---------   --------

Cash and cash equivalents, end of period..........................................................  $  19,853   $124,387
                                                                                                    =========   ========

</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       5
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
     NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The unaudited interim condensed consolidated financial statements furnished
herein reflect all adjustments, which in the opinion of management are of a
normal recurring nature necessary for a fair presentation of results for these
interim periods. Certain information and footnote disclosures normally included
in ACT Manufacturing, Inc.'s ("the Company") annual consolidated financial
statements have been condensed or omitted. The unaudited interim condensed
consolidated financial statements have been prepared on a basis substantially
consistent with the audited consolidated financial statements. The results of
operations for the interim period ended June 30, 2001 are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These interim condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the period ended
December 31, 2000 filed with the Securities and Exchange Commission.

Basis of Consolidation

The accompanying unaudited interim condensed consolidated financial statements
include the accounts of ACT Manufacturing, Inc. and its majority- owned
subsidiaries. All intercompany balances and transactions have been eliminated.
All of the Company's subsidiaries are on a calendar year-end except for ACT
Manufacturing Thailand, which has a November 24 year-end. Accordingly, its
financial position and results of operations for the three and six-month periods
ended May 26, 2001 are included in our unaudited interim condensed consolidated
financial statements.

2. BANK FINANCING

On June 29, 2000, the Company revised its Credit Agreement to increase the
Company's previous credit facility. The Company's Credit Agreement ("Credit
Agreement") with these lenders provides that the lenders will make available to
the Company up to $150.0 million of revolving loans and up to $100.0 million of
term loans. The Company borrowed $75.0 million of the term loan on August 31,
2000 to fund a portion of the purchase price of ACT Manufacturing France. The
Company borrowed the remaining $25.0 million of the term loan on December 27,
2000 to refinance a portion of the debt of ACT Manufacturing Thailand.

The Credit Agreement requires the Company to meet certain financial conditions,
including net worth and the ratios 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
Effective June 30, 2001, the Company entered into an amendment to its Credit
Agreement with a syndicate of financial institutions led by the Chase Manhattan
Bank, as administrative agent (the "Credit Agreement"), to revise certain
financial covenants in addition to other changes including adjustments in the
daily operational processing of loan activity.

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.  During the second quarter of 2001, the Company repaid $3.0
million of these term loans in accordance with the Credit Agreement.

                                       6
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


On December 27, 2000, the Company entered into an amendment to the Credit
Agreement which made available additional five year term loans (the "Additional
Term Loans") in the aggregate amount of up to $100.0 million, subject to certain
conditions. The Company did not draw on this facility, and the ability to draw
on the facility expired on May 18, 2001.

At June 30, 2001, $121.0 million of the Credit Agreement was utilized for
revolving loans, $1.9 million was utilized for letters of credit and an
additional $18.7 million was available for use based upon the applicable
borrowing base. At June 30, 2001, $85.0 million of the outstanding revolving
loans carried an interest rate of 6.58%, $20.0 million carried an interest rate
of 6.52%, and the remaining $16.0 million carried an interest rate of 8.25%. At
June 30, 2001, $91.0 million was outstanding on the term loan at an interest
rate of 6.63%.

On March 29, 2001, ACT Manufacturing Thailand entered into a new Credit
Agreement ("Thai Credit Agreement") with Thai Farmers Bank Public Company
Limited and Bank of Ayudhya Public Company Limited. The Thai Credit Agreement
provides that the lenders will make available to ACT Manufacturing Thailand up
to approximately $53.5 million in revolving loans, term loans and machinery
loans for a term of five years. The Thai Credit Agreement is secured by land,
buildings and machinery, and the guarantee of ACT Manufacturing, Inc. In
addition, the Thai Credit Agreement provides for approximately $1.3 million
(60.0 million Thai baht) in working capital availability. Borrowings will bear
interest at LIBOR plus 2.5%.

At May 26, 2001, ACT Manufacturing Thailand had revolving and term loans with
various financial institutions aggregating $53.5 million at interest rates
ranging from LIBOR plus 2.5% to LIBOR plus 4%.  At May 26, 2001, $35.6 million
was outstanding at interest rates ranging from 6.25% to 8.00%. The loans are
secured by land, buildings, and machinery, in addition to the guarantee of ACT
Manufacturing, Inc. In addition, ACT Manufacturing Thailand had approximately
$1.3 million (60 million Thai baht) in working capital availability which bears
interest at LIBOR plus 2.5%.

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 $14.8 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 June 30, 2001, the
outstanding balance was approximately $13.1 million and was at an interest rate
of 5.15%.  The same credit agreement provides ACT Manufacturing France with a
credit line in the amount of approximately $9.0 million for sales of accounts
receivable, none of which was outstanding at June 30, 2001.  In addition, ACT
Manufacturing France has a capital lease line of approximately $6.7 million, of
which approximately $2.7 million was utilized at June 30, 2001.

3.  CONVERTIBLE SUBORDINATED NOTES ISSUANCE

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 which occurred in August 2000. Prior to the acquisition, 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.

                                       7
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

4.  INVENTORY

Inventory consisted of the following at the dates indicated (in thousands):
<TABLE>
<CAPTION>
                   June 30,  December 31,
                     2001         2000
                    ------       -------
<S>                <C>       <C>
Raw material.....  $223,391      $327,046
Work in process..    44,007        58,236
Finished goods...     9,093        16,043
                   --------      --------

Total............  $276,491      $401,325
                   ========      ========

</TABLE>
The carrying value of inventory approximates replacement cost.

5.  NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted net income per common share reflects
the potential dilution as if common equivalent shares outstanding (common stock
options and the exchange of convertible notes for common stock) were exercised
and/or converted into common stock unless the effect of such equivalent shares
was antidilutive.

A reconciliation of net income (loss) per common share and the weighted average
shares used in the earnings per share ("EPS") calculations for the periods
indicated is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>

                                    Net Income      Weighted      Net Income
                                      (Loss)     Average Shares     (Loss)
                                    (Numerator)   (Denominator)    Per Share
                                    -----------  ---------------  -----------
<S>                                 <C>          <C>              <C>

Three Months Ended June 30, 2001
 Basic............................   $(8,046)       17,072       $(0.47)
                                     =======
 Effect of stock options..........                      --           --
                                                     -----       ------

 Diluted..........................   $(8,046)       17,072       $(0.47)
                                     =======        ======       ======


Three Months Ended June 30, 2000
 Basic............................   $ 7,028        16,716       $0.42
                                     =======


 Effect of stock options..........                   1,029        (0.02)
                                                    ------       ------

 Diluted..........................   $ 7,028        17,745       $ 0.40
                                     =======        ======       ======

</TABLE>

                                       8
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
<TABLE>
<CAPTION>

                                  Net Income      Weighted      Net Income
                                    (Loss)     Average Shares     (Loss)
                                  (Numerator)   (Denominator)    Per Share
                                  -----------  ---------------  -----------
<S>                               <C>          <C>              <C>

Six Months Ended June 30, 2001
 Basic..........................     $(3,292)       17,060       $(0.19)
                                     =======
 Effect of stock options........                       ---          ---

 Diluted........................     $(3,292)       17,060       $(0.19)
                                     =======        ======       ======

Six Months Ended June 30, 2000
 Basic..........................     $13,178        16,631       $ 0.79
                                     =======
 Effect of stock options........                     1,124        (0.05)
                                                     -----       ------

 Diluted........................     $13,178        17,755       $ 0.74
                                     =======        ======       ======
</TABLE>


Options to purchase 1,546,000 and 1,321,000 shares of common stock were
outstanding for the three-month and six-month periods ended June 30, 2001, but
were not included in the computation of diluted EPS due to the net loss recorded
by the Company during these periods, and therefore, their effect would be
antidilutive.  For the three-month and six-month periods ended June 30, 2000,
options to purchase 41,000 shares of common stock  were excluded from the
computation of diluted EPS as their effect would be antidilutive.

For the three-month and six-month periods ended June 30, 2001 and 2000, the
assumed conversion of the convertible subordinated notes into 2,330,460 shares
of common stock was excluded from the computation of diluted EPS, as its
inclusion would have been antidilutive.


6.  COMPREHENSIVE (LOSS) INCOME

A summary of comprehensive (loss) income for the three-month and six-month
periods ended June 30, 2001 and 2000 is as follows (in thousands):

<TABLE>
<CAPTION>

                                                                    Three Months Ended                      Six Months Ended
                                                                         June 30,                               June 30,
                                                               ------------------------               ------------------------
                                                                   2001            2000                   2001            2000
                                                                   ----            ----                   ----            ----
<S>                                                            <C>             <C>                    <C>            <C>
Net (loss) income                                              $ (8,046)        $ 7,028               $ (3,292)       $ 13,178
Other comprehensive income (loss):
Lower (excess) of cost of hedging contracts
   over their fair value                                          1,241               -                   (197)              -
Foreign currency translation adjustment                          (2,084)           (140)                (4,322)           (316)
                                                               --------         -------               --------        --------
Comprehensive (loss) income                                    $ (8,889)        $ 6,888               $ (7,811)       $ 12,862
                                                               ========         =======               ========        ========
</TABLE>

                                       9
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


Derivative gains and losses included in Accumulated Other Comprehensive Income
("AOCI") are reclassified into earnings at the time the forecasted revenue or
expense item is recognized.  During the three months ended June 30, 2001,
approximately $1,438,000 of derivative losses were reclassified to the
statements of income.  The derivative losses reclassified to the statements of
income were offset by gains on the items being hedged.

7.  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 are administered on a
global basis and these expenses are currently recorded where disbursed. As such,
the Company does not currently allocate these expenses across its two segments.
The amounts recorded in the tables below include special charges of $6,847,000
in North American gross profit and $6,540,000 in corporate expenses for the
three and six months ended June 30, 2001.

A summary of the Company's operating results, by segment, for the three-month
and six-month periods ended June 30, 2001 and 2000, as well as the assets by
segment at June 30, 2001 and December 31, 2000, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 Three Months Ended                      Six Months Ended
                                                                        June 30,                               June 30,
                                                               ------------------------               ------------------------
                                                                   2001            2000                   2001            2000
                                                                   ----            ----                   ----            ----
<S>                                                          <C>             <C>                    <C>             <C>
Net Sales
     North America                                            $ 210,946      $  250,114               $485,399        $475,838
     International                                              133,979           2,856                304,782           6,220
                                                              ---------      ----------               --------        --------
     Total                                                    $ 344,925      $  252,970               $790,181        $482,058
                                                              =========      ==========               ========        ========
Gross Profit
     North America                                            $   3,246      $   22,577                $20,981        $ 42,686
     International                                               12,622             114                 27,445               4
                                                              ---------      ----------               --------        --------
     Total                                                    $  15,868      $   22,691               $ 48,426        $ 42,690

Corporate Expenses                                               23,914          15,663                 51,718          29,512
                                                              ---------      ----------               --------        --------
Net (Loss) Income                                             $  (8,046)     $    7,028               $ (3,292)       $ 13,178
                                                              =========      ==========               ========        ========
<CAPTION>
                                                                 June 30,       December 31,
                                                                   2001            2000
                                                                   ----            ----
<S>                                                          <C>             <C>                    <C>             <C>
Segment Assets
     North America                                            $ 459,207        $667,043
     International                                              353,988         400,760
                                                              ---------      ----------
     Total                                                    $ 813,195      $1,067,803
                                                              =========      ==========
</TABLE>

                                       10
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


Geographic Information

The Company operates manufacturing facilities in the United States, Mexico,
Ireland, France and Thailand. Geographic data for net sales for the three-month
and six-month periods ended June 30, 2001 and 2000, as well as long-lived assets
(which consist mainly of property, plant and equipment and intangibles) at
June 30, 2001 and December 31, 2000, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                    Three Months Ended                      Six Months Ended
                                                                         June 30,                               June 30,
                                                                   --------------------                   --------------------
                                                                   2001            2000                   2001            2000
                                                                   ----            ----                   ----            ----
<S>                                                          <C>             <C>                    <C>             <C>
Net Sales
     North America                                            $ 210,946       $ 250,114              $ 485,399       $ 475,838
     Europe                                                      78,187           2,856                183,686           6,220
     Asia                                                        55,792               -                121,096               -
                                                              ---------       ---------              ---------       ---------
     Total                                                    $ 344,925       $ 252,970              $ 790,181       $ 482,058
                                                              =========       =========              =========       =========
<CAPTION>
                                                               June 30,      December 31,
                                                                 2001            2000
                                                                 ----            ----
<S>                                                          <C>             <C>
Long-Lived Assets
     North America                                            $  62,543       $  63,951
     Europe                                                      60,112          64,077
     Asia                                                       109,972         113,270
                                                              ---------       ---------
     Total                                                    $ 232,627       $ 241,298
                                                              =========       =========
</TABLE>

                                       11
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

8.  RECENT FINANCIAL ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations"
("SFAS 141") and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 requires business combinations initiated after June 30, 2001 to
be accounted for using the purchase method of accounting, and broadens the
criteria for recording intangible assets separate from goodwill. Recorded
goodwill and intangibles will be evaluated against this new criteria and may
result in certain intangibles being reclassified into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization. Under SFAS No. 142,
goodwill and certain intangibles are not amortized into results of operations,
but instead are reviewed for impairment and written down and charged to
operations only in the periods in which the recorded value of goodwill and
certain intangibles is more than its fair value. The provisions of each
statement which apply to goodwill and intangible assets acquired prior to June
30, 2001 will be adopted by the Company on January 1, 2002. The Company expects
that the adoption of these accounting standards will result in certain
intangible assets being reclassified into goodwill and will have the impact of
reducing amortization of goodwill and certain intangibles commencing January 1,
2002; however, impairment reviews may result in future periodic write-downs of
goodwill.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), 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 and establishes criteria for
designation and effectiveness of hedging relationships. 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. All of the derivatives used by the France subsidiary are highly
effective as defined by SFAS No. 133 because all of the critical terms of the
derivatives match those of the hedged items.

On June 29, 2001, the Company entered into an interest rate swap agreement with
JP Morgan Chase in order to eliminate interest rate risk on the term loan
portion of the Credit Agreement. The contract, which has a termination date of
June 29, 2005, stipulates that the notional swap amount will decrease as
principal payments are made to the term loan as prescribed by the Credit
Agreement. The Company will pay the bank counterparty a fixed interest rate of
4.94% for the duration of the contract; in return, the Company will receive the
three month LIBOR rate. This rate will reset on a quarterly basis to the
published three month LIBOR rate. The three month LIBOR rate on June 29, 2001
was 3.71%.

The Company adopted SFAS No. 133 and the corresponding amendments under SFAS No.
138 on January 1, 2001, as required.  Adoption of SFAS No. 133 on January 1,
2001 resulted in a cumulative unrealized gain recorded to Accumulated Other
Comprehensive Income ("AOCI") of $3.2 million.  As of June 30, 2001, the Company
recorded an unrealized loss of $0.2 million to AOCI in the balance sheet.

                                       12
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

9.  CONTINGENCIES

In December 1993, CMC Industries a subsidiary of the Company 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.

From time to time, the Company is also subject to claims or litigation
incidental to its business. In particular, as a result of the recent downturn in
the electronics industry, the Company has been increasingly involved in pursuit
of claims and litigation against third parties for the collection on accounts
receivables, and defending claims and litigation against third party vendors
with respect to payment claims.  While the Company believes that these claims,
in the aggregate, will not have a material adverse effect on its ongoing
business, no assurance can be given that the ultimate resolution of any claims
and related expenses, individually or in the aggregate, will not have a material
adverse effect on the Company's consolidated financial position or results of
operations for any particular period.


10.  SPECIAL CHARGES

The Company incurred special charges totaling $13.4 million in the second
quarter of 2001.  Special charges of $6.8 million were recorded as a component
of gross profit, and relate to inventory reserves, unrecovered overhead on parts
shipped to customers or returned to vendors,  and disposition costs incurred in
connection with the Company's inventory reduction program implemented during the
three months ended June 30, 2001.  This inventory reduction program consisted of
disposing of excess quantities of parts to suppliers and vendors.  Additional
special charges of $6.6 million were recorded as a component of operating
expenses, and consisted of severance costs associated with reductions in
workforce of approximately 1,600 employees primarily in the manufacturing
discipline, professional fees incurred with postponed financings, and leases for
equipment taken out of operation.  As of June 30, 2001, approximately $2.1
million of the special charge remains unpaid and will be paid out through
March 2002. The Company anticipates that it will record an additional special
charge in the third quarter of 2001 related to severance and other potential
cost reduction activities.

11. SUBSEQUENT EVENT

In July 2001, the Company acquired the Leicester, United Kingdom manufacturing
facility of Fisher-Rosemount Systems, the process management division of Emerson
Electric, Inc. The terms of the agreement included a cash payment by the
Company, the acquisition of certain inventory, and assumption of certain
liabilities. The results of operations of Fisher Rosemount Systems are not
significant to the Company and, accordingly, pro forma information has not been
presented.

                                       13
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

This Quarterly Report on Form 10-Q, including the following discussions,
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 Quarterly Report that are not statements of historical facts
are forward-looking statements, which involve risks and uncertainties. Our
actual results may differ materially from those indicated in the forward-looking
statements as a result of the factors set forth elsewhere in this Quarterly
Report on Form 10-Q, including under "Cautionary Statements." You should read
the following discussion and analysis together with our condensed consolidated
financial statements for the periods specified and the related notes included
herein. Further reference should be made to our Annual Report on Form 10-K for
the period ended December 31, 2000.

The term "quarter" refers to the three-month period ending June 30 of the
respective year.

OVERVIEW

We are a leading global provider of value-added electronics manufacturing
services to original equipment manufacturers ("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 subassembly, 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 are experiencing economic downturns currently, including those
in 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 have and could continue to materially and negatively impact us. The
recessionary period or other events leading to excess capacity affecting one or
more segments of the electronics industry we serve could likely result in
intensified price competition, reduced margins and a decrease in our net sales.

We currently manufacture at thirteen facilities having an aggregate of
approximately 1.7 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; Hermosillo, Mexico; Leicester, United Kingdom 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 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 later in fiscal 2001. We have
also signed a lease for a 100,000 square foot new products introduction,
prototype and manufacturing facility in Dallas, Texas. We plan to begin
operating in this new facility later in fiscal 2001. Our facilities contained
109 surface mount technology lines ("SMT lines") at June 30, 2001.

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

                                       14
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

 .  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.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001 AND 2000

Net sales increased $91.9 million or 36.3% to $344.9 million for the second
quarter of 2001 compared with $253.0 million for the second quarter of 2000. The
increase was attributable principally to the inclusion of ACT Manufacturing
France net sales of $74.9 million and the inclusion of ACT Manufacturing
Thailand net sales of $55.8 million, each of which was acquired in August 2000,
offset by decreased revenues in the North American business.

Gross profit excluding special charges of $6.8 million, remained constant at
$22.7 million for the second quarter of 2001 compared to the prior year quarter.
Gross profit as a percentage of net sales ("gross margin") decreased to 6.6%
before special charges for the second quarter of 2001 from 9.0% for the second
quarter of 2000. The decrease in the gross margin is primarily attributable to
the shipment of a greater percentage of parts to customers in order to reduce
inventory levels and a decrease in our overall capacity utilization rate.  Parts
sales to customers totaled approximately $50 million for the second quarter of
2001.

Selling, general and administrative ("SG&A") expenses increased $4.0 million or
49.5% to $12.2 million, or 3.5% of net sales, for the second quarter of 2001
compared with $8.2 million, or 3.2% of net sales, for the second quarter of
2000. SG&A expenses increased in both absolute dollars and as a percentage of
sales due to the inclusion of expenses of ACT Manufacturing France and ACT
Manufacturing Thailand and the additional spending in corporate infrastructure
to support our global operations.

Amortization of goodwill increased $3.5 million to $3.7 million for the second
quarter of 2001 compared to $0.2 million for the second quarter of 2000. The
increase is due to the additional goodwill amortization resulting from the
purchases of ACT Manufacturing France and ACT Manufacturing Thailand.

We incurred special charges totaling $13.4 million in the second
quarter of 2001.  Special charges of $6.8 million were recorded as a component
of gross profit, and relate to inventory reserves recorded and disposition costs
incurred in connection with our inventory reduction program implemented during
the quarter. This inventory reduction program consisted of the disposition of
excess quantities of parts to suppliers and vendors, and resulted in an overall
inventory reduction of $96 million during the second quarter of 2001. Additional
special charges of $6.6 million were recorded as a component of operating
expenses and consisted of severance costs associated with reductions in
workforce of approximately 1,600 employees primarily in the manufacturing
discipline, professional fees in connection with postponed financings, and
leases for equipment taken out of operation. As of June 30, 2001, approximately
$2.1 million of the special charge remains unpaid and will be paid out through
March 2002.

Our operating loss including special charges was $6.6 million for the second
quarter of 2001 compared with operating income of $14.3 million for the second
quarter of 2000 as a result of the above factors.

Interest and other expense, net increased $3.8 million to $6.6 million for the
second quarter of 2001 compared to $2.8 million for the second quarter of 2000.
This increase is primarily attributable to higher debt levels generated by
acquisition activity in 2000, as our debt has increased by approximately $135
million from June 30, 2000.

                                       15
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

The provision for income taxes was recorded using a 39.0% effective tax rate for
both the second quarter of 2001 and the comparable prior year period. In
Thailand, the Company currently operates under a "tax holiday" that will expire
in 2002 unless it is renewed. Upon the expiration of the "tax holiday" the
Company is 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.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2001 AND 2000

Our net sales increased $308.1 million or 63.9% to $790.2 million for the six
months ended June 30, 2001 compared with $482.1 million for the comparable
period of 2000. The increase was attributable principally to the inclusion of
ACT Manufacturing France net sales of $176.9 million and the inclusion of ACT
Manufacturing Thailand net sales of $121.1 million, each of which was acquired
in August 2000.

Gross profit before special charges increased $12.6 million to $55.3 million for
the six months ended June 30, 2001 compared with $42.7 million for the
comparable period in 2000. The gross profit increase was primarily attributable
to the growth in our overall sales volume.  Gross profit before special charges
as a percentage of net sales ("gross margin") decreased to 7.0% for the six
months ended June 30, 2001 from 8.9% for the comparable period in 2000. The
decrease in the gross margin is primarily attributable to the shipment of a
greater percentage of lower margin products and parts to customers in order to
reduce inventory levels and a decrease in our overall capacity utilization rate.
Parts sales to customers totaled approximately $75 million for the six months
ended June 30, 2001.

Selling, general and administrative ("SG&A") expenses increased $9.1 million to
$26.3 million, or 3.3% of net sales, for the six months ended June 30, 2001
compared with $17.2 million, or 3.6% of net sales, for the comparable period in
2000. SG&A expenses increased in absolute dollars due to the inclusion of
expenses of ACT Manufacturing France and ACT Manufacturing Thailand and the
additional spending in corporate infrastructure to support our global
operations.  SG&A expenses as a percentage of net sales, however, decreased due
to the fact that ACT Manufacturing France and ACT Manufacturing Thailand had
lower SG&A expenses as a percentage of net sales than our North American
operations.

Amortization of goodwill increased to $7.4 million for the six months ended June
30, 2001 compared to $0.5 million for the comparable period in 2000. The
increase is due to the additional goodwill amortization resulting from the
purchases of ACT Manufacturing France and ACT Manufacturing Thailand.

Special charges of $13.4 million were recorded during the six months ended June
30, 2001 as previously described.

Operating income decreased to $8.3 million, or 1.0% of net sales, for the six
months ended June 30, 2001 compared with operating income of $25.0 million, or
5.2% of net sales, for the comparable period in 2000, primarily as a result of
the special charges recorded in the second quarter of 2001.

Interest and other expense increased to $14.7 million for the six months ended
June 30, 2001 compared to $3.4 million for the comparable period in 2000. This
increase is primarily attributable to higher debt levels in 2001, due to the
acquisition activity that occurred during the second half of 2000.  Total debt
is approximately $135 million higher at June 30, 2001 as compared to June 30,
2000.

                                       16
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

The Company recorded an income tax benefit of $3.1 million for the six months
ended June 30, 2001 and income tax expense of $8.4 million for the comparable
period in 2000. The effective rate was 48.5% for the six months ended June 30,
2001 as compared to 39% for the comparable period in 2000. The difference in
rates is primarily attributable to the inclusion in 2001 of the income of ACT
Manufacturing Thailand, which is not subject to the Thai income tax. 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. Since the Company
had positive pre-tax income in Thailand and negative pre-tax income in the
domestic operations, a significant tax benefit was generated in 2001.  The rate
at which income taxes will be provided in future periods will depend on taxable
income by tax jurisdiction.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We had working capital of $324.0 million at June 30, 2001 compared with $350.9
million at December 31, 2000. Operating activities generated $14.6 million of
cash in the six months ended June 30, 2001 compared with cash used for
operations of $47.3 million in the comparable period of 2000.  The primary
sources of cash in the six months ended June 30, 2001 included a decrease in
accounts receivable of $100.5 million and a decrease in inventory of $124.8
million, offset by decreases in accounts payable of $140.7 million and repayment
of an advance from a customer of $50.0 million.   The decrease in accounts
receivable was primarily due to lower revenue levels generated during 2001,
while the decrease in inventory was the result of improvements in supply chain
management in addition to the sales of parts to customers.  The decrease in
accounts payable was due to reduced purchasing activity. As a result of the
recent downturn in the electronic industry, we have been increasingly involved
in the pursuit of claims and litigation against third parties for the collection
of accounts receivables. Any inability or unwillingness of a customer to pay for
products and services on a timely basis or at all could materially adversely
impact our cash flow, operating results and our financial condition in a
particular period.

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 was unsecured and non- interest bearing.
The advance was repaid in April 2001 primarily through the offset of invoices.

Effective June 30, 2001, the Company entered into an amendment to the Credit
Agreement with a syndicate of Financial Institutions led by the Chase Manhattan
Bank, as administrative agent (the "Credit Agreement"), to revise certain
financial covenants in addition to other changes including adjustments in the
daily operational processing of loan activity.

On March 29, 2001, ACT Manufacturing Thailand entered into a new Credit
Agreement ("Thai Credit Agreement") with Thai Farmers Bank Public Company
Limited and Bank of Ayudhya Public Company Limited. The Thai Credit Agreement
provides that the lenders will make available to ACT Manufacturing Thailand up
to approximately $53.5 million in revolving loans, term loans and machinery
loans for a term of five years. The Thai Credit Agreement is secured by land,
buildings and machinery, and the guarantee of ACT Manufacturing, Inc. In
addition, the Thai Credit Agreement provides for approximately $1.3 million
(60.0 million Thai baht) in working capital availability. Borrowings will bear
interest at LIBOR plus 2.5%.

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 Agreement 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. We borrowed $75.0
million of the term loan on August 31, 2000 to fund a portion of the purchase
price of ACT Manufacturing France. We borrowed the remaining $25.0 million of
the term loan on December 27, 2000 to refinance a portion of the debt of ACT
Manufacturing Thailand.

On December 27, 2000, we entered into an amendment to the Credit Agreement which
makes available additional five year term loans (the "Additional Term Loans") in
the aggregate amount of up to $100.0 million, subject to certain conditions. The
Company did not draw upon this facility, and the ability to draw on the facility
expired on May 18, 2001.

At June 30, 2001, $121.0 million of the Credit Agreement was utilized for
revolving loans, $1.9 million was utilized for letters of credit and an
additional $18.7 million was available for use based upon the applicable
borrowing base. At June 30, 2001, $85.0 million of the outstanding revolving
loans carried an interest rate of 6.58%, $20.0 million carried an interest rate
of 6.52%, and the remaining $16.0 million carried an interest rate of 8.25%.  At
June 30, 2001, $91.0 million was outstanding on the term loan at an interest
rate of 6.63%.

                                       17
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 majority of 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 $1.8 million in interest
expense incurred on the notes in the second quarter of 2001.

On August 2, 2000, we purchased 99.02% of the issued shares and outstanding
options of GSS Thailand for approximately $86.7 million.  At May 26, 2001, ACT
Manufacturing Thailand had revolving and term loans with various financial
institutions aggregating $53.5 million at interest rates ranging from LIBOR plus
2.5% to LIBOR plus 4%.  At May 26, 2001, approximately $35.6 million was
outstanding at interest rates ranging from 6.25% to 8.00%. The loans are secured
by land, buildings, and machinery, in addition to the guarantee of ACT
Manufacturing, Inc. In addition, ACT Manufacturing Thailand had approximately
$1.3 million (60 million Thai baht) in working capital availability which bears
interest at LIBOR plus 2.5%.

On August 31, 2000, we purchased all of the issued shares of Bull Eletronic
Angers S.A. for a purchase price of approximately $99.8 million, of which $8.7
million was paid in the first quarter of 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 $14.8 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 June 30, 2001, the
outstanding balance was approximately $13.1 million and was at an interest rate
of 5.15%.  The same credit agreement provides ACT Manufacturing France with a
credit line in the amount of approximately $9.0 million for sales of accounts
receivable, none of which was outstanding at June 30, 2001.  In addition, ACT
Manufacturing France has a capital lease line of approximately $6.7 million, of
which approximately $2.7 million was utilized at June 30, 2001.

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 gain on the sale of the eOn investment of
approximately $0.9 million in the first quarter of fiscal 2000.

Capital expenditures of approximately $5.4 million in the first six months of
2001 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 2011. As of June 30, 2001, we had equipment lease
lines of approximately $25.3 million available under capital and operating
leases for purchases of manufacturing equipment, computer hardware and software
and furniture.

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 do 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. At June 30, 2001, the carrying amounts of these contracts exceeded
their fair value by approximately $0.2 million. In accordance with SFAS No. 133,
this amount has been recorded to Accumulated Other Comprehensive Income in the
balance sheet.

On June 29, 2001, the Company entered into an interest rate swap agreement with
JP Morgan Chase in order to eliminate interest rate risk on the term loan
portion of the Credit Agreement.  The contract, which has a termination date of
June 29, 2005, stipulates that the notional swap amount will decrease as
principal payments are made to the term loan as prescribed by the Credit
Agreement.  The Company will pay the bank counterparty a fixed interest rate of
4.94% for the duration of the contract; in return, the Company will receive the
three month LIBOR rate.  This rate will reset on a quarterly basis to the
published three month LIBOR rate.  The three month LIBOR rate on June 29, 2001
was 3.71%.

                                       18
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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.

RECENT FINANCIAL ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations"
("SFAS 141") and SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 requires business combinations initiated after June 30, 2001 to
be accounted for using the purchase method of accounting, and broadens the
criteria for recording intangible assets separate from goodwill. Recorded
goodwill and intangibles will be evaluated against this new criteria and may
result in certain intangibles being reclassified into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization. Under this approach,
goodwill and certain intangibles will not be amortized into results of
operations, but instead would be reviewed for impairment and written down and
charged to operations only in the periods in which the recorded value of
goodwill and certain intangibles is more than its fair value. The provisions of
each statement which apply to goodwill and intangible assets acquired prior to
June 30, 2001 will be adopted by the Company on January 1, 2002. The Company
expects that the adoption of these accounting standards will result in certain
intangible assets being reclassified into goodwill and will have the impact of
reducing amortization of goodwill and intangibles commencing January 1, 2002;
however, impairment reviews may result in future periodic write-downs of
goodwill.

In June 1998, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards ("SFAF") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," (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 adopted SFAS No. 133 and the corresponding amendments under SFAS No. 138 on
January 1, 2001, as required. Adoption of SFAS No. 133 on January 1, 2001
resulted in a cumulative unrealized gain recorded to Accumulated Other
Comprehensive Income ("AOCI") of $3.2 million. As of June 30, 2001, we recorded
an unrealized loss of $0.2 million to AOCI in the balance sheet.

                                       19
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 61% of
our net sales in the six months ended June 30, 2001, 69% in fiscal 2000, and 66%
in fiscal 1999. Several customers are experiencing economic downturns currently,
including those in 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 53% and 57% of
our net sales for the six months ended June 30, 2001 and for fiscal 2000,
respectively.

For the six months ended June 30, 2001, EMC and Efficient Networks accounted
for 20% and 14% of our net sales, respectively. For fiscal 2000, Efficient
Networks, EMC and Nortel Networks accounted for approximately 17%, 14% and 12%,
respectively, of our net sales. For fiscal 1999, Nortel Networks and S-3
Incorporated (formerly Diamond Multimedia) accounted for approximately 15% and
13%, respectively, of our net sales. The timing and level of orders from our
customers varies substantially from period to period. The historic level of net
sales we have received from a specific customer in one particular period is not
necessarily indicative of net sales we may receive from that customer in any
future period.

Our results may depend on our ability to diversify our customer base and reduce
our reliance on particular customers. Our major customers may not continue to
purchase products and services from us at current levels or at all. In
particular, we terminated our business with 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:

                                       20
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

  .  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;
     .  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.

                                       21
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 that
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 Thailand, and the United Kingdom
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;
  .  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 Ken Owens, Chief Operating Officer of North America, 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.

                                       22
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

WE MAY NOT BE ABLE TO MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS
EXPERTISE.

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

  .  maintain and enhance our technological capabilities;
  .  develop and market manufacturing services which meet changing customer
     needs; and
  .  successfully anticipate or respond to technological changes in
     manufacturing processes on a cost-effective and timely basis.

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

WE MAY INCUR SIGNIFICANT LIABILITIES IF WE FAIL TO COMPLY WITH ENVIRONMENTAL
REGULATIONS.

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

  .  restrict our ability to expand our facilities;
  .  require us to acquire costly equipment; or
  .  require us to incur other significant costs and expenses.

PRODUCTS WE MANUFACTURE MAY CONTAIN DESIGN OR MANUFACTURING DEFECTS THAT COULD
RESULT IN REDUCED DEMAND FOR OUR SERVICES AND LIABILITY CLAIMS AGAINST US.

We manufacture products to our customers' specifications that 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;

                                       23
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

  .  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 that 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 Industries retained the services of a consultant to assist
in quantifying the potential exposure to CMC in connection with clean-up and
related costs of a former manufacturing site. This site is commonly known as the
ITT Telecommunications site in Milan, Tennessee. The consultant initially
estimated that the cost to remove and dispose of the contaminated soil would be
approximately $200,000. CMC subsequently entered into a voluntary agreement to
investigate the site with the Tennessee Department of Environment and
Conservation. In addition, CMC agreed to reimburse a tenant of the site $115,000
for expenditures previously incurred to investigate environmental conditions at
the site. CMC recorded a total provision of $320,000 based on these estimates.
Environmental studies done in fiscal 1999 have estimated assessments 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 our financial position and results of operations.

From time to time, we are also subject to claims or litigation incidental to our
business. In particular, as a result of the recent downturn in the electronics
industry in general, we have been increasingly involved in pursuit of claims and
litigation against third parties for the collection on accounts receivables, and
defending claims and litigation against third party vendors with respect to
payment claims. While we believe that these claims, in the aggregate, will not
have a material adverse effect on its ongoing business, no assurance can be
given that the ultimate resolution of any claims and related expenses,
individually or in the aggregate, will not have a material adverse effect on our
consolidated financial position or results of operations for any particular
period.

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.

                                       24

<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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.

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. 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;
  .  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

                                       25
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

the United States and internationally. We acquired operations in France and
Thailand in August 2000, and the United Kingdom in July 2001, began operations
in an additional facility in Massachusetts in January 2000 and have signed a
lease for a new facility in California 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 commenced operations at an additional 130,000
square foot building that 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 may not be able to find
additional suitable facilities on a timely basis or on terms satisfactory to us.
Moreover, expansion of 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 June 30, 2001 was approximately $265.1 million. As
of June 30, 2001, 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.

                                       26
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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, 2000 through August 2, 2001, our stock price has fluctuated
between a low of $6.90 per share and a high of $72.25 per share. On August 2,
2001, the closing price for our common stock was $11.14. 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.

                                       27

<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At June 30, 2001, we had $121.0 million of a $150.0 million revolving loan
outstanding that bears interest at variable interest rates. We also have a $91.0
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. At May 26,
2001, ACT Manufacturing Thailand had credit facilities, substantially all of
which were denominated in U.S. dollars, aggregating $53.5 million, which bore
interest at variable rates. ACT Manufacturing France also has an approximately
$14.8 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 June 30, 2001, $85.0
million of the outstanding balance on the revolving loan carried an interest
rate of 6.58%, $20.0 million carried an interest rate of 6.52%, and the
remaining $16.0 million carried an interest rate of 8.25%. At June 30, 2001, the
outstanding balance under the term loan was $91.0 million, which was at an
interest rate of 6.63%. At May 26, 2001, $35.6 million was outstanding under the
ACT Manufacturing Thailand credit facilities at interest rates ranging from
6.25% to 8.00%. The ACT Manufacturing Thailand working capital facilities were
replaced by the Thai Credit Agreement entered into on March 29, 2001. At June
30, 2001, approximately $13.9 million was outstanding under the ACT
Manufacturing France credit facilities at an interest rate of 4.7%. An adverse
change of one percent in the interest rate would cause a change in interest
expense of approximately $2.0 million on an annual basis based on balances
outstanding at the end of the second quarter of 2001.

Substantially all of the business of our Mexico and Thailand operations are
conducted in U.S. dollar denominated transactions and accordingly the functional
currency is the U.S. Dollar. The functional currency of ACT Manufacturing France
is the French franc, although some of that business is conducted in Euro and
other currencies. 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 and 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 June 30, 2001. The fair market value of the convertible
subordinated notes was $52.2 million with a carrying amount of $100.0 million at
June 30, 2001.

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 transaction, generally one to four months. We
adopted SFAS No. 133 and the corresponding amendments under SFAS No. 138 on
January 1, 2001, as required. Adoption of SFAS No. 133 on January 1, 2001
resulted in a cumulative unrealized gain recorded to Accumulated Other
Comprehensive Income ("AOCI") of $3.2 million. As of June 30, 2001, we recorded
an unrealized loss of $0.2 million to AOCI in the balance sheet.

On June 29, 2001, the Company entered into an interest rate swap agreement with
JP Morgan Chase in order to eliminate interest rate risk on the term loan
portion of the Credit Agreement.  The contract, which has a termination date of
June 29, 2005, stipulates that the notional swap amount will decrease as
principal payments are made to the term loan as prescribed by the Credit
Agreement.  The Company will pay the bank counterparty a fixed interest rate of
4.94% for the duration of the contract; in return, the Company will receive the
three month LIBOR rate.  This rate will reset on a quarterly basis to the
published three month LIBOR rate.  The three month LIBOR rate on June 29, 2001
was 3.71%.

                                       28
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

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

  The annual meeting of stockholders was held on May 15, 2001.  Three proposals
were submitted to stockholders as described in the Company's proxy statement
dated April 16, 2001.  The following is a brief description of the matters voted
upon, the numbers of votes cast for and against each proposal, and the number of
abstentions and votes unvoted.

(1)  To elect one member of the Board of Directors to serve for a three-year
     term as a Class III Director or until a successor has been duly elected and
     qualified, or until his earlier resignation or removal.

     Nominee:                       Bruce R. Gardner
     Votes for Nominee:                16,871,849
     Votes Against Nominee:               145,507
     Votes Unvoted:                             0

(2)  To approve and adopt a Second Amended and Restated 1995 Stock Plan pursuant
     to which the aggregate number of shares of common stock which may be issued
     thereunder shall be increased from 2,250,000 to 3,250,000.

     Votes For:                         8,692,003
     Votes Against:                     2,106,844
     Abstain:                              59,009
     Votes Unvoted:                     6,159,500


(3)  To ratify the selection of the firm of Deloitte and Touche LLP as
     independent auditors for the fiscal year ending December 31, 2001.


     Votes For:                        16,783,195
     Votes Against:                       180,337
     Abstain:                              53,824
     Votes Unvoted:                             0


     The term of office for the following directors continued after the meeting:

     Edward T. Cuddy (Class I), Donald G. Polich (Class I), John A. Pino
     (Class II) and Frederick W. Gibbs (Class II).

                                       29
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

10.1   Third Amendment to Credit Agreement dated July 31, 2001 among the
       Company, the several banks and other financial institutions or entities
       from time to time parties thereto, Credit Suisse First Boston as
       Syndication Agent, Societe Generale as Documentation Agent, and The Chase
       Manhatten Bank as Administrative Agent.

10.2   Employment Agreement dated as of May 7, 2001 between the Company and
       Kenneth Owens.

10.3   Interest Rate Swap Agreement dated June 29, 2001 between the Company and
       JP Morgan Chase.

(b)      Reports on Form 8-K:

No reports on Form 8-K were filed during the three-month period ending June 30,
2001

                                       30
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                                   SIGNATURES

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

August 14, 2001            ACT MANUFACTURING, INC.

                           /s/ Christopher L. Gorgone
                           --------------------------

                           Christopher L. Gorgone, Interim Chief
                           Financial Officer, Vice President of
                           Administration, Treasurer and Clerk
                           (Principal Financial and Accounting Officer)

                                       31
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                                 EXHIBIT INDEX

EXHIBIT   DESCRIPTION
-------   -----------

10.1      Third Amendment to Credit Agreement dated July 31, 2001 among the
          Company, the several banks and other financial institutions or
          entities from time to time parties thereto, Credit Suisse First Boston
          as Syndication Agent, Societe Generale as Documentation Agent, and The
          Chase Manhatten Bank as Administrative Agent.

10.2      Employment Agreement dated as of May 4, 2001 between the Company and
          Kenneth Owens.

10.3      Interest Rate Swap Agreement dated June 29, 2001 between the Company
          and JP Morgan Chase.

                                       32