<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 March 31, 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                       17,063,657 Shares
               ------------                       -----------------
                 (Class)                    (Outstanding on May 8, 2001)
<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 Income for the
         three months ended March 31, 2001 and 2000................          3

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

         Condensed Consolidated Statements of Cash Flows for the
         three months ended March 31, 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.......................         12

Item 3.  Quantitative and Qualitative Disclosures about
         Market Risk................................................        25


PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K...........................        26

         Signatures.................................................        27

         Exhibit Index..............................................        28

                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               (IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)


                                               Three Months Ended
                                                    March 31,
                                                    --------
                                                 2001      2000
                                              --------   --------
Net sales.................................... $445,256   $229,088
Cost of goods sold...........................  412,698    209,089
                                              --------   --------

Gross profit.................................   32,558     19,999

Selling, general and administrative expenses.   14,046      9,087
Amortization of goodwill.....................    3,688        236
                                              --------   --------

Operating income.............................   14,824     10,676
                                              --------   --------

Interest expense, net........................   (8,454)    (1,446)
Other income, net............................      422        853
                                              --------   --------

Income before provision for income taxes.....    6,792     10,083

Provision for income taxes...................    2,038      3,933
                                              --------   --------

Net income................................... $  4,754   $  6,150
                                              ========   ========

Basic net income per common share............    $0.28      $0.37
                                              ========   ========

Diluted net income per common share..........    $0.27      $0.35
                                              ========   ========

Weighted average shares outstanding --
basic........................................   17,047     16,546
Weighted average shares outstanding --
diluted......................................   17,320     17,645

   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                                        March 31,  December 31,
                                                          2001        2000
                                                        --------   ----------
                                                      (Unaudited)
ASSETS

CURRENT ASSETS:
 Cash and cash equivalents.............................   $ 16,006  $   48,298
 Accounts receivable - trade, net......................    320,026     351,925
  Accounts and notes receivable from related party.....      3,927       3,331
 Inventory.............................................    372,492     401,325
 Deferred tax asset....................................      8,081       8,258
 Prepaid expenses and other assets.....................     20,028      11,646
                                                          --------  ----------

   Total current assets................................    740,560     824,783
                                                          --------  ----------

PROPERTY AND EQUIPMENT--Net............................     77,632      77,888
DEFERRED TAX ASSET.....................................      1,647       1,647
GOODWILL--Net..........................................    140,562     144,250
OTHER ASSETS--Net......................................     22,217      19,235
                                                          --------  ----------
TOTAL..................................................   $982,618  $1,067,803
                                                          ========  ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Notes payable bank....................................   $ 13,861  $   10,863
 Current portion of long-term debt.....................     16,273      15,627
 Current portion of other long-term liabilities........      2,162       3,481
 Accounts payable......................................    281,846     337,407
 Advance from customer.................................     50,000      50,000
 Due to Bull SA........................................        ---       8,711
 Accrued compensation and related taxes................      6,422       5,906
  Income tax payable...................................      9,190       9,969
 Deferred taxes........................................        ---          45
 Accrued expenses and other............................     27,139      31,917
                                                          --------  ----------
   Total current liabilities...........................    406,893     473,926
                                                          --------  ----------

LONG-TERM DEBT--less current portion...................    236,612     255,517
DEFERRED TAXES.........................................      8,052       8,143
OTHER LONG-TERM LIABILITES.............................      9,594       9,973
CONVERTIBLE SUBORDINATED NOTES.........................    100,000     100,000

CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
 Preferred stock ......................................        ---         ---
 Common stock..........................................        171         170
 Additional paid-in capital............................    171,363     171,220
 Accumulated other comprehensive loss..................     (4,475        (799)
 Retained earnings.....................................     54,408      49,653
                                                          --------  ----------
   Total stockholders' equity..........................    221,467     220,244
                                                          --------  ----------

TOTAL..................................................   $982,618  $1,067,803
                                                          ========  ==========

   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

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

                                                      Three Months Ended
                                                           March 31,
                                                          ----------
                                                        2001       2000
                                                      --------   --------

Cash flows from operating activities:
 Net income...........................................$  4,754   $  6,150
 Adjustments to reconcile net income to net cash
 provided by (used for) operating activities:
   Depreciation and amortization......................   7,570      2,193
   Deferred income taxes..............................      41        ---
   Gain on the sale of investment in affiliate........     ---       (894)
   Loss on disposal of fixed assets...................     239        ---
 Increase (decrease) in cash from:
   Accounts receivable................................  31,303    (28,662)
   Inventory..........................................  28,833    (28,479)
   Prepaid expenses and other assets..................  (8,381)    (2,674)
   Accounts payable................................... (55,561)     3,829
   Accrued expenses and other.........................  (5,041)      (171)
                                                      --------   --------

 Net cash provided by (used for) operating activities.   3,757    (48,708)

Cash flows from investing activities:
 Acquisition of property and equipment................  (2,836)    (1,184)
 Proceeds from the sale of investment in affiliate....     ---      6,417
 Increase in other assets.............................  (2,983)    (2,124)
 Acquisitions, net of cash acquired...................  (8,711)       ---
                                                      --------   --------

Net cash (used for) provided by investing
  activities.......................................... (14,530)     3,109

Cash flows from financing activities:
 Net (repayments) borrowings under line-of-credit
   agreements......................................... (15,002)    45,734
 Net (repayments) on term loan........................  (2,305)      (250)
 Decrease in other liabilities........................  (2,065)       (15)
 Net proceeds from sale of stock......................     145      1,572
                                                      --------   --------

Net cash (used for) provided by financing
  activities.......................................... (19,227)    47,041

Effect of exchange rate changes on cash
  and cash equivalents................................  (2,292)       290
                                                      --------   --------

Net (decrease) increase in cash and
  cash equivalents.................................... (32,292)     1,732
Cash and cash equivalents, beginning
  of period...........................................  48,298      4,558
                                                      --------   --------

Cash and cash equivalents, end of period..............$ 16,006   $  6,290
                                                      ========   ========

   The accompanying notes are an integral part of these 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 March 31, 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-month period
ended February 24, 2001 are included in our first quarter consolidated financial
statements.


2. BANK FINANCING

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

    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 first 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 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 is required to draw on the Additional Term Loans no
later than May 18, 2001. The Company is required to repay substantially all of
the principal amount on all outstanding Additional Term Loans by June 28, 2006.

    At March 31, 2001, $122.0 million of the Credit Agreement was utilized for
revolving loans, $1.7 million was utilized for letters of credit and an
additional $26.3 million was available for use based upon the applicable
borrowing base.  At March 31, 2001, $100.0 million of the outstanding revolving
loans were at an interest rate of 7.56% and the remaining $22.0 million were at
an interest rate of 9.5%.  At March 31, 2001, $94.0 million was outstanding on
the term loan at an interest rate of 7.59%.

    At February 24, 2001, ACT Manufacturing Thailand had working capital credit
facilities with various financial institutions aggregating $35.1 million at
interest rates ranging from LIBOR plus 2.5% to LIBOR plus 4%.  At February 24,
2001, $34.4 million was outstanding at interest rates ranging from 7.75% to
9.08%. The working capital facilities were replaced by the Thai Credit
Agreement entered into on March 29, 2001.  ACT Manufacturing Thailand also has a
loan outstanding denominated in Thai baht. At February 24, 2001, the outstanding
balance was baht 106.1 million ($2.5 million). The Thai baht loan requires
monthly principal payments of baht 4.6 million ($110,000) with the final payment
due July 2003. Interest on the Thai baht loan is payable monthly at a floating
rate that equaled 7.75% at February 24, 2001. The ACT Manufacturing Thailand
baht loan is secured by a pledge of ACT Manufacturing Thailand's fixed deposits
and by a mortgage of its land, buildings, machinery and equipment.

    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 $15.4 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 March 31, 2001, the
outstanding balance was approximately $13.9 million and was at an interest rate
of 4.7%.  The same credit agreement provides ACT Manufacturing France with a
credit line in the amount of approximately $9.3 million for sales of accounts
receivable, none of which was outstanding at March 31, 2001.  In addition, ACT
Manufacturing France has a capital lease line of approximately $7.0 million, of
which approximately $2.8 million was utilized at March 31, 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):

                            March 31,  December 31,
                              2001         2000
                            --------   -----------
Raw material.............   $300,268    $327,046
Work in process..........     57,844      58,236
Finished goods...........     14,380      16,043
                            --------    --------

Total....................   $372,492    $401,325
                            ========    ========

The carrying value of inventory approximates replacement cost.

5.  NET INCOME PER COMMON SHARE

    Basic net income per common share is computed by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted net income per common share reflects the
potential dilution 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 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):

                                                     Weighted
                                     Net Income   Average Shares   Net Income
                                     (Numerator)   (Denominator)    Per Share
                                     -----------  ---------------  -----------

Three Months Ended March 31, 2001
  Basic............................      $4,754           17,047       $ 0.28
                                         ======

  Effect of stock options..........                          273        (0.01)
                                                          ------       ------

  Diluted..........................      $4,754           17,320       $ 0.27
                                         ======           ======       ======

Three Months Ended March 31, 2000
  Basic............................      $6,150           16,546       $ 0.37
                                         ======

  Effect of stock options..........                        1,099        (0.02)
                                                          ------       ------

  Diluted..........................      $6,150           17,645       $ 0.35
                                         ======           ======       ======

    For the three-month period ended March 31, 2001, 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. For the three-month period ended March 31, 2001, options to
purchase 1,307,000 shares of common stock were outstanding at the end of the
period, but were not included in the computation of diluted EPS, because the
exercise prices on these options were greater than the average market price of
the common stock, and therefore, their effect would be antidilutive. For the
three-month period ended March 31, 2000, all outstanding options were included
in the computation of diluted EPS.

                                       8
<PAGE>

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

6.  COMPREHENSIVE INCOME

    A summary of comprehensive income for the three-month periods ended March
31, 2001 and 2000 is (in thousands):

                                                     Three Months Ended
                                                          March 31,
                                                         ----------
                                                        2001     2000
                                                       ------   ------

Net income........................................    $ 4,754   $6,150
Other comprehensive loss:
Excess of cost of hedging contracts
 over their fair value............................     (1,438)     ---
Foreign currency translation adjustment...........     (2,238)    (176)
                                                      -------   ------

Comprehensive income..............................    $ 1,078   $5,974
                                                      =======   ======


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.

    A summary of the Company's operating results and assets, by segment, for the
three-month periods ending March 31, 2001 and 2000 are as follows (in
thousands):

                                           2001              2000
                                     ----------------   ---------------
Net Sales
   North America.....................   $274,453           $225,724
   International.....................    170,803              3,364
                                     ----------------   ---------------
   Total.............................   $445,256           $229,088
                                     ================   ===============

Gross Profit
   North America.....................   $ 17,734           $ 20,109
   International.....................     14,824               (110)
                                     ----------------   ---------------
   Total.............................   $ 32,558           $ 19,999

Corporate Expenses...................   $ 27,804           $ 13,849
                                     ----------------   ---------------
Net Income...........................   $  4,754           $  6,150
                                     ================   ===============

Segment Assets
   North America.....................   $587,879           $448,901
   International.....................    394,739             10,097
                                     ----------------   ---------------
   Total.............................   $982,618           $458,998
                                     ================   ===============

                                       9
<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 and long-lived
assets (which consist mainly of property, plant and equipment and intangibles)
were as follows for the three-month periods ending March 31, 2001 and 2000 (in
thousands):

                                           2001               2000
                                         --------           --------
Net Sales
 North America.......................    $274,453           $225,724
 Europe..............................     105,499              3,364
 Asia................................      65,304                  -
                                         --------           --------
 Total...............................    $445,256           $229,088
                                         ========           ========
Long-Lived Assets
 North America.......................    $ 66,441           $ 52,997
 Europe..............................      61,327              2,909
 Asia................................     112,568                  -
                                         --------           --------
 Total...............................    $240,336           $ 55,906
                                         ========           ========

8.  RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS

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

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

    The Company adopted SFAS No. 133 and the corresponding amendments under SFAS
No. 138 on January 1, 2001, as required.  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 March 31, 2001, the
Company recorded an unrealized loss of $1.4 million to AOCI in the balance
sheet.

                                       10
<PAGE>

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

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


9.  CONTINGENCIES

    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. 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. The Company does not believe that any incidental
claims or litigation will have a material adverse effect on its results of
operations.

                                       11
<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 March 31 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 have recently indicated the possibility of an economic
downturn in their industries, including the networking and telecommunications
market. Since customers in the networking and telecommunications segment of the
electronics industry represent a large portion of our net sales, developments
adverse to this segment of the industry could materially and negatively impact
us. A recessionary period or other event leading to excess capacity affecting
one or more segments of the electronics industry we serve would likely result in
intensified price competition, reduced margins and a decrease in our net sales.

    We currently manufacture at eleven facilities having an aggregate of
approximately 1.5 million square feet. Of our leased manufacturing facilities,
four of the facilities are located in Massachusetts and one facility is located
in each of Santa Clara, California; Lawrenceville, Georgia; Corinth,
Mississippi; and Dublin, Ireland. We also own a 4.4-acre tract of land and a
110,000 square foot manufacturing facility on that property in Hermosillo,
Mexico, a 240,000 square foot manufacturing facility in Thailand and an
approximately 230,000 square foot manufacturing facility in Angers, France. All
of our manufacturing facilities have been certified to the ISO 9002
international quality standard, except our Corinth, Mississippi facility which
has been certified to 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 signed a lease for an additional 130,000
square foot building that is under construction and is adjacent to our facility
in Hermosillo, Mexico. We have also signed a lease for a 100,000 square foot new
products introduction, prototype and manufacturing facility in Dallas, Texas. We
expect to begin operating in both new facilities later in fiscal 2001. Our
facilities contained 109 surface mount technology lines ("SMT lines") at
March 31, 2001.

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

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                   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 MARCH 31, 2001 AND 2000

    Our net sales increased $216.2 million or 94.4% to $445.3 million for the
first quarter of 2001 compared with $229.1 million for the first quarter of
2000. The increase was attributable principally to a net expansion of $48.9
million in our pre-existing operations, primarily in North America, the
inclusion of ACT Manufacturing France net sales of $102.0 million and the
inclusion of ACT Manufacturing Thailand net sales of $65.3 million, each of
which was acquired in August 2000.

    Gross profit increased $12.6 million or 62.8% to $32.6 million for the first
quarter of 2001 compared with $20.0 million for the first quarter of 2000. Gross
profit as a percentage of net sales ("gross margin") decreased to 7.3% for the
first quarter of 2001 from 8.7% for the first quarter of 2000. Our gross profit
increase was primarily attributable to the growth in our overall sales volume.
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.
In the quarter ended March 31, 2001, approximately $25.0 million in parts were
shipped to customers at a minimal gross margin. Without these shipments, the
gross margin for the first quarter of 2001 would have approximated 7.7%. There
were no such parts shipments in the first quarter of the prior year.

    Selling, general and administrative ("SG&A") expenses increased $5.0 million
or 54.6% to $14.0 million, or 3.2% of net sales, for the first quarter of 2001
compared with $9.1 million, or 4.0% of net sales, for the first quarter of 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. SG&A expenses
as a percentage of net sales in the first quarter of 2001, excluding the impact
of ACT Manufacturing France and ACT Manufacturing Thailand, was approximately
3.9%. We expect to continue additional spending for corporate infrastructure to
support our expanded operations over the next several quarters.

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

    Operating income increased $4.1 million to $14.8 million, or 3.3% of net
sales, for the first quarter of 2001 compared with operating income of $10.7
million, or 4.7% of net sales, for the first quarter of 2000 as a result of the
above factors.

    Interest and other expense, net increased $7.4 million to $8.0 million for
the first quarter of 2001 compared to $0.6 million for the first quarter of
2000. This increase is primarily attributable to higher working capital
requirements resulting in a higher average revolving loan balance for the first
quarter of 2001. Interest expense on the revolving credit facility amounted to
$3.1 million for the first quarter of 2001 compared to $1.5 million for the
first quarter of 2000. Also included in interest and other expense, net for the
first quarter of 2001 is $1.8 million of interest expense incurred on our 7%
convertible subordinated notes, $2.1 million of interest incurred on our $94.0
million term loan, $1.0 million of interest on the Thai debt and $0.5 million of
amortization of deferred financing costs.

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                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

    We recorded a provision for income taxes of $2.0 million and $3.9 million
for the first quarter of 2001 and 2000, respectively. In the first quarter of
2001, we provided for income taxes using a 30.0% effective tax rate. In the
first quarter of 2000, we provided for income taxes using a 39.0% effective tax
rate. The difference in rates is primarily attributable to the inclusion in the
first quarter of 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. 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 $333.7 million at March 31, 2001 compared with
$350.9 million at December 31, 2000. Operating activities generated $3.8 million
of cash in the first quarter of 2001 compared with cash used for operations of
$48.7 million in the first quarter of 2000. The primary use of cash for
operating activities for the first quarter of 2001 was a decrease in accounts
payable.  Accounts payable decreased $55.6 million to $281.8 million at March
31, 2001 from $337.4 million at December 31, 2000, primarily due to lower levels
of component purchasing.

    These cash uses were offset by net income generated from operations in the
first quarter of 2001 of $4.8 million and by decreases in inventory and accounts
receivable.  Inventory decreased $28.8 million to $372.5 million at March 31,
2001 from $401.3 million at December 31, 2000, which is primarily the result of
improving supply chain conditions in the electronics component market.  Accounts
receivable decreased $31.3 million to $324.0 million at March 31, 2001 from
$355.3 million at December 31, 2000, which is primarily due to the lower net
sales in the first quarter of 2001 compared with the fourth quarter of 2000.

    In the second fiscal quarter of 2000, a major customer advanced us $50.0
million to strengthen our materials procurement capabilities and enhance the
services we provide to this customer.  This advance is unsecured and non-
interest bearing.  The advance was repaid in April 2001 primarily through the
offset of invoices.

    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. We are required to draw on the Additional Term Loans no later than
May 18, 2001. We are required to repay substantially all of the principal amount
on all outstanding Additional Term Loans by June 28, 2006.

    At March 31, 2001, $122.0 million of the Credit Agreement was utilized for
revolving loans, $1.7 million was utilized for letters of credit and an
additional $26.3 million was available for use based upon the applicable
borrowing base.  At March 31, 2001, $100.0 million of the outstanding revolving
loans were at an interest rate of 7.56% and the remaining $22.0 million were at
an interest rate of 9.5%.  At March 31, 2001, $94.0 million was outstanding on
the term loan at an interest rate of 7.59%.

                                       14
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                   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 first 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 February 24, 2001,
ACT Manufacturing Thailand had working capital credit facilities with various
financial institutions aggregating $35.1 million at interest rates ranging from
LIBOR plus 2.5% to LIBOR plus 4%.  At February 24, 2001, $34.4 million was
outstanding at interest rates ranging from 7.75% to 9.08%.  The ACT
Manufacturing Thailand working capital facilities were replaced by the Thai
Credit Agreement entered into on March 29, 2001.  ACT Manufacturing Thailand
also has a loan outstanding denominated in Thai baht. At February 24, 2001, the
outstanding balance was baht 106.1 million ($2.5 million). The Thai baht loan
requires monthly principal payments of baht 4.6 million ($110,000) with the
final payment due July 2003. Interest on the Thai baht loan is payable monthly
at a floating rate that equaled 7.75% at February 24, 2001.  The ACT
Manufacturing Thailand baht loan is secured by a pledge of ACT Manufacturing
Thailand's fixed deposits and by a mortgage of its land, buildings, machinery
and equipment.

    On August 31, 2000, we purchased all of the issued shares of BEA 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 $15.4 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 March 31, 2001, the
outstanding balance was approximately $13.9 million and was at an interest rate
of 4.7%.  The same credit agreement provides ACT Manufacturing France with a
credit line in the amount of approximately $9.3 million for sales of accounts
receivable, none of which was outstanding at March 31, 2001.  In addition, ACT
Manufacturing France has a capital lease line of approximately $7.0 million, of
which approximately $2.8 million was utilized at March 31, 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 $2.8 million in the first quarter 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 March 31, 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 March 31, 2001, the carrying amounts of these contracts
exceeded their fair value by approximately $1.4 million. In accordance with SFAS
No. 133, this amount has been recorded to Accumulated Other Comprehensive Income
in the balance sheet.

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                   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.



RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS

    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 March 31, 2001, we recorded
an unrealized loss of $1.4 million to AOCI in the balance sheet.

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

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                   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 60% of
our net sales in the first quarter of 2001, 69% in fiscal 2000, and 66% in
fiscal 1999.  Several customers have indicated the possibility of an economic
downturn in their industries, including the networking and telecommunications
market. Developments adverse to these industry segments could materially and
negatively impact us. These industry segments, and the electronics industry as a
whole, experience:

    .  intense competition;
    .  rapid technological changes resulting in short product life cycles and
    .  consequent product obsolescence;
    .  significant fluctuations in product demand;
    .  economic cycles, including recessionary periods; and
    .  consolidation.

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


THE LOSS OF MAJOR CUSTOMERS COULD ADVERSELY AFFECT US.

    We depend on a small number of customers for a significant portion of our
business. Our five largest customers accounted for approximately 54% and 57% of
our net sales for the first quarter of 2001 and for fiscal 2000, respectively.

    For the first quarter of 2001, EMC and Efficient Networks accounted for 21%
and 12% 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:

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                   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.

                                       18
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                   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 and Thailand and procurement
offices in Taiwan and Singapore. We expect to expand into other international
regions. We have limited experience in managing geographically dispersed
operations and in operating in Europe, Mexico or Asia. We also purchase a
significant number of components manufactured in foreign countries. Because of
the scope of our international operations, we are subject to the following
risks, which could materially impact our results of operations:

    .  economic or political instability;
    .  transportation delays and interruptions;
    .  foreign exchange rate fluctuations;
    .  increased employee turnover and labor unrest;
    .  longer payment cycles;
    .  greater difficulty in collecting accounts receivable;
    .  utilization of different systems and equipment;
    .  difficulties in staffing and managing foreign personnel and diverse
       cultures; and
    .  less developed infrastructures.

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

    .  increased regulatory requirements;
    .  higher taxation;
    .  currency conversion limitations;
    .  restrictions on the transfer of funds;
    .  the imposition of or increase in tariffs and duties; or
    .  limitations on imports or exports.

Also, we could be adversely affected if our host countries revise their current
policies encouraging foreign investment or foreign trade.  In Thailand, we
currently operate under a "tax holiday" that will expire in 2002 unless it is
renewed.  Upon the expiration of the "tax holiday," we will become subject to
taxation at a rate of 30% per annum in Thailand.


    OUR BUSINESS COULD SUFFER IF WE LOSE THE SERVICES OF, OR FAIL TO ATTRACT,
KEY PERSONNEL.

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

                                       19
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                   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;

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                   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.


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.

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<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, including the Leicester, England manufacturing business of Fisher-
Rosemount Systems. Failure to consummate additional acquisitions may prevent us
from accumulating sufficient critical mass required by customers in this
consolidating industry. This failure could significantly impact our ability to
effectively compete in our targeted markets and could negatively affect our
results of operations.

    Moreover, acquisitions that we do complete may result in:

    .  the potentially dilutive issuance of common stock or other equity
       instruments;
    .  the incurrence of debt and amortization expenses related to goodwill and
       other intangible assets;
    .  the incurrence of significant costs and expenses; or
    .  the potentially dilutive impact on our earnings per share.

  Acquisition transactions also involve numerous business risks, including:

    .  difficulties in assimilating the acquired operations, technologies,
       personnel and products;
    .  difficulties in managing geographically dispersed and international
       operations;
    .  difficulties in assimilating diverse financial reporting and management
       information systems;
    .  the diversion of management's attention from other business concerns;
       the potential disruption of our business; and
    .  the potential loss of key employees, customers or suppliers.

OUR OPERATING RESULTS WILL DEPEND ON OUR ABILITY TO MANAGE OUR GROWTH.

    We have grown rapidly in recent years and we expect to continue to expand
our operations. This growth has placed, and will continue to place, significant
strain on our management, operations, technical, financial, systems, sales,
marketing and other resources. As our growth continues, we will have to review
and revise our security procedures and operating and financial controls both
domestically and internationally. We will have to continue to invest in both our
manufacturing infrastructure to expand capacity and our operational, financial,
and management information systems. We are currently in the process of
converting to a new global enterprise resource planning system, which we
currently plan to implement in all facilities, both domestic and international,
by the end of fiscal 2002. If we fail to adequately manage the conversion to the
new system, our operating results and financial condition could be harmed. In
addition, if we fail to manage our expected growth effectively, the quality of
our services and products and our operating results could suffer significantly.


EXPANSION OF OUR OPERATIONS MAY NEGATIVELY IMPACT OUR BUSINESS.

    We may expand our operations by establishing or acquiring new manufacturing
facilities or by expanding capacity in our current facilities. We may expand
both in geographical areas in which we currently operate and in new geographical
areas within

                                       22
<PAGE>

                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

the United States and internationally. We acquired operations in France and
Thailand in August 2000, began operations in an additional facility in
Massachusetts in January 2000 and have signed a lease for a new facility in
California which is currently under construction and which will enable us to
consolidate and expand our operations. We expect to begin operations in this new
California facility in fiscal 2001. We have signed a lease for an additional
130,000 square foot building that is under construction and is adjacent to our
facility in Mexico. We have also signed a lease for a 100,000 square foot new
products introduction, prototype and manufacturing facility in Dallas, Texas. We
expect to begin operating in both new facilities in fiscal 2001. We may not be
able to find additional suitable facilities on a timely basis or on terms
satisfactory to us. Moreover, 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 March 31, 2001 was approximately $271.8 million.
As of March 31, 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.

                                       23
<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 May 8, 2001, our stock price has
fluctuated between a low of $9.50 per share and a high of $72.25 per share. On
May 8, 2001, the closing price for our common stock was $17.03. 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.

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                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    At March 31, 2001, we had $122.0 million of a $150.0 million revolving loan
outstanding that bears interest at variable interest rates. We also have a $94.0
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
February 24, 2001, ACT Manufacturing Thailand had credit facilities,
substantially all of which were denominated in U.S. dollars, aggregating $35.1
million, which bore interest at variable rates. The ACT Manufacturing Thailand
working capital facilities were replaced by the Thai Credit Agreement entered
into on March 29, 2001, borrowings under which will bear interest at LIBOR plus
2.5%. ACT Manufacturing France also has an approximately $15.4 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 March 31, 2001, $100.0 million of the outstanding
balance on the revolving loan was at an interest rate of 7.56% and the remaining
$22.0 million was at an interest rate of 9.5%. At March 31, 2001, the
outstanding balance under the term loan was $94.0 million, which was at an
interest rate of 7.59%. At February 24, 2001, $34.4 million was outstanding
under the ACT Manufacturing Thailand credit facilities at interest rates ranging
from 7.75% to 9.08%. The ACT Manufacturing Thailand working capital facilities
were replaced by the Thai Credit Agreement entered into on March 29, 2001. At
March 31, 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 $2.7 million on an annual basis based on balances
outstanding at the end of the first quarter of 2001.

    Substantially all of the business of our Mexico and Thailand operations are
conducted in U.S. dollar denominated transactions. The functional currency of
ACT Manufacturing France is the French franc, although some of that business is
conducted in Euro and other currency denominated transactions.  The functional
currency of our operations in Ireland is the Irish punt, however, these
operations do not represent a significant portion of our net sales 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 March 31, 2001.  The fair market value of the convertible
subordinated notes was $52.2 million with a carrying amount of $100.0 million at
March 31, 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 March 31, 2001, we
recorded an unrealized loss of $1.4 million to AOCI in the balance sheet.








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                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:


10.1     Credit Agreement by and among the Company, Thai Farmers Bank Public
         Company Ltd. and Bank of Ayudhya Public Company Ltd. dated as of March
         29, 2001
21       Subsidiaries

(b)      Reports on Form 8-K:

         No reports on Form 8-K were filed during the three-month period ending
         March 31, 2001

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                   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.

May 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)

                                       27
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                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

                                 EXHIBIT INDEX

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

10.1        Credit Agreement by and among the Company, Thai Farmers Bank Public
            Company Ltd. and Bank of Ayudhya Public Company Ltd. dated as of
            March 29, 2001
21          Subsidiaries

                                       28