<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 September 30, 2001

                                       or

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

         For the Transition Period From                           To

                         Commission File Number: 0-25560

                             ACT MANUFACTURING, INC.

             (Exact name of registrant as specified in its charter)

                Massachusetts                                   04-2777507

(State or other jurisdiction of incorporation             (IRS Employer ID. No.)
or organization)

    2 Cabot Road, Hudson, Massachusetts                            01749

  (Address of principal executive offices)                      (zip code)

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

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

Yes |X| No |_|

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

           Common Stock                      17,080,857 Shares
           ------------                      -----------------

             (Class)                 (Outstanding on November 8, 2001)


                                       1
<PAGE>

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

                                                                            Page
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited):

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

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

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

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

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

Item 3.     Quantitative and Qualitative Disclosures about
            Market Risk.......................................................27

PART II. OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K..................................28

            Signatures........................................................29

            Exhibit Index.....................................................30


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>
                                                      Three Months Ended September 30,       Nine Months Ended September 30,
                                                      --------------------------------       -------------------------------

                                                           2001             2000                  2001             2000
                                                           ----             ----                  ----             ----
<S>                                                     <C>              <C>                   <C>              <C>
Net sales............................................   $  225,898       $  368,515            $1,016,079       $  850,573
Cost of goods sold, including special charges
   and excess capacity costs.........................      233,754          335,203               975,509          774,571
                                                        ----------       ----------            ----------       ----------

Gross profit.........................................       (7,856)          33,312                40,570           76,002

Selling, general and administrative expenses
   including special charges and credit provisions...       23,316           12,260                56,106           29,509
Amortization of goodwill.............................        3,690            1,395                11,072            1,867
                                                        ----------       ----------            ----------       ----------

Operating (loss) income..............................      (34,862)          19,657               (26,608)          44,626

Interest and other expense, net......................        6,754            5,701                21,406            9,066
                                                        ----------       ----------            ----------       ----------

(Loss) income before provision for income taxes......      (41,616)          13,956               (48,014)          35,560

Income tax (benefit) expense.........................      (17,480)           5,756               (20,586)          14,182
                                                        ----------       ----------            ----------       ----------

Net (loss) income....................................   $  (24,136)      $    8,200            $  (27,428)      $   21,378
                                                        ==========       ==========            ==========       ==========

Basic net (loss) income per common share.............   $    (1.41)      $     0.48            $    (1.61)      $     1.28
Diluted net (loss) income per common share...........   $    (1.41)      $     0.45            $    (1.61)      $     1.17

Weighted average shares outstanding -- basic.........       17,081           16,919                17,065           16,728
Weighted average shares outstanding -- diluted.......       17,081           18,256                17,065           18,239
</TABLE>

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


                                       3
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                           September 30,     December 31,
                                                                2001             2000
                                                                ----             ----

                                                            (Unaudited)
<S>                                                          <C>             <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents ...........................      $  14,633       $    48,298
  Accounts receivable - trade, net ....................        182,471           351,925
  Accounts and notes receivable from related party ....          2,496             3,331
  Inventory ...........................................        215,965           401,325
  Deferred tax assets and income taxes refundable .....         27,976             8,258
  Prepaid taxes .......................................          6,226             2,506
  Prepaid expenses and other assets ...................         11,983             9,140
                                                             ---------       -----------

    Total current assets ..............................        461,750           824,783
                                                             ---------       -----------

PROPERTY AND EQUIPMENT--Net ...........................         77,733            77,888
DEFERRED TAX ASSET ....................................          3,766             1,647
GOODWILL--Net .........................................        139,235           144,250
OTHER ASSETS--Net .....................................         16,932            19,235
                                                             ---------       -----------

TOTAL .................................................      $ 699,416       $ 1,067,803
                                                             =========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes payable bank ..................................      $   7,615       $    10,863
  Current portion of long-term debt ...................         21,956            15,627
  Current portion of capital lease obligations ........          1,088             3,481
  Accounts payable ....................................        142,594           337,407
  Advance from customer ...............................             --            50,000
  Due to Bull SA ......................................             --             8,711
  Accrued compensation and related taxes ..............          3,380             5,906
  Income tax payable ..................................             --             9,969
  Deferred tax liabilities ............................             --                45
  Accrued expenses and other ..........................         26,626            31,917
                                                             ---------       -----------

    Total current liabilities .........................        203,259           473,926
                                                             ---------       -----------

LONG-TERM DEBT--less current portion ..................        189,339           255,517
DEFERRED TAXES ........................................          8,159             8,143
CAPITAL LEASE OBLIGATIONS .............................          2,740             2,754
OTHER LONG-TERM LIABILITES ............................          4,747             7,219
CONVERTIBLE SUBORDINATED NOTES ........................        100,000           100,000

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
  Preferred stock .....................................             --                --
  Common stock ........................................            171               170
  Additional paid-in capital ..........................        171,500           171,220
  Accumulated other comprehensive loss ................         (2,724)             (799)
  Retained earnings ...................................         22,225            49,653
                                                             ---------       -----------

    Total stockholders' equity ........................        191,172           220,244
                                                             ---------       -----------

TOTAL .................................................      $ 699,416       $ 1,067,803
                                                             =========       ===========
</TABLE>

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


                                       4
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands - unaudited)

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                                          September 30,
                                                                       2001            2000
                                                                       ----            ----
<S>                                                                 <C>             <C>
Cash flows from operating activities:
   Net (loss) income .........................................      $ (27,428)      $  21,378
   Adjustments to reconcile net (loss) income to net cash
   provided by (used for) operating activities:
     Depreciation and amortization ...........................         21,329           9,411
     Deferred income taxes ...................................         (2,123)            221
     Gain on the sale of investment in affiliate .............             --            (894)
     Loss on disposal of fixed assets ........................            384              --
   Increase (decrease) in cash from:
     Accounts receivable .....................................        170,289        (147,352)
     Inventory ...............................................        186,596         (94,287)
     Prepaid expenses and other assets .......................         (6,525)         (7,584)
     Income tax receivable ...................................        (13,243)             --
     Accounts payable ........................................       (198,706)         80,814
     Advance from customer ...................................        (50,000)         50,000
     Accrued expenses and other ..............................        (24,554)         17,408
                                                                    ---------       ---------

   Net cash provided by (used for) operating activities ......         56,019         (70,885)

Cash flows from investing activities:
   Acquisition of property and equipment .....................         (6,640)         (6,998)
   Proceeds from the sale of investment in affiliate .........             --           6,417
   Decrease (increase) in other assets .......................          2,248         (12,789)
   Acquisitions, net of cash acquired ........................        (12,967)       (136,073)
                                                                    ---------       ---------

 Net cash used for investing activities ......................        (17,359)       (149,443)

Cash flows from financing activities:
   Net (repayments) borrowings under line-of-credit
    agreements ...............................................        (50,444)         93,861
   Proceeds from sale of convertible subordinated notes ......             --         100,000
   (Payments) borrowings on term loans, net ..................        (15,312)         68,640
   Decrease in other liabilities .............................         (5,246)         (2,754)
   Net proceeds from exercise of stock options ...............            284           5,948
                                                                    ---------       ---------

Net cash (used for) provided by financing
 activities ..................................................        (70,718)        265,695

Effect of exchange rate changes on cash
 and cash equivalents ........................................         (1,607)          1,148
                                                                    ---------       ---------

Net (decrease) increase in cash and
 cash equivalents ............................................        (33,665)         46,515
Cash and cash equivalents, beginning
 of period ...................................................         48,298           4,558
                                                                    ---------       ---------

Cash and cash equivalents, end of period .....................      $  14,633       $  51,073
                                                                    =========       =========
</TABLE>

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


                                       5
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

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

Basis of Consolidation

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

2. BANK FINANCING

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

During the quarter ended September 30, 2001, the Company went into an over
advance position in connection with the Credit Agreement, but was within the
applicable borrowing base as of September 30, 2001. The Credit Agreement
requires the Company to meet certain financial conditions, including net worth
and the ratios of total debt, senior secured debt and interest and other fixed
charges, to earnings. The credit facility is secured by substantially all of the
assets of the Company and certain of its subsidiaries. In addition, the Credit
Agreement limits the Company's ability, among other things, to incur debt, grant
liens, dispose of its properties, pay dividends, make capital expenditures or
investments or enter into mergers or acquisitions. Effective June 30, 2001, the
Company entered into an amendment to its Credit Agreement with a syndicate of
financial institutions led by The Chase Manhattan Bank, as administrative agent
to revise certain financial covenants in addition to other changes including
adjustments in the daily operational processing of loan activity.

The revolving loans are subject to a borrowing base formula, under which the
Company may borrow up to specified percentages of the value of various
categories of its assets, including qualified accounts receivable, inventory,
machinery and equipment. Interest is payable either monthly or quarterly, at the
election of the Company, at an interest rate based on either the prime rate of
The Chase Manhattan Bank or the prevailing rates in the Eurocurrency market. The
Company must repay all revolving loans by June 28, 2005. The Company is required
to repay all term loans in quarterly installments from December 31, 2000 through
June 28, 2005. During the third quarter of 2001, the Company repaid $4.0 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)

At September 30, 2001, $92.8 million of the Credit Agreement was utilized for
revolving loans and $1.9 million was utilized for letters of credit. At
September 30, 2001, $75.0 million of the outstanding revolving loans carried an
interest rate of 6.13% and $17.8 million carried an interest rate of 7.50%. At
September 30, 2001, $87.0 million was outstanding on the term loans at an
interest rate of 8.44%. See Note 11 for recent developments regarding the Credit
Agreement.

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 $57.4 million in revolving loans, term loans and machinery
loans for a term of five years. At August 26, 2001, $30.3 million was
outstanding at interest rates ranging from 6.25% to 7.25%. 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 $1.4 million (60.0 million Thai baht) in working capital
availability. At August 26, 2001, $1.1 million was outstanding at an interest
rate of 8.00%.

On November 2, 2000, ACT Manufacturing France entered into a new Credit
Agreement ("The French Credit Agreement") with a syndicate of financial
institutions led by Societe Generale. The French Credit Agreement provides that
the lenders will make available to ACT Manufacturing France up to approximately
$16.0 million of revolving loans. The French Credit Agreement is unsecured and
interest is payable monthly at an interest rate based on the rates in the
Eurocurrency market. As of September 30, 2001, the outstanding balance was
approximately $7.6 million and was at an interest rate of 4.90%. The French
Credit Agreement provides ACT Manufacturing France with a credit line in the
amount of approximately $9.7 million for sales of accounts receivable, none of
which was outstanding at September 30, 2001. In addition, ACT Manufacturing
France has a capital lease line of approximately $7.3 million, of which
approximately $2.8 million was utilized at September 30, 2001.

3.  CONVERTIBLE SUBORDINATED NOTES ISSUANCE

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


                                       7
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

4. INVENTORY

Inventory consisted of the following at the dates indicated (in thousands):

                                               September 30,        December 31,
                                                   2001                 2000
                                                   ----                 ----

Raw material .........................           $171,900             $327,046
Work in process ......................             33,552               58,236
Finished goods .......................             10,513               16,043
                                                 --------             --------

Total ................................           $215,965             $401,325
                                                 ========             ========

The carrying value of inventory approximates replacement cost.

5. NET (LOSS) INCOME PER COMMON SHARE

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

<TABLE>
<CAPTION>
                                                  Net (Loss)     Weighted       Net (Loss)
                                                    Income    Average Shares     Income
                                                 (Numerator)   (Denominator)    Per Share
                                                 -----------   -------------    ---------
<S>                                               <C>              <C>          <C>
Three Months Ended September 30, 2001
  Basic ....................................      $(24,136)        17,081       $  (1.41)

  Effect of stock options ..................            --             --             --
                                                  --------        --------       --------

  Diluted ..................................      $(24,136)        17,081       $  (1.41)
                                                  ========       ========       ========

Three Months Ended September 30, 2000
  Basic ....................................      $  8,200         16,919       $   0.48

  Effect of stock options ..................            --          1,337          (0.03)
                                                  --------       --------       --------

  Diluted ..................................      $  8,200         18,256       $   0.45
                                                  ========       ========       ========
</TABLE>


                                       8
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

<TABLE>
<CAPTION>

                                               Net (Loss)     Weighted       Net (Loss)
                                                Income     Average Shares      Income
                                              (Numerator)   (Denominator)    Per Share
                                              -----------   -------------    ---------
<S>                                            <C>              <C>          <C>
Nine Months Ended September 30, 2001
  Basic .................................      $(27,428)        17,065       $  (1.61)

  Effect of stock options ...............            --             --             --
                                               --------       --------       --------

  Diluted ...............................      $(27,428)        17,065       $  (1.61)
                                               ========       ========       ========

Nine Months Ended September 30, 2000
  Basic .................................      $ 21,378         16,728       $   1.28

  Effect of stock options ...............            --          1,511          (0.11)
                                               --------       --------       --------

  Diluted ...............................      $ 21,378         18,239       $   1.17
                                               ========       ========       ========
</TABLE>

Options to purchase 1,896,000 shares of common stock were outstanding for the
three-month and nine-month periods ended September 30, 2001, but were not
included in the computation of diluted EPS due to the net loss recorded by the
Company during these periods, and therefore, their effect would be antidilutive.

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

6. COMPREHENSIVE (LOSS) INCOME

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

<TABLE>
<CAPTION>
                                                            Three Months Ended           Nine Months Ended
                                                               September 30,                September 30,
                                                               -------------                -------------

                                                            2001          2000           2001           2000
                                                            ----          ----           ----           ----
<S>                                                      <C>            <C>            <C>            <C>
Net (loss) income...................................     $(24,136)      $  8,200       $(27,428)      $ 21,378
Other comprehensive income (loss):
Change in fair value of derivative instruments......         (889)            --         (1,086)            --
Foreign currency translation adjustment.............        2,392           (298)        (1,930)          (614)
Change in pension plan assets.......................        1,091             --          1,091             --
                                                         --------       --------       --------       --------

Comprehensive (loss) income.........................     $(21,542)      $  7,902       $(29,353)      $ 20,764
                                                         ========       ========       ========       ========
</TABLE>


                                       9
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

Derivative gains and losses included in Accumulated Other Comprehensive Income
("AOCI") are reclassified into earnings at the time the forecasted revenue or
expense item is recognized. During the three months ended September 30, 2001,
approximately $197,000 of derivative losses were reclassified to the statements
of operations. The derivative losses reclassified to the statements of
operations were offset by gains on the items being hedged.

The estimated amount of existing gains and losses at September 30, 2001 included
AOCI that is expected to be reclassified into earnings over the next twelve
months is not expected to be material, assuming there is no change in the
instrument.

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, by segment, for the three-month
and nine-month periods ended September 30, 2001 and 2000, as well as the assets
by segment at September 30, 2001 and December 31, 2000, are as follows (in
thousands):

<TABLE>
<CAPTION>
                             Three Months Ended                  Nine Months Ended
                                September 30,                      September 30,
                                -------------                      -------------

                            2001              2000             2001              2000
                            ----              ----             ----              ----
<S>                     <C>               <C>              <C>               <C>
Net Sales
     North America..... $   102,029       $   291,514      $   587,428       $   767,352
     International.....     123,869            77,001          428,651            83,221
                        -----------       -----------      -----------       -----------

     Total............. $   225,898       $   368,515      $ 1,016,079       $   850,573
                        ===========       ===========      ===========       ===========

Gross Profit
     North America..... $   (23,551)      $    25,633      $    (2,570)      $    68,319
     International.....      15,695             7,679           43,140             7,683
                        -----------       -----------      -----------       -----------

     Total............. $    (7,856)      $    33,312      $    40,570       $    76,002

Corporate Expenses.....      16,280            25,112           67,998            54,624
                        -----------       -----------      -----------       -----------

Net (Loss) Income...... $   (24,136)      $     8,200      $   (27,428)      $    21,378
                        ===========       ===========      ===========       ===========
</TABLE>

                                               September 30,        December 31,
                                                   2001                 2000
                                                   ----                 ----

Segment Assets
     North America............................  $  359,474           $  667,043
     International............................     339,942              400,760
                                                ----------           ----------

     Total....................................  $  699,416           $1,067,803
                                                ==========           ==========


                                       10
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

Geographic Information

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

                           Three Months Ended             Nine Months Ended
                              September 30,                  September 30,
                              -------------                  -------------

                          2001            2000           2001            2000
                          ----            ----           ----            ----

Net Sales
     North America.... $  102,029      $  291,514     $  587,428      $  767,352
     Europe...........     75,683          58,805        259,369          65,025
     Asia.............     48,186          18,196        169,282          18,196
                       ----------      ----------     ----------      ----------

     Total............ $  225,898      $  368,515     $1,016,079      $  850,573
                       ==========      ==========     ==========      ==========

                                              September 30,         December 31,
                                                   2001                 2000
                                                   ----                 ----

Long-Lived Assets
     North America............................   $ 62,110             $ 63,951
     Europe...................................     67,307               64,077
     Asia.....................................    108,249              113,270
                                                 --------             --------

     Total....................................   $237,666             $241,298
                                                 ========             ========


                                       11
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

8. PROSPECTIVE AND RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS

In August 2001, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" (SFAS 144"). SFAS 144 addresses
the accounting and reporting for the impairment of long-lived assets and for the
disposal of long-lived assets. The Company will be required to adopt SFAS 144 no
later than the fiscal year beginning on January 1, 2002. The Company has not
completed its analysis of the effect of adopting SFAS 144.

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

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), subsequently amended by
SFAS No. 137 and SFAS No. 138. SFAS No. 133 requires the Company to record all
derivatives on the balance sheet at fair value and establishes criteria for
designation and effectiveness of hedging relationships. To the extent that the
hedge is effective, changes in derivative fair values will either be recognized
in earnings as offsets to the changes in fair value of related hedged assets,
liabilities and unrecognized firmly committed transactions (fair value hedging
relationships), or for forecasted transactions, deferred and recorded as a
component of other accumulated comprehensive income until the hedged
transactions occur and are recognized in earnings (cash flow hedging
relationships). There may be an impact on earnings to the extent that the
hedging relationship is not 100% effective. If hedges do not qualify for hedge
accounting under SFAS No. 133 or if the Company elects not to designate a
derivative as a hedge under SFAS No. 133, then the derivative fair value changes
are recognized directly in earnings. As of September 30, 2001, the Company
recorded a net unrealized loss of $1.1 million to AOCI in the balance sheet.

The Company's France subsidiary uses derivative financial instruments to hedge
certain non-functional currency-denominated assets and liabilities that are
primarily short-term trade accounts payable and receivable balances. Derivative
financial instruments are also used to hedge unrecognized but firmly committed
foreign-currency-denominated revenues and expenses. In all cases, the maturities
of hedging instruments does not usually exceed three to four months. These
instruments may involve elements of credit and market risk in excess of the
amounts recognized in the financial statements. The Company monitors its
positions and the credit quality of counterparties, consisting primarily of
major financial institutions, and does not anticipate nonperformance by any
counterparty. All of the derivatives used by the France subsidiary are highly
effective as defined by SFAS No. 133 because all of the critical terms of the
derivatives match those of the hedged items.  As of September 30, 2001, the
Company recorded an unrealized gain of $0.3 million to AOCI in the balance
sheet.

On June 29, 2001, the Company entered into an interest rate swap agreement with
JP Morgan Chase in order to eliminate interest rate risk on the term loan
portion of the Credit Agreement. The contract, which has a termination date of
June 29, 2005, stipulates that the notional swap amount will decrease as
principal payments are made to the term loan as prescribed by the Credit
Agreement. As of September 30, 2001, the Company recorded a net unrealized loss
of $1.4 million to AOCI in the balance sheet.  As of September 30, 2001, the
Company recorded an unrealized gain of $0.3 million to AOCI in the balance
sheet.

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.


                                       12
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

9. CONTINGENCIES

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

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

10. ACCRUED LIABILITIES - FACILITIES CLOSURES AND SEVERANCE

In the second and third quarters of fiscal 2001, the Company announced plans
relating to restructuring and consolidating certain of its operations, including
facility closures, leases for equipment taken out of operation, and reductions
in workforce. The following table summarizes the costs incurred, paid, and
balance accrued during the nine month period ended and as of September 30, 2001:

                                     Charges                     Balance
                                    Incurred   Payments   September 30, 2001
                                    --------   --------   ------------------
Facility lease costs..............  $  6,309   $ (2,345)      $     3,964
Equipment lease costs.............     2,914     (1,575)            1,339
Employee severance arrangements...     5,629     (5,180)              449
                                    --------   --------       -----------
                                    $ 14,852   $ (9,100)      $     5,752
                                    ========   ========       ===========



11. SUBSEQUENT EVENT

On November 9, 2001, the Company entered into a limited waiver to the Credit
Agreement pursuant to which the syndicate of financial institutions led by The
Chase Manhattan Bank, as administrative agent, agreed to waive until November
23, 2001 noncompliance by the Company of certain borrowing base restrictions up
to a $5 million overadvance facility. The limited waiver also waives until
November 30, 2001 certain events of default relating to repayment obligations by
us of our lease obligations. The $5 million overadvance facility is available to
the Company until November 23, 2001, subject to certain conditions. The limited
waiver further reduces the maximum revolving loan availability to $69 million.

In October 2001, the Company implemented a reductions in workforce of
approximately one thousand additional employees. The Company will record a
charge of approximately $5.2 million in connection with this action in the
fourth quarter of 2001.


                                       13
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

This Quarterly Report on Form 10-Q, including the following discussions,
contains trend analysis and other forward-looking statements within the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Any
statements in this Quarterly Report that are not statements of historical facts
are forward-looking statements, which involve risks and uncertainties. Our
actual results may differ materially from those indicated in the forward-looking
statements as a result of the factors set forth elsewhere in this Quarterly
Report on Form 10-Q, including under "Cautionary Statements." You should read
the following discussion and analysis together with our condensed consolidated
financial statements for the periods specified and the related notes included
herein. Further reference should be made to our Annual Report on Form 10-K for
the period ended December 31, 2000.

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

OVERVIEW

We are a 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.

Many of our customers are experiencing economic downturns currently, including
those in the networking and telecommunications market. Since customers in the
networking and telecommunications segment of the electronics industry represent
a large portion of our net sales, developments adverse to this segment of the
industry have and are likely to continue to materially and negatively impact
us. The recessionary period or other events leading to excess capacity affecting
one or more segments of the electronics industry we serve would likely result in
intensified price competition, reduced margins and a decrease in our net sales.

In response to the weakening global economy, we announced and implemented plans
relating to restructuring and consolidating our operations, including facility
closures and reallocation of production, significant reductions in workforce,
reductions in excess inventory and discontinuation of certain customer
relationships. In the third quarter of 2001, we took charges of approximately
$35.4 million. The charges taken include approximately $9.9 million related to
excess and obsolete inventory which were written down to net realizable value,
approximate $6.3 million related to facility closures and approximately $5.8
million related to lease payments associated with excess production lines, each
of which were included in cost of goods sold in our condensed consolidated
statement of operations for the three months ended September 30, 2001. The
charges taken also include approximately $10.5 million related to bad debt and
other settlement losses incurred on discontinued customer relationships and
other disputes and approximately $2.9 million related to employee severance
arrangements, each of which were included in selling, general and administrative
expenses in our condensed consolidated statement of operations for the three
months ended September 30, 2001.

During the third quarter 2001, we reduced our workforce by 853 employees. This
reduction, in addition to actions taken in the first two quarters of 2001, have
resulted in a reduction in our workforce from approximately 8,800 employees at
January 1, 2001 to approximately 6,000 at September 30, 2001. In October 2001,
an additional 1,000 employees were terminated. We expect to take additional
charges related to our restructuring program in the fourth quarter of 2001.

We currently manufacture at twelve facilities having an aggregate of
approximately 1.6 million square feet. Of our leased manufacturing facilities,
four of the facilities are located in Massachusetts and one facility is located
in each of San Jose, California; Lawrenceville, Georgia; Corinth, Mississippi;
Leicester, England 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


                                       14
<PAGE>

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 also
signed a lease for a 100,000 square foot new products introduction, prototype
and manufacturing facility in Dallas, Texas, however, we currently do not plan
to open this facility in fiscal 2001. As part of our restructuring program, a
portion of our facilities in Calilfornia and Mexico have been closed. In
addition, we have consolidated the printed circuit board operations in Ireland
into the England facility, leaving the Ireland facility as a dedicated cable
operation. During the fourth quarter, we will continue to evaluate our
manufacturing facilities to further align our production capacity to market
conditions. We recorded a $6.3 million charge in the third quarter for facility
closures, which included lease payments for the third quarter as well as
approximately $4.0 million in future lease payments. Our facilities contained
111 surface mount technology lines ("SMT lines") at September 30, 2001. Since
our production during the third quarter of 2001 required the use of only select
production lines, we incurred costs of approximately $5.8 million for the
quarter related to excess capacity on the lines and we are commencing
negotiations with the equipment lessors in an effort to reduce current cash
flow and restructure lease terms.

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

o     customer attempts to manage inventory;

o     changes in the customer's manufacturing strategy; and

o     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 SEPTEMBER 30, 2001 AND 2000

Net sales decreased $142.6 million or 38.7% to $225.9 million for the third
quarter of 2001 compared to $368.5 million for the third quarter of 2000. The
decrease was attributable principally to decreased revenues in the North
American business, which have been significantly impacted by weakness in the
telecommunications industry and the global economy generally.

Gross profit including special charges and excess capacity costs decreased $41.2
million to $(7.9) million for the three months ended September 30, 2001 compared
to $33.3 million in the prior year quarter. The third quarter 2001 gross profit
was negatively impacted by inventory provisions of $9.9 million consisting of
excess and obsolete inventories related to discontinuation of certain customer
relationships and our ongoing inventory reduction program, facility closure and
consolidation charges of $6.3 million and excess operating lease costs of $5.8
million related to production lines not in operation during the quarter. Gross
profit as a percentage of net sales ("gross margin") before special charges
decreased to $14.1 million compared to $33.3 million in the prior year quarter
as a result of the shipment of a greater percentage of parts to customers in
order to reduce inventory levels and a decrease in our overall capacity
utilization rate. Parts sales to customers totaled approximately $38 million for
the quarter ended September 30, 2001. We will incur additional inventory and
other excess capacity charges in the fourth quarter of 2001.

Selling, general and administrative expenses "SG&A" including special charges
and credit provisions increased $11.1 million or 90.2% to $23.3 million, or
10.3% of net sales, for the three months ended September 30, 2001 compared to
$12.3 million, or 3.3% of net sales, in the prior year quarter. The third
quarter 2001 selling, general and administrative expenses were negatively
impacted by charges of $10.5 million related to trade receivable write-offs as a
result of termination of certain customer relationships and other disputes and
$2.9 million of severance charges related to the reduction in workforce of 853
employees during the quarter. SG&A expenses as a percentage of net sales
increased due to the factors discussed above and the lower net sales in the
third quarter 2001. We will incur additional charges related to discontinued
customers and employee severance in the fourth quarter of 2001.

Amortization of goodwill increased $2.3 million to $3.7 million for the third
quarter of 2001 compared to $1.4 million for the third quarter of 2000. The
increase is due to a full quarter of goodwill amortization during the third
quarter of 2001 compared to a partial quarter of goodwill amortization in the
prior year resulting from the purchases of ACT Manufacturing France and ACT
Manufacturing Thailand.

Interest and other expense, net increased $1.1 million to $6.8 million for the
third quarter of 2001 compared to $5.7 million for the third quarter of 2000.
This increase is due in part, to approximately $0.9 million of interest income
earned in the prior year attributable to the reinvestment of the proceeds
received in connection with the issuance of convertible notes in fiscal 2000
as well as declining interest rates offset by increased borrowing levels.


                                       15
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

The provision for income taxes was recorded using a 42.0% effective tax rate for
the third quarter of 2001. In Thailand, the Company currently operates under a
"tax holiday" that will expire in 2002 unless it is renewed. Upon the expiration
of the "tax holiday" the Company is subject to taxation at a rate of 30% per
annum in Thailand. The rate at which income taxes will be provided in future
periods will depend on taxable income by tax jurisdiction.

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

Our net sales increased $165.5 million or 19.5% to $1,016.1 million for the nine
months ended September 30, 2001 compared with $850.6 million for the comparable
period of 2000. The increase was attributable principally to the inclusion of
ACT Manufacturing France net sales of $239.0 million and the inclusion of ACT
Manufacturing Thailand net sales of $169.3 million, each of which was acquired
in August 2000, offset by a decline in net sales in North America.

Gross profit including special charges and excess capacity costs decreased $35.4
million to $40.6 million for the nine months ended September 30, 2001 compared
to $76.0 million in the prior year period. Gross profit in 2001 was negatively
impacted by the charges noted above in addition to special charges of $6.8
million recorded in the second quarter of 2001 related to inventory reserves and
costs associated with our inventory reduction plan. Excluding charges and excess
capacity costs, gross profit totaled $69.3 million, or 6.8% of net sales, as
compared to 8.9% for the prior year. The decrease in gross margin is due to
under absorption of fixed costs due to lower net sales, in addition to sales of
parts to customers at low margins as part of the Company's inventory reduction
program. Total parts sales for the nine months ended September 30, 2001 were
approximately $117.5 million.

SG&A expenses including special charges and credit provisions increased $26.6
million or 90.2% to $56.1 million, or 5.5% of net sales, for the nine months
ended September 30, 2001 compared to $29.5 million, or 3.5% of net sales, in the
prior year period. SG&A expenses increased in the 2001 period as a result of the
charges noted above in addition to $6.5 million of special charges recorded in
the second quarter related to employee severance, professional fees incurred in
connection with postponed financings, and leases for equipment taken out of
operation. Excluding charges and credit provisions, SG&A totaled $36.7 million
for the nine months ended September 30, 2001, or 3.6% of net sales, compared to
the 3.5% of net sales for the prior year period.

Amortization of goodwill increased $9.2 million to $11.1 million for the nine
months ended September 30, 2001 compared to $1.9 million for the comparable
period in 2000. The increase is due to a full year of goodwill amortization
during 2001 compared a partial year of goodwill amortization in the prior year
resulting from the purchases of ACT Manufacturing France and ACT Manufacturing
Thailand.

Interest and other expense, net increased $12.3 million to $21.4 million for the
nine months ended September 30, 2001 compared to $9.1 million for the comparable
period in 2000. This increase is primarily attributable to higher debt levels in
2001, due to the acquisition activity that occurred during the second half of
2000.

The Company recorded an income tax benefit of $20.6 million for the nine months
ended September 30, 2001 and income tax expense of $14.1 million for the
comparable period in 2000. The effective tax rate was 42.9% for the nine months
ended September 30, 2001 compared to 39.9% for the comparable period in 2000.
The difference in rates is primarily attributable to the inclusion in 2001 of
the income of ACT Manufacturing Thailand, which is not subject to Thai income
tax. In Thailand, we currently operate under a "tax holiday" that will expire in
2002 unless it is renewed. Upon the expiration of the "tax holiday" we will
become subject to taxation at a rate of 30% per annum in Thailand. Since we had
positive pre-tax income in Thailand and negative pre-tax income in the North
America operations, a significant tax benefit was generated in the 2001 period.
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 $258.5 million at September 30, 2001 compared with
$350.9 million at December 31, 2000. Operating activities generated $56.0
million of cash in the nine months ended September 30, 2001 compared with cash
used for operations of $70.9 million in the comparable period of 2000. The
primary sources of cash in the nine months ended September 30, 2001 included a
decrease in accounts receivable of $170.3 million and a decrease in inventory of
$186.6 million, offset by decreases in accounts payable of $198.7 million and
repayment of an advance from a customer of $50.0 million. The decrease in
accounts receivable was primarily due to lower revenue levels generated during
2001, while the decrease in inventory was primarily the result of improvements
in supply chain management in addition to the sales of parts to customers. The
decrease in accounts payable was due to reduced purchasing activity. As a result
of the recent downturn in the electronic industry, we have been increasingly

                                       16
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

involved in the pursuit of claims and litigation against third parties for the
collection of accounts receivables. As discussed above, we incurred a $10.5
million charge for the quarter ended September 30, 2001 related to bad debt and
other settlement losses incurred on discontinued customer relationships and
other disputes. In light of the economic environment and the potential
uncertainties associated with litigation, we have settled a significant portion
of these cases. Any inability or unwillingness of a customer to pay for products
and services on a timely basis or at all could materially adversely impact our
cash flow, operating results and our financial condition in a particular period.

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

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

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 (the "Credit Agreement"). Our Credit
Agreement with these lenders is secured by substantially all of our assets, and
certain of our subsidiaries' assets. The Credit Agreement provided 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.

At September 30, 2001, $92.8 million of the Credit Agreement was utilized for
revolving loans and $1.9 million was utilized for letters of credit under the
Credit Agreement. At September 30, 2001, $75.0 million of the outstanding
revolving loans carried an interest rate of 6.13% and $17.8 million carried an
interest rate of 7.50%. At September 30, 2001, $87.0 million was outstanding on
the term loans at an interest rate of 8.44%.

In October 2001, we further reduced our loan balance under the Credit Agreement
by approximately $27.2 million from the September 30, 2001 amount outstanding.

During the third quarter of 2001, we met our working capital needs primarily
through cash generated from operations as well as domestic and foreign bank
borrowings. During the third quarter of 2001, we went into an over advance
position on our domestic credit facility under the Credit Agreement. We were
within the applicable borrowing base as of September 30, 2001. We were also in
an over advance position in October 2001, however, we subsequently reduced our
domestic loan balances within the applicable borrowing base. As a result of
limitations on available borrowings, we must manage our inventory, shipments,
receivables, payments and other cash flow items to remain within the applicable
borrowing base or obtain alternative bank or other financing arrangements. We
have been in ongoing discussions with our domestic bank syndicate to obtain
required consents and amendments as well as to address required liquidity as we
continue to transition our business in light of evolving industry and economic
conditions.

On November 9, 2001, the Company entered into a limited waiver to the Credit
Agreement pursuant to which the syndicate of financial institutions led by The
Chase Manhattan Bank, as administrative agent, agreed to waive until November
23, 2001 noncompliance by the Company of certain borrowing base restrictions up
to a $5 million overadvance facility.  The limited waiver also waives until
November 30, 2001 certain events of default relating to repayment obligations by
us of our lease obligations.  The $5 million overadvance facility is available
to the Company until November 23, 2001, subject to certain conditions.  The
limited waiver further reduces the maximum revolving loan availability to $69
million.

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 third 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. On August 31, 2000, we
purchased all of the issued shares of Bull Electronics Angers S.A. for a
purchase price of approximately $99.8 million, of which $8.7 million was paid in
the first quarter of 2001. In July 2001, we acquired the Leicester, England
manufacturing facility of Fisher-Rosemount Systems, the process management
division of Emerson Electric, Inc. for approximately $7.5 million, of which
$6.0 million has been paid as of September 30, 2001.

                                       17
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 $57.4 million in revolving loans, term loans and machinery
loans for a term of five years. At August 26, 2001, $30.3 million was
outstanding at interest rates ranging from 6.25% to 7.25%. 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 $1.4 million (60.0 million Thai baht) in working capital
availability. At August 26, 2001, $1.1 million was outstanding at an interest
rate of 8.00%.

On November 2, 2000, ACT Manufacturing France entered into a new Credit
Agreement "French Credit Agreement" with a syndicate of financial institutions
led by Societe Generale. The French Credit Agreement provides that the lenders
will make available to ACT Manufacturing France up to approximately $16.0
million of revolving loans. The French Credit Agreement is unsecured and
interest is payable monthly at an interest rate based on the rates in the
Eurocurrency market. As of September 30, 2001, the outstanding balance was
approximately $7.6 million and was at an interest rate of 4.90%. The French
Credit Agreement provides ACT Manufacturing France with a credit line in the
amount of approximately $9.7 million for sales of accounts receivable, none of
which was outstanding at September 30, 2001. In addition, ACT Manufacturing
France has a capital lease line of approximately $7.3 million, of which
approximately $2.8 million was utilized at September 30, 2001.

On June 29, 2001, the Company entered into an interest rate swap agreement with
JP Morgan Chase in order to eliminate interest rate risk on the term loan
portion of the Credit Agreement. The contract, which has a termination date of
June 29, 2005, stipulates that the notional swap amount will decrease as
principal payments are made to the term loan as prescribed by the Credit
Agreement. The Company will pay the bank counterparty a fixed interest rate of
4.94% for the duration of the contract; in return, the Company will receive the
three month LIBOR rate. This rate will reset on a quarterly basis to the
published three month LIBOR rate. The three month LIBOR rate on September 30,
2001 was 2.59%. As of September 30, 2001, the Company recorded a net unrealized
loss of $1.4 million to AOCI in the balance sheet representing the fair value of
the interest rate swap agreement.

Capital expenditures of approximately $6.6 million in the first nine months of
2001 were primarily for the acquisition of equipment and leasehold improvements
related to operations.

We lease manufacturing facilities and certain equipment and computer software
used in our manufacturing operations under capital and operating lease
agreements that expire through 2011. As of September 30, 2001, we had equipment
lease lines of approximately $5.5 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 September 30, 2001, the fair value of these contracts was
approximately $0.3 million. In accordance with SFAS No. 133, this amount has
been recorded to Accumulated Other Comprehensive Income in the balance sheet.

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.

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, including general
economic conditions. As a result of limitations on available borrowing under our
credit facilities, we must manage our inventory, shipments, receivables,
payments and other cash flow items to remain with our applicable borrowing bases
under such credit facilities, or obtain alternative bank or other financing
alternatives. We are likely to require additional capital to finance our working
capital requirements as well as any further acquisitions or other enhancements
to, or expansions of, our manufacturing capacity. We are actively pursuing
discussions with our domestic bank syndicate as well as considering other
initiatives to improve our financial position and liquidity needs. These other
initiatives range from restructuring operating leases and vendor payment
obligations, to pursuing additional foreign credit facilities, to exploring
strategic options such as a alternative financings and divestiture of certain
assets.

RECENT FINANCIAL ACCOUNTING STANDARDS


                                       18
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

In August 2001, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" (SFAS 144"). SFAS 144 addresses
the accounting and reporting for the impairment of long-lived assets and for the
disposal of long-lived assets. The Company will be required to adopt SFAS 144 no
later than the fiscal year beginning on January 1, 2002. The Company has not
completed its analysis of the effect of adopting SFAS 144.

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

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 IS IMPACTED BY THE SLOWDOWN IN ECONOMY WORLDWIDE

Our business is dependent on current and anticipated market demand for
electronics, which has been negatively impacted by the slowdown in the global
economy that began in the second half of 2000 and the terrorist attacks of
September 11, 2001. The uncertainty regarding the growth rate of the worldwide
economies has caused companies to reduce capital investment. These cutbacks have
been particularly severe in the electronics industry which we serve. We cannot
predict if or when the growth rate of the global economy will rebound or whether
the growth rate of our business will rebound when the global economy begins to
grow. The effects of the economic decline has and is likely to continue to
result in lower revenue growth rates and may result in decreased revenues,
reduced profitability or losses. If the global economic conditions worsen, we
may experience a material


                                       19
<PAGE>

adverse impact on our business, operating results and financial condition.

OUR BUSINESS WILL 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 59% of
our net sales in the nine months ended September 30, 2001, 69% in fiscal 2000,
and 66% in fiscal 1999. Many of our customers are experiencing economic
downturns currently, including those in the networking and telecommunications
market. The weakness of global economic conditions, especially developments
adverse to these industry segments have had and are likely to continue to result
in lower revenue growth rates, decreased revenues, reduced profitability or
losses. These industry segments, and the electronics industry as a whole,
experience:

o     intense competition;

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

o     significant fluctuations in product demand;

o     economic cycles, including recessionary periods; and

o     consolidation.

A recessionary period or other event leading to excess capacity especially ones
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. In this weakened global economy, we may not be able to effectively
promote future growth in our revenues or achieve profitability.

WE HAVE TAKEN AND EXPECT TO CONTINUE TO TAKE MEASURES TO ADDRESS THE RECENT
DOWNTURN IN THE GLOBAL ECONOMY AND THE RECENT SLOWDOWN IN THE EMS MARKET WHICH
MEASURES COULD BE UNSUCCESSFUL AND HAVE LONG-TERM NEGATIVE EFFECTS ON OUR
BUSINESS.

We have taken and expect to continue to take restructuring measures to address
the recent downturn in the global economy and the slowdown in the EMS market. In
particular, we have reduced our workforce, closed certain of our operating
facilities, reallocated our production capacity by reducing production lines,
reduced our excess inventory and discontinued certain customer relationships.
These measures are intended to reduce our expenses in the face of decreased
revenues due to decreased customer orders. Our implementation of these measures
and any additional measures taken in the future may be unsuccessful in
addressing the downturn in the global economy and the slowdown in the EMS
market. Current and additional restructuring actions may result in further cash
and non-cash charges, which would have a material adverse effect on our results
of operations and financial condition. In addition, each of these measures and
any additional measures taken in the future may have long-term negative effects
on our business and may make it more difficult to achieve our current or future
business objectives.

WE MUST OBTAIN NECESSARY FINANCING, WORKING CAPITAL AND LIQUIDITY, IN
PARTICULAR FOR OUR NORTH AMERICAN OPERATIONS, AND OUR FAILURE TO DO SO
SUCCESSFULLY WOULD IMPAIR OUR ABILITY TO OPERATE.

In the third and fourth quarters of 2001, we exceeded the borrowing base
available under our domestic Credit Agreement. On November 9, 2001, we obtained
a limited waiver from our domestic bank group which provided a $5 million
overadvance facility until November 23, 2001, subject to certain conditions, and
capped the revolving credit amount availability at $69 million. The revolving
credit facility under the Credit Agreement is a critical source of working
capital and liquidity for our North American operations. We have been actively
pursuing discussions with our domestic bank syndicate, as well as considering
other initiatives to improve our financial position and meet our liquidity
needs. These other initiatives range from restructuring operating leases and
vendor payment obligations, to pursuing additional foreign credit facilities and
to exploring strategic options such as alternative financings and divestiture of
certain assets. There can be no assurance that we will obtain any of the
consents, amendments or liquidity facilities we require to meet our needs.

THE LOSS OF MAJOR CUSTOMERS WOULD 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 50% and 57% of
our net sales for the nine months ended September 30, 2001 and for fiscal 2000,
respectively.

For the nine months ended September 30, 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 also terminated our business with several significant customers
in the nine months ended September 30, 2001. 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 and therefore our net sales
may decline. Because certain customers represent such a large part of our
business, any of the following could negatively impact our business:

o     the loss of one or more major customer;

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

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


                                       20
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

o     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:

o     Customer attempts to manage inventory;

o     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;

o     variation in demand for customer products; and

o     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:

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

o     the timing of production schedules;

o     the purchase of materials;

o     the purchase or leasing of facilities and equipment; and

o     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:

o     adapt more easily to economic downturns;

o     respond more quickly to new or emerging technologies;

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

o     be better able to take advantage of acquisition opportunities;

o     adapt more quickly to changes in customer requirements; and

o     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.

DUE TO THE SLOWDOWN IN ECONOMIC GROWTH, OUR CUSTOMERS MAY EXPERIENCE FINANCING
DIFFICULTIES AND MAY REPRESENT A CREDIT RISK.

With the slowdown in global economic growth in the past several quarters,
especially in the United States, and the uncertainty relating to the prospects
for near-term global economic growth, some of our customers may experience
financial difficulties and may represent a credit risk to us. In the quarter
ended September 30, 2001, we took a $10.5 million charge relating to losses due
to trade receivable write-offs as a result of termination of certain customer
relationships and other disputes. If our customers, especially those limited
operating histories and limited access to capital, experience financial
difficulties or fail to experience commercial success, we may have difficulty
collecting our accounts receivable.


                                       21
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

WE MAY NOT BE ABLE TO OBTAIN RAW MATERIALS OR COMPONENTS FOR OUR ASSEMBLIES ON A
TIMELY BASIS OR AT ALL.

We rely on a single or limited number of third-party suppliers for many
proprietary and other components used in the assembly process. We do not have
any long-term supply agreements. Any inability to obtain, or delay in obtaining,
raw materials or components is likely to result in shipping delays and increased
prices that could adversely affect our ability to manufacture products for our
customers on a timely basis or at acceptable cost. Moreover, the consolidation
trend in our suppliers' industry results in changes in supply relationships and
in the price, availability and quality of components and raw materials. Due to
our utilization of just-in-time inventory techniques, the timely availability of
many components is dependent on our ability to both develop accurate forecasts
of customer requirements and manage the materials supply chain. If we fail to do
either, our operating results may suffer.

OPERATING IN FOREIGN COUNTRIES EXPOSES US TO INCREASED RISKS.

We have operations in France, Ireland, Mexico, Thailand, and England and
procurement offices in Taiwan and Singapore. 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:

o     economic or political instability;

o     transportation delays and interruptions;

o     foreign exchange rate fluctuations;

o     increased employee turnover and labor unrest;

o     longer payment cycles;

o     greater difficulty in collecting accounts receivable;

o     utilization of different systems and equipment;

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

o     less developed infrastructures.

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

o     increased regulatory requirements;

o     higher taxation;

o     currency conversion limitations;

o     restrictions on the transfer of funds;

o     the imposition of or increase in tariffs and duties; or

o     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 Narendra "Pat" Pathipati, Executive Vice President and
Chief Financial Officer, Ken Owens, Chief Operating Officer of North America,
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. Our growth in the future will also require us to attract,
motivate, train and retain additional skilled and experienced managerial,
manufacturing, financial, sales and technical personnel. We face intense
competition for such personnel. We may not be able to attract, motivate and
retain personnel with the skills and experience needed to successfully manage
our business and operations.


                                       22
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

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

o     maintain and enhance our technological capabilities;

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

o     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:

o     restrict our ability to expand our facilities;

o     require us to acquire costly equipment; or

o     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 are likely to 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:

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

o     general economic conditions;

o     shipment delays;

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

o     effectiveness in controlling manufacturing costs;


                                       23
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

o     changes in cost and availability of labor and components;

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

o     the levels at which we utilize our manufacturing capacity.

Our operating expenses are based on anticipated revenue levels and a high
percentage of our operating expenses are relatively fixed in the short term. As
a result, any unanticipated shortfall in revenue in a quarter would likely
adversely affect our operating results for that quarter. Also, changes in our
product assembly mix may cause our margins to fluctuate that could negatively
impact our results of operations for that period. Results of operations in any
period should not be considered indicative of the results to be expected for any
future period.

WE MAY INCUR COSTS AND LIABILITIES RELATED TO POTENTIAL OR PENDING LITIGATION.

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

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

JOHN A. PINO HAS SIGNIFICANT INFLUENCE OVER OUR COMPANY.

John A. Pino, Chairman of the Board, President and Chief Executive Officer, and
a number of trusts for his and his family's benefit, collectively beneficially
own approximately 30% of our common stock. As a result, Mr. Pino is able to
exert significant influence over us through his ability to influence the
election of directors and all other matters that require action by our
stockholders. The voting power of Mr. Pino and these trusts could have the
effect of preventing or delaying a change in control of our company which Mr.
Pino opposes.

RISKS RELATED TO OUR ACQUISITIONS

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 September 30, 2001 was approximately $222.7 million.
As of September 30, 2001, we also had $100.0 million of convertible subordinated
notes outstanding. Our leverage could have important adverse consequences. For
example, it could:

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

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


                                       24
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

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

o     limit our ability to borrow additional funds.

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

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.

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

Moreover, acquisitions that we do complete may result in:

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

o     the incurrence of debt;

o     the incurrence of significant costs and expenses; or

o     the potentially dilutive impact on our earnings per share.

Acquisition transactions also involve numerous business risks, including:

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

o     difficulties in managing geographically dispersed and international
      operations;

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

o     the diversion of management's attention from other business concerns; the
      potential disruption of our business; and

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


                                       25
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

WE MAY FAIL TO SECURE NECESSARY ADDITIONAL FINANCING.

Our future success depends in part on our ability to obtain additional financing
and capital to support our operations and growth. We may seek to raise capital
by:

o     issuing additional common stock or other equity instruments;

o     issuing debt securities;

o     obtaining additional lease financings;

o     increasing our lines of credit; or

o     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 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 November 7, 2001, our stock price has fluctuated
between a low of $1.42 per share and a high of $72.25 per share. On November 7,
2001, the closing price for our common stock was $1.42. 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:

o     quarterly variations in our operating results;

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

o     announcements of new products, or sales forecasts or results by our
      customers;

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

o     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:

o     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;

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

o     require unanimity for stockholder action by written consent;

o     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

o     provide for change of control payments.


                                       26
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2001, we had $92.8 million of a $150.0 million domestic
revolving loan outstanding that bears interest at variable interest rates. We
also have a $87.0 million domestic 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 August 26, 2001, ACT Manufacturing Thailand had
credit facilities, substantially all of which were denominated in U.S. dollars,
aggregating $57.4 million, which bore interest at variable rates. ACT
Manufacturing France also has an approximately $16.0 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 September 30, 2001, $75.0 million of the
outstanding balance on the domestic revolving loan carried an interest rate of
6.13% and $17.8 million carried an interest rate of 7.50%. At September 30,
2001, the outstanding balance under the domestic term loan was $87.0 million,
which was at an interest rate of 8.44%. At August 26, 2001, $31.4 million was
outstanding under the ACT Manufacturing Thailand credit facilities at interest
rates ranging from 6.25% to 8.00%. At September 30, 2001, approximately $7.6
million was outstanding under the ACT Manufacturing France credit facilities at
an interest rate of 4.90%. An adverse change of one percent in the interest rate
would cause a change in interest expense of approximately $1.4 million on an
annual basis based on balances outstanding at the end of the third quarter of
2001.

On June 29, 2001, the Company entered into an interest rate swap agreement with
JP Morgan Chase in order to eliminate interest rate risk on the term loan
portion of the Credit Agreement. The contract, which has a termination date of
June 29, 2005, stipulates that the notional swap amount will decrease as
principal payments are made to the term loan as prescribed by the Credit
Agreement. The Company will pay the bank counterparty a fixed interest rate of
4.94% for the duration of the contract; in return, the Company will receive the
three month LIBOR rate. This rate will reset on a quarterly basis to the
published three month LIBOR rate. The three month LIBOR rate on September 30,
2001 was 2.59%. As of September 30, 2001, the Company recorded a net
unrealized loss of $1.4 million to AOCI in the balance sheet representing the
fair value of the interest rate swap agreement.

Substantially all of the business of our Mexico and Thailand operations are
conducted in U.S. dollar denominated transactions and accordingly the functional
currency is the U.S. Dollar. The functional currency of ACT Manufacturing France
is the French franc, although some of that business is conducted in Euro and
other currencies. The functional currency of our operations in Ireland is the
Irish punt and in England is the pound sterling, however, these operations do
not represent a significant portion of our net sales and expenses. Expenses for
our French, Irish and English operations are also paid in French francs and
Euros, Irish punts and pounds sterling, respectively. Although the functional
currency of our foreign operations, other than France, Ireland and England, 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. Our statement of operations
will be impacted by fluctuations in exchange rates that affect expenses paid in
local currencies.

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.

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 September 30, 2001. The fair market value of the
convertible subordinated notes was $26.5 million with a carrying amount of
$100.0 million at September 30, 2001.




                                       27
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

10.1 Employment Agreement dated as of August 8, 2001 between the Company and
Narendra "Pat" Pathipati.

10.2 Limited Waiver of Credit Agreement dated November 9, 2001 among the
Company, The Chase Manhattan Bank, as Administrative Agent, Credit Suisse First
Boston, as Syndication Agent, Societe General, as Documentation Agent, and the
several lenders and other financial institutions or entities from time to time
party thereto.

(b) Reports on Form 8-K:

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


                                       28
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                                   SIGNATURES

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

November 14, 2001                   ACT MANUFACTURING, INC.

                                    /s/ Narendra Pathipati
                                    ----------------------------------
                                    Narendra Pathipati,
                                    Executive Vice President and Chief
                                    Financial Officer


                                       29
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                                  EXHIBIT INDEX

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

10.1        Employment Agreement dated as of August 8, 2001 between the Company
            and Narendra "Pat" Pathipati.

10.2        Limited Waiver to Credit Agreement dated November 9, 2001, among the
            Company, The Chase Manhattan Bank, as Administrative Agent, Credit
            Suisse First Boston, as Syndication Agent, Societe General, as
            Documentation Agent, and the several lenders and other financial
            institutions or entities from time to time party thereto.


                                       30