Edgar Filing: SMTC CORP

As filed with the Securities and Exchange Commission on April 4, 2001
Registration No. 333-33208
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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Post-Effective
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SMTC Corporation
(Exact name of registrant as specified in its charter)

Delaware 3672 98-0197680
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification No.)
of incorporation or Classification Code
organization) Number)
635 Hood Road
Markham, Ontario,
Canada L3R 4N6
(905) 479-1810
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
---------------
Paul Walker
President
SMTC Corporation
635 Hood Road
Markham, Ontario, Canada L3R 4N6
(905) 479-1810
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies of all communications, including communications sent to agent for
service, should be sent to:
Alfred O. Rose, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Offering Maximum
Title of Each Class of Amount to be Price Per Aggregate Offering Amount of
Securities to be Registered Registered Share(2) Price(2) Registration Fee
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Common Stock, par value
$.01 per share........ 12,650,000(1) $16.00 $202,400,000 $53,434(3)
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(1) Of the 12,650,000 shares registered by this registration statement,
4,365,000 shares were registered to be issued in exchange for exchangeable
shares of SMTC Manufacturing Corporation of Canada, a subsidiary of ours.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
(3) $33,000 was paid on March 20, 2000, $7,750 was paid on May 23, 2000, $160
was paid on June 19, 2000 and $12,524 was paid on July 20, 2000.

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Filed pursuant to Rule 424(b)(3)
Registration No. 333-33208

PROSPECTUS

4,375,000 Shares

[SMTC LOGO APPEARS HERE]

SMTC CORPORATION

Common Stock

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The shares of our common stock offered by this prospectus will be issued in
exchange for exchangeable shares of SMTC Manufacturing Corporation of Canada,
or SMTC Canada, a subsidiary of ours. We are bearing the expenses of
registration of the shares in this prospectus.

Our shares of common stock have been approved for quotation on the Nasdaq
National Market under the symbol "SMTX". The exchangeable shares are traded on
the Toronto Stock Exchange under the symbol "SMX". On April 3, 2001 the closing
sale price of the common stock on Nasdaq was $1.9375 per share.

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Investing in our common stock involves risks. "Risk Factors" begin on page
12.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.

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The date of this prospectus is April 4, 2001.

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TABLE OF CONTENTS

Page
----

Prospectus Summary.................. 1
About this Prospectus............... 8
Risk Factors........................ 9
Use of Proceeds..................... 16
The Reclassification................ 16
Dividend Policy..................... 17
Capitalization...................... 18
Dilution............................ 19
Selected Consolidated Financial
Data............................... 20
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......... 25
Business............................ 37
Management.......................... 48
Executive Compensation.............. 52

Employment Arrangements............. 54
Option Grants in Last Fiscal Year... 55
Option Exercises in Last Fiscal Year
and Fiscal Year-end Option Values.. 56
Related Party Transactions.......... 59
Principal Stockholders.............. 61
Description of Indebtedness......... 63
Description of Capital Stock........ 64
Details of the Exchangeable Shares.. 69
Shares Eligible for Future Sale..... 82
Plan of Distribution................ 85
Legal Matters....................... 86
Experts............................. 86
Additional Information.............. 87
Index to Financial Statements....... F-1

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different
from that contained in this prospectus. We are offering to exchange
exchangeable shares of SMTC Canada for shares of our common stock only in
jurisdictions where such exchanges are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of shares of our
common stock.

PROSPECTUS SUMMARY

This summary highlights information we present in greater detail elsewhere
in this prospectus. This prospectus contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from those discussed in the forward-looking statements as a result of factors
described under "Risk Factors" and elsewhere in this prospectus.

SMTC Corporation

We are a leading provider of advanced electronics manufacturing services, or
EMS, to electronics industry original equipment manufacturers, or OEMs,
worldwide. We service our customers through eleven manufacturing and technology
centers strategically located in key technology corridors in the United States,
Canada, Europe and a cost-effective region of Mexico. Our full range of value-
added services include product design, procurement, prototyping, assembly,
test, final system build, comprehensive supply chain management, packaging,
global distribution and after-sales support. Our business is focused on the
fast-growing communications, networking and computing sectors. Based upon a
comparison of our 2000 pro forma revenue of approximately $842.6 million with
2000 EMS industry revenue data provided by Technology Forecasters, Inc., or
TFI, we are among the 15 largest public EMS companies worldwide. We believe we
are well-positioned to capitalize on the significant and growing market
opportunity to provide advanced EMS solutions to OEMs on a global basis.

We have customer relationships with over 50 OEMs, many of which date back
more than five years. Our customers include industry leading OEMs such as
Alcatel, Dell, EMC, IBM and Lucent Technologies. We developed these
relationships by capitalizing on the continuing trend of OEMs to outsource
manufacturing services, to consolidate their supply base and to form long-term
strategic partnerships with selected high quality EMS providers. We also have
relationships with a number of emerging companies in the high-growth
communications and networking sectors, including Cobalt Networks (now part of
Sun Microsystems), Netopia, and Sycamore Networks. In 2000, approximately 79%
of our pro forma revenue was generated from the communications and networking
sectors. We expect to continue to grow our business both through the addition
of new, high quality customers and the expansion of our relationships with our
existing customers.

The EMS market is large and continues to grow rapidly. According to TFI,
global EMS industry revenue is forecasted to grow at a compounded annual rate
of approximately 27%, from $78.0 billion in 1999 to $260.0 billion in 2004. TFI
forecasts that larger EMS companies will grow more rapidly. We believe that the
growth for larger EMS companies is projected to be greater than the industry
average because OEMs are increasingly outsourcing production to larger
manufacturers that have the ability to provide a total service solution.
Industry growth is being fueled by the overall growth of the electronics
industry, the increased outsourcing of manufacturing by OEMs and the
divestiture of OEM manufacturing assets to EMS businesses. We believe that OEMs
decide to outsource in order to take advantage of the technology and
manufacturing expertise of EMS companies, eliminate manufacturing overhead,
reduce time-to-market of products and improve supply chain efficiency. TFI
estimates that the percentage of total cost of goods sold in the electronics
industry which is outsourced for manufacture by OEMs will increase from 11% in
1999 to 26% by 2004. According to TFI, the EMS industry is highly fragmented
with over 3,000 independent EMS companies in existence and the 15 largest
companies accounting for 45% of the worldwide market in 1999 based on revenue.
The EMS industry has experienced, and is anticipated to continue to experience,
significant consolidation. We believe that the fragmented nature of the
industry will allow us to take advantage of acquisition opportunities to
increase our scale and geographic scope as well as expand our customer
relationships and service offerings.

Since 1995 we and our predecessors have completed eight acquisitions and one
new site development which have substantially expanded our geographic reach,
added manufacturing capacity, enabled us to diversify into new markets and
broadened our technological capabilities and service offerings. Our corporate
structure is the result of the July 1999 combination of the former SMTC
Corporation, or Surface Mount, and HTM Holdings, Inc., or HTM. Combining
Toronto, Ontario based Surface Mount and Denver, Colorado based HTM provided us
with increased strategic and operating scale and greater geographic breadth.
After the combination, we purchased Zenith Electronics' facility in Chihuahua,
Mexico, which expanded our cost-effective manufacturing capabilities in an
important geographic region. In September 1999, we established a manufacturing
presence in the Northeastern United States and expanded our value-added
services to include high precision enclosures capabilities by acquiring Boston,
Massachusetts based W.F. Wood, Incorporated, or W.F. Wood. In July 2000, we
acquired Pensar Corporation, or Pensar, an EMS Company specializing in design
engineering headquartered in Appleton, Wisconsin. In November 2000, we acquired
Qualtron Teoranta, or Qualtron, a provider of specialized cable and harness
assemblies, based in Donegal, Ireland and Haverhill, Massachusetts. We intend
to continue to capitalize on the attractive acquisition opportunities that
exist in the EMS marketplace. We are considering potential acquisitions in
North America and Europe and are presently targeting Asia as an area for future
expansion.

Our Solutions

Our solutions capitalize on our technological capabilities and the service
offerings we deliver to OEMs. Key elements of our solutions include:

. Customer-focused Team Oriented Production System, or T.O.P.S. Our cross-
functional teams work as customer-focused business units without
departmental barriers. As a result, we are able to tailor the
manufacturing process for each customer resulting in reduced cycle times
and quick time-to-market capabilities.

. Comprehensive Supply Chain Management; Web-based System. Our supply
chain management expertise enables us to rapidly scale operations to
meet customer needs, shift capacity in response to product demand
fluctuations, reduce material costs and effectively distribute products
to our customers or their end-customers. In addition, we have available
and are implementing a web-based supply chain management system which
allows us to communicate, collaborate and plan with our suppliers and
customers in real time.

. Fully Integrated Worldwide Factories. Our global reach enables us to
provide OEMs with the flexibility to manufacture products locally in
several regions of the world. All of our assembly locations operate
under the same model and with the same systems, allowing customers to
seamlessly transfer their production from one of our facilities to
another. This gives our customers greater flexibility to transfer
production to the facility that suits their needs, enhances
communication among facilities and allows our employees to work
effectively at any of our sites.

Our Strategy

Our objective is to enhance our position as a leading EMS provider to OEMs
worldwide. We intend to achieve this objective by pursuing the following
strategies:

. Expand our global presence in strategic markets;

. Continue to provide leading edge supply chain management capabilities;

. Strengthen our relationships with leading and emerging global OEMs in
attractive EMS segments;

. Provide advanced technological capabilities and comprehensive service
offerings; and

. Pursue selective acquisition opportunities, including asset divestitures
by OEMs.

Initial Public Offering and Amendment of Senior Credit Facility

On July 27, 2000, we consummated an initial public offering of 6,625,000
shares of our common stock and 4,375,000 exchangeable shares of our subsidiary
SMTC Manufacturing Corporation of Canada, or SMTC Canada. Each exchangeable
share of SMTC Canada is exchangeable at the option of the holder at any time
into one share of our common stock, subject to compliance with applicable
securities laws.

Concurrently with the consummation of our initial public offering, we
amended our senior credit facility. In connection with the amendment to our
senior credit facility, we borrowed an additional $30.0 million in term loans
and increased the borrowing availability under our revolving credit facilities
to $100.0 million. See "Description of Indebtedness".

Our net proceeds from our initial public offering of $157.1 million, after
deducting the underwriting discounts and commissions and estimated fees and
expenses paid by us, including a fee of $1.8 million paid in connection with
the termination of our management agreement and from our $30.0 million of new
term borrowings under our senior credit facility, were approximately $187.1
million. We used the net proceeds to: (i) repay approximately $75.4 million
outstanding under the term loans and approximately $68.3 million outstanding
under the revolving credit facilities under our senior credit facility, (ii)
repay approximately $5.1 million outstanding under our senior subordinated
notes, (iii) repay approximately $10.3 million outstanding under our demand
notes, (iv) finance the $18.0 million cash portion of the purchase price for
our acquisition of Pensar Corporation, or Pensar and (v) repay approximately
$5.1 million of Pensar's outstanding debt. We used the remaining approximately
$4.9 million for general corporate purposes.

On August 18, 2000, we sold additional shares of common stock upon exercise
of the underwriters' over-allotment option, raising net proceeds of $24.6
million.

Address

SMTC Corporation is a Delaware corporation incorporated in 1998. Our
principal executive office is located at 635 Hood Road, Markham, Ontario,
Canada L3R 4N6 and our telephone number is (905) 479-1810. We maintain a
website on the Internet at www.smtc.com. Our website, and the information
contained therein, is not a part of this prospectus.

The Offering

Common Stock offered by SMTC in exchange for
the outstanding exchangeable shares of
SMTC Canada................................ 4,375,000 shares

Use of proceeds............................. SMTC will not receive any proceeds from the
exchange of the exchangeable shares of SMTC
Canada into shares of common stock.

Nasdaq National Market symbol for
common stock............................... SMTX

Exchange Procedure

Holders of exchangeable shares may initiate the exchange of their
exchangeable shares for common stock by exercising their retraction rights. The
retraction right is exercised by presenting to SMTC Canada or to CIBC Mellon
Trust Company, as trustee, (i) a certificate or certificates representing the
number of exchangeable shares the holder desires to retract; (ii) a duly
executed retraction request indicating the number of exchangeable shares the
holder desires to retract and the retraction date; and (iii) such other
documents as may be required to effect the retraction of the retracted
exchangeable shares. A holder wishing to exercise the retraction right must
present these documents to SMTC Canada or to the trustee at least 10 business
days prior to the retraction date specified in the retraction request. The
retraction rights of holders of exchangeable shares and the retraction
procedure are described in greater detail under "Details of the Exchangeable
Shares."

Summary Consolidated Historical and Pro Forma Financial Statements and Other
Data

The summary consolidated financial data set forth below is only a summary
and you should read it together with "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Consolidated Financial Information," and our
consolidated financial statements and the related notes appearing elsewhere in
this prospectus.

. The results of operations and other financial data for 1998 represents
the results of operations and financial data for HTM. For accounting
purposes, HTM is considered to have acquired Surface Mount in the July
1999 combination.

. The results of operations and other financial data included in this
prospectus for the year ended December 31, 1999 include a full year of
results for HTM, as well as the results for Surface Mount from July 30,
1999 through to December 31, 1999 and results for W.F. Wood from
September 4, 1999 through to December 31, 1999.

. The results of operations and other financial data included in this
prospectus for the year ended December 31, 2000 include a full year of
results for HTM, Surface Mount and W.F. Wood as well as the results for
Pensar from July 27, 2000 through to December 31, 2000 and the results
of Qualtron from November 22, 2000 through to December 31, 2000.

. The unaudited pro forma results of operations, adjusted net earnings and
other financial data for the years ended December 31, 1999 and December
31, 2000 contain the results of Surface Mount, HTM, W.F. Wood, Pensar
and Qualtron as if the combination of Surface Mount and HTM and the
acquisitions of W.F. Wood, Pensar and Qualtron and the initial public
offering and application of proceeds to reduce indebtedness had occurred
on January 1, 1999. As such, the pro forma results have been adjusted to
reflect additional goodwill amortization related to the combination of
Surface Mount and HTM, additional goodwill amortization related to the
acquisition of W.F. Wood, additional goodwill amortization related to
the acquisition of Pensar, additional goodwill amortization related to
the acquisition of Qualtron, additional interest expense and income tax
effects related to the borrowings required to complete the Pensar and
Qualtron acquisitions, and the effect of the initial public offering
including the exercise of the underwriters over-allotment option.

Our consolidated financial statements and our selected consolidated
financial data have been prepared in accordance with United States GAAP. These
principles conform in all material respects to Canadian GAAP except as
described in Note 22 to our consolidated financial statements. The differences
between the line items under United States GAAP and those as determined under
Canadian GAAP are not significant except that under Canadian GAAP the 1999 and
2000 extraordinary losses would have been reported as pre-tax expenses of $2.1
million and $4.3 million, respectively. Accordingly, the 1999 loss before
income tax recovery would be $2.8 million, income tax recovery would be $0.7
million and net loss would be unchanged at $2.1 million under Canadian GAAP.
The 2000 income before income taxes would be $9.4 million, income tax expense
would be $5.7 million and net earnings would be $3.7 million under Canadian
GAAP.

Pro forma
Years Ended Year Ended
December 31, December 31,
---------------------- -------------
1998 1999 2000 1999 2000
------ ------ ------ ------ ------
(in millions, except per share
amounts)

SMTC Corporation
Consolidated Statement of Operations
Data:
Revenue................................. $ 89.7 $258.0 $782.7 $530.7 $842.6
Cost of sales........................... 82.5 236.3 714.4 472.6 764.3
------ ------ ------ ------ ------
Gross profit.......................... 7.2 21.7 68.3 58.1 78.3
Selling, general and administrative
expenses............................... 3.3 13.3 34.6 33.9 40.3
Amortization............................ 0.2 2.0 6.2 8.7 9.2
Recapitalization expenses (a)........... 2.2 -- -- -- --
Former shareholders' compensation (b)... -- -- -- 0.6 --
Acquisition-related bonuses (c)......... -- -- -- 2.6 --
------ ------ ------ ------ ------
Operating income........................ 1.5 6.4 27.5 12.3 28.8
Interest................................ 2.0 7.1 13.8 0.1 7.7
------ ------ ------ ------ ------
Earnings (loss) before income taxes
(d).................................... (0.5) (0.7) 13.7 12.2 21.1
Income taxes (recovery)................. (0.2) 0.1 7.4 5.4 10.5
------ ------ ------ ------ ------
Earnings (loss) before extraordinary
loss................................... (0.3) (0.8) 6.3 $ 6.8 $ 10.6
====== ======
Extraordinary loss (e).................. -- (1.3) (2.7)
------ ------ ------
Net earnings (loss)..................... $ (0.3) $ (2.1) $ 3.6
====== ====== ======
Earnings (loss) before extraordinary
loss per common share (f):
Basic................................. $(0.44) $(1.89) $ 0.24 $ 0.24 $ 0.38
Diluted............................... (0.44) (1.89) 0.23 0.24 0.37
Weighted average number of shares
outstanding (f):
Basic................................. 2.1 1.6 13.2 28.2 28.2
Diluted............................... 2.1 1.6 13.7 28.9 29.0
Other Financial Data:
EBITDA (g).............................. $ 4.6 $ 14.9 $ 43.3 $ 31.6 $ 48.7
Depreciation............................ $ 2.9 $ 6.5 $ 9.6 $ 10.6 $ 10.7
Amortization of goodwill................ -- 1.5 5.3 8.6 8.6
Amortization of deferred financing
costs.................................. 0.2 0.5 0.6 0.1 0.3
Amortization of deferred lease costs.... -- -- 0.3 -- 0.3
Capital expenditures.................... 3.2 4.1 25.7 13.6 27.4
Cash flows from operating activities.... (3.8) (6.6) (104.9)
Cash flows from financing activities.... 4.3 49.6 159.1
Cash flows from investing activities.... (0.5) (41.4) (53.6)

As of As of
December 31, December 31,
1999 2000
------------ ------------
Actual Actual
------------ ------------
(in millions)

Consolidated Balance Sheet Data:
Cash and short-term investments....................... $ 2.1 $ 2.7
Working capital....................................... 53.4 188.3
Total assets.......................................... 228.1 547.5
Total debt, including current maturities.............. 134.0 118.0
Shareholders' equity.................................. 7.8 228.5

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(a) Leveraged recapitalization expenses of $2.2 million for the year ended
December 31, 1998 include transaction costs and compensation expense
related to our leveraged recapitalization.

(b) Reflects compensation paid to the former shareholders of W.F. Wood and
Pensar.

(c) Acquisition-related bonuses for pro forma as adjusted December 31, 1999
consist of one-time bonuses of $2.3 million paid to management of W.F.
Wood and $0.3 million paid to employees of W.F. Wood.

(d) Refer to Note 22 to our consolidated financial statements for a
description of differences between United States GAAP and Canadian GAAP.

(e) The extraordinary loss of $1.3 million in 1999 arises from debt prepayment
penalties of $0.8 million, the write-off of unamortized debt financing
fees of $1.0 million and the write-off of unamortized debt discount of
$0.3 million, net of a tax recovery of $0.8 million. The extraordinary
loss of $2.7 million in 2000 arises from debt prepayment penalties of $0.3
million, the write-off of unamortized debt financing fees of $2.9 million
and the write-off of the value of the warrants issued in excess of the
proceeds received of $1.1 million, net of a tax recovery of $1.6 million.

(f) Earnings (loss) per common share is calculated after providing for
priority rights of preferred shares. Given the changes in our capital
structure in connection with the 1999 combination of Surface Mount and
HTM, historical earnings (loss) per share of common stock for the year
ended December 31, 1998 are not comparable to subsequent years. Pro forma
earnings per share and pro forma weighted average number of common shares
outstanding include all outstanding common stock and exchangeable shares.

(g) EBITDA means earnings before interest expense, income taxes, depreciation
and amortization. EBITDA is presented because we believe it is a widely
accepted financial indicator of an entity's ability to incur and service
debt. EBITDA should not be considered as an alternative to cash flow from
operating activities, as a measure of liquidity or as an alternative to
net income as a measure of operating results in accordance with United
States or Canadian GAAP.

ABOUT THIS PROSPECTUS

The industry statistical data presented in this prospectus, except where
otherwise noted, have been compiled from an electronics manufacturing services
industry report, "Contract Manufacturing from a Global Perspective-2000
Update," and other data prepared by TFI, a California-based management
consulting firm specializing in the electronics manufacturing industry.
Although we have not independently verified the data, we believe that TFI is a
reliable source of information. In addition, certain statistical data relating
to us presented in this prospectus have been compiled from our internal surveys
and schedules that, while believed by us to be reliable, have not been verified
by any independent sources.

Some of the statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are forward-looking statements. These forward-looking statements
include, but are not limited to, statements about our plans, objectives,
expectations and intentions and other statements contained in this prospectus
that are not historical facts. When used in this prospectus, the words
"anticipates," "believes," "continue," "could," "estimate," "expects,"
"intends," "may," "plans," "seeks," "should," or "will," or the negative of
these terms or similar expressions, are generally intended to identify forward-
looking statements. Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking
statements, including the factors discussed under "Risk Factors." You should
read this prospectus completely and with the understanding that our actual
future results may be materially different from what we expect. We may not
update these forward-looking statements after the date of this prospectus, even
though our situation will change in the future. All forward-looking statements
attributable to us are expressly qualified by these cautionary statements.

We have applied for trademark protection for SMTC and the SMTC logo. This
prospectus contains trademarks, service marks and trade names of companies and
organizations other than SMTC Corporation.

Except where the context otherwise requires,

. references in this prospectus to "SMTC," "we," " our," "us" and similar
expressions are references to SMTC Corporation, together with its
direct and indirect subsidiaries (and for periods prior to the July
1999 combination of our predecessors, SMTC Corporation and HTM
Holdings, Inc., include both of our predecessors and their respective
subsidiaries),

. references in this prospectus to "Surface Mount" are references to SMTC
Corporation and its affiliated companies, including The Surface Mount
Technology Centre Inc., prior to the July 1999 combination of SMTC
Corporation and HTM Holdings, Inc.,

. references in this prospectus to "shares" are references, collectively,
to shares of common stock issued by SMTC and the exchangeable shares
issued by SMTC Canada,

. references in this prospectus to this "offering" are references to
SMTC's offering of common stock in exchange for the outstanding
exchangeable shares of SMTC Canada, and

. references in this prospectus to "US$" or "$" are to U.S. dollars and
all references to "C$" are to Canadian dollars.

. references in this prospectus to our "initial public offering" are to
the combined initial public offerings of our common stock and our
exchangeable shares.

Unless otherwise indicated, the information in this prospectus is presented
as though all the exchangeable shares of SMTC Canada outstanding on the closing
of our initial public offering have been exchanged for our common stock.

RISK FACTORS

FORWARD-LOOKING STATEMENTS

A number of the matters and subject areas discussed in this prospectus are
forward-looking in nature. The discussion of such matters and subject areas is
qualified by the inherent risks and uncertainties surrounding future
expectations generally; these expectations may differ materially from SMTC's
actual future experience involving any one or more of such matters and subject
areas. SMTC cautions readers that all statements other than statements of
historical facts included in this prospectus regarding SMTC's financial
position and business strategy may constitute forward-looking statements. All
of these forward-looking statements are based upon estimates and assumptions
made by SMTC's management, which although believed to be reasonable, are
inherently uncertain. Therefore, undue reliance should not be placed on such
estimates and statements. No assurance can be given that any of such estimates
or statements will be realized, and it is likely that actual results will
differ materially from those contemplated by such forward-looking statements.
Factors that may cause such differences include: (1) increased competition; (2)
increased costs; (3) the inability to consummate business acquisitions on
attractive terms; (4) the loss or retirement of key members of management;
(5) increases in SMTC's cost of borrowings or lack of availability of
additional debt or equity capital on terms considered reasonable by management;
(6) adverse state, federal or foreign legislation or regulation or adverse
determinations by regulators; (7) changes in general economic conditions in the
markets in which SMTC may compete and fluctuations in demand in the electronics
industry; (8) the inability to manage inventory levels efficiently in light of
changes in market conditions; and (9) the inability to sustain historical
margins as the industry develops. SMTC has attempted to identify certain of the
factors that it currently believes may cause actual future experiences to
differ from SMTC's current expectations regarding the relevant matter or
subject area. In addition to the items specifically discussed in the foregoing,
SMTC's business and results of operations are subject to the risks and
uncertainties described under the heading "Factors That May Affect Future
Results" below. The operations and results of SMTC's business may also be
subject to the effect of other risks and uncertainties. Such risks and
uncertainties include, but are not limited to, items described from time to
time in SMTC's reports filed with the Securities and Exchange Commission.

FACTORS THAT MAY AFFECT FUTURE RESULTS
RISKS RELATED TO OUR BUSINESS AND INDUSTRY

A majority of our revenue comes from a small number of customers; if we lose
any of our largest customers, our revenue could decline significantly.

Our largest customer in 2000 was Dell, which represented approximately 14.7%
of our total pro forma revenue in 2000. Our next five largest customers
collectively represented an additional 35.1% of our total pro forma revenue in
2000. We expect to continue to depend upon a relatively small number of
customers for a significant percentage of our revenue. In addition to having a
limited number of customers, we manufacture a limited number of products for
each of our customers. If we lose any of our largest customers or any product
line manufactured for one of our largest customers, we could experience a
significant reduction in our revenue. Also, the insolvency of one or more of
our largest customers or the inability of one or more of our largest customers
to pay for its orders could decrease revenue. As many of our costs and
operating expenses are relatively fixed, a reduction in net revenue can
decrease our profit margins and adversely affect our business, financial
condition and results of operations.

Our industry is very competitive and we may not be successful if we fail to
compete effectively.

The electronics manufacturing services (EMS) industry is highly competitive.
We compete against numerous domestic and foreign EMS providers including
Celestica Inc., Flextronics International Ltd., Jabil Circuit, Inc., SCI
Systems, Inc. and Solectron Corporation. In addition, we may in the future
encounter competition from other large electronics manufacturers that are
selling, or may begin to sell, electronics

manufacturing services. Many of our competitors have international operations,
and some may have substantially greater manufacturing, financial research and
development and marketing resources and lower cost structures than we do. We
also face competition from the manufacturing operations of current and
potential customers, which are continually evaluating the merits of
manufacturing products internally versus the advantages of using external
manufacturers.

We may experience variability in our operating results, which could negatively
impact the price of our shares.

Our annual and quarterly results have fluctuated in the past. The reasons
for these fluctuations may similarly affect us in the future. Historically, our
calendar fourth quarter revenue has been highest and our calendar first quarter
revenue has been lowest. Prospective investors should not rely on results of
operations in any past period to indicate what our results will be for any
future period. Our operating results may fluctuate in the future as a result of
many factors, including:

. variations in the timing and volume of customer orders relative to our
manufacturing capacity;

. variations in the timing of shipments of products to customers;

. introduction and market acceptance of our customers' new products;

. changes in demand for our customers' existing products;

. the accuracy of our customers' forecasts of future production
requirements;

. effectiveness in managing our manufacturing processes and inventory
levels;

. changes in competitive and economic conditions generally or in our
customers' markets;

. changes in the cost or availability of components or skilled labor; and

. the timing of, and the price we pay for, acquisitions and related
integration costs.

In addition, most of our customers typically do not commit to firm
production schedules more than 30 to 90 days in advance. Accordingly, we cannot
forecast the level of customer orders with certainty. This makes it difficult
to schedule production and maximize utilization of our manufacturing capacity.
In the past, we have been required to increase staffing, purchase materials and
incur other expenses to meet the anticipated demand of our customers. Sometimes
anticipated orders from certain customers have failed to materialize, and
sometimes delivery schedules have been deferred as a result of changes in a
customer's business needs. Any material delay, cancellation or reduction of
orders from our largest customers could cause our revenue to decline
significantly. In addition, as many of our costs and operating expenses are
relatively fixed, a reduction in customer demand can decrease our gross margins
and adversely affect our business, financial condition and results of
operations. On other occasions, customers have required rapid and unexpected
increases in production, which have placed burdens on our manufacturing
capacity.

Any of these factors or a combination of these factors could have a material
adverse effect on our business, financial condition and results of operations.

We are dependent upon the electronics industry, which produces technologically
advanced products with short life cycles.

Substantially all of our customers are in the electronics industry, which is
characterized by intense competition, short product life-cycles and significant
fluctuations in product demand. In addition, the electronics industry is
generally subject to rapid technological change and product obsolescence. If
our customers are unable to create products that keep pace with the changing
technological environment, their products could become obsolete and the demand
for our services could significantly decline. Our success is largely dependent
on the success achieved by our customers in developing and marketing their
products. Furthermore, this

industry is subject to economic cycles and has in the past experienced
downturns. A recession or a downturn in the electronics industry would likely
have a material adverse effect on our business, financial condition and results
of operations.

Shortage or price fluctuation in component parts specified by our customers
could delay product shipment and affect our profitability.

A substantial portion of our revenue is derived from "turnkey"
manufacturing. In turnkey manufacturing, we provide both the materials and the
manufacturing services. If we fail to manage our inventory effectively, we may
bear the risk of fluctuations in materials costs, scrap and excess inventory,
all of which can have a material adverse effect on our business, financial
condition and results of operations. We are required to forecast our future
inventory needs based upon the anticipated demands of our customers.
Inaccuracies in making these forecasts or estimates could result in a shortage
or an excess of materials. In addition, delays, cancellations or reductions of
orders by our customers could result in an excess of materials. A shortage of
materials could lengthen production schedules and increase costs. An excess of
materials may increase the costs of maintaining inventory and may increase the
risk of inventory obsolescence, both of which may increase expenses and
decrease profit margins and operating income.

Many of the products we manufacture require one or more components that we
order from sole-source suppliers. Supply shortages for a particular component
can delay productions of all products using that component or cause cost
increases in the services we provide. In addition, in the past, some of the
materials we use, such as memory and logic devices, have been subject to
industry-wide shortages. As a result, suppliers have been forced to allocate
available quantities among their customers and we have not been able to obtain
all of the materials desired. Our inability to obtain these needed materials
could slow production or assembly, delay shipments to our customers, increase
costs and reduce operating income. Also, we may bear the risk of periodic
component price increases. Accordingly, some component price increases could
increase costs and reduce operating income. Also we rely on a variety of common
carriers for materials transportation, and we route materials through various
world ports. A work stoppage, strike or shutdown of a major port or airport
could result in manufacturing and shipping delays or expediting charges, which
could have a material adverse effect on our business, financial condition and
results of operations.

We have experienced significant growth in a short period of time and may have
trouble integrating acquired businesses and managing our expansion.

Since 1996, we have completed eight acquisitions. Acquisitions may involve
numerous risks, including difficulty in integrating operations, technologies,
systems, and products and services of acquired companies; diversion of
management's attention and disruption of operations; increased expenses and
working capital requirements; entering markets in which we have limited or no
prior experience and where competitors in such markets have stronger market
positions; and the potential loss of key employees and customers of acquired
companies. In addition, acquisitions may involve financial risks, such as the
potential liabilities of the acquired businesses, the dilutive effect of the
issuance of additional equity securities, the incurrence of additional debt,
the financial impact of transaction expenses and the amortization of goodwill
and other intangible assets involved in any transactions that are accounted for
using the purchase method of accounting, and possible adverse tax and
accounting effects.

We have a limited history of owning and operating our acquired businesses on
a consolidated basis. There can be no assurance that we will be able to meet
performance expectations or successfully integrate our acquired businesses on a
timely basis without disrupting the quality and reliability of service to our
customers or diverting management resources. Our rapid growth has placed and
will continue to place a significant strain on management, on our financial
resources, and on our information, operating and financial systems. If we are
unable to manage this growth effectively, it may have a material adverse effect
on our business, financial condition and results of operations.

Our acquisition strategy may not succeed.

As part of our business strategy, we expect to continue to grow by pursuing
acquisitions of other companies, assets or product lines that complement or
expand our existing business. Competition for attractive companies in our
industry is substantial. We cannot assure you that we will be able to identify
suitable acquisition candidates or finance and complete transactions that we
select. Our failure to execute our acquisition strategy may have a material
adverse effect on our business, financial condition and results of operation.
Also, if we are not able to successfully complete acquisitions, we may not be
able to compete with larger EMS providers who are able to provide a total
customer solution.

If we do not effectively manage the expansion of our operations, our business
may be harmed.

We have grown rapidly in recent periods, and this growth may be difficult to
sustain. Internal growth and further expansion of services may require us to
expand our existing operations and relationships. We plan to expand our design
and development services and our manufacturing capacity by expanding our
facilities and by adding new equipment. Expansion has caused, and is expected
to continue to cause, strain on our infrastructure, including our managerial,
technical, financial and other resources. Our ability to manage future growth
effectively will require us to attract, train, motivate and manage new
employees successfully, to integrate new employees into our operations and to
continue to improve our operational and information systems. We may experience
inefficiencies as we integrate new operations and manage geographically
dispersed operations. We may incur cost overruns. We may encounter construction
delays, equipment delays or shortages, labor shortages and disputes, and
production start-up problems that could adversely affect our growth and our
ability to meet customers' delivery schedules. We may not be able to obtain
funds for this expansion on acceptable terms or at all. In addition, we expect
to incur new fixed operating expenses associated with our expansion efforts,
including increases in depreciation expense and rental expense. If our revenue
does not increase sufficiently to offset these expenses, our business,
financial condition and results of operations would be materially adversely
affected.

If we are unable to respond to rapidly changing technology and process
development, we may not be able to compete effectively.

The market for our products and services is characterized by rapidly
changing technology and continuing process development. The future success of
our business will depend in large part upon our ability to maintain and enhance
our technological capabilities, to develop and market products and services
that meet changing customer needs, and to successfully anticipate or respond to
technological changes on a cost-effective and timely basis. In addition, the
EMS industry could in the future encounter competition from new or revised
technologies that render existing technology less competitive or obsolete or
that reduce the demand for our services. There can be no assurance that we will
effectively respond to the technological requirements of the changing market.
To the extent we determine that new technologies and equipment are required to
remain competitive, the development, acquisition and implementation of such
technologies and equipment may require us to make significant capital
investments. There can be no assurance that capital will be available for these
purposes in the future or that investments in new technologies will result in
commercially viable technological processes.

Our business will suffer if we are unable to attract and retain key personnel
and skilled employees.

We depend on the services of our key senior executives, including Paul
Walker, Philip Woodard, Gary Walker and Derrick D'Andrade. Our business also
depends on our ability to continue to recruit, train and retain skilled
employees, particularly executive management, engineering and sales personnel.
Recruiting personnel in our industry is highly competitive. In addition, our
ability to successfully integrate acquired companies depends in part on our
ability to retain key management and existing employees at the time of the
acquisition. There can be no assurance that we will be able to retain our
executive officers and key personnel or attract qualified management in the
future.

Risks particular to our international operations could adversely affect our
overall results.

Our success will depend, among other things, on successful expansion into
new foreign markets in order to offer our customers lower cost production
options. Entry into new foreign markets may require considerable management
time as well as start-up expenses for market development, hiring and
establishing office facilities before any significant revenue is generated. As
a result, operations in a new foreign market may operate at low profit margins
or may be unprofitable.

Pro forma revenue generated outside of the United States and Canada was
approximately 11% in 2000. International operations are subject to inherent
risks, including:

. fluctuations in the value of currencies and high levels of inflation;

. longer payment cycles and greater difficulty in collecting amounts
receivable;

. unexpected changes in and the burdens and costs of compliance with a
variety of foreign laws;

. political and economic instability;

. increases in duties and taxation;

. inability to utilize net operating losses incurred by our foreign
operations to reduce our U.S. and Canadian income taxes;

. imposition of restrictions on currency conversion or the transfer of
funds; and

. trade restrictions.

We are subject to a variety of environmental laws, which expose us to potential
financial liability.

Our operations are regulated under a number of federal, state, provincial,
local and foreign environmental and safety laws and regulations, which govern,
among other things, the discharge of hazardous materials into the air and water
as well as the handling, storage and disposal of such materials. Compliance
with these environmental laws is a major consideration for us because we use
metals and other hazardous materials in our manufacturing processes. We may be
liable under environmental laws for the cost of cleaning up properties we own
or operate if they are or become contaminated by the release of hazardous
materials, regardless of whether we caused such release. In addition we, along
with any other person who arranges for the disposal of our wastes, may be
liable for costs associated with an investigation and remediation of sites at
which we have arranged for the disposal of hazardous wastes, if such sites
become contaminated, even if we fully comply with applicable environmental
laws. In the event of a contamination or violation of environmental laws, we
could be held liable for damages including fines, penalties and the costs of
remedial actions and could also be subject to revocation of our discharge
permits. Any such revocations could require us to cease or limit production at
one or more of our facilities, thereby having a material adverse effect on our
operations. Environmental laws could also become more stringent over time,
imposing greater compliance costs and increasing risks and penalties associated
with any violation, which could have a material adverse effect on our business,
financial condition and results of operations.

RISKS RELATED TO OUR CAPITAL STRUCTURE

Our future indebtedness could adversely affect our financial health and
severely limit our ability to plan for or respond to changes in our business.

At December 31, 2000, we had $115.8 million of indebtedness under our senior
credit facility. We plan to incur additional indebtedness from time to time to
finance acquisitions or capital expenditures or for other purposes. This debt
could have adverse consequences for our business, including:

. We will be more vulnerable to adverse general economic conditions;

. We will be required to dedicate a substantial portion of our cash flow
from operations to repayment of debt, limiting the availability of cash
for other purposes;

. We may have difficulty obtaining additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate
purposes or other purposes;

. We may have limited flexibility in planning for, or reacting to, changes
in our business and industry;

. We could be limited by financial and other restrictive covenants in our
credit arrangements in our borrowing of additional funds; and

. We may fail to comply with the covenants under which we borrowed our
indebtedness which could result in an event of default. If an event of
default occurs and is not cured or waived, it could result in all
amounts outstanding, together with accrued interest, becoming
immediately due and payable. If we were unable to repay such amounts,
the lenders could proceed against any collateral granted to them to
secure that indebtedness.

There can be no assurance that our leverage and such restrictions will not
materially adversely affect our ability to finance our future operations or
capital needs or to engage in other business activities. In addition, our
ability to pay principal and interest on our indebtedness to meet our financial
and restrictive covenants and to satisfy our other debt obligations will depend
upon our future operating performance, which will be affected by prevailing
economic conditions and financial, business and other factors, certain of which
are beyond our control, as well as the availability of revolving credit
borrowings under our senior credit facility or successor facilities.

The terms of our credit agreement impose significant restrictions on our
ability to operate.

The terms of our current credit agreement restrict, among other things, our
ability to incur additional indebtedness, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, merge, consolidate or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our assets.
We are also required to maintain specified financial ratios and satisfy certain
financial condition tests, which further restrict our ability to operate as we
choose. Substantially all of our assets and those of our subsidiaries are
pledged as security under our senior credit facility.

Investment funds affiliated with Bain Capital, Inc., investment funds
affiliated with Celerity Partners, Inc., Kilmer Electronics Group Limited and
certain members of management held approximately 12.9%, 12.1%, 7.1% and 13.2%,
respectively, of our outstanding shares as of March 16, 2001. In addition,
three of the nine directors who serve on our board are, or were,
representatives of the Bain funds, two are representatives of the Celerity
funds, two are representatives of Kilmer Electronics Group Limited and two are
members of management. By virtue of such stock ownership and board
representation, the Bain funds, the Celerity funds, Kilmer Electronics Group
Limited and certain members of management have a significant influence over all

matters submitted to our stockholders, including the election of our directors,
and exercise significant control over our business policies and affairs. Such
concentration of voting power could have the effect of delaying, deterring or
preventing a change of control or other business combination that might
otherwise be beneficial to our stockholders.

Provisions in our charter documents and state law may make it harder for others
to obtain control of us even though some stockholders might consider such a
development favorable.

Provisions in our charter, by-laws and certain provisions under Delaware law
may have the effect of delaying or preventing a change of control or changes in
our management that stockholders consider favorable or beneficial. If a change
of control or change in management is delayed or prevented, the market price of
our shares could suffer.

USE OF PROCEEDS

Because the shares of our common stock offered hereunder will be issued in
exchange for the exchangeable shares of our subsidiary SMTC Canada, none of
which will be held by us, we will receive no proceeds from the sale of such
common stock.

THE RECLASSIFICATION

Prior to the initial public offering, SMTC had three classes of common
stock, designated as Class A common stock, Class L common stock and Class N
common stock. The Class L common stock was identical to the Class A common
stock, except that each share of Class L common stock was entitled to a
preferential payment upon any distribution by SMTC to holders of SMTC capital
stock, whether by dividend, liquidating distribution or otherwise, equal to
the original cost of such share, $162.00, plus an amount which accrued on a
daily basis at a rate of 12.0% per annum, compounded quarterly. After payment
of this preference amount, each share of Class A common stock and Class L
common stock was to share equally in all distributions to holders of SMTC
capital stock. As of July 27, 2000, the closing date of our initial public
offering, the preference amount was $182.16 per share of Class L common stock.
The Class N common stock was non-participating and represented voting rights
only.

In addition, prior to our initial public offering, SMTC Canada had
outstanding Class L exchangeable shares that were exchangeable into shares of
SMTC Class L common stock on a one-for-one basis. SMTC Canada also had
outstanding Class Y shares that carried dividend and voting rights on the same
basis as the Class L exchangeable shares. The holder of the Class Y shares
entered into an agreement with SMTC under which the Class Y shares are
exchangeable for shares of Class L common stock on a one-for-one basis. See
"Description of Capital Stock."

In connection with the completion of the initial public offering, we

. purchased the outstanding SMTC Canada Class Y shares in exchange for
shares of Class L common stock;

. converted each of the outstanding shares of Class L common stock into
one share of Class A common stock plus an additional number of shares of
Class A common stock determined by dividing the preference amount by the
value of a share of Class A common stock based on the initial public
offering price;

. converted each share of Class A common stock into 3.6745 shares of
common stock;

. redeemed all outstanding shares of Class N common stock and issued one
share of special voting stock which is held by a trustee for the benefit
of the holders of exchangeable shares; and

. converted each Class L exchangeable share into exchangeable shares of
the same class as those offered in our initial public offering in the
same ratio as shares of Class L common stock were converted to shares of
common stock.

The transactions described above are collectively referred to in this
prospectus as the "reclassification."

DIVIDEND POLICY

SMTC Corporation has never declared or paid a cash dividend on its shares,
and we currently do not anticipate paying any cash dividends in the foreseeable
future. Our existing credit facilities restrict our ability to pay dividends.
We currently intend to retain earnings and cash flow to finance future
operations and expansion and to reduce indebtedness. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

On closing of our initial public offering, SMTC and its Canadian affiliates
entered into a support agreement under which SMTC agreed to maintain the
economic equivalence of the exchangeable shares and the common stock by, among
other things, not declaring and paying dividends on the common stock unless
SMTC Canada is able to declare and pay economically equivalent dividends on the
exchangeable shares in accordance with the terms of those shares. SMTC Canada
may also declare stock dividends from time to time as necessary to maintain the
one-for-one economic equivalence between exchangeable shares and shares of
common stock. The SMTC Canada exchangeable shares do not carry any other right
to receive dividends from SMTC Canada. Although SMTC Canada has paid dividends
on its shares in the past, it does not currently anticipate paying any cash
dividends on the exchangeable shares in the forseeable future.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our
capitalization as of December 31, 2000.

You should read this information together with our consolidated financial
statements and the related notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this prospectus.

December 31,
2000
------------
Actual
---------

Cash and cash equivalents....................................... $ 2.7
=======
Short-term obligations.......................................... 8.5
Long-term obligations:
Long-term debt................................................ 108.3
Capital lease obligations..................................... 1.2
-------
Total long-term obligations................................. 109.5
Shareholders' equity:
Common stock, $0.01 par value, 60,000,000 shares authorized
and 28,223,860 shares issued and outstanding (a)............. 77.4
Additional paid-in capital...................................... 151.4
Retained earnings (deficit)..................................... (.7)
Other........................................................... .4
-------
Total shareholders' equity.................................. 228.5
-------
Total capitalization........................................ $ 346.5
=======

(a) Includes 6,370,959 exchangeable shares, no par value, issued by SMTC
Canada. Does not include (i) 466,395 shares of common stock reserved for
issuance pursuant to our Amended and Restated 1998 Equity Incentive Plan,
(ii) 1,397,000 shares of common stock reserved for issuance pursuant to
our Amended and Restated 2000 Equity Incentive Plan or (iii) 578,441
shares of common stock reserved for issuance pursuant to outstanding
warrants as of December 31, 2000.

DILUTION

This offering is for shares of common stock to be issued in exchange for
currently outstanding exchangeable shares. The exchange of common stock for
exchangeable shares will not result in any change to the net tangible book
value per share before and after the exchange of shares. Investors should be
aware, however, that the price of our shares may not bear any rational
relationship to net tangible book value per share.

SELECTED CONSOLIDATED FINANCIAL DATA

SMTC Corporation, or SMTC, is the result of the July 1999 combination of the
former SMTC Corporation, or Surface Mount, and HTM Holdings, Inc., or HTM. Upon
completion of the combination and concurrent recapitalization, the former
stockholders of HTM held approximately 58.0% of the outstanding shares of SMTC.
We have accounted for the combination under the purchase method of accounting
as a reverse acquisition of Surface Mount by HTM. Because HTM acquired Surface
Mount for accounting purposes, HTM's assets and liabilities are included in our
consolidated financial statements at their historical cost and the comparative
figures for the periods prior to the combination reflect the results of
operations of HTM. The results of operations of Surface Mount are included in
our consolidated financial statements from the date of the combination.

Pro Forma Selected Financial Data (Unaudited)

The unaudited pro forma results of operations, adjusted net earnings and
other financial data included in this report for the years ended December 31,
1999 and December 31, 2000 contain the results of Surface Mount, HTM, W.F. Wood
Incorporated, or W.F. Wood, Pensar Corporation, or Pensar, and Qualtron
Teoranta or Qualtron, as if the combination of Surface Mount and HTM and the
acquisitions of W.F. Wood, Pensar and Qualtron and the initial public offering
and application of proceeds to reduce indebtedness had occurred on January 1,
1999. As such, the pro forma results have been adjusted to reflect additional
goodwill amortization related to the combination of Surface Mount and HTM,
additional goodwill amortization related to the acquisitions of W.F. Wood,
Pensar and Qualtron, additional interest expense and income tax effects related
to the borrowings required to complete the Pensar and Qualtron acquisitions,
and the effect of the initial public offering including the exercise of the
underwriters' over-allotment option.

This pro forma selected financial data is presented as a supplement to our
actual selected financial data to provide a basis for analyzing and comparing
the results of operations of the combined and acquired companies.

Actual Selected Financial Data

The actual selected financial data includes the following:

. The results of operations, adjusted net earnings and other financial
data for 1996, 1997 and 1998 represent the results of operations,
adjusted net earnings and financial data for HTM. For accounting
purposes, HTM is considered to have acquired Surface Mount in the July
1999 combination.

. The results of operations, adjusted net earnings and other financial
data for 1999 include a full year of results of HTM, as well as the
results for Surface Mount from July 30, 1999 through to December 31,
1999 and results for W.F. Wood from September 4, 1999 through to
December 31, 1999.

. The results of operations, adjusted net earnings and other financial
data for 2000 include a full year of results for HTM, Surface Mount and
W.F. Wood as well as the results for Pensar from July 27, 2000 through
to December 31, 2000 and the results for Qualtron Teoranta from November
22, 2000 through to December 31, 2000.

The data set forth below should be read in conjunction with our
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
thereto appearing elsewhere in this prospectus.

Pro forma
Year Ended
Year Ended December 31, December 31,
------------------------------------ -------------
1996 1997 1998 1999 2000 1999 2000
------ ----- ------ ------ ------ ------ ------
(in millions, except per share data)

SMTC Corporation
Consolidated Statement of
Operations Data:
Revenue.................... $ 70.8 $59.0 $ 89.7 $258.0 $782.7 $530.7 $842.6
Cost of sales.............. 68.9 53.6 82.5 236.3 714.4 472.6 764.3
------ ----- ------ ------ ------ ------ ------
Gross profit............. 1.9 5.4 7.2 21.7 68.3 58.1 78.3
Selling, general and
administrative expenses... 2.8 2.8 3.3 13.3 34.6 33.9 40.3
Amortization............... -- -- 0.2 2.0 6.2 8.7 9.2
Relocation expenses (a).... 0.5 -- -- -- -- -- --
Recapitalization expenses
(b)....................... -- -- 2.2 -- -- -- --
Former shareholders'
compensation (c).......... -- -- -- -- -- 0.6 --
Acquisition-related bonuses
paid to management and
employees of W.F. Wood
(d)....................... -- -- -- -- -- 2.6 --
------ ----- ------ ------ ------ ------ ------
Operating income (loss).... (1.4) 2.6 1.5 6.4 27.5 12.3 28.8
Interest................... 0.7 0.7 2.0 7.1 13.8 0.1 7.7
------ ----- ------ ------ ------ ------ ------
Earnings (loss) before
income taxes (e).......... (2.1) 1.9 (0.5) (0.7) 13.7 12.2 21.1
Income taxes (recovery).... (0.8) 0.7 (0.2) 0.1 7.4 5.4 10.5
------ ----- ------ ------ ------ ------ ------
Earnings (loss) before
extraordinary loss........ (1.3) 1.2 (0.3) (0.8) 6.3 $ 6.8 $ 10.6
====== ======
Extraordinary loss (f)..... -- -- -- (1.3) (2.7)
------ ----- ------ ------ ------
Net earnings (loss)........ $ (1.3) $ 1.2 $ (0.3) $ (2.1) $ 3.6
====== ===== ====== ====== ======
Earnings (loss) before
extraordinary loss per
common share (g):
Basic.................... $(0.40) $0.40 $(0.44) $(1.89) $0.24 $0.24 $0.38
Diluted.................. $(0.40) $0.40 $(0.44) $(1.89) $0.23 $0.24 $0.37
Net earnings (loss) per
common share (g)..........
Basic.................... $(0.40) $0.40 $(0.44) $(2.68) $0.04
Diluted.................. $(0.40) $0.40 $(0.44) $(2.68) $0.03
Weighted average number of
shares outstanding (g):
Basic.................... 3.1 3.1 2.1 1.6 13.2 28.2 28.2
Diluted.................. 3.1 3.1 2.1 1.6 13.7 28.9 29.0

Consolidated
Adjusted
Net
Earnings:

Pro forma
Year ended
Year Ended December 31, December 31,
----------------------------------- --------------
1996 1997 1998 1999 2000 1999 2000
------ ----- ------ ------ ----- ------ ------
(in millions, except per share amounts)

Net earnings (loss)....... $ (1.3) $ 1.2 $(0.3) $(2.1) $ 3.6 $ 6.8 $ 10.6
Adjustments:
Extraordinary loss....... -- -- -- 1.3 2.7 -- --
Amortization of
goodwill................ -- -- -- 1.5 5.3 8.6 8.6
Relocation expenses...... 0.5 -- -- -- -- -- --
Recapitalization
expenses................ -- -- 2.2 -- -- -- --
Management fees.......... -- -- 0.1 0.7 -- 0.7 --
Former shareholder
compensation............ -- -- -- 0.6 -- 0.6 --
Acquisition-related
bonuses paid to
management and employees
of W.F. Wood............ -- -- 2.6 -- 2.6 --
Income tax effect........ (0.2) -- (0.9) (0.5) (1.1) (3.3) (1.7)
------ ----- ------ ------ ----- ------ ------
Adjusted net earnings
(loss) $ (1.0) $ 1.2 $ 1.1 $ 0.9 $10.5 $ 16.0 $ 17.5
====== ===== ====== ====== ===== ====== ======
Adjusted net earnings
(loss) per common share:
Basic................... $(0.32) $0.40 $ 0.52 $(0.80) $0.56 $ 0.57 $ 0.62
Diluted................. $(0.32) $0.40 $ 0.52 $(0.80) $0.54 $ 0.55 $ 0.60
====== ===== ====== ====== ===== ====== ======
Weighted average number of
shares outstanding:
Basic................... 3.1 3.1 2.1 1.6 13.2 28.2 28.2
Diluted................. 3.1 3.1 2.1 1.6 13.7 28.9 29.0
====== ===== ====== ====== ===== ====== ======

As a result of the combination of Surface Mount and HTM and a number of
subsequent acquisitions, we use consolidated adjusted net earnings and
consolidated pro forma adjusted net earnings as measures of our operating
performance. Consolidated adjusted net earnings is consolidated net earnings
(loss) adjusted for extraordinary items and acquisition related charges such as
the amortization of goodwill, management fees, former shareholders'
compensation and other charges as described in the table, and the related
income tax effect of these adjustments. Consolidated pro forma adjusted net
earnings is consolidated pro forma net earnings adjusted for acquisition
related charges such as the amortization of goodwill, management fees, former
shareholders' compensation and other charges as described in the table, and the
related income tax effect of these adjustments. Consolidated adjusted net
earnings and consolidated pro forma adjusted net earnings are not measures of
performance under United States GAAP or Canadian GAAP. Consolidated adjusted
net earnings and consolidated pro forma adjusted net earnings should not be
considered in isolation or as a substitute for net earnings prepared in
accordance with United States GAAP or Canadian GAAP or as alternative measures
of performance or profitability.

Pro forma
As of December 31, December 31,
-------------------------------- -------------
1996 1997 1998 1999 2000 1999 2000
---- ---- ---- ----- ------- ------ ------
(in millions)

Other Financial Data:
EBITDA (h).................... $0.5 $4.8 $4.6 $14.9 $ 43.3 $ 31.6 $ 48.7
Depreciation.................. 1.9 2.2 2.9 6.5 9.6 10.6 10.7
Amortization of goodwill...... -- -- -- 1.5 5.3 8.6 8.6
Amortization of deferred
financing costs.............. -- -- 0.2 0.5 0.6 0.1 0.3
Amortization of deferred lease
cost......................... -- -- -- -- 0.3 -- 0.3
Capital expenditures.......... 0.6 0.9 3.2 4.1 25.7 13.6 27.4
Cash flows from operating
activities................... 6.1 (0.4) (3.8) (6.6) (104.9)
Cash flows from financing
activities................... (5.5) 1.2 4.3 49.6 159.1
Cash flows from investing
activities................... (0.6) (0.4) (0.5) (41.4) (53.6)

As of December 31,
---------------------------------
1996 1997 1998 1999 2000
----- ----- ------ ------ ------
(in millions)

Consolidated Balance Sheet Data:
Cash and short-term investments.............. $ 0.1 $ 0.4 $ 0.5 $ 2.1 $ 2.7
Working capital.............................. 1.7 4.1 8.1 53.4 188.3
Total assets................................. 22.9 31.7 44.2 228.1 547.5
Total debt, including current maturities..... 7.0 8.2 35.5 134.0 118.0
Shareholders' equity (deficit)............... 7.1 8.4 (10.5) 7.8 228.5

(a) Relocation expenses include costs incurred to move equipment and employees
from a facility in Longmont, Colorado to Denver, Colorado.

(b) Leveraged recapitalization expenses of $2.2 million for the year ended
December 31, 1998 include transaction costs and compensation expense
related to our leveraged recapitalization.

(d) Acquisition-related bonuses consist of one-time bonuses of $2.3 million
paid to management and $0.3 million paid to employees.

(e) Refer to Note 22 to our consolidated financial statements for a
description of differences between United States GAAP and Canadian GAAP.

(f) The extraordinary loss of $1.3 million in 1999 arises from debt prepayment
penalties of $0.8 million, the write-off of unamortized debt financing
fees of $1.0 million and the write-off of the unamortized debt discount of
$0.3 million, net of a tax recovery of $0.8 million. The extraordinary
loss of $2.7 million in 2000 arises from debt prepayment penalties of $0.3
million, the write-off of unamortized debt financing fees of $2.9 million
and the write-off of the value of the warrants issued in excess of the
proceeds received of $1.1 million, net of a tax recovery of $1.6 million.

(g) Earnings (loss) per common share is calculated after providing for
priority rights of preferred shares. Given the changes in our capital
structure in connection with the 1999 combination of Surface Mount and
HTM, historical earnings (loss) per share of common stock for the years
ended December 31, 1997 and 1998 are not comparable to subsequent years.

(h) EBITDA means earnings before interest expense, income taxes, depreciation
and amortization. EBITDA is presented because we believe it is a widely
accepted financial indicator of an entity's ability to incur and service
debt. EBITDA should not be considered as an alternative to cash flow from
operating activities, as a measure of liquidity or as an alternative to
net income as a measure of operating results in accordance with United
States or Canadian GAAP.

Quarterly Results

The following tables set forth our unaudited pro forma quarterly results and
historical quarterly results for the eight quarters ended December 31, 2000.
This information has been prepared on the same basis as our annual consolidated
financial statements and it includes all adjustments necessary for a fair
presentation of the financial results of such periods. This information should
be read in conjunction with our annual consolidated financial statements for
the years ended December 31, 1999 and 2000. The operating results for any
previous quarter are not necessarily indicative of results for any future
periods.

Pro Forma Results
Quarter Ended
------------------------------------------------------------------------------------
March 31, June 30, October 3, December 31, April 2, July 2, October 1, December 31,
1999 1999 1999 1999 2000 2000 2000 2000
--------- -------- ---------- ------------ -------- ------- ---------- ------------
(in millions, except per share amounts)

Revenue................. $123.6 $119.6 $140.9 $146.6 $146.2 $190.0 $242.5 $263.9
Gross profit............ 14.8 12.3 14.1 16.9 14.7 17.3 21.3 25.0
Earnings (loss)......... 2.9 2.1 (0.7) 2.5 0.3 1.9 3.7 4.7
Adjusted earnings....... 4.6 3.9 2.9 4.6 2.0 3.6 5.4 6.5
Adjusted earnings per
share--diluted......... $ 0.16 $ 0.13 $ 0.10 $ 0.16 $ 0.07 $ 0.12 $ 0.19 $ 0.22
Weighted average number
of shares outstanding--
diluted................ 28.9 28.9 28.9 28.9 28.9 28.9 28.9 29.0

Historical Results
Quarter Ended
------------------------------------------------------------------------------------
March 31, June 30, October 3, December 31, April 2, July 2, October 1, December 31,
1999 1999 1999 1999 2000 2000 2000 2000
--------- -------- ---------- ------------ -------- ------- ---------- ------------
(in millions, except per share amounts)

Revenue................. $ 23.3 $ 23.3 $ 88.0 $123.4 $124.3 $167.1 $231.5 $259.8
Gross profit............ 1.7 1.5 6.7 11.8 11.1 13.7 19.6 23.9
Earnings (loss) before
extraordinary loss..... -- -- (0.7) (0.1) (1.4) 0.1 3.3 4.3
Net earnings (loss)..... -- -- (2.0) (0.1) (1.4) 0.1 0.6 4.3
Adjusted net earnings
(loss)................. 0.1 -- (0.2) 1.0 (0.6) 1.0 4.4 5.7
Net earnings (loss) per
share before
extraordinary loss..... $ 0.03 $(0.07) $(0.73) $(0.61) $(1.16) $(0.53) $ 0.14 $ 0.16
Adjusted net earnings
(loss) per share--
diluted................ $ 0.06 $(0.03) $(0.45) $(0.17) $(0.81) $(0.18) $ 0.19 $ 0.20
Weighted average number
of shares outstanding--
diluted................ 1.4 1.4 2.1 2.4 2.4 2.4 21.1 28.7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the "Selected
Consolidated Financial Data" section of this prospectus, our consolidated
financial statements and notes to those statements included elsewhere in this
prospectus. The forward-looking statements in this discussion regarding the
electronics manufacturing services industry, our expectations regarding our
future performance, liquidity and capital resources and other non-historical
statements in this discussion include numerous risks and uncertainties, as
described in the "Risk Factors" section of this prospectus. Our actual results
may differ materially from those contained in any forward-looking statements.
You should read this discussion completely and with the understanding that our
actual future results may be materially different from what we expect. We may
not update these forward-looking statements after the date of this prospectus,
even though our situation will change in the future. All forward-looking
statements attributable to us are expressly qualified by these cautionary
statements.

All amounts are stated in thousands of U.S. dollars, except where stated
otherwise.

Overview

We are a leading provider of advanced electronics manufacturing services, or
EMS, to electronics industry original equipment manufacturers, or OEM's,
worldwide. Our full range of value-added services include product design,
procurement, prototyping, advanced cable and harness interconnect, high-
precision enclosures, printed circuit board assembly, test, final system build,
comprehensive supply chain management, packaging, global distribution and after
sales support.

Our revenue has grown from approximately $59.0 million in 1997 to pro forma
revenue of $842.6 million in 2000 through both internal growth and strategic
acquisitions. The July 1999 combination of Surface Mount and HTM provided us
with increased strategic and operating scale and greater geographic breadth.
Collectively, since 1995 we have completed the following seven acquisitions:

. Radian Electronics' operations, which enabled our expansion into Austin,
Texas, and established our relationship with Dell, in 1996;

. Ogden Atlantic Design's operations in Charlotte, North Carolina, which
provided us with a facility in a major technology center in the
Southeastern United States, in 1997;

. Ogden International Europe's operations in Cork, Ireland, which expanded
our global presence into Europe, in 1998;

. Zenith Electronics' facility in Chihuahua, Mexico, which expanded our
cost-effective manufacturing capabilities and added Zenith (now
Motorola) as a customer, in July 1999;

. W.F. Wood, based outside Boston, Massachusetts, which provided us with a
manufacturing presence in the Northeastern United States, expanded our
value-added services to include high precision enclosures capabilities,
and added EMC and Sycamore Networks as customers, in September 1999;

. Pensar Corporation, located in Appleton, Wisconsin, which provided us
with a wide range of electronics and design manufacturing services, on
July 27, 2000 and concurrent with the closing of the initial offering;
and

. Qualtron Teoranta, with sites in both Donegal, Ireland and Haverhill,
Massachusetts, which allowed us to expand our ability to provide
customers with a broad range of services focusing on fibre optic
connector assemblies and volume cable assemblies, on November 22, 2000.

In addition, we completed the following financing activities in 2000:

Initial Public Offering

. On July 27, 2000, we completed an initial public offering of our common
stock in the United States and the exchangeable shares of our
subsidiary, SMTC Manufacturing Corporation of Canada, in Canada, raising
net proceeds (not including proceeds from the sale of shares upon the
exercise of the underwriters' over-allotment option) of $157.1 million;

. Concurrent with the effectiveness of the initial public offering, we
completed a share capital reorganization;

. In connection with the initial public offering, we entered into an
amended and restated credit agreement with our lenders, which provided
for an initial term loan of $50.0 million and revolving credit loans,
swing line loans and letters of credit up to $100.0 million;

. On July 27, 2000, we paid a fee of $1.8 million to terminate a
management agreement under which we paid quarterly fees of approximately
$0.2 million; and

. On August 18, 2000, we sold additional shares of common stock upon
exercise of the underwriters' over-allotment option, raising net
proceeds of $24.6 million.

Pre Initial Public Offering

. In May 2000, we issued senior subordinated notes to certain shareholders
for proceeds of $5.0 million, which were repaid with the proceeds of our
initial public offering;

. On May 18, 2000, we issued 41,667 warrants for $2.5 million cash
consideration in connection with the May 2000 issue of $5.0 million in
senior subordinated notes; and

. On July 3, 2000, we issued demand notes in the aggregate principal
amount of $9.9 million, which were repaid with the proceeds of our
initial public offering;

We continue to seek acquisition opportunities that enable us to expand our
geographic reach, add manufacturing capacity and diversify into new markets. We
are considering potential acquisitions in North America and Europe, and we are
targeting Asia for future expansion. We intend to continue to capitalize on
attractive acquisition opportunities in the EMS marketplace, and our goal is
generally to have each acquisition be accretive to earnings after a transition
period of approximately one year. We also plan to continue our strategy of
augmenting our existing EMS capabilities with the addition of related value-
added services. By expanding the services we offer, we believe that we will be
able to expand our business with our existing customers and develop new
opportunities with potential customers.

Consistent with our past practices and normal course of business, we engage
from time to time in discussions with respect to potential acquisitions. While
we have identified several opportunities that would

expand our global presence, add to our value-added services and establish
strategic relationships with new customers, we are not currently party to any
definitive acquisition agreements.

We used approximately $143.7 million of the proceeds from our initial public
offering to reduce indebtedness under our credit facility. On July 27, 2000, we
entered into an amended and restated credit facility with our lenders, which
provided for an initial term loan of $50.0 million and revolving credit loans,
swing line loans and letters of credit up to $100.0 million. As at December 31,
2000, we had borrowed $115.8 million under this facility. We intend to continue
to borrow under our new credit facility to finance working capital growth and
any cash portion of future acquisitions; however we generally intend to keep
our debt at approximately 30% of our total capitalization.

We currently provide turnkey manufacturing services to the majority of our
customers. In 2000, 98.8% of our pro forma revenue was from turnkey
manufacturing services compared to 97.1 % in 1999. From July 1999 to March
2000, under the terms of a production agreement with Zenith, we manufactured
products for Zenith on a consignment basis. In a consignment arrangement, we
provide manufacturing services only, while the customer purchases the materials
and components necessary for production. In April 2000, we began to purchase
materials for Zenith, and as a result, our relationship with Zenith evolved
into a turnkey manufacturing relationship. Turnkey manufacturing services
typically result in higher revenue and higher gross profits but lower gross
profit margins when compared to consignment services.

With our turnkey manufacturing customers, we generally operate under
contracts that provide a general framework for our business relationship. Our
actual production volumes are based on purchase orders under which our
customers do not commit to firm production schedules more than 30 to 90 days in
advance. In order to minimize customers' inventory risk, we generally order
materials and components only to the extent necessary to satisfy existing
customer forecasts or purchase orders. Fluctuations in material costs are
typically passed through to customers. We may agree, upon request from our
customers, to temporarily delay shipments, which causes a corresponding delay
in our revenue recognition. Ultimately, however, our customers are generally
responsible for all goods manufactured on their behalf.

We service our customers through a total of eleven facilities located in the
United States, Canada, Europe and Mexico. In 2000, approximately 80.0% of our
pro forma revenue was generated from operations in the United States,
approximately 9.0% from Canada, approximately 3.0% from Europe and
approximately 8.0% from Mexico. Our facility in Chihuahua was acquired in July
1999 from Zenith Electronics Corporation. We expect to continue to increase
revenue from this facility, with the transfer of certain production from other
facilities and with the addition of new business and increased volume from our
current business.

The unaudited pro forma results of operations are presented as a supplement
to our actual results of operations to provide a basis for analyzing and
comparing the results of operations of the combined and acquired companies. As
such, the pro forma results of operations for the year ended December 31, 1999
contain the results of Surface Mount, HTM, W.F. Wood, Pensar and Qualtron as if
the combination of Surface Mount and HTM, the acquisitions of W.F. Wood, Pensar
and Qualtron and the initial public offering and application of proceeds to
reduce indebtedness had occurred on January 1, 1999. The historical results of
operations for the year ended December 31, 1999 include a full year of
operating results for HTM, as well as the operating results for Surface Mount
from July 30, 1999 through to December 31, 1999 and operating results for W.F.
Wood from September 3, 1999 through to December 31, 1999. As such, the 1999 pro
forma results have been adjusted to reflect seven months of additional goodwill
amortization related to the acquisition of Surface Mount by HTM, eight months
of additional goodwill amortization related to the acquisition of W.F. Wood,
twelve months of additional goodwill amortization related to the acquisitions
of Pensar and Qualtron, additional interest expense and income tax effects
related to the borrowings required to complete the acquisitions of Pensar and
Qualtron and the effects of the initial public offering including the exercise
of the underwriters' over-allotment option.

The unaudited pro forma results of operations for the year ended December
31, 2000 contain the results of Surface Mount, HTM, W.F. Wood, Pensar and
Qualtron as if the combination of Surface Mount and HTM, the acquisitions of
W.F. Wood, Pensar and Qualtron and the initial public offering and application
of proceeds to reduce indebtedness had occurred on January 1, 1999. The
historical results of operations for the year ended December 31, 2000 include a
full year of operating results for HTM, Surface Mount and W.F. Wood as well as
the results of Pensar from July 27, 2000 through to December 31, 2000 and the
results of Qualtron from November 22, 2000 through to December 31, 2000. As
such, the 2000 pro forma results have been adjusted to reflect seven months of
additional goodwill amortization related to the acquisition of Pensar, eleven
months of additional goodwill amortization related to the acquisition of
Qualtron, the additional interest expense and income tax effects related to the
borrowings required to complete the acquisitions of Pensar and Qualtron and the
effects of the initial public offering including the exercise of the
underwriters' over-allotment option.

Our fiscal year end is December 31. The consolidated financial statements of
SMTC, including the consolidated financial statements of HTM for periods prior
to the combination, are prepared in accordance with United States GAAP, which
conforms in all material respects to Canadian GAAP, except as disclosed in Note
22 to the consolidated financial statements.

We begin our Management's Discussion and Analysis of Financial Condition and
Results of Operations with a discussion of the pro forma year ended December
31, 2000 compared to the pro forma year ended December 31, 1999. Because our
historical financial statements do not fully reflect the July 1999 combination
of HTM and Surface Mount, our September 1999 acquisition of W.F. Wood, our July
2000 acquisition of Pensar and our November 2000 acquisition of Qualtron or the
completion of our initial public offering, a discussion of our historical
operations does not provide a sufficient understanding of the financial
conditions and results of operations of our business. Following our discussion
of the pro forma results of operations, we discuss our historical financial
condition and results of operations for the year ended December 31, 2000
compared to the year ended December 31, 1999 and for the year ended December
31, 1999 compared to the year end December 31, 1998.

SMTC Corporation

Pro Forma Results of Operations

The following table sets forth certain pro forma operating data expressed as
a percentage of revenue for the periods indicated:

December 31, December 31,
1999 2000
------------ ------------

Revenue............................................ 100.0% 100.0%
Cost of sales...................................... 89.1 90.7
----- -----
Gross profit....................................... 10.9 9.3
Selling, general and administrative
expenses.......................................... 7.0 4.8
Amortization of intangible assets.................. 1.6 1.1
----- -----
Operating income................................... 2.3 3.4
Interest........................................... -- 0.9
----- -----
Earnings before income taxes....................... 2.3 2.5
Income taxes....................................... 1.0 1.2
----- -----
Earnings........................................... 1.3% 1.3%
===== =====

Pro forma year ended December 31, 2000 compared to the pro forma year ended
December 31, 1999

Pro Forma Revenue

Pro forma revenue increased $311.9 million, or 58.8%, from $530.7 million
for the year ended December 31, 1999, to $842.6 million for the year ended
December 31, 2000. This increase resulted primarily from the growth of pro
forma revenue generated by our United States operations and our Chihuahua
facility. For the year ended December 31, 2000, 80.3% of our pro forma revenue
was generated from operations in the United States, 8.9% from Canada, 3.0% from
Europe and 7.8% from Mexico. For the year ended December 31, 1999, 83.5% of our
pro forma revenue was generated from operations in the United States, 9.4% from
Canada, 5.2% from Europe and 1.9% from Mexico.

Pro forma revenue from Dell for the year ended December 31, 2000 was $124.0
million, or 14.7% of total pro forma revenue. For the year ended December 31,
1999, pro forma revenue from Dell was $157.5 million, or 29.7%, of total pro
forma revenue. The 1999 revenue from Dell consisted primarily of personal
computer based products, whereas the 2000 revenue from Dell consisted primarily
of the high growth, networking based products. No other customer represented
more than 10% of pro forma revenue in the years ended December 31, 1999 and
December 31, 2000.

Pro Forma Gross Profit

Pro forma gross profit increased $20.2 million, or 34.8%, from $58.1 million
for the year ended December 31, 1999 to $78.3 million for the year ended
December 31, 2000. Our pro forma gross profit margin declined from 10.9% for
the year ended December 31, 1999 to 9.3% for the year ended December 31, 2000.
The decline in the pro forma gross margin is due to a shift from lower
revenue/higher gross margin consignment revenue to higher revenue/lower gross
margin turnkey revenue at the Chihuahua facility, the underutilization of our
fixed costs in the Chihuahua facility due to delays in the transition of
certain customers to that facility and change in customer mix. We continue to
seek to improve our overall profit margins by offering our customers a wider
range of services, better utilizing our fixed manufacturing costs and by
pursuing acquisitions of businesses that provide value-added services.

Pro Forma Selling, General & Administrative Expenses

Pro forma selling, general and administrative expenses increased $3.2
million, or 8.6%, from $37.1 million for the year ended December 31, 1999 to
$40.3 million for the year ended December 31, 2000. As a percentage of pro
forma revenue, pro forma selling, general and administrative expenses decreased
from 7.0% to 4.8% because of the higher pro forma revenue base. Pro forma
selling, general and administrative expenses for the year ended December 31,
1999 included management fees of $0.7 million, one time payments of $0.6
million as compensation to former W.F. Wood and Pensar shareholders and $2.6
million as acquisition related bonuses paid to management and employees of W.F.
Wood. We expect pro forma selling, general and administrative expenses to
continue to decline as a percentage of pro forma revenue as we continue to grow
our revenue base.

Pro Forma Amortization

Pro forma amortization of intangible assets increased $0.5 million, or 5.7%,
from $8.7 million for the year ended December 31, 1999 to $9.2 million for the
year ended December 31, 2000. Pro forma amortization for the year ended
December 31, 1999 included amortization of $2.4 million of goodwill related to
the combination of Surface Mount and HTM, amortization of $1.7 million of
goodwill related to the acquisition of W.F. Wood, amortization of $2.7 million
of goodwill related to the acquisition of Pensar, amortization of $1.8 million
of goodwill related to the acquisition of Qualtron and amortization of $0.1
million of deferred finance costs related to the establishment of our senior
credit facility in July 1999.

Pro forma amortization for the year ended December 31, 2000 included
amortization of $2.4 million of goodwill related to the combination of Surface
Mount and HTM, amortization of $1.7 million of goodwill related to the
acquisition of W.F. Wood, amortization of $2.7 million of goodwill related to
the acquisition

of Pensar, amortization of $1.8 million of goodwill related to the acquisition
of Qualtron, amortization of $0.3 million of deferred finance costs related to
our amended and restated senior credit facility of July 2000 and amortization
of $0.3 million of deferred equipment lease costs.

Pro Forma Interest Expense

Pro forma interest expense increased $7.6 million from $0.1 million for the
year ended December 31, 1999 to $7.7 million for the year ended December 31,
2000 due to the interest expense related to debt incurred to meet increased
working capital requirements to fund the growth of our business.

Pro Forma Income Tax Expense

For the year ended December 31, 2000, we had a pro forma income tax expense
of $10.5 million on pro forma income before taxes of $21.1 million, producing
an effective pro forma tax rate of 49.8%. The effective rate of tax was higher
than the statutory rate as we were not able to claim a recovery of losses of
$1.1 million incurred by our subsidiary, SMTC Manufacturing Corporation of
Ireland Limited, or deduct $4.2 million of goodwill related to the combination
of Surface Mount and HTM and the acquisition of Qualtron.

For the year ended December 31, 1999, we had a pro forma income tax expense
of $5.4 million on pro forma income before taxes of $12.2 million, producing an
effective pro forma tax rate of 44.3%. The effective rate of tax was higher
than the statutory rate as we were not able to claim a recovery of losses of
$0.5 million incurred by our subsidiary, SMTC Manufacturing Corporation of
Ireland Limited, or to deduct $4.2 million of goodwill related to the
combination of Surface Mount and HTM and the acquisition of Qualtron.

SMTC Corporation (formerly HTM Holdings, Inc.)

Results of Operations

The following table sets forth certain operating data expressed as a
percentage of revenue for the years ended:

December 31, December 31, December 31,
1998 1999 2000
------------ ------------ ------------

Revenue................................ 100.0 % 100.0 % 100.0 %
Cost of sales.......................... 92.0 91.6 91.3
----- ----- -----
Gross profit........................... 8.0 8.4 8.7
Selling, general and administrative
expenses.............................. 3.7 5.2 4.4
Amortization of intangible assets...... 0.2 0.8 0.8
Recapitalization expenses.............. 2.5 -- --
----- ----- -----
Operating income....................... 1.6 2.4 3.5
Interest............................... 2.2 2.7 1.8
----- ----- -----
Earnings (loss) before income taxes.... (0.6) (0.3) 1.7
Income taxes (recovery)................ (0.2) -- 0.9
----- ----- -----
Earnings (loss) before extraordinary
loss.................................. (0.4) (0.3) 0.8
Extraordinary loss..................... -- (0.5) (0.3)
----- ----- -----
Net earnings (loss).................... (0.4)% (0.8)% 0.5 %
===== ===== =====

Year ended December 31, 2000 compared to the year ended December 31, 1999

Revenue increased $524.7 million, or 203.4%, from $258.0 million for the
year ended December 31, 1999 to $782.7 million for the year ended December 31,
2000. This increase resulted from both organic growth and

from the combination of Surface Mount and HTM, the acquisition of our Chihuahua
facility in July 1999, our acquisition of W.F. Wood in September 1999, the
acquisition of Pensar in July 2000 and the acquisition of Qualtron in November
2000. Acquisition revenue contributed $226.5 million, or 43.2%, of the
increase. Organic revenue from both existing customers and new customers
increased $298.2 million, or 61.5%, during 2000.

Revenue from Dell of $124.0 million and from Alcatel of $79.8 million for
the year ended December 31, 2000 was 15.8% and 10.2%, respectively, of total
revenue. Revenue from Dell of $76.3 million, from Carrier Access of $27.1
million and from IBM of $25.7 million was 29.6%, 10.5% and 10.0%, respectively,
of total revenue for the year ended December 31, 1999. Alcatel was not a
customer of ours in 1999. No other customer represented more than 10% of
revenue in the years ended December 31, 1999 and December 31, 2000.

For the year ended December 31, 2000, 79.8% of our revenue was generated
from operations in the United States, 9.5% from Canada, 2.3% from Europe and
8.4% from Mexico. For the year ended December 31, 1999, 85.9% of our revenue
was generated from operations in the United States, 7.4% from Canada, 2.9% from
Europe and 3.8% from Mexico. We intend to enhance our position as a leading EMS
provider by expanding our global presence in strategic markets with the
addition of facilities in new cost effective regions and geographic locations,
and through the expansion of our international sales efforts.

Gross Profit

Gross profit increased $46.6 million from $21.7 million for the year ended
December 31, 1999 to $68.3 million for the year ended December 31, 2000. Our
gross profit margin improved from 8.4% for the year ended December 31, 1999 to
8.7% for the year ended December 31, 2000. The improvement in gross profit was
due to both organic growth and the combination of Surface Mount and HTM and the
acquisitions we completed in 1999 and 2000. The increase in the gross margin
was due to the positive impact of the acquisitions. Gross profit from
acquisitions contributed $25.0 million at a gross margin of 11.0% to the
increase. Organic growth contributed $21.6 million to the increase at a gross
margin of 7.2%.

Selling, General & Administrative Expenses

Selling, general and administrative expenses increased $21.3 million from
$13.3 million for the year ended December 31, 1999 to $34.6 million for the
year ended December 31, 2000. As a percentage of revenue, selling, general and
administrative expenses decreased from 5.2% to 4.4%. The combination of Surface
Mount and HTM and the subsequent acquisitions contributed $21.3 million to the
increase in selling, general and administrative expenses. At our Denver
facility, selling, general, and administrative expenses increased $0.4 million
from $3.3 million for the year ended December 31, 1999 to $3.7 million for the
year ended December 31, 2000 but declined as a percentage of that site's
revenue from 3.2% to 2.0%.

Amortization

Amortization of intangible assets for the year ended December 31, 2000 of
$6.2 million included the amortization of $2.4 million of goodwill related to
the combination of Surface Mount and HTM, $1.7 million of goodwill related to
the acquisition of W.F. Wood, $1.1 million related to the acquisition of Pensar
and $0.1 million related to the acquisition of Qualtron. We are amortizing
goodwill of $24.9 million resulting from the combination of Surface Mount and
HTM, $17.4 million resulting from the acquisition of W.F. Wood, $26.6 million
resulting from the acquisition of Pensar and $18.1 million resulting from the
acquisition of Qualtron, over a period of ten years. Amortization of intangible
assets for the year ended December 31, 2000 also included the amortization of
$0.6 million of deferred finance costs related to the establishment of our
amended and restated senior credit facility in July 2000 and $0.3 million of
deferred equipment lease costs. The costs associated with our amended and
restated senior credit facility are being amortized over the four year
remaining term of the debt.

Amortization of $2.0 million for the year ended December 31, 1999 included
the amortization of $0.9 million of goodwill related to the combination of
Surface Mount and HTM, $0.6 million of goodwill related to the acquisition of
W.F. Wood, $0.3 million of deferred finance costs related to the establishment
of our senior credit facility in July 1999 and $0.2 million of deferred
financing costs related to HTM's credit facility prior to the refinancing.

Interest Expense

Interest expense increased $6.7 million from $7.1 million for the year ended
December 31, 1999 to $13.8 million for the year ended December 31, 2000 due to
interest expense related to debt incurred in connection with the combination of
Surface Mount and HTM, debt incurred to purchase our Chihuahua facility and
W.F. Wood and debt incurred to meet increased working capital requirements to
fund the growth of our business. The weighted average interest rates with
respect to the debt for the years ended December 31, 1999 and 2000 were 9.5%
and 9.9%, respectively.

Income Tax Expense

For the year ended December 31, 2000, we recorded an income tax expense of
$7.4 million on pre-tax income of $13.7 million, which produced an effective
tax rate of 54.0% as we were not able to claim a recovery on losses of $1.1
million by our subsidiary, SMTC Manufacturing Corporation of Ireland Limited,
or deduct $2.4 million of goodwill related to the combination of Surface Mount
and HTM.

For the year ended December 31, 1999, an income tax expense of $0.1 million
was recorded on a loss before taxes of $0.7 million as we were not able to
claim a recovery of losses of $0.5 million by our subsidiary, SMTC
Manufacturing Corporation of Ireland Limited, or deduct $0.9 million of
goodwill related to the combination of Surface Mount and HTM.

Extraordinary Loss

Approximately $143.7 million of the proceeds of the initial public offering
were used to reduce our indebtedness under our credit facility. In connection
with the initial public offering, we entered into an amended and restated
credit agreement with our lenders. As a result, an extraordinary loss of $2.7
million ($4.3 million before tax), related to early payment penalties, the
write-off of a portion of the unamortized deferred financing fees and the
write-off of the value of the warrants issued in excess of the proceeds
received, was recorded for the year ended December 31, 2000. The $2.7 million
charge would not be presented as an extraordinary loss in accordance with
Canadian GAAP. Rather, the $4.3 million pre-tax expense would be reported in
income before taxes and the tax benefit of $1.6 million would be reported as
tax recovery.

As a result of the early payment of the senior notes payable and
subordinated notes that occurred concurrent with the business combination of
Surface Mount and HTM, an extraordinary charge of $1.3 million ($2.1 million
before tax), related to early payment penalties, the write-off of unamortized
deferred financing fees, and the write-off of the unamortized debt discount,
was recorded for the year ended December 31, 1999. The $1.3 million charge
would not be presented as an extraordinary loss in accordance with Canadian
GAAP. Rather, the $2.1 million pre-tax expense would be reported in loss before
taxes and the tax benefit of $0.8 million would be reported as tax recovery.

Year ended December 31, 1999 compared to the year ended December 31, 1998

Revenue

Revenue increased $168.3 million, or 187.6% from $89.7 million in 1998 to
$258.0 million in 1999. This increase resulted largely from the combination of
Surface Mount and HTM, the acquisition of our Chihuahua facility in July 1999
and our acquisition of W.F. Wood in September 1999. Surface Mount, W.F. Wood
and our

Chihuahua facility contributed $134.5 million, $11.0 million and $9.9 million,
respectively, to the increase in revenue. Surface Mount's largest customer was
Dell. Revenue from Dell for the five month period from the date of the
combination of Surface Mount and HTM to December 31, 1999 was $76.3 million, or
29.6% of total revenue for 1999. Revenue generated by our Denver facility,
formerly HTM, increased $12.9 million, or 14.4%, from $89.7 million in 1998 to
$102.6 million in 1999. In 1999, revenue from Carrier Access of $27.1 million
and revenue from IBM of $25.7 million represented 10.5% and 10.0% of total
revenue, respectively. No other customer represented more than 10.0% of our
revenue in 1999.

In 1999, 85.9% of our revenue was generated from operations in the United
States, 7.4% from Canada, 3.8% from Mexico and 2.9% from Europe. Revenue
generated from outside the United States increased from zero in 1998 to $36.4
million or 14.1% of revenue in 1999. The increase was due to the combination of
Surface Mount and HTM and the acquisition of our Chihuahua facility.

Gross Profit

Gross profit increased $14.5 million from $7.2 million in 1998 to $21.7
million in 1999. Our gross margin improved from 8.0% in 1998 to 8.4% in 1999.
The improvements in gross profit and gross margin were due to the acquisitions
completed in 1999 as well as the combination of Surface Mount and HTM. The
combination of Surface Mount and HTM added $11.1 million of gross profit at a
gross margin of 8.3%, our Chihuahua facility contributed $1.1 million of gross
profit at a gross margin of 11.1% and our W.F. Wood business added $1.8 million
of gross profit at a gross margin of 16.4%

Our Chihuahua facility provided us with higher gross margins because it had
a higher percentage of consignment sales, which typically result in lower
revenue and higher gross profit margins but lower gross profit compared to
turnkey services.

Our W.F. Wood business contributes higher gross margins because the high
precision enclosure products manufactured by that business have higher profit
margins than the products we have historically manufactured.

At our Denver facility, formerly HTM, gross profit increased $0.5 million,
from $7.2 million in 1998 to $7.7 million in 1999, but the gross margin
declined from 8.0% to 7.5% due to a change in our business at that facility
toward manufacturing products with higher volumes and lower profit margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $10.0 million from
$3.3 million in 1998 to $13.3 million in 1999. As a percentage of revenue,
selling, general and administrative expenses increased from 3.7% in 1998 to
5.2% in 1999 because the facilities added through our acquisitions and the
combination of Surface Mount and HTM were operating at a lower rate of capacity
than our Denver facility. Included in selling general and administrative
expense in 1999 were management fees of $0.7 million paid to our principal
stockholders. In 1998, $0.1 million of management fees were paid to the
principal stockholders of HTM. Selling, general and administrative expenses
were unchanged from 1998 to 1999 at our Denver facility

Amortization

Amortization of intangible assets in 1999 includes the amortization of $0.9
million of goodwill related to the combination of Surface Mount and HTM and
$0.6 million of goodwill related to the acquisition of W.F. Wood. There were no
intangible items amortized in 1998. Also included in the amortization of
intangible assets is the amortization of $0.3 million of deferred finance costs
related to the establishment of our $155.0 million senior credit facility in
July 1999 and $0.2 million of deferred finance costs related to HTM's credit
facility prior to refinancing. In 1998, amortization of deferred finance costs
was $0.2 million.

Interest Expense

Interest expense increased $5.1 million from $2.0 million in 1998 to $7.1
million in 1999, primarily as a result of the increase in debt incurred in
connection with the combination of Surface Mount and HTM and the debt incurred
to purchase our Chihuahua facility and W.F. Wood. Debt of $35.5 million and
$134.0 million was outstanding at December 31, 1998 and December 31, 1999,
respectively. The weighted average interest rates with respect to such debt for
1998 and 1999 were 10.1% and 9.5%, respectively.

Income Tax Expense

Income tax expense in 1999 amounted to $0.1 million on a loss before tax of
$0.7 million, at an effective rate of 14.1%, as we were not able to claim a
recovery on losses of $0.5 million incurred by our subsidiary SMTC
Manufacturing Corporation of Ireland Limited, and we were not able to deduct
$0.9 million of goodwill expense related to the combination of Surface Mount
and HTM. We were able to reduce our tax expense by $0.4 million by applying
$1.0 million of net operating tax losses available to our subsidiaries in the
United States. Income tax expense in 1998 amounted to a recovery of $0.2
million on a loss before tax of $0.5 million, at an effective tax rate of
37.0%.

Extraordinary Loss

The extraordinary loss of $1.3 million in 1999, net of the tax benefit of
$0.8 million, arose from early payment penalties of $0.8 million, the write-off
of $1.0 million of unamortized deferred financing fees and the write-off of the
unamortized debt discount of $0.3 million associated with the repayment of
senior and subordinated notes which were refinanced under the $155.0 million
senior credit facility entered into in connection with the July 1999
combination of Surface Mount and HTM. There were no extraordinary gains or
losses in 1998. The $1.3 million charge would not be presented as an
extraordinary loss in accordance with Canadian GAAP. Rather, the $2.1 million
pre-tax expense would be reported in loss before taxes and the tax benefit of
$0.8 million would be reported as tax recovery.

Liquidity and Capital Resources

Our principal sources of liquidity are cash provided from borrowings under
our senior credit facility and our access to the capital markets. Our principal
uses of cash have been to finance mergers and acquisitions, to meet debt
service requirements and to finance capital expenditures and working capital
requirements. We anticipate that these will continue to be our principal uses
of cash in the future.

Net cash used for operating activities for the year ended December 31, 1999
was $6.6 million compared to net cash used for operating activities of $104.9
million for the year ended December 31, 2000. The growth of both existing and
new customers during 2000 led to our increased working capital needs.

Net cash provided by financing activities for the year ended December 31,
1999 was $49.6 million due to the net increase of borrowings of $55.1 million,
which was offset by capital lease payments of $1.6 million and debt issuance
costs of $4.0 million. Net cash provided by financing activities for year ended
December 31, 2000 was $159.1 million due to the net proceeds from issuance of
capital stock of $179.2 million, and proceeds from the issue of warrants of
$2.5 million, which was offset by repayment of long-term debt and capital
leases and debt issuance costs of $19.7 million, $1.4 million and $1.5 million
respectively.

Net cash used in investing activities for the year ended December 31, 1999
was $41.4 million due to the net purchase of capital and other assets of $4.1
million, the combination of SMTC and HTM and the acquisitions of W.F. Wood and
the Chihuahua facility for a total of $31.6 million and cash held in escrow
related to the acquisition of the Chihuahua facility of $5.7 million. Net cash
used in investing activities for the year ended December 31, 2000 was $53.6
million due to net purchases of capital and other assets of $25.9 million and
the acquisitions of Pensar and Qualtron for a total of $27.7 million.

In May 2000, we issued senior subordinated notes to certain shareholders for
proceeds of $5.0 million, which were repaid, with proceeds from the initial
public offering. In conjunction with the subordinated notes, on May 18, 2000 we
issued 41,667 warrants for cash consideration of $2.5 million which were
converted into warrants to purchase 477,049 shares upon our initial public
offering.

On July 3, 2000, in order to provide us with additional working capital and
to finance the growth of our business, certain of our stockholders purchased
demand notes from us in the amount of $9.9 million. These notes were paid on
July 27, 2000 with proceeds from our initial public offering.

On July 27, 2000, we entered into an amended and restated credit agreement
with our lenders, which provided for an initial term loan of $50.0 million and
revolving credit loans, swing line loans and letters of credit up to $100.0
million. As of December 31, 2000, we had borrowings of $115.8 million under our
senior credit facility.

On July 27, 2000, we completed an initial public offering of our shares of
common stock in the United States and exchangeable shares of our subsidiary,
SMTC Manufacturing Corporation of Canada, in Canada. The offering consisted of
6,625,000 shares of common stock at a price of $16.00 per share and 4,375,000
exchangeable shares at a price of Canadian $23.60 per share. The net proceeds
from the offering (not including proceeds from the sale of shares upon the
exercise of the underwriters' over-allotment option) of approximately $157.1
million were used to reduce our indebtedness under the senior credit facility,
to repay outstanding notes, to repay debt of Pensar and to finance the cash
portion of the purchase price of Pensar, which closed simultaneously with the
initial public offering. On August 18, 2000, an additional 1,650,000 of shares
of our common stock were issued at a price of $16.00 upon the exercise of the
underwriters' over-allotment option. The net proceeds of $24.6 million from the
sale of shares upon the exercise of the underwriters' over-allotment option
were used to reduce our indebtedness under the senior credit facility.

Our management believes that cash generated from operations, available cash
and amounts available under our senior credit facility will be adequate to meet
the debt service requirements, capital expenditures and working capital needs
at our current level of operations and organic growth, although no assurance
can be given
in this regard. If we experience unusually strong growth or pursue significant
acquisition, we will likely require additional capital. There can be no
assurance that our business will generate sufficient cash flow from operations
or that future borrowings will be available to enable us to service our
indebtedness. Our future operating performance and ability to service or
refinance indebtedness will be subject to future economic conditions and to
financial, business and other factors, certain of which are beyond our control.

Impact of Inflation

We believe that our results of operations will not be significantly affected
by moderate changes in the inflation rate.

Recently Issued Accounting Standards

In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") 101 and
in March 2000 issued SAB 101A "Revenue Recognition," which provide guidelines
in applying U.S. generally accepted accounting principles to revenue
recognition in financial statements. As a consequence of the issuance of SAB
101B in June 2000, we were required to implement SAB 101 as of the fourth
quarter of 2000. We believe that our revenue recognition practices are
consistent with the guidelines.

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes methods of accounting for derivative financial instruments
and hedging activities related to those instruments as well as other hedging
activities. SFAS No. 133 requires all derivatives to be recognized either as
assets or liabilities and measured at fair value. SFAS No. 137 delays the
effective date of SFAS No. 133 to fiscal years beginning after June 15,

2000. We will implement SFAS No. 133 for our first quarter ended March 31,
2001. In accordance with the new standard, we will account for our existing
interest rate swaps as cash flow hedges. If we applied the new standard at
December 31, 2000 we would record a $0.1 million liability on our balance sheet
and a $0.1 million charge to other comprehensive income as a cumulative effect
type adjustment to reflect the initial mark to market on the interest rate
swaps.

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost
of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. As required, we implemented this standard in
1999. The implementation did not have a material impact on our financial
position, results of operations or cash flows.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities." SOP 98-5 requires that all start-up costs related to the new
operations must be expenses as incurred. In addition, all start-up costs that
were capitalized in the past must be written off when SOP 98-5 is adopted. As
required, we implemented this standard in 1999. The implementation did not have
a material impact on our financial position, results of operations or cash
flows.

BUSINESS

Overview

SMTC Corporation ("We" or "SMTC" or the "Company") is a leading provider of
advanced electronics manufacturing services, or EMS, to electronics industry
original equipment manufacturers, or OEMs, worldwide. We service our customers
through eleven manufacturing and technology centers strategically located in
key technology corridors in the United States, Canada, Europe and a cost-
effective region of Mexico. Our full range of value-added services include
product design, procurement, prototyping, assembly, enclosures, interconnect,
test, final system build, comprehensive supply chain management, packaging,
global distribution and after-sales support. Our business is focused on the
fast-growing fixed and wireless communications, networking and computing
sectors. Based upon our comparison of our 2000 pro forma revenue of
approximately $842.6 million with 2000 EMS industry revenue data provided by
Technology Forecasters, Inc., or TFI, we are among the 15 largest public EMS
companies worldwide. We believe we are well-positioned to capitalize on the
significant and growing market opportunity to provide advanced EMS solutions to
OEMs on a global basis.

We have customer relationships with over 50 OEMs, many of which date back
more than five years. Our customers include industry leading OEMs such as Dell,
Alcatel, Motorola, IBM, EMC and Lucent Technologies. We developed these
relationships by capitalizing on the continuing trend of OEMs to outsource
manufacturing services to consolidate their supply base and to form long-term
strategic partnerships with selected high quality EMS providers. We also have
relationships with a number of emerging companies in the high-growth
communications and networking sectors, including Cobalt Networks (now part of
Sun Microsystems), Netopia and Sycamore Networks. In 2000, approximately 79% of
our pro forma revenue was generated from the communications and networking
sectors. We expect to continue to grow our business through the addition of
new, high quality customers and the expansion of our relationships with
existing customers.

We believe that our key competitive advantages include our global
manufacturing capabilities, customer focused team-based approach, global supply
chain management capabilities and leading edge equipment and processes that are
consistent from site to site. In addition, we have introduced advanced web-
based collaborative planning tools that electronically link us with our
customers and suppliers in real time, enhancing our supply chain management
capabilities.

SMTC Corporation is the result of the July 1999 combination of the former
SMTC Corporation, or Surface Mount, and HTM Holdings, Inc., or HTM. Surface
Mount was established in Toronto, Ontario in 1985. HTM was established in
Denver, Colorado in 1990. SMTC was established in Delaware in 1998. Combining
Surface Mount and HTM provided us with increased strategic and operational
scale and greater geographic breadth. After the combination, we purchased
Zenith Electronics' facility in Chihuahua, Mexico, which expanded our cost-
effective manufacturing capabilities in an important geographic region. In
September 1999, we established a manufacturing presence in the Northeastern
United States and expanded our value-added services to include high precision
enclosure capabilities by acquiring Boston, Massachusetts based W.F. Wood. In
July 2000, we acquired Pensar Corporation, an EMS company specializing in
design engineering and headquartered in Appleton, Wisconsin. In November 2000,
we acquired Qualtron Teoranta, a provider of specialized cable and harness
interconnect assemblies, based in Donegal, Ireland and with a subsidiary in
Haverhill, Massachusetts.

Industry Background

The EMS industry provides manufacturing services to OEMs in the electronics
marketplace. The EMS market is large and continues to grow rapidly. According
to TFI, global EMS industry revenue is forecasted to grow at a compounded
annual growth rate of approximately 27%, from $78 billion in 1999 to $260
billion in 2004. TFI forecasts that larger EMS companies with revenue of
approximately $500 million or greater are expected to grow more rapidly during
the same period. We believe that the growth for larger EMS companies is

projected to be greater than the industry average because OEMs are increasingly
outsourcing production to larger manufacturers that have the ability to provide
a total service solution across multiple geographies. EMS industry growth is
being fueled by the overall growth of the electronics industry, the increased
outsourcing of manufacturing by OEMs, and the divestiture of OEM manufacturing
assets to EMS businesses. We believe that OEMs decide to outsource
manufacturing in order to take advantage of the technology and manufacturing
expertise of EMS companies, eliminate manufacturing overhead, reduce time-to-
market of products, and improve supply chain efficiency. TFI estimates that the
percentage of total cost of goods sold in the electronics industry which is
outsourced for manufacturing by OEMs will increase from 11% in 1999 to 26% by
2004.

In addition, according to TFI, the EMS industry is highly fragmented with
over 3,000 independent EMS companies in existence and the 15 largest companies
accounting for approximately 45% of the worldwide market in 1999. The EMS
industry has experienced, and is anticipated to continue to experience,
significant consolidation. We believe that the fragmented nature of the
industry will allow us to take advantage of further acquisition opportunities
to increase our scale and geographic scope as well as to expand our customer
relationships and service offerings.

Revenues generated by the EMS industry are relatively concentrated among the
computing and fixed and wireless communications sectors. TFI reports that the
$78 billion in revenues generated by the EMS industry in 1999 is attributable
to the following sectors: 13% to wireless telecom, 20% to wired
telecom/networking, 23% to computer peripheral, 20% to computer systems, 2% to
consumer, 7% to industrial and 15% to other. TFI forecasts that a projected
$260 billion in revenues generated by the EMS industry in 2004 will be
attributable to the following sectors: 19% to wireless telecom, 25% to wired
telecom/networking, 17% to computer peripheral, 18% to computer systems, 8% to
consumer, 4% to industrial and 9% to other.

Historically, OEMs were vertically integrated manufacturers that invested
significantly in manufacturing assets and facilities around the world to
manufacture, service and distribute their products. EMS originated as primarily
labor intensive functions outsourced by OEMs to obtain additional capacity
during periods of high demand. Early EMS providers were essentially
subcontractors, providing production capacity on a transactional basis.
However, with significant advances in manufacturing process technology, EMS
providers developed additional capabilities and were able to improve quality
and dramatically reduce OEMs' costs. Furthermore, as the capabilities of EMS
companies expanded, an increasing number of OEMs adopted and became dependent
upon EMS outsourcing strategies. Over time, OEMs came to rely on EMS providers
to perform a broader array of manufacturing services, including design and
development activities. In recent years, EMS providers have further expanded
their range of services to include advanced manufacturing, packaging and
distribution and overall supply chain management. In addition, many OEMs are
reducing the number of vendors from which outsourced services are purchased,
and are partnering with EMS suppliers that can provide a total service solution
on a national or global basis, in order to further lower costs and increase
supplier accountability.

By using EMS providers, OEMs are able to focus on their core competencies,
including product development, sales and marketing, while leveraging the
manufacturing efficiency and capital investment of EMS providers. OEMs use EMS
providers to enhance their competitive position by:

. Reducing Time-to-Market. Electronics products are experiencing
increasingly shorter product life cycles, requiring OEMs to continually
reduce the time required to bring new products to market. OEMs can
significantly improve product development cycles and enhance time-to-
market by benefiting from the expertise and infrastructure of EMS
providers. This expertise includes capabilities relating to design,
quick-turn prototype development and rapid ramp-up of new products to
high volume production, with the critical support of worldwide supply
chain management.

. Improving Supply Chain Management. OEMs who manufacture internally are
faced with greater complexities in planning, procurement and inventory
management due to frequent design changes, short product life cycles and
product demand fluctuations. OEMs can address these complexities by
outsourcing to EMS providers which possess sophisticated supply chain
management capabilities and can leverage significant component
procurement advantages to lower product costs.

. Accessing Advanced Manufacturing Capabilities and Process Technologies.
Electronics products and electronics manufacturing technology have
become increasingly sophisticated and complex, making it difficult for
many OEMs to maintain the necessary technology expertise and focus
required to efficiently manufacture products internally. By working
closely with EMS providers, OEMs gain access to high quality
manufacturing expertise and capabilities in the areas of advanced
process, interconnect and test technologies.

. Improving Access to Global Markets. OEMs are generally increasing their
international activities in an effort to expand sales through access to
foreign markets. EMS companies with worldwide capabilities are able to
offer such OEMs global manufacturing solutions enabling them to meet
local content requirements to distribute products efficiently around the
world at lower costs.

The SMTC Customer Solution

We believe that the key competitive advantages of our solution include our
customer-focused team based approach, comprehensive supply chain management
capabilities and fully integrated worldwide facilities. Our customers benefit
from the following components of the SMTC solution:

Customer-focused Team Oriented Production System, or T.O.P.S. Our cross-
functional teams work as customer-focused business units without departmental
barriers, which allows for faster and more direct communication between our
customers and the team responsible for their products. The removal of
departmental barriers minimizes time wasted by internal communication between
departments. Our teams provide the customer with the entire range of services
from prototype to production to distribution. In addition, our cross-functional
team structure enables us to tailor each team to specific custom requirements.
In some cases we have employees on-site at customer locations. The result is a
manufacturing process tailored to each customer, which we believe accelerates
time-to-market for our customers.

Comprehensive Supply Chain Management; Web-based System. The systems and
processes we employ in supply chain management enable us to rapidly scale
operations to meet customer needs, shift capacity in response to product demand
fluctuations, reduce material costs and effectively distribute products to our
customers or their end-customers. We have available and are implementing web-
based systems through which we communicate, collaborate and plan with our
customers and suppliers in real time. This web-based system enhances inventory
management through information sharing and access and is a valuable tool for
managing inventory risk and exposure. In addition, our customers can commit to
delivering products to their customers knowing that the materials and capacity
are available because they can monitor the status of our materials and capacity
in real time through use of our web-based collaborative planning system.

Fully Integrated Worldwide Factories. Our global reach enables us to provide
OEMs with the flexibility to manufacture products locally in several regions of
the world. All of our assembly locations operate under the same model and with
the same systems allowing customers to seamlessly transfer their production
from one of our facilities to another. This gives our customers greater
flexibility and the opportunity to reduce their costs by transferring
production to the facility that suits their needs. The fact that each assembly
facility operates similarly also enhances communications among facilities,
allows our employees to work effectively at any of our sites, improves quality
control, allows us to acquire equipment at volume discounts and promotes
adoption of best practices at each of our facilities. These factors reduce
inefficiencies, improve product quality and ultimately reduce costs.

The SMTC Strategy

Our objective is to enhance our position as a leading EMS provider to OEMs
worldwide. We intend to achieve this objective by pursuing the following
business strategies:

Expand our Global Presence in Strategic Markets. In order to enhance our
existing high standards of service to our global customers, we intend to
continue to expand our global presence. We expect to tailor each

assembly facility we acquire to the same high standards of excellence and to a
similar plant layout as our current assembly facilities. This will allow us to
continue to enjoy the benefits of fully integrated factories. Since 1995, we
have expanded from our first facility located in Toronto, Ontario to eleven
facilities located in the United States, Canada, Europe and Mexico. We intend
to continue to expand our global infrastructure and are currently targeting
Asia as an area for future expansion.

Continue to Provide Leading Edge Supply Chain Management Capabilities. We
remain fully committed to maintaining our leadership position in supply chain
management through the use of innovative management strategies. We believe the
introduction of our web-based collaborative planning system is enabling us to
rapidly scale operations to meet customer needs, shift capacity in response to
product demand fluctuations, reduce material costs and effectively distribute
products to our customers or their end-customers.

Strengthen our Relationships with Leading and Emerging Global OEMs in
Attractive EMS Segments. We plan to continue to focus on providing advanced
electronic manufacturing services to industry leaders, particularly in the high
growth, high value-added communications and networking sectors. Communications
and networking companies, in particular, are dramatically increasing the amount
of manufacturing they are outsourcing, and we believe our technological
capabilities and global manufacturing platform are well suited to capitalize on
this opportunity. In addition to our industry leading customers such as Dell,
Alcatel, Motorola, IBM, EMC and Lucent Technologies, we have relationships with
a number of emerging companies in the communications and networking sectors
including Cobalt Networks (now part of Sun Microsystems), Netopia and Sycamore
Networks.

Provide Advanced Technological Capabilities and Comprehensive Service
Offerings. We remain committed to enhancing our capabilities and value-added
services to meet the ongoing needs of our customers. Through our continuing
investment in leading-edge assembly and logistics technologies, as well as our
investment in design, engineering and test capabilities, we are able to offer
our customers a variety of advanced design and manufacturing solutions. These
capabilities include micro ball grid arrays, complex circuitry layouts,
manufacturing and testing of wireless products and manufacturing of ethernet
cards, among others. Additionally, building on our integrated engineering and
manufacturing capabilities, we provide our customers with services ranging from
initial product design and prototype production to final product assembly, test
and distribution directly to our customers. We believe that this provides
greater control over quality, delivery and costs and enables us to offer our
customers a complete cost effective solution.

Pursue Selective Acquisition Opportunities, including Asset Divestitures by
OEMs. We intend to continue to target strategic acquisitions that will enable
us to expand our geographic reach, add manufacturing capacity, secure key new
customers, diversify into complementary product markets or broaden our
technological capabilities and value-added service offerings. We have
successfully completed eight acquisitions since 1995. As a result, we have
developed and deployed a comprehensive integration strategy which includes
establishing our team-oriented production system at all locations with broad-
based workforce participation, utilizing similar manufacturing equipment and
processes, deploying common information technology platforms, transferring best
practices among operations company wide and leveraging wide-scale procurement.

Our Services

Our full range of advanced value-added electronics manufacturing services
include:

New Product Development and Introduction. The key to our new product
approach is the cross-functionality of our teams. We integrate our design
group, materials group and manufacturing group into a new product development
team which works with our customers and suppliers throughout the development
process to ensure that new designs are efficiently transitioned into
production. We use advanced design tools to enable new product ideas to
progress from design, to simulation and physical layout, to design for
manufacturability. We work with our customers' product developers in the early
stages of new product development. Our new product development team also
coordinates the prototyping of new product designs, a critical stage in the

development of new products. Our prototyping and new product introduction
centers are strategically located, and we use electronic communications with
our customers and suppliers in order to provide a quick response to customer
demands and to facilitate greater collaboration between our new product
development team, out customers and our suppliers.

Supply Chain Management. We use our integrated resource planning and supply
chain management systems to optimize efficient materials management from
supplier to end-customer. We provide our customers with a complete supply chain
management solution, using advanced electronic schedule sharing methods with
our customers and suppliers to plan, purchase, expedite and warehouse
components and materials. We believe our inventory management and volume
procurement capabilities reduce costs and shorten total cycle time. Effective
management of the supply chain is critical to the success of OEMs because it
reduces the time required to deliver products to market and the capital
requirements associated with carrying inventory. The introduction of our web-
based collaborative planning system will further link our suppliers and
customers in a real time environment.

Assembly and Integration. We use state-of-the-art technology in the assembly
process, and continually focus, together with our customers and suppliers, on
developing assembly techniques, improving quality, improving time-to-market of
our customers' products and reducing costs. We are able to apply a broad range
of assembly techniques, from pin-through-hole and surface mount to micro ball
grid array assemblies. Our extensive test capabilities allow us to identify the
cause of defects and determine the most appropriate corrective action. Our
engineers work proactively with our customers and suppliers to implement
solutions to defects before products are shipped. We also design and test
packaging of products for bulk shipment or single end-customer use. We provide
fully-integrated system build services to our customers. These services
capitalize on our sophisticated logistical capabilities to rapidly acquire and
assemble source components, perform complex testing and deliver products to our
customers around the world. Our complete system integration capabilities,
coupled with our strength in supply chain management, position us to meet our
customers' growing demand for build-to-order system solutions.

Global Distribution and After-sales Support. We have a sophisticated
integrated system for managing complex international distribution, allowing us
to efficiently ship worldwide and, in many cases, directly to the OEMs' end-
customers. We also offer a wide range of after-sales support services including
field failure analyses, product upgrades and repair services. We also assist
our customers in improving design for manufacture.

Our Customers

We target industry leading OEMs primarily in the high growth networking and
fixed and wireless communications sectors. Pro forma 2000 revenue from
customers was allocated by industry as follows: 45% from networking, 34% from
communications and 21% from industrial, consumer and other.

We have customer relationships with over 50 OEMs, many of which date back
more than five years. Our customers include industry leading OEMs such at Dell,
Alcatel, Motorola, IBM, EMC and Lucent Technologies. We also have relationships
with a number of emerging companies in the high-growth communications and
networking sectors, including Cobalt Networks (now part of Sun Microsystems),
Netopia and Sycamore Networks. The electronic products we assemble and
manufacture can be found in a wide array of end-products including:

. PBX switches .Routers .Personal computers
. Wireless base .Hubs .Multimedia peripherals
stations .Communications .Video broadcasting
. Wireless loop systems switches .Ethernet PCMCIA cards
. Modems .Mass storage devices .Semiconductor test
. Fax machines .Data servers equipment
. Components for T1 and .Workstations
T3 broadband
equipment

Marketing and Sales

We market our services through a focused strategy that emphasizes our team
based approach to servicing our customers. In addition to developing
relationships with established industry leading OEMs, we also target selected
emerging companies in high growth market segments. We target prospective
customers in the networking, fixed and wireless communications, computing and
peripheral and other industries which are leaders in their markets. We are
focused on building relationships with customers that require a volume of
production that complements our customer-focused team-based approach and supply
chain offerings. In all cases, our goal is to allocate our program management,
engineering and manufacturing resources, business systems and assets on a
customer-by-customer basis, enabling each of our customers to have a dedicated
environment that operates as a virtual extension of its business.

We have a direct sales force with a global presence that focuses on new and
existing customers to take advantage of our worldwide capabilities. We also
have a mix of established direct sales representatives and manufacturer
representative companies throughout Canada, the United States and Europe. Our
sales offices are located within our manufacturing facilities. In addition, we
have a sales office in Boston, Massachusetts. When a customer opportunity is
identified by our direct or outside sales force, we dedicate a team to the
potential customer that becomes part of our marketing effort and will continue
to service the customer throughout our relationship.

Supply Chain Management

We believe that the basis of true collaboration is seamless integration
across the enterprise-wide system, encompassing the customers' worldwide
facilities, our global manufacturing sites, and our suppliers. We provide our
customers with a complete supply chain management solution, using advanced
electronic schedule sharing methods with our customers and suppliers to plan,
purchase, expedite and warehouse components and materials. The systems and
processes we currently employ in supply chain management enable us to rapidly
scale operations to meet customer needs, shift capacity in response to product
demand fluctuations, reduce material costs and effectively distribute products
to our customers or their end-customers.

In April 1999, we launched a major new initiative with the development of
our web-based collaborative planning systems. These systems were initially used
to enhance our manufacturing execution capabilities through the use of web-
based master scheduling, real time materials requirement planning and factory
scheduling software. In conjunction with our enhanced manufacturing execution
processes, during 2000, we introduced our web-based collaborative planning
tools for customer demand management and supplier management.

We believe that in order to continue to offer our customers leading
services, we and our customers and suppliers must create virtual enterprises,
sharing information and making joint decisions to ensure a fast and cost-
effective response to the market. Our web-based collaborative planning tools
feature a "capable to promise" ability that we expect will improve flexibility
and reduce cycle times in the supply chain for our customers. Through a web-
based user interface, our customers and suppliers have direct access to our
supply chain management database. Customers are able to monitor the
availability and supply of component parts in real time. Simulation features
allow customers to explore "what-if" scenarios, enhancing our customers'
forecasting and planning efficiency. Communication is streamlined throughout
the supply chain, allowing our customers to receive timely feedback from us and
allowing us to receive real time input from our suppliers.

Our goal is to gauge and optimize performance in real time. As our web-based
tools are further deployed and enhanced, they enable all activities in the
supply chain to be synchronized, and enable us and our trading partners to
rapidly analyze, revise and fine-tune plans based on the latest customer
information. WebPLAN and Lotus Notes are the foundation for our e-business
solution.

Our web-based collaborative planning system is currently operating at all of
our locations. In the first half of 2000, we introduced the system to our
customers and suppliers. Because our customers and suppliers require

only standard, low-cost web access capabilities to access our collaborative
planning tool, and because the system represents a major advance over
traditional electronic data interchange systems, we believe our customers and
suppliers will continue to readily adopt our leading-edge e-business solution
to supply chain management.

Technology, Processes and Development

We use advanced technology in the assembly and testing of the products we
manufacture. We believe that our processes and skills are among the most
sophisticated in the industry.

Surface mount technology is the principal technology for the assembly of
printed circuit boards. Our customer-focused factories include predominantly
surface mount technology lines, which are highly flexible and are continually
reconfigured to meet customer-specific product requirements. In addition to
expertise in conventional surface mount technology, we have extensive
capabilities utilizing a broad range of technologies, including:

. chip scale packaging, which is a method of using integrated circuits
(chips) without encapsulating them in epoxy, thereby utilizing less
space on the circuit board;

. flip chips, which are structures that house interconnected circuits and
are utilized to minimize printed circuit board surface area when compact
packaging is required;

. tape automated bonding, which is a specialized assembly-process
technology that involves the application of components onto a circuit
board using temperature and pressure;

. multichip module-laminates, which are a type of printed circuit board
design that allows for the placement of multiple integrated circuits or
other components in a limited surface area; and

. micro ball grid array, which is a method of mounting an integrated
circuit or other component to a printed circuit board. Rather than using
pins, the component is attached with small balls of solder at each
contact. This method allows for greater component density and is used in
printed circuit boards with higher layer counts.

We also work with a wide range of substrate types from thin flexible
printed circuit boards to highly complex, dense multilayer boards.

Our assembly capabilities are complemented by advanced test capabilities.
These technologies include:

. high speed functional testing, a method of testing products by
simulating actual use modes in high volume;

. burn-in testing, a test method where products are powered on for 24
hours to ensure product functionality;

. vibration testing, a method that tests whether products can withstand
forces encountered under normal use;

. in-circuit testing, an automated test for workmanship defects; and

. in-situ dynamic thermal cycling stress testing, a test method of
exposing products from high to low temperature extremes for several
cycles, which identifies any early product failures.

We believe that our inspection technology is among the most sophisticated
in the EMS industry. Our inspection technology includes:

. x-ray laminograph, a method that utilizes an x-ray to view thin layers
of a circuit board;

. three-dimensional laser paste, a volumetric inspection method that
utilizes a microscope with lasers; and

. scanning electron microscopy, a scanning method that utilizes a
microscope with 200 times magnification or greater.

Our ongoing research and development activities include the development of
processes and test technologies as well as some focused product development. We
are proactive in developing manufacturing techniques which take advantage of
the latest component and product designs and packaging.

Our Suppliers

We currently use electronic data interchange with our key suppliers, and
ensure speed of supply through the use of automated receiving and full-service
distribution capabilities. With the implementation of our web-based
collaborative planning systems, our customers' needs are integrated with our
suppliers in a more efficient and cost effective manner than is achievable
through traditional electronic data interchange. In pro forma 2000 we purchased
approximately $685 million in materials. We believe this volume of procurement
enhances our ability to obtain better pricing, influence component packaging
and design and obtain supply of components in constrained markets.

We generally order materials and components under our agreements with
customers only to the extent necessary to satisfy existing customer orders or
forecasts. We have implemented specific inventory management strategies with
certain suppliers such as "line-side stocking" (pulling inventory at the
production line on an as needed basis) and other SMTC supply chain velocity and
flexibility programs. Fluctuations in material costs are typically passed
through to customers. We may agree, upon request from our customers, to
temporarily delay shipments, which causes a corresponding delay in our revenue
recognition. Ultimately, however, our customers are generally responsible for
all goods manufactured on their behalf.

During pro forma 2000, we did not rely significantly on any one supplier,
with no supplier representing more than 10.0% of total purchases, with the
exception of Arrow Electronics, Inc., which represented 10.9% of total
purchases.

Competition

The EMS industry is highly fragmented and comprised of a large number of
domestic and foreign companies. The intense competition we face is provided by
many independent companies as well as in-house manufacturing capabilities of
current and potential customers who evaluate our capabilities against the merit
of manufacturing products internally. We compete with different companies
depending on the type of service or geographic area. Our competitors include
Celestica Inc., Flextronics International Ltd., Jabil Circuit, Inc.,
SCI Systems, Inc. and Solectron Corporation as well as numerous other smaller
EMS providers. Certain of our competitors may have greater manufacturing,
financial, research and development and marketing resources than we do. We
believe that we are a leading EMS provider and that we are well positioned to
compete against these larger competitors due to our product quality,
flexibility and timeliness in responding to design and schedule changes,
reliability in meeting product delivery schedules, pricing, technological
sophistication, the provision of value-added services and geographic locations.

Governmental Regulation

Our operations are subject to certain federal, state, provincial and local
regulatory requirements relating to environmental compliance and site cleanups,
waste management and health and safety matters. In particular, we are subject
to regulations promulgated by regulatory agencies pertaining to health and
safety in the workplace and the use, storage, discharge and disposal of
hazardous chemicals used in the manufacturing process.

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

Recent Developments

On July 27, 2000, simultaneously with the closing of our initial public
offering, we acquired Pensar Corporation, an EMS company specializing in design
services and located in Appleton, Wisconsin. The

purchase consideration consisted of $18 million in cash and the balance in
shares of our common stock. We issued 1,188,682 shares of common stock at a
valuation of $16 per share to finance the share portion of the purchase price
of the Pensar acquisition. The cash portion of the acquisition was financed
with a portion of the proceeds from the initial public offering. The total
purchase price, including transaction costs, was approximately $37 million.

On November 22, 2000, we acquired Qualtron Teoranta, a provider of
specialized custom-made cable harnesses and fiber optic assemblies located in
Donegal, Ireland, together with its subsidiary, Haverhill, Massachusetts based
Qualtron, Inc. The purchase consideration consisted of approximately $14.4
million in cash and the balance in exchangeable shares. Our subsidiary, SMTC
Manufacturing Corporation of Canada, issued 547,114 exchangeable shares valued
at Cdn. $22.93 per share to finance the share portion of the Qualtron Teoranta
acquisition. The total purchase price, including transaction costs, was
approximately $26.9 million.

We announced in a press release on March 30, 2001 that we will close our
assembly facility in Denver, Colorado, leaving in place a sales and marketing
presence to service the Rocky Mountain Region. Production at the Denver
facility, one of the last remaining SMTC sites not recently refurbished, will
be migrated to SMTC facilities closer to customer locations and to our recently
retrofitted and expanded lower cost Chihuahua, Mexico facility. We expect to
take a one-time pre-tax charge of approximately $15 million associated with our
facility rationalization.

Employees

As of December 31, 2000, we employed approximately 5,000 full time employees
worldwide. In addition, we employ varying levels of temporary employees as our
production demands. Given the variable nature of our project flow and the quick
response time required by our customers, it is critical that we be able to
quickly ramp-up and ramp-down our production to maximize efficiency. To achieve
this, our strategy has been to employ skilled temporary labor force, as
required. We use outside contractors to qualify our temporary employees on a
site-by-site basis. Our production level temporary employees are compensated by
the hour. We do not have any permanent leased employees. We believe we are
team-oriented, dynamic and results-oriented with an emphasis on customer
service and quality at all levels. We believe this environment is a critical
factor for us to be able to fully utilize the intellectual capital of our
employees. From time to time we relocate our management level employees as
needed to fill open positions at our sites. Because of our training programs,
we have not experienced difficulty in adequately staffing skilled employees.

With the exception of approximately 500 of our employees in Mexico and 250
of our employees in Ireland, none of our employees is unionized. We have never
experienced a work stoppage or strike and believe that our employee relations
are good.

Our Structure and Our History

The SMTC family of companies includes the following companies, with their
jurisdictions of incorporation or organization in parentheses:

SMTC Corporation (Delaware)
HTM Holdings, Inc. (Delaware)
SMTC de Chihuahua S.A. de C.V. (Mexico)
SMTC Manufacturing Corporation of California (California)
SMTC Manufacturing Corporation of Canada (Ontario)
STMC Manufacturing Corporation of Colorado (Delaware)
SMTC Manufacturing Corporation of Ireland Limited (Ireland)
SMTC Manufacturing Corporation of Massachusetts (Massachusetts)

SMTC Manufacturing Corporation of North Carolina (North Carolina)
SMTC Manufacturing Corporation of Texas (Texas)
SMTC Manufacturing Corporation of Wisconsin (Wisconsin)
SMTC Mex Holdings, Inc. (Delaware)
SMTC Nova Scotia Company (Nova Scotia)
Qualtron, Inc. (Massachusetts)
Qualtron Teoranta (Ireland)

SMTC Corporation

Our company's present corporate structure resulted from the July 1999
combination of Surface Mount and HTM in a transaction accounted for under the
purchase method of accounting as the acquisition of Surface Mount by HTM. The
transaction provided us with increased strategic and operating scale, as well
as greater geographic breadth. Subsequent to the combination, all of Surface
Mount's operating subsidiaries, other than SMTC Canada, SMTC Manufacturing
Corporation of Ireland Limited, Qualtron Teoranta and Qualtron, Inc., have
become subsidiaries of HTM.

Since the combination, we acquired Zenith's facility in Chihuahua, Mexico, a
transaction which expanded our cost-effective manufacturing capabilities in an
important geographic region. In September 1999, we acquired the Boston,
Massachusetts based systems integration and precision enclosures business of
W.F. Wood, which expanded our operations into the Northeastern United States.
In July 2000, we acquired Appleton, Wisconsin based Pensar Corporation, which
provided us with an enhanced design engineering and test capability, additional
partnerships with leading technology suppliers, a diversification of our
customer base and an expanded geographic presence in the Midwestern United
States. In November 2000, we acquired Haverhill, Massachusetts based Qualtron,
Inc. in connection with the acquisition of its parent company, Qualtron
Teoranta, by SMTC Canada, as described below. We plan to continue to capitalize
on attractive acquisitions and internal growth opportunities in the EMS
marketplace and are presently targeting Asia as an area for future expansion.

SMTC Canada

SMTC Canada was incorporated in Canada in 1985 as The Surface Mount
Technology Centre Inc., or SMTCI, and continued as an Ontario company in 1994.
Prior to the July 1999 combination, SMTCI and its wholly-owned U.S. subsidiary,
Surface Mount, completed a reorganization as a result of which Surface Mount
became the parent of a group of companies which included SMTCI. In connection
with the July 1999 reorganization, SMTC Nova Scotia Company, a wholly-owned
subsidiary of SMTC, acquired all of the outstanding voting shares of SMTCI. On
October 29, 1999, SMTCI changed its name to SMTC Manufacturing Corporation of
Canada. On June 1, 2000, SMTCI adopted a French form of its name and eliminated
several classes of unissued shares from its authorized capital. In November
2000, SMTC Canada acquired Ireland based Qualtron Teoranta, a provider of
specialized cable and harness assemblies.

HTM Holdings, Inc.

In June 1998, Hi-Tech Manufacturing Inc., or Hi-Tech Manufacturing, was
recapitalized by investors led by Bain Capital and Celerity Partners, Inc., and
HTM, a Delaware corporation, was organized such that Hi-Tech Manufacturing
became a wholly owned subsidiary of HTM. Organized in 1990, Thornton, Colorado
based Hi-Tech Manufacturing was a turnkey contract manufacturer which focused
on the assembly of completed printed circuit boards. Hi-Tech Manufacturing has
changed its name to SMTC Manufacturing Corporation of Colorado.

Legal Proceedings

We are a party to various legal actions arising in the ordinary course of
our business. We believe that the resolution of these legal actions will not
have a material adverse effect on our financial position or results of
operations.

Backlog

Although we obtain firm purchase orders from our customers, our customers
typically do not make firm orders for delivery of products more than 30 to 90
days in advance. We do not believe that the backlog of expected product sales
covered by firm purchase orders is a meaningful measure of future sales since
orders may be rescheduled or canceled.

Facilities

We conduct our operations within approximately 1,070,000 square feet of
building space. We believe our facilities are currently adequate for our
operating needs. Our principal service at all locations is assembly of
electronic components, with the exception of the Boston facility where we
manufacture precision enclosures and Donegal, Ireland and Haverhill,
Massachusetts where we manufacture cable and harness interconnect assemblies.
We expect to transition our Denver facility from component production to sales
and marketing during the second or third quarter of 2001. Our facilities are as
follows:

Approx.
Location Square Footage Leased/Owned
-------- -------------- ------------

Toronto, Ontario............................... 100,000 Leased
San Jose, California........................... 75,000 Leased
Denver, Colorado............................... 100,000 Leased
Boston, Massachusetts.......................... 150,000 Leased
Haverhill, Massachusetts....................... 20,000 Leased
Charlotte, North Carolina...................... 125,000 Leased
Austin, Texas.................................. 75,000 Leased
Appleton, Wisconsin............................ 75,000 Owned
Chihuahua, Mexico.............................. 250,000 Owned
Cork, Ireland.................................. 50,000 Leased
Donegal, Ireland............................... 50,000 Leased

We have exercised an option under our Austin, Texas lease to purchase 20
acres adjacent to our existing facility. We are in the process of selling the
property back to the developer.

We also are in the process of purchasing additional land and a facility
situated in Austin, Texas. We expect to move our Austin operations to the new
building and for that facility to be operational in the second or third quarter
of 2001. This sale and leaseback arrangement will require the approval of our
lenders under our senior credit facility.

All of our principal facilities are ISO certified to ISO 9001 or ISO 9002
standards. ISO 9001 and ISO 9002 are commonly recognized standards in the EMS
industry that are published by the International Standardization Organization
and relate to quality management systems. ISO 9001 contains requirements for
quality assurance in design, development, production, installation and
servicing. ISO 9002 contains requirements for quality assurance in production,
installation and servicing.

The principal executive office of SMTC and SMTC Canada is located at 635
Hood Road, Markham, Ontario, Canada L3R 4N6.

MANAGEMENT

Directors, Executive Officers and Key Employees

The following table sets forth our directors and executive officers, their
ages as of March 31, 2001, the positions currently held by each person and
their place of residence. All of the directors and executives have been with us
since Surface Mount combined with HTM in July 1999, except Stanley Plzak and
Ian Loring.

Name and Municipality of
Residence Age Office
------------------------ --- ------

Paul Walker............. 43 President, Chief Executive Officer and Director(1)(2)(5)
Unionville, Ontario

Philip Woodard.......... 46 Executive Vice President, Assembly Operations(2)
Newmarket, Ontario

Gary Walker............. 40 Executive Vice President, Business Programs Management and Director(2)
Monte Sereno, California

Derrick D'Andrade....... 47 Executive Vice President, Engineering and Quality(2)
Richmond Hill, Ontario

Stanley Plzak........... 53 Executive Vice President, Design and Sub-Assembly Operations
Appleton, Wisconsin

Gary Itenson............ 41 Senior Vice President, Business Development and Supplier Strategy
Los Altos, California

Richard Smith........... 41 Vice President, Chief Financial Officer(2)
Toronto, Ontario

David Dominik........... 44 Director(3)
Belvedere, California

Prescott Ashe........... 33 Director(1)(4)
San Francisco,
California

Ian Loring.............. 34 Director(5)
San Francisco,
California

Stephen Adamson......... 44 Director(4)(5)
Los Angeles, California

Mark Benham............. 49 Director
Woodside, California

Michael Griffiths....... 49 Director(1)(3)
Toronto, Ontario

Anthony Sigel........... 37 Director(3)(4)(5)
Toronto, Ontario

--------
(1) Also a member of the board of directors of SMTC Canada.
(2) Also an officer of SMTC Canada.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee.
(5) Member of the Nominating Committee.

Paul Walker has served as President and Chief Executive Officer and as a
director of SMTC since its inception in 1998. He is also an officer and
director of SMTC Canada. He co-founded Surface Mount, a predecessor to SMTC
Corporation, in 1985. Previously he was employed at Brock Electronics, a
manufacturer and distributor of production equipment for the electronics
industry, as Director of Business Management from 1982 to 1985 and at Motorola
Canada, an integrated communications and embedded electronics solutions
provider, as Program Director from 1979 to 1982. Paul Walker is Gary Walker's
brother.

Philip Woodard joined Surface Mount in 1992 as Vice President, Materials.
Previously he was employed at Motorola Canada, an integrated communications and
embedded electronics solutions provider, from 1977 to 1992 where he progressed
through various positions to Director of Materials.

Gary Walker currently serves as Executive Vice President, Business Programs
Management. He has been a director of SMTC since its inception in 1998. He is
also an officer of SMTC Canada. He co-founded Surface Mount, a predecessor to
SMTC Corporation, in 1985. Previously he was employed at Brock Electronics, a
manufacturer and distributor of production equipment for the electronics
industry, as a Manufacturers Representative from 1982 to 1985 and at Motorola
Canada, an integrated communications and embedded electronics solutions
provider, from 1980 to 1982. Gary Walker is the brother of SMTC's President and
Chief Executive Officer, Paul Walker.

Derrick D'Andrade co-founded Surface Mount in 1985. Formerly Vice President,
Engineering, he was previously employed at Motorola Canada as Manufacturing
Engineering Manager from 1979 to 1985 and at Sunbeam Canada, a manufacturer of
home appliances, as Manufacturing Manager from 1975 to 1979.

Stanley Plzak has been with us since the acquisition of Pensar Corporation
in July 2000. Mr. Plzak was a founder and director of Pensar and served as its
President and Chief Executive Officer since its inception in 1983. His career
includes various technical, managerial, and executive positions in industrial
controls, medical, marine propulsion and electronics manufacturing services
industries, and he has served as a member of the adjunct faculty of the
University of Wisconsin. He is currently a director and the chair-elect of the
IPC (Association Connecting the Electronics Industries).

Gary Itenson joined Surface Mount in April 1996. Previously, he was employed
at Future Electronics, an electronics components distributor, from 1981 to 1996
where his career progressed from field sales to sales management to strategic
account/multi-region sales management to division general management.

Richard Smith joined Surface Mount in August 1998. Previously, he was
employed as Chief Financial Officer of Wolf Group Integrated Communications, an
advertising and public relations company, from 1997 to 1998; Vice President
Finance of Green Forest Lumber Corporation, a Toronto Stock Exchange listed
forest products manufacturer from 1988 to 1997; Account Manager at the Bank of
Nova Scotia from 1985 to 1988; and auditor, Price Waterhouse, a public
accounting firm, from 1982 to 1985.

David Dominik has served as a director since July 1999. Mr. Dominik is a co-
founder and managing director of Golden Gate Capital. He is also a special
limited partner of Bain Capital, Inc., a private equity investment firm. He was
a managing director of Bain Capital, Inc. from 1990 to March 2000. Previously,
Mr. Dominik was a general partner of Zero State Capital, a venture capital firm
focused on early-stage companies, and assistant to the chairman of Genzyme
Corporation, a biotechnology firm. From 1982 to 1984, he worked as a management
consultant at Bain & Company, a consulting firm. Mr. Dominik also serves as a
director of ChipPAC, Inc., Integrated Circuit Systems, Inc., DDi Corp. and
OneSource.

Prescott Ashe has served as a director since July 1999. Mr. Ashe is a co-
founder and managing director of Golden Gate Capital. Mr. Ashe was a principal
at Bain Capital, Inc., a private equity investment firm, from June 1998 to
March 2000 and was an associate at Bain Capital, Inc. from December 1992 to
June 1998. Prior to that, he was an analyst at Bain Capital, Inc. and a
consultant at Bain & Company, a consulting firm. Mr. Ashe also serves as a
director of ChipPAC, Inc., Integrated Circuit Systems, Inc. and DDi Corp.

Ian Loring has served as a director since June 2000. Mr. Loring joined Bain
Capital, Inc., a private equity investment firm, in 1996. He has been a
managing director at Bain Capital since January 2001 and was a principal there
from 1997 to 2000. From 1993 to 1996, Mr. Loring was a Vice President at
Berkshire Partners, where he worked in the speciality manufacturing, technology
and retail industries. Mr. Loring also serves as a director of Therma-Wave,
Inc.

Stephen Adamson has served as a director since July 1999. Mr. Adamson is a
Partner of Celerity Partners, Inc. Prior to joining Celerity Partners, Inc., he
was a Managing Director of W.E. Myers & Co., a merchant banking firm. Prior to
W. E. Myers & Co., Mr. Adamson was Managing Director with KD Equities, a
private partnership specializing in middle market leveraged buyouts. Mr.
Adamson is a director of Financial Pacific Insurance Group, Inc., Rapid Design
Service, Inc., and Starcom Holdings, Inc.

Mark Benham has served as a director since July 1999. Mr. Benham was a co-
founder of Celerity Partners, Inc., a private equity investment firm, and has
been a Partner since 1992. Previously he was a Senior Investment Officer of
Citicorp Venture Capital, Ltd., and prior to that he was an advisor to Yamaichi
UniVen Co., Ltd., the venture capital subsidiary of Yamaichi Securities
International. Mr. Benham is a director of DDi Corp., Rapid Design Service,
Inc., and Starcom Holdings, Inc.

Michael Griffiths has served as a director since July 1999. Mr. Griffiths
has been President of Kilmer Van Nostrand Co. Limited, or KVN, a private
investment holding company, since 2000 and has served there in various other
capacities since 1979. Previously, Mr. Griffiths was a manager with Clarkson
Gordon Chartered Accountants (now Ernst & Young), a public accounting firm,
with responsibility for the audit, tax and related management matters of a
variety of public clients.

Anthony Sigel has served as a director since July 1999. Mr. Sigel has been
Managing Partner of Kilmer Capital Partners, a private investment holding
company, since 2000. Previously, Mr. Sigel was Vice President Corporate
Development of Kilmer Van Nostrand Co. Limited, a position he held since 1991.
Prior to joining KVN, Mr. Sigel was an Associate within Bankers Trust Company's
Merchant Bank, Toronto, Canada.

Board Composition

Each of our directors is elected and serves until a successor is duly
elected and qualified or until the earlier of his death, resignation or
removal. All members of our board of directors set forth herein were elected by
class vote pursuant to our certificate of incorporation. Paul Walker and Gary
Walker are representatives of management, Messrs. Dominik, Loring and Ashe are
representatives of the Bain funds, Messrs. Adamson and Benham are
representatives of the Celerity funds and Messrs. Griffiths and Sigel are
representatives of Kilmer Electronics Group Limited. Our executive officers are
elected by and serve at the discretion of the board of directors.

Our board is divided into three classes, as nearly equal in number as
possible, with each director serving a three-year term and one class being
elected at each year's annual meeting of stockholders. Paul Walker, Gary Walker
and Mr. Dominik are in the class of directors whose term expires at the 2001
annual meeting of our stockholders. Messrs. Ashe, Benham and Sigel are in the
class of directors whose term expires at the 2002 annual meeting of our
stockholders. Messrs. Loring, Adamson and Griffiths are in the class of
directors whose term expires at the 2003 annual meeting of our stockholders. At
each annual meeting of our stockholders, successors to the class of directors
whose term expires at such meeting will be elected to serve for three-year
terms or until their respective successors are elected and qualified.

Board Committees

Our board of directors has three committees: the audit committee, the
compensation committee and the nominating committee. The board may also
establish other committees to assist in the discharge of its responsibilities.

The audit committee makes recommendations to the board of directors
regarding the independent auditors to be nominated for appointment by the
stockholders and reviews the independence of such auditors, approves the scope
of the annual audit activities of the independent auditors, approves the audit
fee payable to the independent auditors and reviews such audit results with the
independent auditors. The audit committee is currently comprised of Messrs.
Dominik, Griffiths and Sigel. KPMG LLP presently serves as our independent
auditors.

The compensation committee provides a general review of our compensation and
benefit plans to ensure that they meet corporate objectives. In addition, the
compensation committee reviews the chief executive officer's recommendations on
compensation of all our officers and adopting and changing major compensation
policies and practices, and reports its recommendations to the whole board of
directors for approval and authorization. The compensation committee is
comprised of Messrs. Loring, Adamson and Sigel.

The nominating committee identifies, screens and recommends qualified
candidates to fill vacancies on the board of directors and is comprised of Paul
Walker and Messrs. Loring, Adamson and Sigel.

Compensation of Directors

We currently pay no compensation to our non-employee directors, and pay no
additional remuneration to our employees or to our executives for serving as
directors.

Compensation Committee Interlocks and Insider Participation

No interlocking relationship exists between our board of directors or our
compensation committee and the board of directors or compensation committee of
any other company, nor has any interlocking relationship existed in the past.

Executive Compensation

The following table sets forth information concerning the compensation for
the years ended December 31, 2000, 1999 and 1998 on a pro forma basis for our
chief executive officer and four other most highly compensated executive
officers at the end of our last fiscal year. For ease of reference, we
collectively refer to these executive officers throughout this section as our
"named executive officers."

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation for
the years ended December 31, 2000, 1999 and 1998 on a pro forma basis for our
chief executive officer and four other most highly compensated executive
officers at the end of our last fiscal year. We have also included information
for Edward Johnson, who resigned from his position as an officer and director
of SMTC in October 2000. For ease of reference, we collectively refer to these
executive officers throughout this section and elsewhere in this prospectus as
our "named executive officers."

SUMMARY COMPENSATION TABLE

Annual Long Term
Compensation(1) Compensation
------------------- ---------------------
Restricted Securities
Stock Underlying All Other
Salary Bonus Awards Options Compensation
Name and Principal Position Year ($) ($) ($) (#) ($)
--------------------------- ---- ------- ------- ---------- ---------- ------------

Paul Walker(2).......... 2000 284,339(3) -- -- 150,000 (4) --
President and Chief 1999 168,612 -- -- -- --
Executive Officer 1998 167,853 16,458 -- -- --
Edward
Johnson(2)(5)(19)...... 2000 171,986 69,374 -- -- 58,600(10)
Executive Vice
President, 113,591(11)
Business Development 1999 164,408 53,437 -- 37,884 (6) 9,235(12)
19,517 (7)
5,060 (8)
1998 123,950 49,185 -- 33,108 (9) 164,909(13)
Philip Woodard(2)....... 2000 227,471(14) -- -- 50,000 (4) --
Executive Vice
President, 1999 134,889 -- -- 26,640(15) --
Assembly Operations 1998 134,282 2,596 -- -- --
Gary Walker(2).......... 2000 200,000 -- -- 50,000 (4) --
Executive Vice
President, 1999 200,000 -- -- -- --
Business Programs 1998 200,000 153,873 -- -- --
Management
Derrick D'Andrade(2).... 2000 227,471(16) -- -- 50,000 (4) --
Executive Vice
President, 1999 134,889 -- -- -- --
Engineering and Quality 1998 134,282 16,458 -- -- --
Richard Smith........... 2000 108,751 -- -- 10,000(17) --
Vice President, 1999 93,566 -- -- 11,024(15) --
Chief Financial Officer 1998 30,856(18) -- -- -- --

--------
(1) Excludes perquisites and other personal benefits because such compensation
did not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus for any of the named executive officers.
(2) Compensation information for Messrs. Walker, Woodard, Walker and D'Andrade
includes compensation paid by Surface Mount during periods prior to the
July 30, 1999 combination of Surface Mount and HTM, and by SMTC during
periods after the combination. Compensation information for Mr. Johnson
includes compensation paid by HTM during periods prior to the combination,
and by SMTC during periods after the combination.

(3) Includes deferred compensation of $116,034, which represents compensation
earned by Mr. Walker in 1999 ($34,339) and 2000 ($81,695).
(4) Represents options to purchase shares of our common stock at an exercise
price of $16.00 per share.
(5) During the year ended December 31, 1998 and from January 1, 1999 until the
July 30, 1999 combination of Surface Mount and HTM, Mr. Johnson served as
President and Chief Executive Officer of HTM.
(6) Represents options to purchase shares of our common stock at an exercise
price equal to $0.50 per share issued in connection with the combination of
Surface Mount and HTM in July 1999 to replace options to purchase shares of
HTM common stock.
(7) Represents options to purchase shares of our common stock at an exercise
price equal to $9.07 per share issued in connection with the combination of
Surface Mount and HTM in July 1999 to replace options to purchase shares of
HTM common stock.
(8) Represents options to purchase shares of common stock of HTM at an exercise
price of $5.13 per share, which options were replaced by the options to
purchase shares of our common stock in connection with the combination of
Surface Mount and HTM in July 1999.
(9) Represents options to purchase shares of common stock of HTM at an exercise
price of $5.13 per share issued in connection with the recapitalization of
HTM in June 1998 to replace options to purchase shares of HTM common stock.
These options were replaced by the options to purchase shares of our common
stock in connection with the combination of Surface Mount and HTM in July
1999.
(10) Represents amounts paid to Mr. Johnson in respect of accrued vacation up
to the date of his resignation.
(11) Represents amounts paid to Mr. Johnson as severance payments subsequent to
his resignation.
(12) Represents amounts paid to Mr. Johnson in respect of the cancellation of
vested stock options exercisable for HTM common stock in connection with
the June 1998 recapitalization of HTM.
(13) Represents amounts paid to Mr. Johnson in respect of the cancellation of
vested stock options exercisable for HTM common stock in connection with
the June 1998 recapitalization of HTM, which amounts were held in escrow
for one year following the date of the recapitalization and were
subsequently paid to Mr. Johnson.
(14) Includes deferred compensation of $92,827, which represents compensation
earned by Mr. Woodard in 1999 ($27,471) and 2000 ($65,356).
(15) Represents options to purchase shares of our common stock at an exercise
price of $5.36 per share.
(16) Includes deferred compensation of $92,827, which represents compensation
earned by Mr. D'Andrade in 1999 ($27,471) and 2000 ($65,356).
(17) Represents options to purchase shares of our common stock at an exercise
price of $19.88 per share.
(18) Mr. Smith joined Surface Mount in August 1998.
(19) Mr. Johnson resigned from his position as an officer and director of SMTC
in October 2000.

EMPLOYMENT ARRANGEMENTS

Paul Walker is currently employed as our President and Chief Executive
Officer pursuant to an employment agreement dated July 30, 1999, which is
effective until December 31, 2001 and will automatically renew for successive
one-year terms unless it is terminated by the parties in accordance with its
terms. Under the employment agreement, Mr. Walker receives an annual salary of
$250,000 per year and is eligible for an annual bonus based upon our
achievement of certain EBITDA (earnings before interest expense, income taxes,
depreciation and amortization) targets. Mr. Walker's employment agreement
contains customary confidentiality provisions and a non-compete clause which is
effective during the term of the agreement, for one year following termination
of his employment if he is terminated for cause, and, under certain other
circumstances, for two years following the termination of his employment. In
the event Mr. Walker's employment is terminated by us without cause, or by Mr.
Walker for good reason, the employment agreement provides that we will pay Mr.
Walker his base salary for two years following such termination.

Philip Woodard is currently employed as our Executive Vice President,
Assembly Operations, pursuant to an employment agreement dated July 30, 1999,
which is effective until December 31, 2001 and will automatically renew for
successive one-year terms unless it is terminated by the parties in accordance
with its terms. Under the employment agreement, Mr. Woodard receives an annual
salary of $200,000 per year and is eligible for an annual bonus based upon our
achievement of certain EBITDA targets. Mr. Woodard's employment agreement
contains customary confidentiality provisions and a non-compete clause which is
effective during the term of the agreement, for one year following termination
of his employment if he is terminated for cause, and, under certain other
circumstances, for two years following the termination of his employment. In
the event Mr. Woodard's employment is terminated by us without cause, or by Mr.
Woodard for good reason, the employment agreement provides that we will pay Mr.
Woodard his base salary for two years following such termination.

Gary Walker is currently employed as our Executive Vice President, Business
Programs Management pursuant to an employment agreement dated July 30, 1999,
which is effective until December 31, 2001 and will automatically renew for
successive one-year terms unless it is terminated by the parties in accordance
with its terms. Under the employment agreement, Mr. Walker receives an annual
salary of $200,000 per year and is eligible for an annual bonus based upon our
achievement of certain EBITDA targets. Mr. Walker's employment agreement
contains customary confidentiality provisions and a non-compete clause which is
effective during the term of the agreement, for one year following termination
of his employment if he is terminated for cause, and, under certain other
circumstances, for two years following the termination of his employment. In
the event Mr. Walker's employment is terminated without cause, or by Mr. Walker
for good reason, the employment agreement provides that we will pay Mr. Walker
his base salary for two years following such termination.

Derrick D'Andrade is currently employed as our Executive Vice President,
Engineering and Quality pursuant to an employment agreement dated July 30,
1999, which is effective until December 31, 2001 and will automatically renew
for successive one year terms unless it is terminated by the parties in
accordance with its terms. Under the employment agreement, Mr. D'Andrade
receives an annual salary of $200,000 per year and is eligible for an annual
bonus based upon our achievement of certain EBITDA targets. Mr. D'Andrade's
employment agreement contains customary confidentiality provisions and a non-
compete clause which is effective during the term of the agreement, for one
year following termination of his employment if he is terminated for cause and,
under certain other circumstances, for two years following the termination of
his employment. In the event Mr. D'Andrade's employment is terminated by us
without cause, or by Mr. D'Andrade for good reason, the employment agreement
provides that we will pay Mr. D'Andrade his base salary for two years following
such termination.

Stanley Plzak is currently employed as our Executive Vice President, Design
and Sub-Assembly Operations, pursuant to an employment agreement dated July 27,
2000, which is effective until December 31, 2001 and will automatically renew
for successive one-year terms unless it is terminated by the parties in
accordance with its terms. Under the employment agreement, Mr. Plzak receives
an annual salary of $275,000

per year. Mr. Plzak's employment agreement contains customary confidentiality
provisions and a non-compete clause which is effective during the term of the
agreement, for one year following termination of his employment if he is
terminated for cause, and, under certain other circumstances, for the period
during which he continues to receive his base salary following the termination
of his employment. In the event Mr. Plzak's employment is terminated by us
without cause, or by Mr. Plzak for good reason, the employment agreement
provides that we will pay Mr. Plzak his base salary for one year following such
termination.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning grants of options to
purchase shares of our common stock made to the named executive officers during
the fiscal year ended December 31, 2000.

OPTION GRANTS IN FISCAL 2000

Individual Grants
------------------------------------------
Percent
of
Total
Options Potential
Granted Realizable Value
Nmber of to at Assumed Annual
Securities Employees Exercise Rates of Stock
Underlying in Price Price Appreciation
Options Fiscal Per for Option Term
Granted 2000 Share Expiration -------------------
Name (#)(1) (%) ($) Date 5% ($) 10%($)
---- ---------- --------- -------- ---------- --------- ---------

Paul Walker............. 150,000(2) 10.7 16.00 7/20/2010 1,509,347 3,824,982
Edward Johnson*......... -- -- -- -- -- --
Philip Woodard.......... 50,000(2) 3.6 16.00 7/20/2010 503,116 1,274,994
Gary Walker............. 50,000(2) 3.6 16.00 7/20/2010 503,116 1,274,994
Derrick D'Andrade....... 50,000(2) 3.6 16.00 7/20/2010 503,116 1,274,994
Richard Smith........... 10,000(3) # 19.88 8/30/2010 125,024 316,836

--------
(1) None of such options was vested at December 31, 2000.
(2) Options will vest in four annual installments beginning July 20, 2001.
(3) Options will vest in four annual installments beginning August 30, 2001.
# Represents less than 1%.
* Mr. Johnson resigned from his position as an officer and director of SMTC in
October 2000.

OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information for the named executive officers
concerning stock option exercises during out last fiscal year.

AGGREGATED OPTION EXERCISES IN FISCAL 2000
AND FISCAL YEAR-END OPTION VALUES

Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Acquired Value Options At Fiscal Year-End At Fiscal Year-End
On Exercise Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
Name (#) ($) (#) ($)(1)
---- --------------- -------- --------------------------- ---------------------------

Paul Walker............. -- -- 0/150,000 0/0
Edward Johnson*......... -- -- 19,442/0 88,558/0
Philip Woodard.......... -- -- 6,660/69,980 55,045/165,135
Gary Walker............. -- -- 0/50,000 0/0
Derrick D'Andrade....... -- -- 0/50,000 0/0
Richard Smith........... -- -- 2,756/18,268 22,778/68,335

--------
(1) The closing price of SMTC's common stock on December 29, 2000, the last
trading day of fiscal 2000, was $13.625.
* Mr. Johnson resigned from his position as an officer and director of SMTC in
October 2000.

Stock Plans

Amended and Restated 1998 Equity Incentive Plan

On September 30, 1999, the board of directors adopted, and our stockholders
approved, our Amended and Restated 1998 Equity Incentive Plan, or the 1998
Plan, which amended and restated in its entirety our 1998 Equity Incentive
Plan. The 1998 Plan authorizes the granting of stock options to our executives
or other key employees. Under the 1998 Plan, our board of directors is
authorized to grant stock purchase options exercisable for up to 671,378 shares
of our common stock, subject to adjustment upon the occurrence of certain
events to prevent any dilution or expansion of the rights of participants that
might otherwise result from the occurrence of such events, which grants may be
made to such executives or key employees, in such quantities, at such exercise
price and on such other terms and conditions as may be established by the board
of directors. Currently there are options exercisable for [54,271] shares of
common stock, available for issue under the 1998 Plan. A total of 184,511
options exercisable for common stock under the 1998 Plan were granted in
connection with the July 1999 combination of Surface Mount and HTM in
substitution of stock options previously granted by HTM to certain of its
executives and key employees. Those options expire in April 2009 or June 2008,
subject to earlier expiration in connection with the termination of the
optionholder's employment. A total of 121,774 of the substituted options
exercisable for common stock were immediately exercisable upon grant, but the
shares of common stock acquired upon exercise are subject to certain transfer
restrictions which lapse over the four year period beginning on the date of
grant. The remainder of the substituted options exercisable for common stock
vest over the four year period beginning on the date of grant. On May 18, 2000,
the terms of the options held by four former HTM executives were amended to
provide for the restrictions to lapse with respect to 88,912 shares of common
stock held by such optionholders on June 8, 2000, and for options exercisable
for 45,800 shares of common stock to become fully vested on June 8, 2000. An
additional 428,304 options exercisable for our common stock under the 1998 Plan
were granted by the board of directors on September 30, 1999. Those options
expire in September 2009, subject to earlier termination in connection with the
termination of the optionholder's employment. Those options become exercisable
in four equal annual installments beginning on September 30, 2000. The vesting
of an optionholder's unvested options is dependent upon continued employment
with us. Upon termination of employment, all unexercised and unvested options
expire and are forfeited. In the event of the acquisition of a majority or more
of our voting securities by any

person or "group" as defined under Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, (other than our stockholders as of the date of the
1998 Plan and their affiliates), the compensation committee of the board of
directors may provide for the automatic vesting of all unvested options, for
the termination of unvested options, or for the receipt by holders of such
options of the consideration offered per share of common stock less the
exercise price of their options.

2000 Equity Incentive Plan

The SMTC/SMTC Manufacturing Corporation of Canada 2000 Equity Incentive
Plan, or the 2000 Plan, was adopted by our board of directors and approved by
our stockholders prior to the completion of our initial public offering. We
granted to some of our executive officers and employees options to purchase a
total of approximately 300,000 shares of our common stock and exchangeable
shares with an exercise price equal to the initial public offering price at the
closing of our initial public offering.

The 2000 Plan provides for the grant of options to all employees, officers,
directors and consultants of SMTC and its affiliates worldwide. In the United
States, incentive stock options may be granted to our employees (including
officers and employee directors) and nonstatutory stock options may be granted
to our employees, directors and consultants. A nonstatutory stock option is a
stock option that is not intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code. The holder of a nonstatutory stock
option generally is taxed on the difference between the exercise price and the
fair market value when exercised. The 2000 Plan also provides for the grant of
stock appreciation rights, restricted stock, unrestricted stock, deferred
stock, and securities (other than stock options) which are convertible into or
exchangeable for common stock, including options exercisable for SMTC Canada
exchangeable shares, on such terms and conditions as our board determines.

A total of (1) 1,727,052 shares of common stock, (2) any shares returned to
existing plans as a result of the termination of options and (3) annual
increases of 1.0% of our outstanding common stock to be added on the date of
each annual meeting of our stockholders commencing in 2001, or such lesser
amounts as may be determined by the board of directors, will be reserved for
issuance pursuant to the 2000 Plan. For purposes of the preceding sentence, the
following will not be considered to have been delivered under the 2000 Plan:

. shares remaining under an award that terminates without having been
exercised in full;

. shares subject to an award, where cash is delivered to a participant in
lieu of such shares;

. shares of restricted stock that have been forfeited in accordance with
the terms of the applicable award; and

. shares held back, in satisfaction of the exercise price or tax
withholding requirements, from shares that would otherwise have been
delivered pursuant to an award.

The number of shares of stock delivered under an award shall be determined
net of any previously acquired shares tendered by the participant in payment of
the exercise price or of withholding taxes. The maximum number of incentive
stock options that may be issued pursuant to the 2000 Plan is 3,000,000. The
maximum number of options exercisable for exchangeable shares that may be
issued pursuant to the 2000 Plan is 1,000,000.

The administrator of the 2000 Plan has the power to determine the terms of
the options granted, including the exercise price of the option, the number of
shares subject to each option, the exercisability thereof, and the form of
consideration payable upon such exercise. In addition, our board of directors
has the authority to amend, suspend or terminate the 2000 Plan, provided that
no such action may affect any shares previously issued and sold or any option
previously granted under the 2000 Plan. Cash performance grants, intended to
qualify as "performance-based compensation," may be issued under the plan,
subject to shareholder approval as required by Section 162(m) of the Internal
Revenue Code.

Options granted under the 2000 Plan are generally not transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
and only by such optionee. Options granted under the 2000 Plan must generally
be exercised within three months after the end of an optionee's status as an
employee, director or consultant of SMTC, or within 12 months after such
optionee's termination by death or disability, but in no event later than the
expiration of the option term.

The exercise price of all incentive stock options granted under the 2000
Plan must be at least equal to the fair market value of the underlying common
stock or exchangeable shares on the date of the grant. The exercise price of
nonstatutory stock options granted under the 2000 Plan is determined by the
administrator, but with respect to nonstatutory stock options intended to
qualify as "performance-based compensation" within the meaning of Section
162(m) of the Internal Revenue Code, the exercise price must be at least equal
to the fair market value of the common stock on the date of grant. With respect
to any participant who owns stock possessing more than 10% of the voting power
of all classes of our outstanding capital stock, the exercise price of any
incentive stock option granted must be at least equal to 110% of the fair
market value on the grant date. The term of all other options granted under the
2000 Plan shall be determined by the administrator, provided that the term of
certain options must not exceed 10 years.

The 2000 Plan provides that in the event of our merger with or into another
corporation, or a sale of substantially all of our assets, each option shall be
assumed or an equivalent option substituted for by the successor corporation.
If the outstanding options are not assumed or substituted for by the successor
corporation, the administrator shall provide for the optionee to have the right
to exercise the option as to all of the optioned stock, including shares as to
which it would not otherwise be exercisable. This may have the effect of
discouraging a potential acquiror from making a tender offer or otherwise
attempting to gain control of us because our employees might have a reduced
incentive to remain with us following a merger or sale.

RELATED PARTY TRANSACTIONS

Stockholders Agreement

Certain of our current stockholders and optionholders are parties to a
stockholders agreement that, among other things, provides for registration
rights and restrictions on the transfer of shares.

Termination of Management Agreement

A management agreement was entered into on July 30, 1999 among SMTC, Bain
Capital Partners VI, L.P., or Bain, Celerity Partners, Inc., or Celerity, and
Kilmer Electronics Group Limited, or Kilmer. Investment funds affiliated with
Bain and Celerity are our largest stockholders. Our directors Messrs. Dominik,
Loring and Ashe are, or were during fiscal 2000, affiliated with the Bain
funds, our directors Messrs. Benham and Adamson are affiliated with the
Celerity funds, and our directors Messrs. Griffiths and Sigel are affiliated
with Kilmer. Amounts paid under the management agreement during fiscal 2000 to
Bain, Celerity and Kilmer totaled $74,000 in the aggregate. This management
agreement was terminated in connection with our initial public offering for a
termination fee of $1.8 million that was paid using a portion of the gross
proceeds of the offering, with $720,000 paid to each of Bain and Celerity, and
$360,000 paid to Kilmer.

Certain Loans from Major Stockholders

On April 26, 2000, Celerity Partners III, L.P., Kilmer, Paul Walker, Derrick
D'Andrade, Gary Walker and Philip Woodard purchased demand notes from us for a
purchase price equal to the principal amount of the notes in the amounts of
$1,400,000, $910,000, $1,000,000, $677,874, $600,000 and $150,000,
respectively. The demand notes bore interest at 15% per year, had a fee of 2%
of the principal amount that was due upon repayment and were payable to the
holders of the notes upon demand. The demand notes were repaid to Celerity
Partners III, L.P., Kilmer, Paul Walker, Derrick D'Andrade, Gary Walker and
Philip Woodard in the aggregate amounts of $1,441,233, $936,801, $1,029,452,
$697,839, $617,671 and $154,418, respectively, on May 18, 2000. The demand
notes were repaid with cash proceeds from the sale of notes and warrants
pursuant to a senior subordinated loan agreement and a warrant subscription
agreement, each dated May 18, 2000. We repaid the demand notes and then sold
such notes and warrants in order to raise more capital than was originally
provided by our sale of the demand notes to finance our growth and our working
capital needs.

Under a senior subordinated loan agreement dated May 18, 2000, some of our
stockholders or their affiliates, including some of the Bain funds, Celerity
Partners III, L.P., Kilmer, Paul Walker, Derrick D'Andrade, Philip Woodard and
General Electric Capital Corporation, purchased notes from us in the amounts of
$1,589,782, $1,268,381, $909,605, $529,190, $529,190, $101,694 and $72,155,
respectively. The notes bore interest at 15% per year. These notes were repaid
with the proceeds of our initial public offering to the Bain funds, Celerity
Partners III, L.P., Kilmer, Paul Walker, Derrick D'Andrade, Philip Woodard and
General Electric Capital Corporation in the aggregate amounts of $1,635,488,
$1,304,847, $935,757, $544,405, $544,405, $104,619 and $74,229, respectively.

In connection with the sale of notes under the senior subordinated loan
agreement dated May 18, 2000 described above, under a warrant subscription
agreement dated May 18, 2000, we sold warrants for $2,500,000, exercisable for
an aggregate of 477,049 shares of common stock. Upon exercising these warrants
immediately prior to the consummation of our initial public offering, some of
our stockholders or their affiliates, including some of the Bain funds,
Celerity Partners III, L.P., Kilmer, Paul Walker, Derrick D'Andrade, Philip
Woodard and General Electric Capital Corporation received 151,681, 121,016,
86,785, 50,490, 50,490, 9,703 and 6,884 shares, respectively.

On July 3, 2000, Kilmer and an affiliate of the Bain funds purchased demand
notes from us for a purchase price equal to the principal amount of the notes
in the amounts of $4,188,292 and $5,736,708, respectively. The demand notes
bore interest of 3% of the principal amount accruing on the date of issuance
and 13.75% per year

and were payable to the holders of the notes upon demand. These notes were
repaid with the proceeds of our initial public offering to Kilmer and an
affiliate of the Bain funds in the amounts of $4,352,334 and $5,961,395,
respectively.

The sale of the subordinated notes and warrants and the demand notes
provided us with additional working capital to finance the growth of our
business.

Directors' Relationships with Major Stockholders

All of our current directors are affiliated with our major stockholders.
Paul Walker and Gary Walker are executive officers, stockholders and directors.
David Dominik, Ian Loring and Prescott Ashe are, or were during fiscal 2000,
affiliated with Bain. Stephen Adamson and Mark Benham are affiliated with
Celerity. Michael Griffiths and Anthony Sigel are affiliated with Kilmer.

Purchases from an Affiliate of a Major Stockholder

Investment funds affiliated with Bain and Celerity are also stockholders of
DDi Corp., one of our suppliers. Our transactions with DDi Corp., which totaled
approximately $5.0 million in 2000, are on equivalent terms as those with our
other suppliers.

Certain Loans and Payments Made to Executive Officers

In connection with the exchange and reclassification of certain of Gary
Walker's shares of stock of SMTC Canada into common stock of SMTC in July 2000,
we agreed to fund any tax liability incurred by Mr. Walker as a result of the
exchange by making an interest-free loan to him and to compensate him for any
tax payable by him on any imputed interest on such loan. As of December 31,
2000, we had lent $690,000 to Mr. Walker under this arrangement. We expect to
lend approximately $2.0 million in the aggregate to Mr. Walker pursuant to this
arrangement. The loan will be secured by a first priority security interest
over all of Mr. Walker's shares of capital stock of SMTC and will be repayable
at such time and to the extent that Mr. Walker receives after-tax cash proceeds
in respect of such shares.

In connection with the acquisition of Pensar, we requested that the former
stockholders of Pensar file an election that allows us to deduct for income tax
purposes the goodwill related to the acquisition. We agreed to lend, on an
interest-free basis, approximately $4.5 million to the former stockholders of
Pensar, including Stanley Plzak, to fund any tax liability incurred as a result
of the election. No amounts have been lent pursuant to this arrangement thus
far. The loans will be secured by a first priority security interest over all
of the shares of capital stock of SMTC held by the stockholders and will be
repayable at such time and to the extent that the stockholders receive after-
tax cash proceeds in respect of such shares.

The options granted in fiscal 2000 to each of the named executive officers
named in the Summary Compensation Table are indicated in the Long-Term
Compensation Awards column.

The Company and each of Paul Walker, Philip Woodard, Gary Walker, Derrick
D'Andrade and Stanley Plzak have entered into employment agreements as more
fully described under "Employment Arrangements".

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of March 16, 2001, information regarding
beneficial ownership. The table sets forth the number of shares beneficially
owned, and the percentage ownership for:

. each person who is known by us to own beneficially more than 5% of our
outstanding shares of common stock;

. each executive officer named in our summary compensation table and each
director; and

. all executive officers and directors as a group.

As of March 16, 2001, our outstanding equity securities consisted of
28,689,779 shares.

Unless otherwise indicated below, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of common
stock, except to the extent authority is shared by spouses under applicable
law. Unless otherwise indicated below, each entity or person listed below
maintains a mailing address of c/o SMTC Corporation, 635 Hood Road, Markham,
Ontario, Canada, L3R 4N6.

The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission. The
information is not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes any shares as to
which the individual or entity has sole or shared voting or investment power
and any shares as to which the individual or entity has the right to acquire
beneficial ownership within 60 days after March 16, 2001 through the exercise
of any stock option, warrant or other right. The inclusion in the following
table of those shares, however, does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner.

Percentage
Shares Beneficially Owned (*) of Shares
------------------------------ Beneficially
Name and Address Shares Options Total Owned
---------------- ---------- ------------------- ------------

Principal Stockholders:
Bain Capital Funds(1)(2)........ 3,686,455 -- 3,686,455 12.9
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Celerity EMSIcon, L.L.C.(1)..... 3,480,927 -- 3,480,927 12.1
c/o Celerity Partners
11111 Santa Monica Boulevard
Suite 1127
Los Angeles, California 90025
Kilmer Electronics Group,
Limited........................ 2,045,263 -- 2,045,263 7.1
Scotia Plaza, Suite 2700
P.O. Box 127
40 King Street West
Toronto, Ontario, Canada
M5H 3Y2
Directors and Executive
Officers:
Paul Walker(3).................. 1,189,894 -- 1,189,894 4.2
Gary Walker..................... 1,139,404 -- 1,139,404 4.0
Derrick D'Andrade(4)............ 1,189,894 -- 1,189,894 4.2
Philip Woodard.................. 228,663 6,660 235,323 0.8
Richard Smith................... -- 2,756 2,756 #
David Dominik(1)(5)............. 896,816 -- 896,816 3.1
Prescott Ashe(1)(6)............. 133,034 -- 133,034 0.5
Ian Loring(1)(7)................ 133,034 -- 133,034 0.5
Mark Benham(8).................. 3,480,927 -- 3,480,927 12.1
Stephen Adamson(8).............. 3,480,927 -- 3,480,927 12.1
Michael Griffiths............... -- -- -- --
Anthony Sigel................... -- -- -- --
All Directors and executive
officers as a group
(14 persons)................... 8,532,746 16,076 8,548,822 29.8

--------
* The number of shares of common stock deemed outstanding on March 16, 2001
with respect to a person or group includes (a) 28,689,779 shares
outstanding on such date and (b) all options that are currently exercisable
or will be exercisable within 60 days of March 16, 2001 by the person or
group in question.
# Represents an amount less than 0.5% of shares outstanding.
(1) The shares of common stock included in the table include shares held
through investment in EMSIcon Investments, LLC. Each member of EMSIcon
Investments, LLC has sole voting and investment power as to shares held on
such member's behalf by EMSIcon Investments, LLC.
(2) Includes shares of common stock held by Bain Capital Fund VI, L.P., ("Fund
VI"); BCIP Associates II ("BCIP II"), BCIP Associates II-B ("BCIP II-B"),
BCIP Associates II-C ("BCIP II-C"); Sankaty High Yield Asset Partners, L.P.
("Sankaty"); Bain Capital V Mezzanine Fund, L.P. ("Mezzanine"); BCM Capital
Partners, L.P. ("BCM"); and BCIP Trust Associates II (("BCIP Trust II") and
collectively with Fund VI, BCIP II, BCIP II-B, BCIP II-C, Sankaty,
Mezzanine and BCM, the "Bain Capital Funds"). Does not include shares owned
by other stockholders that are subject to the Stockholders Agreement.
(3) Consists of shares owned by P.N. Walker Consulting Inc. Paul Walker is the
sole stockholder of P.N. Walker Consulting Inc. and may be deemed to
beneficially own shares owned by P.N. Walker Consulting Inc.
(4) Consists of shares owned by Nichal, Inc. Derrick D'Andrade is the sole
stockholder of Nichal, Inc. and may be deemed to beneficially own shares
owned by Nichal, Inc.
(5) The shares of common stock included in the table represent shares held by
BCIP II, BCIP II-C and BCIP Trust II. Mr. Dominik is a former managing
director of Bain Capital, Inc. and is a former general partner of BCIP II,
BCIP II-C and BCIP Trust II and accordingly may be deemed to beneficially
own shares owned by such funds. Mr. Dominik disclaims beneficial ownership
of any such shares in which he does not have a pecuniary interest. The
address of Mr. Dominik is c/o Golden Gate Capital, One Embarcadero Center,
Suite 3300, San Francisco, California 94111.
(6) The shares of common stock included in the table represent shares held by
BCIP-II. Mr. Ashe is a former principal of Bain Capital, Inc. and is a
former partner of BCIP II-B and accordingly may be deemed to beneficially
own shares owned by such funds. Mr. Ashe disclaims beneficial ownership of
any such shares in which he does not have a pecuniary interest. The address
of Mr. Ashe is c/o Golden Gate Capital, One Embarcadero Center, Suite 3300,
San Francisco, California 94111.
(7) The shares of common stock included in the table represent shares held by
BCIP II-B. Mr. Loring is a managing director of Bain Capital, Inc. and is a
partner of BCIP II-B and accordingly may be deemed to beneficially own
shares owned by such funds. Mr. Loring disclaims beneficial ownership of
any such shares in which he does not have a pecuniary interest. The address
of Mr. Loring is c/o Bain Capital, Inc., Two Copley Plaza, Boston,
Massachusetts 02116.
(8) Mr. Benham and Mr. Adamson are both managing members of Celerity EMSIcon,
LLC and accordingly may be deemed to beneficially own shares owned by
Celerity EMSIcon, LLC. Mr. Benham and Mr. Adamson disclaim beneficial
ownership of any such shares in which they do not have a pecuniary
interest. The address for Mr. Benham and Mr. Adamson is c/o Celerity
Partners, 11111 Santa Monica Boulevard, Suite 1127, Los Angeles, California
90025.

DESCRIPTION OF INDEBTEDNESS

We and our subsidiaries have outstanding debt under our senior credit
facility.

Senior Credit Facility

We, together with our subsidiaries HTM Holdings Inc. and SMTC Manufacturing
Corporation of Canada, have entered into an agreement with various banks and
financial institutions, including Lehman Commercial Paper Inc. as a lender and
as general administrative agent for the other lenders, providing for our senior
credit facilities. We amended our senior credit facilities concurrently with
consummation of our initial public offering on July 27, 2000. Following such
amendment, the senior credit facilities consisted of:

. a US Tranche A facility of $50,000,000 as an initial term loan;

. a US revolving credit facility of up to $91,562,500 in revolving credit
loans, swing line loans and letters of credit; and

. a Canadian revolving credit facility of up to US $8,437,500 in revolving
credit loans, swing line loans, letters of credit, depository notes and
bills of exchange.

The indebtedness under our senior credit facility was approximately $115.8
million as of December 31, 2000.

The senior credit facility is jointly and severally guaranteed by and
secured by the assets and capital stock of our subsidiaries other than certain
foreign subsidiaries, and our future subsidiaries, other than certain foreign
subsidiaries, will guarantee the senior credit facility and secure that
guarantee with their assets. The capital stock of our future subsidiaries,
other than certain foreign subsidiaries, will also be pledged to secure the
senior credit facility. The senior credit facility requires us to meet
financial ratios and benchmarks and requires us and our subsidiaries to comply
with other restrictive covenants. The senior credit facility contains customary
restrictions on our ability to incur additional indebtedness or guarantee the
indebtedness of others, create liens on our assets, enter into business
combinations, liquidate or dissolve, dispose of assets other than in the
ordinary course of business, declare or pay cash dividends, make capital
expenditures in excess of established limits, make investments in third
parties, modify or prepay debt instruments, engage in transactions with our
affiliates, enter into sale and leaseback arrangements with respect to real
property, change our fiscal year, enter into agreements that restrict our
ability to create liens to secure the senior credit facility, restrict the
ability of our subsidiaries to make distributions to us, engage in unrelated
lines of business, conduct operating activities at SMTC or enter into hedging
agreements other than in the ordinary course of business.

The US revolving credit facility terminates in July 2004. The Canadian
revolving credit facility terminates in July 2004.

Our borrowings under the US senior credit facility bear interest at varying
rates based, at our option, on either the Eurodollar base rate plus an
applicable margin ranging from 200 to 300 basis points or the US base rate plus
an applicable margin ranging from 25 to 125 basis points. The amount of the
applicable margin is based on our leverage ratio.

Our borrowings under the Canadian senior credit facility bear interest at
varying rates based, at our option, on either the Eurodollar base rate plus an
applicable margin ranging from 200 to 300 basis points or the Canadian base
rate plus an applicable margin ranging from 25 to 125 basis points. The amount
of the applicable margin is based on our leverage ratio.

The overall effective interest rate at December 31, 2000 was 9.6%. We are
required to pay to the lenders under the senior credit facility a commitment
fee on the average unused portion of our US and Canadian revolving credit
facility and a letter of credit fee on any letters of credit outstanding. We
are required to pay to the lenders under the Canadian portion of the senior
credit facility a stamping fee on depository notes and bills

of exchange outstanding. We must apply proceeds of sales of debt, equity or
material assets to prepayment of the senior credit facility, subject to some
exceptions, and must also, in some circumstances, pay excess cash flow to the
lenders under the senior credit facility.

The above summaries of the material provisions of the senior credit facility
and the senior subordinated loan agreement are qualified in their entirety by
reference to all of the provisions of the senior credit facility and the senior
subordinated loan agreement, which have been filed as exhibits to the
registration statement of which this prospectus forms a part. See "Additional
Information."

DESCRIPTION OF CAPITAL STOCK

General Matters

The total amount of our authorized capital stock consists of
60,000,000 shares of common stock and 5,000,000 shares of one or more series of
preferred stock.

As of March 16, 2001, we have 28,689,779 shares of common stock outstanding
(consisting of our common stock and exchangeable shares issued by SMTC Canada
that may be exchangeable into our common stock). We will have no shares of any
series of preferred stock outstanding, other than the one share of special
voting stock described below. The following summary of provisions of our
capital stock describes all material provisions of, but does not purport to be
complete and is subject to, and qualified in its entirety by, our certificate
of incorporation and our by-laws, and by the provisions of applicable law.

The certificate and by-laws contain provisions that are intended to enhance
the likelihood of continuity and stability in the composition of the board of
directors and which may have the effect of delaying, deferring or preventing a
future takeover or change in control of our company unless such takeover or
change in control is approved by our board of directors.

Common Stock

The issued and outstanding shares of common stock are validly issued, fully
paid and nonassessable. Subject to the prior rights of the holders of any
series of preferred stock, the holders of outstanding shares of common stock
are entitled to receive dividends out of assets legally available therefor at
such time and in such amounts as the board of directors may from time to time
determine. Please see "Dividend Policy." The shares of common stock are not
convertible and the holders thereof have no preemptive or subscription rights
to purchase any of our securities. Upon liquidation, dissolution or winding up
of our company, the holders of common stock are entitled to receive pro rata
our assets which are legally available for distribution, after payment of all
debts and other liabilities and subject to the prior rights of any holders of
any series of preferred stock then outstanding. Each outstanding share of
common stock is entitled to one vote on all matters submitted to a vote of
stockholders. There is no cumulative voting. Except as otherwise required by
law or the restated certificate, the holders of common stock vote together as a
single class on all matters submitted to a vote of stockholders.

Our common stock is listed for quotation on the Nasdaq National Market under
the symbol "SMTX."

Preferred Stock

Our board of directors may, without further action by our stockholders, from
time to time, direct the issuance of shares of preferred stock in a series and
may, at the time of issuance, determine the rights, preferences and limitations
of each series. Satisfaction of any dividend preferences of outstanding shares
of preferred stock would reduce the amount of funds available for the payment
of dividends on shares of common

stock. Holders of shares of preferred stock may be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding-up
of our company before any payment is made to the holders of shares of common
stock. The issuance of shares of preferred stock may render more difficult or
tend to discourage a merger, tender offer or proxy contest, the assumption of
control by a holder of a large block of our securities or the removal of
incumbent management. Upon the affirmative vote of a majority of the total
number of directors then in office, the board of directors, without stockholder
approval, may issue shares of preferred stock with voting and conversion rights
which could adversely affect the holders of shares of common stock.

There are no shares of preferred stock outstanding, and we have no current
intention to issue any of our unissued, authorized shares of preferred stock,
other than the one share of special voting stock described below. However, the
issuance of any shares of preferred stock in the future could adversely affect
the rights of the holders of common stock.

SMTC Canada Share Capital

Each of the exchangeable shares issued in our initial public offering is
exchangeable, at the option of the holder, at any time for one share of our
common stock. Holders of the exchangeable shares are entitled to dividend and
liquidation rights that are, as nearly as practicable, economically equivalent
to those of holders of shares of our common stock. However, the exchangeable
shares generally do not have any voting rights in respect of SMTC Canada.
Holders of exchangeable shares have certain rights to receive common stock in
the event of any liquidation, dissolution or winding-up of SMTC Canada or SMTC
or any other distribution of the assets of SMTC Canada or SMTC for the purpose
of winding-up its respective affairs.

On closing of our initial public offering, we entered into a voting and
exchange trust agreement and issued one share of SMTC special voting stock to a
trustee to be held for the benefit of the holders of exchangeable shares, other
than companies with which we are affiliated. By furnishing instructions to the
trustee, holders of exchangeable shares are able to exercise essentially the
same voting rights with respect to SMTC as they would have if they had
exchanged their exchangeable shares for shares of our common stock.

On closing of our initial public offering, we also entered into a support
agreement under which we agreed to maintain the economic equivalency of the
exchangeable shares and the common stock by, among other things, not declaring
and paying dividends on the common stock unless SMTC Canada is able to declare
and pay economically equivalent dividends on the SMTC Canada exchangeable
shares in accordance with the terms of those shares. SMTC Canada may also
declare stock dividends from time to time as necessary to maintain the one-for-
one economic equivalence between SMTC Canada exchangeable shares and shares of
common stock. The SMTC Canada exchangeable shares do not carry any other right
to receive dividends from SMTC Canada.

The support agreement provides that, in the event that a tender offer, share
exchange offer, issuer bid, take-over bid or similar transaction with respect
to the common stock is proposed by SMTC or is proposed to SMTC or its
stockholders and is recommended by the board of directors of SMTC, or is
otherwise effected or to be effected with the consent or approval of the board
of directors of SMTC, and the exchangeable shares are not otherwise redeemed by
SMTC Canada or SMTC Nova Scotia Company, SMTC will use its reasonable efforts
to enable and permit holders of exchangeable shares to participate in such an
offer to the same extent and on an economically equivalent basis as the holders
of SMTC common stock. Without limiting the generality of the foregoing, SMTC
will use its reasonable efforts to ensure that holders of exchangeable shares
may participate in all such offers without being required to exercise their
right to retract their exchangeable shares or, if so required, to ensure that
any such retraction shall be effective only upon, and shall be conditional
upon, the closing of the offer and only to the extent necessary to tender to or
deposit under the offer.

The exchangeable shares are subject to adjustment or modification in the
event of a stock split or other change to our capital structure so as to
maintain the initial one-to-one relationship between the exchangeable shares
and our common stock. On or after July 27, 2015, subject to acceleration in
certain circumstances, the board of directors of SMTC Canada may redeem all of
the outstanding exchangeable shares by delivering to the holders one share of
our common stock for each exchangeable share held.

The exchangeable shares of SMTC Canada issued in our initial public offering
may not be resold or otherwise transferred in the United States except pursuant
to an effective registration statement under the Securities Act or an exemption
from registration under the Act. This prospectus is included in the
registration statement that we have filed with respect to the issuance of the
shares of our common stock issuable upon the exercise of the exchange rights
granted to the holders of the exchangeable shares of SMTC Canada.

SMTC Nova Scotia Company owns all of the 9,477,847 common shares and
6,331,517 Class C preferred shares that have been issued by SMTC Canada. Gary
Walker holds all the 23,092 Class Y shares that have been issued by SMTC
Canada. In connection with the reclassification, SMTC Nova Scotia Company has
agreed to purchase all his Class Y shares in exchange for an equivalent number
of Class L common shares. The Class Y shares entitle the holder to dividends
based on the dividends payable on the exchangeable shares. Holders of Class Y
shares are also entitled to receive, on a liquidation, dissolution or winding
up of SMTC Canada, an amount based on the value of the exchangeable shares, as
determined by our board of directors. The terms of the SMTC Canada common
shares are substantially the same as the terms of our common stock. The Class C
preferred shares are redeemable at any time at the option of SMTC Canada and
entitle the holder to receive fixed preferential non-cumulative cash dividends
of C$0.06 per share per year in priority to the holders of Class L exchangeable
shares, Class Y shares and common shares. Holders of Class C preferred shares
are also entitled to a preference payment of C$1.00 per share in the event of
any liquidation, dissolution or winding-up of SMTC Canada, before any payment
is made to the holders of SMTC Canada Class L exchangeable shares, Class Y
shares and common shares. The common shares, the Class C preferred shares and
the Class Y shares were not changed in the reclassification and remain
outstanding after completion of our initial public offering.

The Toronto Stock Exchange has approved the listing of the exchangeable
shares under the symbol "SMX."

Registration Rights

Under the stockholders agreement dated July 30, 1999, as amended, between us
and our current stockholders, some of our stockholders will be entitled to
rights with respect to the registration under the Securities Act of some or all
of their shares as described below.

Majority Stockholders Demand Registration Rights. At any time after 180 days
following the effective date of any registration statement filed with our
initial public offering, the holders of a majority of the aggregate number of
shares of common stock held by our stockholders who are parties to the
stockholders agreement can request that we register all or a portion of their
shares. We will only be required to file up to three registration statements on
forms other than Form S-3 in response to such demand registration rights.

Other Demand Registration Rights. At any time after July 30, 2003,
stockholders holding a majority of the shares of common stock held by the Bain
Capital Funds and their affiliates, by Celerity EMSIcon, LLC and its
affiliates, and by P. N. Walker Consulting, Inc., Paul Walker, Nichal Inc.,
Derek D'Andrade, Gary Walker, Philip Woodard and Kilmer Electronics Group
Limited, taken as a group, in each case holding at least 15% of our common
stock then held by the parties to our stockholders agreement, can request that
we register all or a portion of their shares. We will only be required to file
up to three registration statements on forms other than Form S-3 in response to
such demand registration rights. We will not be required to file a registration
statement in response to their demand registration rights within 180 days
following the effective date of any registration statement filed by us with
respect to an underwritten public offering of our securities for our own
account.

Piggyback Registration Rights. If we register any securities for public sale
after our initial public offering, the holders of shares of our common stock
who are parties to the stockholders agreement will have the right to include
their shares in the registration statement. This right does not apply to a
registration statement relating to any of our employee benefit plans, a
corporate reorganization or qualified public offerings unless such public
offering has been initiated pursuant to the majority demand registration rights
or other demand

registration rights described above. The managing underwriter of any
underwritten offering will have the right to limit the number of shares
registered by these holders for marketing reasons.

All shares covered by the stockholders agreement, as amended, could
potentially be required to be registered in connection with the exercise of any
of the registration rights described above.

We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, which will be paid by the selling stockholders.

Holders of these registration rights have waived the exercise of these
registration rights for 180 days following the date of this prospectus.

Other Provisions of the Certificate of Incorporation and By-laws

Our certificate of incorporation provides for the board to be divided into
three classes, as nearly equal in number as possible, serving staggered terms.
Approximately one-third of the board will be elected each year. Please see
"Management." Under the Delaware General Corporation Law, directors serving on
a classified board can only be removed for cause. The provision for a
classified board could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of the board until the
second annual stockholders meeting following the date the acquiror obtains the
controlling stock interest. The classified board provision could have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of SMTC and could increase the
likelihood that incumbent directors will retain their positions.

Our certificate of incorporation provides that stockholder action can be
taken only at an annual or special meeting of stockholders and cannot be taken
by written consent in lieu of a meeting. The certificate of incorporation and
the by-laws provide that, except as otherwise required by law, special meetings
of the stockholders can only be called by the chairman of the board, the chief
executive officer or pursuant to a resolution adopted by a majority of the
board of directors. Stockholders will not be permitted to call a special
meeting or to require the board to call a special meeting.

The by-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of our stockholders, including proposed
nominations of persons for election to the board. Stockholders at an annual
meeting may only consider proposals or nominations specified in the notice of
meeting or brought before the meeting by or at the direction of the board or by
a stockholder who was a stockholder of record on the record date for the
meeting, who is entitled to vote at the meeting and who has given to our
secretary timely written notice, in proper form, of such stockholder's
intention to bring that business before the meeting. Although the by-laws do
not give the board the power to approve or disapprove stockholder nominations
of candidates or proposals regarding other business to be conducted at a
special or annual meeting, the by-laws may have the effect of precluding the
conduct of business at a meeting if the proper procedures are not followed or
may discourage or defer a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of SMTC.

The certificate of incorporation and by-laws provide that the affirmative
vote of holders of at least 75% of the total votes eligible to be cast in the
election of directors is required to amend, alter, change or repeal some of
their provisions, unless such amendment or change has been approved by a
majority of the directors not affiliated or associated with any person or
entity holding 10% or more of the voting power of our outstanding capital
stock. For purposes of calculating the votes of directors in such
circumstances, neither the Bain Capital Funds, Celerity Partners nor Kilmer
Electronics Group shall be deemed at any time to be an entity holding 10% or
more of the voting power of SMTC's outstanding capital stock, without regard to
the actual percentage of the voting power SMTC's capital stock held from time
to time by any of them. This requirement of a super-majority vote to approve
amendments to the certificate of incorporation and by-laws could enable a
minority of our stockholders to exercise veto power over any such amendments.

Provisions of Delaware Law Governing Business Combinations

We are subject to the "business combination" provisions of the Delaware
General Corporation Law. In general, such provisions prohibit a publicly held
Delaware corporation from engaging in various "business combination"
transactions with any "interested stockholder" for a period of three years
after the date of the transaction in which the person became an "interested
stockholder," unless:

. the transaction is approved by the board of directors prior to the date
the "interested stockholder" obtained such status;

. upon consummation of the transaction which resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining
the number of shares outstanding those shares owned by (a) persons who
are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or

. on or subsequent to such date the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested
stockholder."

A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. In general,
an "interested stockholder" is a person who, together with affiliates and
associates, owns 15% or more of a corporation's voting stock or within three
years did own 15% or more of a corporation's voting stock. However, our
Certificate of Incorporation provides that a stockholder affiliated or
associated with the Bain Capital Funds, Celerity Partners or Kilmer Electronics
Group Limited will not be considered an "interested stockholder,"
notwithstanding that stockholder's percentage of our voting stock. None of such
stockholders has a present intention to engage in any transaction which would
constitute a "business combination." The statute could prohibit or delay
mergers or other takeover or change in control attempts with respect to SMTC
and, accordingly, may discourage attempts to acquire SMTC.

Limitations on Liability and Indemnification of Officers and Directors

Our certificate of incorporation limits the liability of directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
our certificate of incorporation provides that we will indemnify our directors
and officers to the fullest extent permitted by such law. We entered into
indemnification agreements with our current directors and executive officers
prior to the completion of our initial public offering and expect to enter into
a similar agreement with any new directors or executive officers.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is Mellon Investor
Services, L.L.C. The transfer agent and registrar for the exchangeable shares
is CIBC Mellon Trust Company.

DETAILS OF THE EXCHANGEABLE SHARES

The following is a summary of the exchangeable share provisions and certain
provisions of the Voting and Exchange Trust Agreement and the Exchangeable
Share Support Agreement. This summary is qualified in its entirety by reference
to the full text of the exchangeable share provisions, the Voting and Exchange
Trust Agreement and the Exchangeable Share Support Agreement.

General

The exchangeable shares are intended to be functionally and economically
equivalent to the shares of our common stock and are exchangeable at any time
at the option of the holder on a one-for-one basis for shares of common stock.
SMTC Canada, SMTC and CIBC Mellon Trust Company, as trustee, have entered into
a voting and exchange trust agreement pursuant to which SMTC issued one share
of special voting stock, or special voting share, to the trustee to be held by
the trustee for the benefit of the holders of exchangeable shares (other than
SMTC and its affiliates). By furnishing instructions to the trustee under the
Voting and Exchange Trust Agreement, holders of exchangeable shares will have
the functionally equivalent voting rights with respect to SMTC as they would
have upon an exchange of exchangeable shares for common stock. Holders of
exchangeable shares will also be entitled to receive from SMTC Canada (i) cash
dividends payable in U.S. dollars or Canadian dollars that are economically
equivalent to cash dividends, if any, paid by SMTC on its common stock, and
(ii) stock dividends consisting of the same number of exchangeable shares as is
equal to the number of shares of common stock, if any, paid by SMTC as a stock
dividend on its common stock. The exchangeable shares are subject to adjustment
or modification in the event of a stock split or other change to the capital
structure of SMTC so as to maintain the initial one-to-one relationship between
the exchangeable shares and the common stock.

Voting, Dividend and Liquidation Rights

Voting Rights with Respect to SMTC Canada

Except as required by law or under the Exchangeable Share Support Agreement,
the terms of the exchangeable share provisions with respect to the amendment
thereof or the Voting and Exchange Trust Agreement, the holders of exchangeable
shares will not be entitled as such to receive notice of or attend any meeting
of shareholders of SMTC Canada or to vote at any such meeting.

In accordance with the terms of the Exchangeable Share Support Agreement,
neither SMTC nor any of its affiliates will exercise any voting rights with
respect to any exchangeable shares held by it, although it will appoint
proxyholders with respect to such exchangeable shares for the sole purpose of
attending meetings of the holders of exchangeable shares in order to be counted
as part of the quorum for such meetings.

Voting Rights with Respect to SMTC

The special voting share held by the trustee for the benefit of the
registered holders of the exchangeable shares (other than SMTC and its
affiliates) will have attached thereto that number of votes, which may be cast
at any meeting at which SMTC Stockholders are entitled to vote, equal to the
number of exchangeable shares outstanding from time to time (other than
exchangeable shares held by SMTC and its affiliates).

Each registered holder of an exchangeable share (other than SMTC and its
affiliates) on the record date for any meeting at which SMTC stockholders are
entitled to vote will be entitled to instruct the trustee to exercise one of
the votes attached to the special voting share for each exchangeable share held
by such holder. The trustee will exercise each vote attached to the special
voting share only as directed by the relevant holder and, in the absence of
instructions from a registered holder as to voting, will not exercise such
votes. A registered holder may, upon instructing the trustee, obtain a proxy
from the trustee entitling the holder to vote directly at the relevant meeting
the votes attached to the special voting share to which the holder is entitled.
In connection with each meeting, to the extent that the trustee has not, upon
such instructions, signed and delivered to

registered holders proxies as aforesaid, the trustee shall exercise its voting
rights as holder of the special voting share either by proxy or in person.

The trustee will send to the registered holders of the exchangeable shares
the notice of each meeting at which the SMTC stockholders are entitled to vote,
together with the related meeting materials and a statement as to the manner in
which the holder may instruct the trustee to exercise the votes attached to the
special voting share. Such sending by the trustee shall commence on the same
day as SMTC sends such notice and materials to the SMTC stockholders. The
trustee will also send to the registered holders of exchangeable shares copies
of all information statements, interim and annual financial statements, reports
and other materials sent by SMTC to the SMTC stockholders at the same time as
such materials are sent to the SMTC stockholders. If such materials are
provided to the trustee by SMTC, the trustee will also send to the registered
holders of the exchangeable shares all materials sent by third parties to SMTC
stockholders, including dissident proxy circulars and tender and exchange offer
circulars, as soon as reasonably practicable after such materials are delivered
to the trustee.

All rights of a registered holder of exchangeable shares to instruct the
trustee to exercise votes attached to the special voting share will cease upon
the exchange (whether by redemption, retraction or liquidation, or through the
exercise of the related call rights) of all of such holder's exchangeable
shares for common stock. In addition, the trust governing the rights of
registered holders of exchangeable shares to instruct the trustee to exercise
votes attaching to the special voting share may be terminated or amended with
the approval of the holders of the exchangeable shares as set forth below under
the heading "Amendment and Approval".

Dividend Rights

Holders of exchangeable shares will be entitled to receive, subject to
applicable law and to the next paragraph, dividends (i) in the case of a cash
dividend declared on the common stock, in an amount in cash for each
exchangeable share corresponding to the cash dividend declared on each share of
common stock; (ii) in the case of a stock dividend declared on the common stock
to be paid in common stock, in such number of exchangeable shares for each
exchangeable share as is equal to the number of shares of common stock to be
paid on each share of common stock; or (iii) in the case of a dividend declared
on the common stock in property other than cash or common stock, in such type
and amount of property as is the same as, or economically equivalent to the
type and amount of property declared as a dividend on each share of common
stock (as determined by SMTC Canada's board of directors in good faith and in
its sole discretion). Cash dividends on the exchangeable shares are payable in
U.S. dollars or the Canadian Dollar Equivalent thereof, at the option of SMTC
Canada. The declaration date, record date and payment date for dividends on the
exchangeable shares will be the same as those for the corresponding dividends
on the common stock.

In the case of a stock dividend declared on the common stock to be paid in
common stock, in lieu of declaring a corresponding stock dividend on the
exchangeable shares, the board of directors of SMTC Canada may, in its
discretion and subject to applicable law, subdivide, redivide or change (each a
"subdivision") each issued and unissued exchangeable share on the basis that
each exchangeable share before the subdivision becomes that number of
exchangeable shares as is equal to the sum of (i) one; and (ii) the number of
shares of common stock to be paid as a stock dividend on each share of common
stock. In such instance, such subdivision shall become effective on the
effective date for the dividend declared on the common stock without any
further act or formality on the part of the board of directors of SMTC Canada
or of the holders of exchangeable shares. No approval of the holders of
exchangeable shares to an amendment to the articles of SMTC Canada shall be
required to give effect to such subdivision. The record date for the
determination of the holders of exchangeable shares entitled to receive
exchangeable shares in connection with any subdivision of exchangeable shares
and the effective date of such subdivision shall be the same dates as the
record date and payment date, respectively, for the corresponding stock
dividend declared on common stock.

Liquidation Rights with Respect to SMTC Canada

In the event of the liquidation, dissolution or winding-up of SMTC Canada or
any other distribution of the assets of SMTC Canada among its shareholders for
the purpose of winding-up its affairs, holders of exchangeable shares will
have, subject to applicable law, preferential rights to receive from SMTC
Canada the Company Liquidation Amount for each exchangeable share held. Upon
the occurrence of such liquidation, dissolution or winding-up, SMTC Nova Scotia
will have an overriding liquidation call right to purchase all of the
outstanding exchangeable shares (other than exchangeable shares held by SMTC
and its affiliates) from the holders thereof on the effective date of the
liquidation, dissolution or winding-up of SMTC Canada for a purchase price per
share equal to the Company Liquidation Amount. If SMTC Nova Scotia exercises
the liquidation call right in respect of a holder's exchangeable shares and
pays all amounts payable by it to such holder in connection with such exercise,
SMTC Canada shall no longer be obligated to pay to the holder any declared and
unpaid dividends on such exchangeable shares.

Upon the occurrence and during the continuance of a Company Insolvency
Event, each registered holder of exchangeable shares (other than SMTC and its
affiliates) will be entitled to instruct the trustee to exercise the exchange
right with respect to any or all of the exchangeable shares held by such
holder, thereby requiring SMTC to purchase such exchangeable shares from the
holder. As soon as practicable following the occurrence of a Company Insolvency
Event or any event which may, with the passage of time and/or the giving of
notice, become a Company Insolvency Event, SMTC Canada or SMTC will give
written notice thereof to the trustee. As soon as practicable thereafter, the
trustee will notify each registered holder of exchangeable shares of such event
or potential event and will advise the holder of its rights with respect to the
exchange right. The purchase price payable by SMTC for each exchangeable share
purchased under the exchange right will be the Company Liquidation Amount. If
SMTC purchases a holder's exchangeable shares under the exchange right, SMTC
Canada shall no longer be obligated to pay to the holder any declared and
unpaid dividends on such exchangeable shares.

Liquidation Rights with Respect to SMTC

In order for the holders of the exchangeable shares to participate on a pro
rata basis with the holders of common stock, on the fifth business day prior to
the effective date of an SMTC Liquidation Event, each exchangeable share (other
than those held by SMTC and its affiliates) will, pursuant to an automatic
exchange right, automatically be exchanged for the SMTC Liquidation Amount
pursuant to the Voting and Exchange Trust Agreement. Upon a holder's request
and surrender of exchangeable share certificates, duly endorsed in blank and
accompanied by such instruments of transfer as SMTC may reasonably require,
SMTC will deliver or cause the transfer agent to deliver (i) certificates
representing the aggregate number of shares of common stock due in respect of
the SMTC Liquidation Amount, registered in the name of the holder or in such
name as the holder may request; and (ii) if applicable, a check for the
aggregate amount of declared and unpaid dividends to the holder at the address
recorded in the securities register, in each case less any amounts withheld on
account of tax required to be deducted and withheld therefrom. For a
description of certain SMTC obligations with respect to the dividend and
liquidation rights of the holders of exchangeable shares, see "- Support
Obligation" below.

Retraction

Subject to the exercise by SMTC Nova Scotia of its retraction call right,
holders of exchangeable shares will be entitled to retract (that is, to require
SMTC Canada to redeem) any or all of the exchangeable shares held by such
holder for a retraction price per exchangeable share equal to one share of
common stock plus any declared and unpaid dividends on such exchangeable share.
Holders of the exchangeable shares may effect such retraction by presenting to
SMTC Canada or to the trustee (i) a certificate or certificates representing
the number of exchangeable shares the holder desires to retract; (ii) a duly
executed retraction request indicating the number of exchangeable shares the
holder desires to retract and the retraction date; and (iii) such other

documents as may be required to effect the retraction of the retracted
exchangeable shares. A holder wishing to exercise the retraction right must
present the foregoing documents to SMTC Canada or to the trustee at least
10 business days prior to the retraction date specified in the retraction
request.

When a holder requests SMTC Canada to redeem retracted exchangeable shares,
SMTC Nova Scotia will have an overriding retraction call right to purchase on
the retraction date all but not less than all of the retracted exchangeable
shares, at a purchase price per share equal to one share of common stock plus
any declared and unpaid dividends on such exchangeable share for each retracted
exchangeable share. Upon receipt of a retraction request, SMTC Canada will
immediately notify SMTC Nova Scotia of the retraction request. SMTC Nova Scotia
must then advise SMTC Canada within five business days as to whether the
retraction call right will be exercised. If SMTC Nova Scotia does not so advise
SMTC Canada, SMTC Canada will notify the holder as soon as possible thereafter
that SMTC Nova Scotia will not exercise the retraction call right. If, within
such five business day period, SMTC Nova Scotia advises SMTC Canada that SMTC
Nova Scotia will exercise the retraction call right, then provided the
retraction request is not revoked by the holder as described below, the
retraction request shall thereupon be considered only to be an offer by the
holder to sell the retracted exchangeable shares to SMTC Nova Scotia in
accordance with the retraction call right. If SMTC Nova Scotia exercises the
retraction call right in respect of a holder's retracted exchangeable shares
and pays all amounts payable by it to such holder in connection with such
exercise, SMTC Canada shall no longer be obligated to pay to the holder any
declared and unpaid dividends on such retracted exchangeable shares.

A holder may revoke its retraction request, in writing, at any time prior to
the close of business on the business day preceding the retraction date, in
which case the retracted exchangeable shares will neither be purchased by SMTC
Nova Scotia nor be redeemed by SMTC Canada. If a holder does not revoke its
retraction request, the retracted exchangeable shares will, on the retraction
date, be purchased by SMTC Nova Scotia or redeemed by SMTC Canada, as the case
may be, in each case as set out above. SMTC Canada or SMTC Nova Scotia, as the
case may be, will deliver or cause the transfer agent to deliver (i)
certificates, representing the aggregate number of shares of common stock due,
registered in the name of the holder or in such other name as the holder may
request; and (ii) if applicable, a check for the aggregate amount of declared
and unpaid dividends to the holder at the address recorded in the securities
register or at the address specified in the holder's retraction request or by
holding the same for pick up by the holder at the registered office of SMTC
Canada or the office of the transfer agent as specified by SMTC Canada, in each
case less any amounts withheld on account of tax required to be deducted and
withheld therefrom.

If, as a result of solvency requirements or applicable law, SMTC Canada is
not permitted to redeem all retracted exchangeable shares tendered by a
retracting holder, and provided that SMTC Nova Scotia has not exercised the
retraction call right with respect to such retracted exchangeable shares, SMTC
Canada will redeem only those retracted exchangeable shares tendered by the
holder (rounded down to the nearest whole number of shares) as would not be
contrary to such provisions of applicable law. The trustee, on behalf of the
holder of any retracted exchangeable shares not so redeemed by SMTC Canada,
will, pursuant to the exchange right, require SMTC to purchase the retracted
exchangeable shares not redeemed on the retraction date.

Redemption

Subject to applicable law and the redemption call right, SMTC Canada will,
on the redemption date, redeem all but not less than all of the then
outstanding exchangeable shares for a redemption price per exchangeable share
equal to one share of common stock plus any declared and unpaid dividends on
the exchangeable share. SMTC Canada will, at least 60 days prior to the
redemption date, or such number of days as the board of directors of SMTC
Canada may determine to be reasonably practicable under the circumstances in
respect of a redemption date arising in connection with, among other events, an
SMTC Control Transaction, an Exchangeable Share Voting Event or an Exempt
Exchangeable Share Voting Event, provide the registered holders of the
exchangeable shares with written notice of the proposed redemption of the
exchangeable shares by SMTC Canada or of the purchase of the exchangeable
shares by SMTC Nova Scotia pursuant to the redemption call right described
below.

SMTC Nova Scotia will have an overriding redemption call right to purchase
on the redemption date all but not less than all of the exchangeable shares
then outstanding (other than exchangeable shares held by SMTC and its
affiliates) for a purchase price per exchangeable share equal to one share of
common stock plus any declared and unpaid dividends on the exchangeable
shares. Upon the exercise of the redemption call right, holders will be
obligated to sell their exchangeable shares to SMTC Nova Scotia. If SMTC Nova
Scotia exercises the redemption call right in respect of a holder's
exchangeable shares and pays all amounts payable by it to such holder in
connection with such exercise, SMTC Canada's right and obligation to redeem
the exchangeable shares on such redemption date will terminate and it shall
not be obligated to pay to the holder any declared and unpaid dividends on
such exchangeable shares.

The "redemption date" will be the date, if any, established by the board of
directors of SMTC Canada for the redemption by SMTC Canada of all but not less
than all of the outstanding exchangeable shares pursuant to the exchangeable
share provisions, which date shall be no earlier than July 27, 2015, unless:

(i) there are fewer than 500,000 exchangeable shares outstanding (other
than exchangeable shares held by SMTC and its affiliates), as such
number of shares may be adjusted by the board of directors of SMTC
Canada to give effect to any subdivision or consolidation of or stock
dividend on the exchangeable shares, any issue or distribution of
rights to acquire exchangeable shares or securities exchangeable for or
convertible into exchangeable shares, any issue or distribution of
other securities or rights or evidences of indebtedness, or assets, or
any other capital reorganization or other transaction affecting the
exchangeable shares, in which case the board of directors of SMTC
Canada may accelerate such redemption date to such date prior to July
27, 2015, as it may determine, upon at least 60 days' prior written
notice to the registered holders of the exchangeable shares and the
trustee;

(ii) an SMTC Control Transaction occurs, in which case, provided that the
board of directors of SMTC Canada determines, in good faith and in its
sole discretion, that it is not reasonably practicable to
substantially replicate the terms and conditions of the exchangeable
shares in connection with such SMTC Control Transaction and that the
redemption of all but not less than all of the outstanding
exchangeable shares is necessary to enable the completion of such SMTC
Control Transaction in accordance with its terms, the board of
directors of SMTC Canada may accelerate such redemption date to such
date prior to July 27, 2015 as it may determine upon such number of
days' prior written notice to the registered holders of the
exchangeable shares and the trustee as the board of directors of SMTC
Canada may determine to be reasonably practicable in such
circumstances;

(iii) an Exchangeable Share Voting Event is proposed, in which case,
provided that the board of directors of SMTC Canada has determined,
in good faith and in its sole discretion, that it is not reasonably
practicable to accomplish the business purpose intended by the
Exchangeable Share Voting Event, which business purpose must be bona
fide and not for the primary purpose of causing the occurrence of a
redemption date, in any other commercially reasonable manner that
does not result in an Exchangeable Share Voting Event, the redemption
date shall be the business day prior to the record date for any
meeting or vote of the holders of the exchangeable shares to consider
the Exchangeable Share Voting Event, and the board of directors of
SMTC Canada shall give such number of days' prior written notice of
such redemption to the registered holders of the exchangeable shares
and the trustee as it may determine to be reasonably practicable in
such circumstances; or

(iv) an Exempt Exchangeable Share Voting Event is proposed and the holders
of the exchangeable shares fail to take the necessary action at a
meeting or other vote of holders of exchangeable shares to approve or
disapprove, as applicable, the Exempt Exchangeable Share Voting Event,
in which case the redemption date shall be the business day following
the day on which the holders of the exchangeable shares failed to take
such action, and the board of directors of SMTC Canada shall give such
number of days' prior written notice of such redemption to the
registered holders of the exchangeable shares and the trustee as it
may determine to be reasonably practicable in such circumstances,

provided, however, that the accidental failure or omission to give any notice
of redemption under clause (i), (ii), (iii) or (iv) above to less than 10% of
such holders of exchangeable shares shall not affect the validity of any such
redemption.

Tender Offers

The Exchangeable Share Support Agreement provides that, in the event that a
tender offer, share exchange offer, issuer bid, take-over bid or similar
transaction with respect to the SMTC common stock is proposed by SMTC or is
proposed to SMTC or its stockholders and is recommended by the board of
directors of SMTC, or is otherwise effected or to be effected with the consent
or approval of the board of directors of SMTC, and the exchangeable shares are
not otherwise redeemed or repurchased by SMTC Canada or SMTC Nova Scotia, SMTC
will use its reasonable efforts to enable and permit holders of exchangeable
shares to participate in such offer to the same extent and on an economically
equivalent basis as the holders of SMTC common stock. Without limiting the
generality of the foregoing, SMTC will use its reasonable efforts to ensure
that holders of exchangeable shares may participate in all offers without
being required to exercise their right to retract their exchangeable shares as
described under "- Retraction" or, if so required, to ensure that any such
retraction shall be effective only upon, and shall be conditional upon, the
closing of the offer and only to the extent necessary to tender to or deposit
under the offer.

Certain Restrictions

Without the approval of the holders of the exchangeable shares as set forth
below under the heading"" - Amendment and Approval", SMTC Canada will not:

(a) pay any dividends on the common shares of SMTC Canada, or any other
shares ranking junior to the exchangeable shares, other than stock
dividends payable in common shares of SMTC Canada, or any such other
shares ranking junior to the exchangeable shares, as the case may be;

(b) redeem, purchase or make any capital distribution in respect of common
shares of SMTC Canada, or any other shares ranking junior to the
exchangeable shares;

(c) redeem or purchase any other shares of SMTC Canada ranking equally with
the exchangeable shares with respect to the payment of dividends or on
any liquidation distribution;

(d) issue any exchangeable shares; provided that SMTC Canada may at any
time, with or without such approval, issue exchangeable shares (A)
pursuant to any shareholder rights plan or equity incentive plan
adopted by SMTC Canada; (B) by way of stock dividend to the holders of
exchangeable shares; or (C) by way of any subdivision of exchangeable
shares described above under the heading "- Voting, Dividend and
Liquidation Rights"; or

(e) issue any shares of SMTC Canada ranking equally with, or superior to,
the exchangeable shares other than by way of stock dividends to the
holders of such exchangeable shares.

The restrictions in clauses (a), (b), (c) and (d) above will not apply at
any time when the dividends on the outstanding exchangeable shares
corresponding to dividends declared and paid on the common stock have been
declared and paid in full.

Amendment and Approval

The exchangeable share provisions may be added to, changed or removed only
with the approval of the holders thereof. Any such approval or any other
approval or consent to be given by the holders of the exchangeable shares will
be deemed to have been sufficiently given if given in accordance with
applicable law, subject to a minimum requirement that such approval or consent
be evidenced by a resolution passed by not less than two-thirds of the votes
cast on such resolution at a meeting of the holders of exchangeable shares
duly called and held at which holders of at least 25% of the then-outstanding
exchangeable shares are present or represented by proxy. If no such quorum is
present at such meeting within one-half hour after the time appointed
therefor, then the meeting will be adjourned to such place and time (not less
than five days later) as may be designated by the chairman of such meeting. At
such adjourned meeting, the holders of exchangeable shares present or
represented by proxy may transact the business for which the meeting was
originally called and a resolution passed thereat by the affirmative vote of
not less than two-thirds of the votes cast on such resolution will constitute
the approval or consent of the holders of the exchangeable shares.

In accordance with the terms of the Exchangeable Share Support Agreement,
neither SMTC nor any of its Affiliates will exercise any voting rights with
respect to any exchangeable shares held by it, although it will appoint
proxyholders with respect to such exchangeable shares for the sole purpose of
attending meetings of the holders of exchangeable shares in order to be
counted as part of the quorum for such meetings.

Support Obligation

Pursuant to an exchangeable share support agreement to be entered into by
SMTC, SMTC Canada and SMTC Nova Scotia on closing of this offering, the
Exchangeable Share Support Agreement, SMTC will make the following covenants
for so long as any exchangeable shares (other than exchangeable shares owned
by SMTC or its affiliates) remain outstanding:

. SMTC will not declare or pay dividends on its common stock unless SMTC
Canada is able to (A) declare and pay and simultaneously declares or
pays, as the case may be, an equivalent dividend on the exchangeable
shares; or (B) subdivide and simultaneously subdivides the exchangeable
shares in lieu of a stock dividend (as provided for in the exchangeable
share provisions);

. SMTC will advise SMTC Canada in advance of the declaration of any
dividend on the common stock and ensure that (A) the declaration date,
record date and payment date for dividends on the exchangeable shares
are the same as those for the corresponding dividend on the common
stock; or (B) the record date and effective date for a subdivision of
the exchangeable shares in lieu of a stock dividend (as provided for in
the exchangeable share provisions) are the same as the record date and
payment date for the corresponding stock dividend on the common stock;

. SMTC will ensure that the record date for any dividend declared on the
common stock is not less than 10 business days after the declaration
date of such dividend;

. SMTC will take all actions and do all things reasonably necessary or
desirable to enable and permit SMTC Canada, in accordance with
applicable law, to pay to the holders of the exchangeable shares and
otherwise perform its obligations with respect to the satisfaction of
the applicable Company Liquidation Amount in the event of a liquidation,
dissolution or winding-up of SMTC Canada, or the exchange of
exchangeable shares for common stock plus any declared and unpaid
dividends on such exchangeable shares in the event of a retraction
request by a holder of exchangeable shares or a redemption of
exchangeable shares by SMTC Canada;

. SMTC will take all actions and do all things reasonably necessary or
desirable to enable and permit SMTC Nova Scotia, in accordance with
applicable law, to perform its obligations arising upon the exercise by
it of the call rights, including the delivery of common stock to holders
of exchangeable shares in accordance with the provisions of the
applicable call right; and

. if SMTC becomes a "specified financial institution" (as such term is
defined in the Tax Act) or does not deal at arm's length with such a
person, SMTC will take all such actions and do all such things as are
reasonably necessary or desirable to cause SMTC Nova Scotia to exercise
the retraction call right if requested to do so by a holder of
exchangeable shares making a retraction request.

The Exchangeable Share Support Agreement and the exchangeable share
provisions will provide that, without the prior approval of SMTC Canada and
the holders of the exchangeable shares given in the manner set forth above
under the heading "- Amendment and Approval", SMTC will not issue or
distribute additional common stock, securities exchangeable for or convertible
into or carrying rights to acquire common stock, rights, options or warrants
to subscribe therefor, evidences of indebtedness or other assets, to all or
substantially all holders of common stock, nor shall SMTC subdivide, redivide,
reduce, combine, reclassify or otherwise change the common stock, unless the
same or an economically equivalent distribution on or change to the
exchangeable shares (or in the rights of the holders thereof) is made
simultaneously. SMTC Canada's board of directors will be conclusively
empowered to determine in good faith and in its sole discretion whether any
corresponding distribution on or change to the exchangeable shares is the same
as or economically equivalent to any proposed distribution on or change to the
common stock. In the event of any proposed tender offer, share

exchange offer, issuer bid, take-over bid or similar transaction with respect
to the common stock which is recommended by the SMTC board of directors and in
connection with which the exchangeable shares are not redeemed by SMTC Canada
or purchased by SMTC Nova Scotia pursuant to the redemption call right, SMTC
will use reasonable efforts to take all actions necessary or desirable to
enable holders of exchangeable shares to participate in such transaction to the
same extent and on an economically equivalent basis as the holders of common
stock.

In order to assist SMTC in complying with its obligations under the
Exchangeable Share Support Agreement and to permit SMTC Nova Scotia to exercise
the call rights, SMTC Canada will be required to notify SMTC and SMTC Nova
Scotia of the occurrence of certain events, such as the liquidation,
dissolution or winding-up of SMTC Canada whether on a voluntary or involuntary
basis, SMTC Canada's receipt of a retraction request from a holder of
exchangeable shares, and the issuance by SMTC Canada of any exchangeable
shares, rights, options or warrants to acquire exchangeable shares or other
securities exchangeable for or convertible into exchangeable shares.

Under the Exchangeable Share Support Agreement, SMTC will agree that it will
not, and will cause its affiliates not to, exercise any voting rights attached
to the exchangeable shares owned by it or them on any matter considered at
meetings of holders of exchangeable shares. SMTC has also agreed to use its
reasonable best efforts to enable SMTC Canada to maintain a listing for the
exchangeable shares on a Canadian stock exchange.

With the exception of administrative changes for the purpose of adding
covenants of any or all parties, making certain necessary amendments or curing
ambiguities or clerical errors (in each case, provided that the board of
directors of each of SMTC, SMTC Canada and SMTC Nova Scotia are of the opinion
that such amendments are not prejudicial to the interests of the holders of
exchangeable shares), the Exchangeable Share Support Agreement may not be
amended without the approval of the holders of exchangeable shares given in the
manner set forth above under the heading "- Amendment and Approval".

Ranking

The exchangeable shares will be entitled to a preference over SMTC Canada's
common shares and any other shares ranking junior to the exchangeable shares
with respect to the payment of dividends and the distribution of assets in the
event of a liquidation, dissolution or winding-up of SMTC Canada, whether
voluntary or involuntary, or any other distribution of the assets of SMTC
Canada among its shareholders for the purpose of winding-up its affairs. The
exchangeable shares will rank junior to the Class C preferred shares of SMTC
Canada that are held by SMTC Nova Scotia and any other shares ranking prior to
the exchangeable shares.

Withholding Rights

SMTC Canada, SMTC Nova Scotia, SMTC and the transfer agents will be entitled
to deduct and withhold from any dividends or consideration otherwise payable to
any holder of exchangeable shares or common stock such amounts as SMTC Canada,
SMTC Nova Scotia, SMTC or the transfer agents are required to deduct and
withhold with respect to such payment under the Tax Act, the United States
Internal Revenue Code of 1986, as amended, or any provision of provincial,
state, local or foreign tax law. Any amounts withheld will be treated for all
purposes as having been paid to the holder of the shares in respect of which
such deduction and withholding was made, provided that such withheld amounts
are actually remitted to the appropriate taxing authority. If the amount so
required to be deducted or withheld from any payment to a holder exceeds the
cash portion of the amount otherwise payable to the holder, SMTC Canada, SMTC
Nova Scotia, SMTC or the transfer agents may sell or otherwise dispose of such
portion of the consideration as is necessary to provide sufficient funds to
SMTC Canada, SMTC Nova Scotia, SMTC or the transfer agents, as the case may be,
to enable it to comply with such deduction or withholding requirement. SMTC
Canada, SMTC Nova Scotia, SMTC or the transfer agents, as the case may be, must
notify the holder of any such sale and remit to such holder any unapplied
balance of the net proceeds of such sale.

Appraisal Rights

In the event of a merger or consolidation of SMTC, holders of exchangeable
shares would not have any appraisal rights under Section 262 of the General
Corporation Law of Delaware. Holders of exchangeable shares who wish to
exercise appraisal rights in connection with a proposed transaction could
exchange their exchangeable shares into common stock prior to the record date
for the determination of shareholders entitled to exercise appraisal rights.

Certain Canadian Federal Income Tax Considerations

The following is a summary of the principal Canadian federal income tax
considerations generally applicable to the redemption or exchange of
exchangeable shares by holders who, for purposes of the Income Tax Act (Canada)
(the "Tax Act"), are resident in Canada, hold their exchangeable shares, and
will hold their shares of common stock, as capital property and deal at arm's
length with SMTC Corporation, SMTC Nova Scotia and SMTC Canada. This summary
does not apply to a holder with respect to whom SMTC Corporation is or will be
a foreign affiliate within the meaning of the Tax Act.

Exchangeable shares and shares of common stock will generally be considered
to be capital property to a holder unless the shares are held in the course of
carrying on a business or are acquired in a transaction considered to be an
adventure in the nature of trade. Holders whose exchangeable shares might not
otherwise qualify as capital property may be entitled to make an irrevocable
election under subsection 39(4) of the Tax Act to have all their Canadian
securities, including their exchangeable shares, treated as capital property in
the taxation year in which the election is made and in all subsequent years. In
addition, exchangeable shares and shares of common stock held by a financial
institution, as defined for the purposes of the mark-to-market rules in the Tax
Act, will generally not be considered to be capital property. Holders that are
financial institutions should consult their own tax advisors to determine the
tax consequences to them of the application of these rules.

This summary is based on the current provisions of the Tax Act, the
regulations thereunder and the current published administrative policies and
assessment practices of the Canada Customs and Revenue Agency. This summary
also takes into account all proposed amendments to the Tax Act and the
regulations announced by the Minister of Finance before the date hereof. This
summary does not otherwise take into account or anticipate changes in the law,
whether by judicial, governmental or legislative action or decision, nor does
it take into account provincial, territorial or foreign income tax legislation
or considerations, which may differ from the Canadian federal income tax
considerations described herein.

THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND
SHOULD NOT BE CONSTRUED AS, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER OF
EXCHANGEABLE SHARES. ACCORDINGLY, HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
AS TO THE TAX CONSEQUENCES OF THE REDEMPTION OR EXCHANGE OF EXCHANGEABLE SHARES
HAVING REGARD TO THEIR PARTICULAR CIRCUMSTANCES.

For the purposes of the Tax Act, all amounts relating to the acquisition,
holding or disposition of shares of common stock must be expressed in Canadian
dollars; amounts denominated in U.S. dollars must be converted into Canadian
dollars based on the Canadian/US dollar exchange rate at the time the amounts
arise.

Redemption or Exchange of Exchangeable Shares

On the redemption (including a retraction) of an exchangeable share by SMTC
Canada, the holder will be deemed to have received a dividend equal to the
amount, if any, by which the redemption proceeds (the fair market value at that
time of the shares of common stock plus the amount of any cash received on the
redemption) exceeds the paid-up capital for purposes of the Tax Act of the
exchangeable share at the time of the redemption.

Any deemed dividend received on a redemption by a holder who is an
individual will be included in computing the holder's income and will be
subject to the gross-up and dividend tax credit rules normally applicable to
taxable dividends received from a corporation resident in Canada.

Any deemed dividend received on a redemption by a holder that is a
corporation, other than a specified financial institution, as defined in the
Tax Act, will be included in computing the holder's income and, subject to the
discussion below respecting the denial of the inter-corporate dividend
deduction, will generally be deductible in computing its taxable income.

Any deemed dividend received on a redemption by a holder that is a specified
financial institution will be deductible in computing its taxable income only
if (i) the holder did not acquire the exchangeable shares in the ordinary
course of its business, or (ii) at the time the deemed dividend is received,
the exchangeable shares are listed on a prescribed stock exchange in Canada
(which currently includes the TSE) and the holder, alone or together with
persons with whom it does not deal at arm's length, does not receive and is not
deemed to receive dividends in respect of more than 10% of the outstanding
exchangeable shares either directly or through a partnership or, in certain
cases, through a trust.

If SMTC Corporation, or any other person with whom SMTC Corporation does not
deal at arm's length, is a specified financial institution at the time of a
redemption, then subject to the exemption described below, a holder that is a
corporation will not be entitled to deduct the deemed dividend received on the
redemption in computing its taxable income. In general, a corporation is a
specified financial institution if it is a bank, a trust company, a credit
union, an insurance corporation or a corporation whose principal business is
lending money to, or purchasing debt obligations issued by, persons with whom
the corporation is dealing at arm's length or a combination of these
activities, or a corporation that is controlled by, or related to, one or more
of such entities. SMTC Corporation is of the view that neither it nor any
person with whom it does not deal at arm's length is a specified financial
institution at the present time. There can be no assurance, however, that this
status will not change before exchangeable shares are redeemed. In any event,
this rule will not apply if, at the time a deemed dividend is received on a
redemption, SMTC Corporation is related to SMTC Canada for purposes of the Tax
Act and the exchangeable shares are listed on a prescribed stock exchange in
Canada, unless deemed dividends in respect of more than 10% of the outstanding
exchangeable shares are, or are deemed to be, paid to the holder or to the
holder and persons with whom the holder does not deal at arm's length or any
partnership or trust of which the holder or non-arm's length person is a member
or beneficiary.

A holder that is a private corporation, as defined in the Tax Act, or any
other corporation resident in Canada and controlled or deemed to be controlled
by or for the benefit of an individual (other than a trust) or a related group
of individuals (other than trusts) may be liable to pay a refundable tax under
Part IV of the Tax Act of 33 1/3% of any deemed dividend received on the
redemption of exchangeable shares to the extent that such deemed dividend is
deductible in computing the holder's taxable income. A holder that is a
Canadian-controlled private corporation, as defined in the Tax Act, may be
liable to pay an additional refundable tax of 6 2/3% on any deemed dividend
that is not deductible in computing taxable income.

On the redemption (including a retraction) of an exchangeable share by SMTC
Canada, the holder will also be considered to have disposed of the exchangeable
share for proceeds of disposition equal to the redemption proceeds less the
amount of any deemed dividend received on the redemption and will generally
realize a capital gain (or a capital loss) equal to the amount by which such
proceeds of disposition exceed (or are less than) the holder's adjusted cost
base of the exchangeable share. See "- Taxation of Capital Gains or Capital
Losses" below. In some circumstances, the amount of any deemed dividend
received on a redemption by a holder that is a corporation may be treated as
proceeds of disposition and not as a dividend.

Where an exchangeable share is exchanged with SMTC Corporation or SMTC Nova
Scotia for shares of common stock, the holder will generally realize a capital
gain (or a capital loss) to the extent the proceeds of disposition of the
exchangeable share exceed (or are less than) the holder's adjusted cost base of
the exchangeable share and any reasonable costs of disposition. For this
purpose, the proceeds of disposition will

be the aggregate of the fair market value at the time of the exchange of the
shares of common stock received on the exchange and the amount of any cash
received by the holder as part of the exchange consideration. See "- Taxation
of Capital Gains or Capital Losses" below.

Because of the existence of the call rights, the exchange right and the
automatic exchange right, a holder of exchangeable shares cannot control
whether such holder will receive shares of common stock by way of redemption of
the exchangeable shares by SMTC Canada or by way of exchange of the
exchangeable shares with SMTC Corporation or SMTC Nova Scotia. As described
above, the Canadian federal income tax consequences of a redemption differ from
those of an exchange.

Acquisition, Holding and Disposition of Common Stock

The cost of the shares of common stock received on the redemption or
exchange of an exchangeable share will be equal to the fair market value of
such shares at the time of redemption or exchange and will be averaged with the
adjusted cost base of other shares of common stock held by the holder as
capital property at that time.

Dividends received on shares of common stock will be included in the
holder's income for the purposes of the Tax Act. Such dividends received by a
holder who is an individual will not be subject to the gross-up and dividend
tax credit rules in the Tax Act. A holder that is a corporation will not be
entitled to deduct the amount of such dividends in computing its taxable
income. A holder that is a Canadian-controlled private corporation may be
liable to pay an additional refundable tax of 6 2/3% on such dividends. Subject
to the detailed rules in the Tax Act, a holder may be entitled to a foreign tax
credit or deduction for any United States non-resident withholding tax paid on
dividends received on shares of common stock.

A disposition or deemed disposition of common stock by a holder will
generally result in a capital gain (or capital loss) to the extent that the
proceeds of disposition exceed (or are less than) the holder's adjusted cost
base to the shareholder of common stock and any reasonable costs of
disposition. See -"Taxation of Capital Gains or Capital Losses" below.

Taxation of Capital Gains or Capital Losses

Under proposed amendments to the Tax Act, one-half of any capital gain (a
"taxable capital gain") will generally be included in the holder's income in
the taxation year in which the disposition occurs and one-half of any capital
loss (an "allowable capital loss") may be deducted against taxable capital
gains in the taxation year in which the disposition occurs in accordance with
the rules in the Tax Act and the proposed amendments. Allowable capital losses
which cannot be deducted from taxable capital gains in the year of disposition
may generally be carried back three years and forward indefinitely to offset
taxable capital gains in the years to the extent and in the circumstances set
out in the Tax Act and the proposed amendments.

Capital gains realized by individuals and certain trusts may give rise to
alternative minimum tax under the Tax Act. A holder that is a Canadian-
controlled private corporation may be liable to pay an additional refundable
tax of 6 2/3% on taxable capital gains.

If the holder of an exchangeable share is a corporation, the amount of any
capital loss arising on a disposition or deemed disposition of an exchangeable
share may be reduced by the amount of dividends received or deemed to have been
received by it on the share to the extent and in the circumstances prescribed
by the Tax Act. Similar rules may apply where a corporation is a member of a
partnership or a beneficiary of a trust that owns exchangeable shares or where
a trust or partnership of which a corporation is a beneficiary or a member is a
member of a partnership or a beneficiary of a trust that owns any such shares.

Qualified Investments

Shares of common stock will be qualified investments under the Tax Act for
trusts governed by registered retirement savings plans, registered retirement
income funds, deferred profit sharing plans and deferred income plans,
provided such shares are listed on a prescribed stock exchange. Shares of
common stock will be foreign property under the Tax Act.

Foreign Property Investment Entity Status

On June 22, 2000, the Minister of Finance introduced draft legislation (the
"proposed rules") relating to the income tax treatment of investments by
Canadian residents in foreign investment entities ("FIEs"). If the proposed
rules are enacted in the form contained in the draft legislation, holders of
exchangeable shares will be subject to special anti-deferral rules in each
taxation year that begins after 2000, if SMTC Corporation is a FIE at the end
of its last taxation year ended at or before the end of the relevant taxation
year. If these rules applied, the tax consequences of a redemption or an
exchange would differ from those described above. In simplified terms, a
foreign corporation, like SMTC Corporation, will be an FIE within the meaning
of the proposed rules at the end of a taxation year if, at that time, the
"carrying value" of its "investment property" represents more than 50% of the
"carrying value" of all of its property.

The draft legislation has not been tabled in the House of Commons and its
release was accompanied by an invitation from the Minister of Finance for
comments from interested parties. Accordingly, it is impossible to predict
whether the proposed rules will be enacted in the form contained in the draft
legislation or what changes to the proposed rules might be made before they
are enacted. However, SMTC Corporation believes that, if the proposed rules
applied on the date hereof, it would not be a FIE and expects to conduct its
affairs in such a manner that, if the proposed rules are enacted in the form
contained in the draft legislation, it would not be a FIE at any relevant time
in the foreseeable future.

Definitions

Unless the context otherwise requires, the following terms shall have the
meanings set forth below when used in the "Details of Exchangeables Shares"
section.

"Canadian Dollar Equivalent" means in respect of an amount expressed in a
currency other than Canadian dollars at any date, the product obtained by
multiplying:

(i) the foreign currency amount; and

(ii) the noon spot exchange rate on such date for such foreign currency
expressed in Canadian dollars as reported by the Bank of Canada or, if
such noon spot exchange rate is not available, such spot exchange rate
on such date for such foreign currency expressed in Canadian dollars
as may be deemed by the board of directors of SMTC Canada to be
appropriate for such purpose.

"Company Insolvency Event" means the consent of SMTC Canada to the
institution of bankruptcy, insolvency or winding-up proceedings against it, or
the filing of a petition, answer or consent seeking dissolution or winding-up
under any bankruptcy, insolvency or analogous laws, including without
limitation, the Companies Creditors' Arrangement Act (Canada) and the
Bankruptcy and Insolvency Act (Canada), where SMTC Canada fails to contest in
good faith any such proceedings commenced in respect of it within 30 days of
becoming aware thereof, or the consent by SMTC Canada to the filing of any
such petition or to the appointment of a receiver, or the institution by SMTC
Canada of any such proceeding, or the making by SMTC Canada of a general
assignment for the benefit of creditors, or the admission in writing by SMTC
Canada of its inability to pay its debts generally as they become due, or SMTC
Canada not being permitted, pursuant to solvency requirements of applicable
law, to redeem any retracted exchangeable shares.

"Company Liquidation Amount" means, with respect to each exchangeable share,
an amount equal to the current market price of a share of common stock on the
last business day prior to the effective date of the liquidation, dissolution
or winding-up of SMTC Canada, to be satisfied by the delivery of one share of
common stock plus the full amount of all dividends, if any, declared and unpaid
on each such exchangeable share held by a holder on any dividend record date
occurring prior to such time.

"Exchangeable Share Voting Event" means any matter in respect of which
holders of exchangeable shares are entitled to vote as shareholders of SMTC
Canada, other than an Exempt Exchangeable Share Voting Event, and, for greater
certainty, excluding any matter in respect of which holders of exchangeable
shares are entitled to vote (or instruct the trustee to vote) in their capacity
as beneficiaries under the Voting and Exchange Trust Agreement.

"Exempt Exchangeable Share Voting Event" means any matter in respect of
which holders of exchangeable shares are entitled to vote as shareholders of
SMTC Canada in order to approve or disapprove, as applicable, any change to, or
in the rights of the holders of, the exchangeable shares, where the approval or
disapproval, as applicable, of such change would be required to maintain the
equivalence of the exchangeable shares and the common stock.

"SMTC Control Transaction" means any merger, amalgamation, tender offer,
material sale of shares or rights or interests therein or thereto or similar
transactions involving, for or by SMTC, or any proposal to take any such
action.

"SMTC Liquidation Amount" means, with respect to each exchangeable share, an
amount equal to the current market price of a share of common stock on the
fifth business day prior to the effective date of an SMTC Liquidation Event, to
be satisfied by delivery of one share of common stock plus any declared and
unpaid dividends.

"SMTC Liquidation Event" means (i) any determination by the SMTC board of
directors to institute voluntary liquidation, dissolution, or winding-up
proceedings with respect to SMTC or to effect any other distribution of its
assets among its shareholders for the purpose of winding-up its affairs; or
(ii) the earlier of (A) receipt by SMTC of notice of, and (B) SMTC becoming
aware of, any threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation, dissolution or
winding-up of SMTC or to effect any other distribution of assets of SMTC among
its shareholders for the purpose of winding-up its affairs, in each case of (A)
or (B) above where SMTC has failed to contest in good faith any such proceeding
commenced in respect of SMTC within 30 days of becoming aware thereof.

"SMTC Nova Scotia" means SMTC Nova Scotia Company, a wholly-owned subsidiary
of SMTC.

SHARES ELIGIBLE FOR FUTURE SALE

The sale of a substantial amount of our shares in the public market could
adversely affect the prevailing market price of our shares. Furthermore, the
sale of a substantial amount of shares in the public market after the
contractual and legal restrictions on resale described below lapse could
adversely affect the prevailing market price of our shares and our ability to
raise equity capital in the future.

We had a total of 28,689,779 shares outstanding on March 16, 2001. Of these
shares, all of the shares sold in our initial public offering are freely
tradable without restriction or further registration under the Securities Act,
unless the shares are purchased by "affiliates" as that term is defined in Rule
144 under the Securities Act. Any shares purchased by an affiliate may not be
resold except pursuant to an effective registration statement or an applicable
exemption from registration, including an exemption under Rule 144 of the
Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. These restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These rules
are summarized below.

Subject to the provisions of Rule 144 and Rule 701, restricted shares
totaling 15,013,679 became available for sale in the public market 180 days
after the date of our initial public offering. The sale of these restricted
securities is subject to the volume restrictions contained in those rules.

Rule 144

In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year from the
later of the date those shares of common stock were acquired from us or from an
affiliate of ours would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:

. one percent of the number of shares of common stock then outstanding,
which was equal to approximately 220,000 shares on March 16, 2001; or

. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale of any shares of common
stock.

The sales of any shares of common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years from the later of the date
such shares of common stock were acquired from us or from an affiliate of ours,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. As of March
16, 2001, no shares are eligible for sale under Rule 144(k).

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is
eligible to resell those shares 90 days after the effective date our initial
public offering in reliance on Rule 144, but without compliance with some of
the restrictions, including the holding period, contained in Rule 144.

No precise prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price of our common stock prevailing from time to time. We are unable to
estimate the number of our shares that may be sold in the public market
pursuant to Rule 144 or Rule 701 because this will depend on the market price
of our common stock, the personal circumstances of the sellers and other
factors. After our initial public offering, there were 54,271 shares available
for sale under Rule 701. Nevertheless, sales of significant amounts of our
common stock in the public market could adversely affect the market price of
our common stock.

Stock Plans

We have filed a registration statement under the Securities Act covering
2,213,499 shares of common stock reserved for issuance under our 1998 Plan and
our 2000 Plan. This registration statement is expected to be filed as soon as
practicable after the effective date of our initial public offering.

There are options to purchase 466,395 shares of our common stock outstanding
under our 1998 Plan. In addition, we granted options to purchase approximately
300,000 shares of common stock under our 2000 Plan prior to the completion of
our initial public offering. All of these shares are eligible for sale in the
public market from time to time, subject to vesting provisions, Rule 144 volume
limitations applicable to our affiliates and, in the case of some of the
options, the expiration of lock-up agreements.

Registration Rights under Stockholders Agreement

Some of our stockholders, under some circumstances, have the right to
require us to register their shares for future sale. See "Description of
Capital Stock--Registration Rights."

Sales in Canada--Exchangeable Shares

Canadian residents hold 6,370,959 exchangeable shares and no options to
purchase exchangeable shares as of March 16, 2001. All of the outstanding
exchangeable shares are freely tradeable in Canada without restriction except
for shares that may be held by controlling persons of SMTC Canada (generally,
persons or companies, who alone or in combination with others hold a sufficient
number of securities to affect materially the control of SMTC Canada or SMTC).

Exchangeable shares issuable upon exercise of such options may not be sold
or otherwise disposed of for value in Canada, except pursuant to a prospectus,
a discretionary exemption or a statutory exemption available only in specific
limited circumstances, for 12 months from the date that the Ontario Securities
Commission issues a receipt for the prospectus to be used by SMTC Canada in
connection with the concurrent offering of exchangeable shares.

All of the exchangeable shares are freely exchangeable into common stock on
a one-for-one basis and freely tradeable in the United States as such common
stock, subject to compliance with applicable securities laws.

PLAN OF DISTRIBUTION

We have offered an aggregate of 11,000,000 shares of common stock pursuant
to this offering and an underwritten public offering. 4,375,000 of such shares
were initially offered by our subsidiary, SMTC Canada, as exchangeable shares
of its capital stock. The exchangeable shares of SMTC Canada may be exchanged
at any time at the option of the holder on a one-for-one basis for shares of
our common stock. The issuance of such shares of common stock in exchange for
exchangeable shares is being registered by this prospectus. We have agreed to
bear the expenses of registration of the shares in this prospectus.

Holders of exchangeable shares may exchange their exchangeable shares for
common stock by exercising their retraction rights, which are described under
"Details of Exchangeable Shares--Retraction." A description of the tax effects
of such exchange is also included under "Details of Exchangeable Shares."

The exchangeable shares are intended to be functionally and economically
equivalent to the shares of common stock, accordingly there are no material
differences in the rights of the holders of common stock and the holders of
exchangeable shares. Additional information on the rights of the holders of
exchangeable shares is included under "Details of Exchangeable Shares."

LEGAL MATTERS

The validity of the shares to be issued in this offering has been passed
upon for us by Ropes & Gray, Boston, Massachusetts. Some partners of Ropes &
Gray are members in RGIP LLC, which beneficially owns 27,971 shares of common
stock. RGIP LLC is also an investor in certain of the Bain Capital Funds. The
"Details of Exchangeable Shares--Certain Canadian Federal Income Tax
Considerations" has been passed upon for us by McMillan Binch, Toronto,
Ontario.

EXPERTS

Our consolidated financial statements and financial statement schedule as of
December 31, 1999 and 2000 and for the years then ended and the consolidated
financial statements of SMTC Corporation, or Surface Mount, as of July 29, 1999
and August 31, 1998 and for the period from September 1, 1998 to July 29, 1999
and each of the years in the two year period ended August 31, 1998 included in
this prospectus and elsewhere in the registration statement have been so
included in reliance on the reports of KPMG LLP, independent accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

The audited consolidated financial statements and financial statement
schedule of SMTC Corporation (formerly HTM Holdings, Inc.) as of and for the
year ended December 31, 1998 included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.

The financial statements of W.F. Wood, Incorporated as of September 3, 1999
and December 31, 1998 and 1997, and for the period from January 1, 1999 to
September 3, 1999 and each of the three years in the period ended December 31,
1998 included in this prospectus have been so included in reliance on the
report of Canby, Maloney & Co., Inc., independent accountants, appearing
elsewhere herein, and upon the authority of such firm as experts in auditing
and accounting.

The financial statements of Pensar as of December 31, 1998 and 1999 and for
each of the years in the three-year period ended December 31, 1999 included in
this prospectus and elsewhere in the registration statement have been so
included in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

The financial statements of Qualtron as of September 30, 2000 and 1999 and
for each of the years in the three-year period ended September 30, 2000
included in this prospectus and elsewhere in the registration statement have
been so included in reliance upon the report of KPMG, independent accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

On September 20, 1999, we notified KPMG LLP that it would be engaged as our
independent auditors, replacing Arthur Andersen LLP, who were dismissed as our
independent auditors on September 20, 1999. KPMG LLP was the independent
auditor for Surface Mount prior to the July 1999 combination of Surface Mount
and HTM. The decision to change independent auditors was approved by our board
of directors on September 17, 1999. During their engagement, Arthur Andersen
LLP issued no audit report which was qualified or modified as to uncertainty,
audit scope or accounting principles, no adverse opinions or disclaimers of
opinion on any of our financial statements, and there were no disagreements
with Arthur Andersen LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For
further information about us and our common stock, you should refer to the
registration statement. Any statements made in this prospectus as to the
contents of any contract, agreement or other document are necessarily
incomplete. With respect to each such contract, agreement or other document
filed as an exhibit to the registration statement we refer you to the exhibit
for a more complete description of the matter involved, and each statement in
this prospectus shall be deemed qualified in its entirety by this reference.

You may read and copy all or any portion of the registration statement or
any reports, statements or other information in the files at the public
reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C., 20549 and at the regional offices of the SEC
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request
copies of these documents upon payment of a duplicating fee by writing to the
SEC. You may call the SEC at 1-800-SEC-0330 for further information on the
operation of its public reference rooms. Our filings, including the
registration statement, will also be available to you on the Internet site
maintained by the SEC at http://www.sec.gov.

We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can request copies of these documents,
for a copying fee, by writing to the SEC. We intend to furnish our stockholders
with annual reports containing financial statements audited by our independent
auditors.

SMTC CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

SMTC Corporation:
Unaudited Pro Forma Consolidated Financial Information for the year ended
December 31, 2000....................................................... F-3
Pro Forma Consolidated Statement of Earnings for the year ended December
31, 2000 (unaudited).................................................... F-4
Notes to Pro Forma Consolidated Statement of Earnings for the year ended
December 31, 2000 (unaudited)........................................... F-5
SMTC Corporation (formerly HTM Holdings, Inc.):
Auditors' Report......................................................... F-8

Consolidated Balance Sheets as of December 31, 1999 and 2000............. F-10

Consolidated Statements of Operations for the years ended December 31,
1998, 1999 and 2000..................................................... F-11

Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
for the years ended December 31, 1998, 1999 and 2000.................... F-12

Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1999 and 2000........................................ F-13

Notes to Consolidated Financial Statements............................... F-14

SMTC Corporation (formerly The Surface Mount Technology Centre
Inc.)("Surface Mount"):
Auditors' Report......................................................... F-42
Consolidated Balance Sheets as of August 31, 1998 and July 29, 1999...... F-43
Consolidated Statements of Earnings and Retained Earnings (Deficit) for
the years ended August 31, 1997 and 1998 and the period from September
1, 1998 to July 29, 1999................................................ F-44
Consolidated Statements of Cash Flows for the years ended August 31, 1997
and 1998 and the period from September 1, 1998 to July 29, 1999 ........ F-45
Notes to Consolidated Financial Statements............................... F-46

W.F. Wood, Incorporated:
Independent Auditor's Report............................................. F-58
Balance Sheets as of December 31, 1997 and 1998 and September 3, 1999.... F-59
Statements of Income for the years ended December 31, 1996, 1997 and 1998
and the period from January 1, 1999 to September 3, 1999................ F-60
Statements of Stockholders' Equity for the years ended December 31, 1996,
1997 and 1998 and the period from January 1, 1999 to September 3, 1999.. F-61
Statements of Cash Flows for years ended December 31, 1996, 1997, 1998,
and the period from January 1, 1999 to September 3, 1999................ F-62
Notes to Financial Statements............................................ F-64

Pensar Corporation:
Independent Auditors' Report............................................. F-70

Balance Sheets as of December 31, 1998 and 1999 and June 30, 2000
(unaudited)............................................................. F-71

Statements of Income for the years ending December 31, 1997, 1998 and
1999 and the six months ended June 30, 1999 and 2000 (unaudited)........ F-72

F-1

Page
----

Statements of Stockholders' Equity for the years ending December 31,
1997, 1998 and 1999 and the six months ended June 30, 2000 (unaudited).. F-73

Statements of Cash Flows for the years ending December 31, 1997, 1998 and
1999 and the six months ended June 30, 1999 and 2000 (unaudited)........ F-74

Notes to Financial Statements............................................ F-75

Qualtron Teoranta:
Auditors' Report......................................................... F-85

Accounting Policies...................................................... F-86

Consolidated Profit and Loss Accounts for the years ended September 30,
1998, 1999 and 2000..................................................... F-89

Consolidated Movements on Profit and Loss Accounts for the years ended
September 30, 1999 and 2000............................................. F-90

Consolidated Statements of Total Recognised Gains and Losses for the
years ended September 30, 1999 and 2000................................. F-90

Consolidated Balance Sheets as of September 30, 1999 and 2000............ F-91

Consolidated Cash Flow Statements for the years ended September 30, 1998,
1999 and 2000........................................................... F-92

Reconciliation of Net Cash Flow to Movement in Net Funds for the years
ended September 30, 1998, 1999 and 2000................................. F-92

Notes Forming Part of the Financial Statements........................... F-93

F-2

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF SMTC CORPORATION
Year ended December 31, 2000

The unaudited pro forma consolidated statement of earnings for the year
ended December 31, 2000 gives pro forma effect to (1) the acquisition of Pensar
Corporation by SMTC Corporation, (2) the acquisition of Qualtron Teoranta by
SMTC Manufacturing Corporation of Canada and (3) the initial public offering
including the exercise of the underwriters' over-allotment option and the
application of the net proceeds to reduce indebtedness. The unaudited pro forma
consolidated statement of earnings gives effect to the acquisitions and our
initial public offering as if each of these occurred on January 1, 2000. The
accounting policies used in preparing the unaudited pro forma consolidated
financial information are those disclosed in the SMTC Corporation consolidated
financial statements included in this prospectus.

The unaudited pro forma consolidated financial information has been provided
for information purposes only and is not necessarily indicative of the results
of operations or financial condition that actually would have been achieved if
the acquisition and other transactions had been completed on the date indicated
or that may be reported in the future. The unaudited pro forma financial
information does not reflect expenses expected to be incurred to finalize the
integration of the acquired operations or potential cost savings or
improvements in revenue that SMTC Corporation believes can be realized as a
result of the acquisition. The pro forma financial information should be read
in conjunction with the consolidated financial statements of SMTC Corporation
and the acquired operations, including the respective notes, included elsewhere
in this prospectus.

F-3

SMTC CORPORATION

PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(In thousands of U.S. dollars, except share quantities and per share amounts)
Year ended December 31, 2000
(Unaudited)

Pensar
SMTC Corporation Qualtron Teoranta
Corporation period from period from
year ended January 1, 2000 January 1, 2000 to
December 31, to July 27 November 22,
2000 2000 2000 Adjustments Pro forma
------------ --------------- ------------------ ----------- ----------

Revenue................. $ 782,763 $38,355 $21,445 $ $ 842,563
Cost of sales........... 714,420 32,534 17,370 764,324
---------- ------- ------- ------ ----------
Gross profit............ 68,343 5,821 4,075 78,239
Selling, general and
administrative
expenses............... 34,614 3,403 2,329 40,346
Amortization............ 6,229 4 -- 3,212 (a)
(295)(b) 9,150
---------- ------- ------- ------ ----------
Operating income........ 27,500 2,414 1,746 (2,917) 28,743
Interest expense
(income)............... 13,837 232 (64) 1,965 (c)
(8,286)(d) 7,684
---------- ------- ------- ------ ----------
Earnings before income
taxes.................. 13,663 2,182 1,810 3,404 21,059
Income taxes............ 7,347 -- 185 2,897 (e) 10,429
---------- ------- ------- ------ ----------
Earnings................ $ 6,316 $ 2,182 $ 1,625 $ 507 $ 10,630
========== ======= ======= ====== ==========
Earnings per common
share:
Earnings.............. $ 6,316
Less Class L preferred
entitlement.......... (3,164)
----------
Earnings attributable to
common shareholders.... $ 3,152
==========
Earnings per common
share
Basic................. $ 0.24 $ 0.38
Diluted............... 0.23 0.37
========== ==========
Weighted average number
of shares outstanding:
Basic................. 13,212,076 28,213,506
Diluted............... 13,736,616 29,042,133
========== ==========

See accompanying notes to pro forma consolidated financial information.

F-4

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(In thousands of U.S. dollars)
Year ended December 31, 2000
1.Basis of presentation:

The unaudited pro forma consolidated statement of earnings has been
prepared in accordance with United States Generally Accepted Accounting
Principles.

The pro forma consolidated statement of earnings for the year ended
December 31, 2000 gives effect to the following transactions:

(i) The initial public offering of common stock of the Company and
exchangeable shares of its subsidiary with the net proceeds used
to repay indebtedness.

(ii) SMTC Corporation's acquisition of all the issued and outstanding
shares of Pensar Corporation on the closing date of the initial
public offering for approximately $37,019 including acquisition
costs. The purchase consideration consisted of $18,000 in cash
consideration and costs and 1,188,682 shares of common stock of
SMTC Corporation. The valuation of the Company's shares issued
as consideration was based on the Company's initial public
offering price.

(iii) SMTC Corporation's acquisition of all the issued and outstanding
shares of Qualtron Teoranta for approximately $26,900 including
acquisition costs. The final purchase price is subject to a
working capital adjustment. The purchase consideration consists
of $14,355 in cash consideration and costs and 547,114
exchangeable shares of SMTC Corporation's subsidiary, SMTC
Manufacturing Corporation of Canada.

The unaudited pro forma consolidated financial information for the year
ended December 31, 2000 has been prepared by management of SMTC Corporation
based on the audited consolidated financial information of SMTC Corporation
(formerly HTM Holdings, Inc.) for the year ended December 31, 2000, the
unaudited financial statements of Pensar Corporation for the period from
January 1, 2000 to July 27, 2000 and the unaudited financial statements of
Qualtron Teoranta for the period from January 1, 2000 to November 22, 2000.

The unaudited pro forma consolidated statement of earnings does not
reflect the net after-tax extraordinary loss of $2.7 million resulting from
debt prepayment penalties of $0.3 million, the write-off of unamortized
debt financing fees of $2.9 million and the write-off of the value of the
warrants issued in excess of the proceeds received of $1.1 million, net of
a tax recovery of $1.6 million.

The acquisitions are accounted for by the purchase method. The total
purchase consideration is allocated to the identifiable assets acquired and
liabilities assumed based on their respective fair values as at the date of
acquisition, with the excess amounts allocated to goodwill, which will be
amortized over a useful life of ten years.

Accounting policies used in the preparation of the unaudited pro forma
consolidated financial information are those disclosed in the SMTC
Corporation consolidated financial statements as at and for the year ended
December 31, 2000. The unaudited pro forma consolidated financial
information should be read in conjunction with the separate historical
audited consolidated financial statements of SMTC Corporation (formerly HTM
Holdings, Inc.), Pensar Corporation and Qualtron Teoranta.

The pro forma consolidated financial information is not necessarily
indicative of the actual results that would have occurred had the
acquisitions occurred on the dates indicated and is not necessarily
indicative

F-5

SMTC CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION--(Continued)
(In thousands of U.S. dollars)
Year ended December 31, 2000
of the results of operations or financial condition that actually would
have been achieved if the acquisitions had been completed on the dates
indicated, or that may be reported in the future. In preparing pro forma
information, no adjustments have been made to reflect expenses expected to
be incurred to finalize the integration of the acquired operations or the
full impact of the operating synergies expected to result from combining
the operations of SMTC Corporation and the acquired operations.

2.Pro forma adjustments:

The pro forma consolidated statement of earnings gives effect to the
acquisitions of Pensar Corporation and Qualtron Teoranta as if each had
taken place on January 1, 2000. The following reflects the allocation of
the purchase consideration for the acquisitions in accordance with the
purchase method of accounting:

Pensar Qualtron
Corporation Teoranta
----------- --------

Current assets........................................ $ 16,609 $13,041
Capital assets........................................ 5,299 1,858
Other long-term assets................................ 581 --
Goodwill and excess of purchase price over tangible
book value of net assets acquired.................... 26,563 18,075
Liabilities assumed................................... (12,033) (6,074)
-------- -------
Net assets acquired................................... $ 37,019 $26,900
======== =======

(a) Reflects the additional amortization expense of $1,555 for Pensar
Corporation and $1,657 for Qualtron Teoranta related to goodwill and
the excess of purchase price over tangible book value of net assets
acquired. The amortization is based on an estimated useful life of 10
years.

(b) Reflects the decrease in amortization of debt issuance costs as a
result of the application of the offering proceeds to reduce
indebtedness.

(c) Reflects the additional interest expense of $873 for Pensar Corporation
and $1,092 for Qualtron Teoranta related to the borrowings required by
SMTC Corporation to complete the Pensar Corporation and Qualtron
Teoranta acquisitions based on the Company's incremental borrowing rate
on December 31, 2000 of LIBOR plus 250 basis points.

(d) Reflects the decrease in interest expense in connection with the use of
net proceeds from the offering to repay outstanding debt as follows:

Pro forma interest expense (including acquisitions)............. $15,970
Elimination of historical and pro forma interest resulting from
the application of offering proceeds........................... (8,286)
-------
Pro forma interest expense subsequent to the offering........... $ 7,684
=======

The elimination of historical and pro forma interest is calculated by
applying the offering proceeds, including the overallotment proceeds,
net of the prepayment penalty to outstanding debt balances (including
the debt related to the acquisitions) net of $5,000 to be applied to
the subordinated notes

F-6

SMTC CORPORATION
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(In thousands of U.S. dollars, except per share amounts)
Year ended December 31, 2000
(Unaudited)
issued in May 2000 and $9,925 of demand notes issued in July 2000, as
if the proceeds were applied at January 1, 2000. The proceeds were
applied against the entire balance outstanding on the subordinated
debt, term loans, Pensar Corporation debt and a portion of the
revolving credit facility.

(e) Reflects the income tax effect of:

. the goodwill amortization (adjustment (a)) at a 40% effective tax
rate. The goodwill amortization of $1,555 in connection with the
acquisition of Pensar Corporation is tax deductible. The goodwill
amortization of $1,657 in connection with the Qualtron Teoranta
acquisition is not tax deductible;

. adjustments (b), (c) and (d) at a 40% effective tax rate; and

. treating Pensar Corporation as a "C" Corporation. Prior to its
acquisition by SMTC Corporation, Pensar Corporation held subchapter
"S" status for federal and state income tax purposes, thereby
consenting to include the Company's income in the shareholders'
individual income tax returns.

F-7

AUDITORS' REPORT

To the Board of Directors of SMTC Corporation

We have audited the accompanying consolidated balance sheets of SMTC
Corporation (formerly HTM Holdings, Inc.) and subsidiaries as at December 31,
1999 and 2000, and the related consolidated statements of operations, changes
in shareholders' equity (deficiency), and cash flows for each of the years in
the two-year period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SMTC
Corporation and subsidiaries as at December 31, 1999 and 2000, and the results
of its operations and its cash flows for each of the years in the two-year
period ended December 31, 2000 in accordance with United States generally
accepted accounting principles.

United States generally accepted accounting principles vary in certain
significant respects from accounting principles generally accepted in Canada.
Application of accounting principles generally accepted in Canada would have
affected results of operations for each of the years in the three-year period
ended December 31, 2000 and shareholders' equity (deficiency) as at December
31, 1999 and 2000 to the extent summarized in note 22 to the consolidated
financial statements.

/s/ KPMG LLP

Chartered Accountants

Toronto, Canada
February 9, 2001

F-8

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of SMTC Corporation (formerly HTM Holdings, Inc.):

We have audited the accompanying consolidated balance sheet of SMTC
Corporation (a Delaware corporation, formerly HTM Holdings, Inc.) and its
subsidiary as of December 31, 1998, and the related consolidated statements of
earnings (loss), changes in shareholders' equity (deficiency) and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SMTC Corporation (formerly HTM Holdings, Inc.) and its subsidiary as of
December 31, 1998, and the results of their operations and their cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States.

/s/ ARTHUR ANDERSEN LLP

Denver, Colorado
March 10, 1999

F-9

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars)

December 31, 1999
and 2000
------------------
1999 2000
-------- --------

Assets
Current assets:
Cash and short-term investments......................... $ 2,083 $ 2,698
Accounts receivable (note 4)............................ 71,597 194,749
Inventories (note 5).................................... 61,680 191,821
Prepaid expenses........................................ 3,647 5,233
Deferred income taxes (note 10)......................... 1,527 1,044
-------- --------
140,534 395,545
Capital assets (note 6)................................... 35,003 58,564
Goodwill (note 7)......................................... 40,800 80,149
Other assets (note 8)..................................... 11,145 9,859
Deferred income taxes (note 10)........................... 623 3,359
-------- --------
$228,105 $547,476
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable........................................ $ 53,119 $141,574
Accrued liabilities..................................... 29,307 51,695
Income taxes payable.................................... 1,127 5,458
Current portion of long-term debt (note 9).............. 2,000 7,500
Current portion of capital lease obligations (note 9)... 1,541 995
-------- --------
87,094 207,222
Capital lease obligations (note 9)........................ 1,537 1,242
Long-term debt (note 9)................................... 128,942 108,305
Deferred income taxes (note 10)........................... 2,733 2,221
Shareholders' equity:
Capital stock (note 11)................................. 3 77,427
Warrants (note 11)...................................... 367 367
Loans receivable (note 11).............................. (60) (27)
Additional paid-in-capital.............................. 11,804 151,396
Deficit................................................. (4,315) (677)
-------- --------
7,799 228,486
Commitments and contingencies (notes 15 and 16)
United States and Canadian accounting policy differences
(note 22)................................................ $228,105 $547,476
======== ========

See accompanying notes to consolidated financial statements.

F-10

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)

Years ended December 31,
--------------------------------
1998 1999 2000
--------- --------- ----------

Revenue..................................... $ 89,687 $ 257,962 $ 782,763
Cost of sales............................... 82,528 236,331 714,420
--------- --------- ----------
Gross profit................................ 7,159 21,631 68,343
Selling, general and administrative
expenses................................... 3,280 13,332 34,614
Amortization................................ 151 1,990 6,229
Leveraged recapitalization expenses (note
2(a)(ii)).................................. 2,219 -- --
--------- --------- ----------
Operating income............................ 1,509 6,309 27,500
Interest (note 9)........................... 2,030 7,066 13,837
--------- --------- ----------
Earnings (loss) before income taxes......... (521) (757) 13,663
Income taxes (recovery) (note 10):
Current................................... 15 442 7,954
Deferred.................................. (208) (335) (607)
--------- --------- ----------
(193) 107 7,347
--------- --------- ----------
Earnings (loss) before extraordinary loss... (328) (864) 6,316
Extraordinary loss, net of income tax
recovery of 1999--$811; 2000--$1,640 (note
17)........................................ -- (1,279) (2,678)
--------- --------- ----------
Net earnings (loss)......................... $ (328) $ (2,143) $ 3,638
========= ========= ==========
Earnings (loss) per common share (note 20):
Earnings (loss) before extraordinary loss... $ (328) $ (864) $ 6,316
Preferred share dividends................... (609) -- --
Class L preferred entitlement............... -- (2,185) (3,164)
--------- --------- ----------
Earnings (loss) before extraordinary loss
attributable to common shareholders........ (937) (3,049) 3,152
Extraordinary loss.......................... -- (1,279) (2,678)
--------- --------- ----------
Earnings (loss) attributable to common
shareholders............................... $ (937) $ (4,328) $ 474
========= ========= ==========
Earnings (loss) per common share before
extraordinary loss......................... $ (0.44) $ (1.89) $ 0.24
Extraordinary loss per common share......... -- (0.79) (0.20)
--------- --------- ----------
Basic earnings (loss) per common share...... $ (0.44) $ (2.68) $ 0.04
========= ========= ==========
Diluted earnings (loss) per common share.... $ (0.44) $ (2.68) $ 0.03
========= ========= ==========
Weighted average number of shares
outstanding:
Basic..................................... 2,147,130 1,617,356 13,212,076
Diluted................................... 2,147,130 1,617,356 13,736,616
========= ========= ==========

See accompanying notes to consolidated financial statements.

F-11

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
(Expressed in thousands of U.S. dollars)

Years ended December 31, 1998, 1999 and 2000
-------------------------------------------------------------------------
Total
Additional shareholders'
Capital Treasury paid-in Loans equity
stock Warrants stock capital receivable Deficit (deficiency)
--------- -------- -------- ---------- ---------- ------- -------------
(note 11)

Balance, December 31,
1997................... $ 5 $ -- $ -- $ 5,971 $-- $(1,844) $ 4,132
Shares issued........... 2 -- -- 7,907 -- -- 7,909
Warrants issued......... -- 367 -- -- -- -- 367
Preferred share
dividends.............. -- -- -- (609) -- -- (609)
Shares repurchased...... (1) -- (21,938) -- -- -- (21,939)
Loss for the year....... -- -- -- -- -- (328) (328)
------- ------ ------- -------- ---- ------- --------
Balance, December 31,
1998................... 6 367 (21,938) 13,269 -- (2,172) (10,468)
Acquisition of SMTC
Corporation............ (3) -- 21,938 (1,525) -- -- 20,410
Options exercised....... -- -- -- 60 (60) -- --
Loss for the year....... -- -- -- -- -- (2,143) (2,143)
------- ------ ------- -------- ---- ------- --------
Balance, December 31,
1999................... 3 367 -- 11,804 (60) (4,315) 7,799
Warrants issued......... -- 3,598 -- -- -- -- 3,598
Warrants exercised...... 4 (3,598) -- 3,594 -- -- --
Share reorganization.... 116 -- -- (116) -- -- --
Shares issued on
completion of initial
public offering, net of
costs of $20,706....... 64,976 -- -- 116,718 -- -- 181,694
Shares issued on
acquisition of Pensar
Corporation............ 12 -- -- 19,007 -- -- 19,019
Options exercised....... -- -- -- 160 -- -- 160
Shares issued on
acquisition of Qualtron
Teoranta............... 12,545 -- -- -- -- -- 12,545
Conversion of shares
from exchangeable to
common stock........... (229) -- -- 229 -- -- --
Repayment of loans
receivable............. -- -- -- -- 33 -- 33
Net earnings............ -- -- -- -- -- 3,638 3,638
------- ------ ------- -------- ---- ------- --------
Balance, December 31,
2000................... $77,427 $ 367 $ -- $151,396 $(27) $ (677) $228,486
======= ====== ======= ======== ==== ======= ========

See accompanying notes to consolidated financial statements.

F-12

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)

Years ended December 31,
-----------------------------
1998 1999 2000
-------- -------- ---------

Cash provided by (used in):
Operations:
Net earnings (loss)........................... $ (328) $ (2,143) $ 3,638
Items not involving cash:
Amortization................................ 151 1,990 6,229
Depreciation................................ 2,869 6,452 9,595
Deferred income tax provision (benefit)..... (208) (335) (71)
Loss (gain) on disposition of capital
assets..................................... (6) 160 (60)
Loss on early extinguishment of debt........ -- 1,279 2,461
Change in non-cash operating working capital:
Accounts receivable......................... (9,895) 4,441 (110,131)
Inventories................................. (1,170) (15,217) (118,455)
Prepaid expenses and other.................. 105 (1,705) (1,316)
Accounts payable and accrued liabilities.... 4,709 (1,487) 103,200
-------- -------- ---------
(3,773) (6,565) (104,910)
Financing:
Increase in bank indebtedness................. 1,212 -- --
Repayment of bank indebtedness................ -- (6,559) --
Increase in restricted cash................... (250) -- --
Increase in long-term debt.................... -- 130,942 --
Repayment of long-term debt................... -- (69,261) (19,717)
Principal payments on notes payable........... (175) -- --
Principal payments on capital lease
obligations.................................. (1,319) (1,571) (1,427)
Proceeds from warrants........................ -- -- 2,500
Issuance of subordinated notes................ -- -- 5,000
Repayment of subordinated notes............... -- -- (5,000)
Issuance of demand notes...................... -- -- 9,925
Repayment of demand notes..................... -- -- (9,925)
Proceeds from notes payable................... 25,000 -- --
Proceeds from issuance of common stock........ 9,252 -- 202,560
Dividends paid on preferred stock............. (609) -- --
Stock issuance costs.......................... (1,342) -- (23,400)
Repurchase of stock........................... (26,160) -- --
Repayment of loans receivable................. -- -- 33
Debt issuance costs........................... (1,296) (3,975) (1,450)
-------- -------- ---------
4,313 49,576 159,099
Investments:
Acquisitions, net of $4,672 (1999--$698) cash
acquired..................................... -- (31,619) (27,683)
Purchases of capital assets................... (505) (4,130) (25,676)
Proceeds from sale of capital assets.......... 30 8 278
Cash in escrow................................ -- (5,735) --
Purchase of other assets...................... -- 62 (493)
-------- -------- ---------
(475) (41,414) (53,574)
-------- -------- ---------
Increase in cash and cash equivalents........... 65 1,597 615
Cash and cash equivalents, beginning of year.... 421 486 2,083
-------- -------- ---------
Cash and cash equivalents, end of year.......... $ 486 $ 2,083 $ 2,698
======== ======== =========

Supplemental cash flow information (note 14)
See accompanying notes to consolidated financial statements.

F-13

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

1.Nature of business:

The Company is a worldwide provider of advanced electronics
manufacturing services to original equipment manufacturers. The Company
services its customers through eleven manufacturing and technology centres
located in the United States, Canada, Europe and Mexico.

The Company's accounting principles are in accordance with accounting
principles generally accepted in the United States and, except as outlined
in note 22, are, in all material respects, in accordance with accounting
principles generally accepted in Canada.

2. Significant accounting policies:

(a) Basis of presentation:

(i) Business combination between HTM Holdings, Inc. and SMTC
Corporation:

Effective July 30, 1999, SMTC Corporation acquired 100% of the
outstanding common shares of HTM Holdings, Inc. SMTC Corporation
issued 1,393,971 Class A shares and 154,168 Class L shares to the
shareholders of HTM Holdings, Inc. for $16,739 cash consideration
and 100% of the outstanding shares of HTM Holdings, Inc.
Simultaneously, the former shareholders of SMTC Corporation
subscribed for an additional 26,701 Class N shares for nominal
consideration. Upon completion of these transactions, the former HTM
Holdings, Inc. shareholders held 58% of the outstanding shares of
SMTC Corporation. Accordingly, the acquisition is recorded as a
reverse takeover of SMTC Corporation by HTM Holdings, Inc. and
accounted for using the purchase method. Application of reverse
takeover accounting results in the following:

(a) The consolidated financial statements of the combined entity are
issued under the name of the legal parent (SMTC Corporation) but
are considered a continuation of the financial statements of the
legal subsidiary (HTM Holdings, Inc.).

(b) As HTM Holdings, Inc. is deemed to be the acquiror for
accounting purposes, its assets and liabilities are included in
the consolidated financial statements of the continuing entity
at their carrying values and the comparative figures reflect the
results of operations of HTM Holdings, Inc.

(c) Control of the net assets and operations of SMTC Corporation is
deemed to be acquired by HTM Holdings, Inc. effective July 30,
1999. For purposes of this transaction, the deemed consideration
is $24,703, being the $20,410 fair value of the outstanding
common shares of SMTC Corporation immediately prior to the
business combination plus transaction costs of $4,293.

Details of net assets acquired at fair value are as follows:

Current assets.............................................. $ 84,423
Capital assets.............................................. 21,093
Goodwill.................................................... 24,863
Liabilities assumed......................................... (105,676)
---------
Net assets acquired......................................... $ 24,703
=========

F-14

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(ii) Recapitalization transaction:

On June 8, 1998, HTM Holdings, Inc. completed a leveraged
recapitalization and reorganization in which it sold 1,800,424 new
shares to an investment company, reacquired 92% of its then
outstanding common shares, retired its preferred stock and settled
all options outstanding under its 1993 stock option plan.

In connection with the recapitalization, the Company contributed
substantially all of its assets and liabilities to a newly formed
subsidiary in exchange for 100% of the subsidiary's stock, and
changed its name from Hi-Tech Manufacturing, Inc. to HTM Holdings,
Inc. The subsidiary adopted the Hi-Tech Manufacturing, Inc. name.
The subsidiary borrowed $13,000 in senior debt and $12,000 in
subordinated debt and entered into a $15,000 revolving line of
credit agreement. The stock of the subsidiary was pledged as
collateral for the senior debt and line of credit. The subsidiary
loaned approximately $21,000 to the Company.

The net sources and uses of proceeds were as follows:

Borrowings..................................................... $ 23,700
Stock proceeds................................................. 7,900
Repurchase of stock............................................ (26,800)
--------
$ 4,800
========

Subsequent to the leveraged recapitalization, an investment
company held 92% of the outstanding common stock of the parent.

Transaction costs related to the leveraged recapitalization and
compensation expense arising from the settlement of stock options
resulted in a $2,219 charge to operating income in fiscal 1998.

(b) Principles of consolidation:

The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated on consolidation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting year. Actual results may differ from those estimates.

(d) Revenue recognition:

Revenue from the sale of products is recognized when goods are shipped
to customers. Revenue from the provision of services is recognized when
services are provided. The earnings process is complete upon shipment of
products and provision of services.

(e) Cash and short-term investments:

Cash and short-term investments include cash on hand and deposits with
banks with original maturities of less than three months.

F-15

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(f) Inventories:

Inventories are valued on a first-in, first-out basis at the lower of
cost and replacement cost for raw materials and at the lower of cost and
net realizable value for work in progress. Inventories include an
application of relevant overhead.

(g) Capital assets:

Capital assets are recorded at cost and depreciated on a straight-line
basis over their estimated useful lives as follows:

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

Buildings............................................... 20 years
Machinery and equipment................................. 7 years
Office furniture and equipment.......................... 7 years
Computer hardware and software.......................... 3 years
Leasehold improvements.................................. Over term of lease
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(h) Goodwill:

Goodwill represents the excess of cost over the fair value of net
tangible assets acquired in facility acquisitions and other business
combinations. Goodwill is amortized on a straight-line basis over 10 years.
The recoverability of goodwill is reviewed whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment of value is recorded if undiscounted projected future net cash
flows of the acquired operation are determined to be insufficient to
recover goodwill. The amount of goodwill impairment, if any, is measured
based on projected discounted future net cash flows using a discount rate
reflecting the Company's average cost of funds.

(i) Other assets:

Costs incurred relating to the issuance of debt are deferred and
amortized over the term of the related debt. Amortization of debt issuance
costs is included in amortization expense in the consolidated statements of
operations. Deferred lease costs are amortized over the term of the lease.

(j) Income taxes:

Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year end, based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable earnings. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
more likely than not to be realized. The effect of changes in tax rates is
recognized in the period in which the rate change occurs.

(k) Stock-based compensation:

The Company accounts for stock options issued to employees using the
intrinsic value method of Accounting Principles Board Opinion No. 25.
Compensation expense is recorded on the date stock options are granted only
if the current fair value of the underlying stock exceeds the exercise
price. The Company has provided the pro forma disclosures required by
Statement of Financial Accounting Standards No. 123.

F-16

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(l) Foreign currency translation:

The functional currency of all foreign subsidiaries is the U.S. dollar.
Monetary assets and liabilities denominated in foreign currencies are
translated into U.S. dollars at the year-end rates of exchange. Non-
monetary assets and liabilities denominated in foreign currencies are
translated at historic rates and revenue and expenses are translated at
average exchange rates prevailing during the month of the transaction.
Exchange gains or losses are reflected in the consolidated statements of
operations.

(m) Financial instruments and hedging:

The Company enters into interest rate swap contracts to hedge its
exposure to changes in interest rates on its long-term debt. The contracts
have the effect of converting the floating rate of interest on $65,000 of
the senior credit facility to a fixed rate. Net receipts, payments and
accruals under the swap contracts are recorded as adjustments to interest
expense.

If a swap is terminated prior to its maturity, the gain or loss is
recognized over the remaining original life of the swap if the item hedged
remains outstanding or immediately, if the item hedged does not remain
outstanding. If the swap is not terminated prior to maturity, but the
underlying hedged item is no longer outstanding, the interest rate swap is
marked to market and any unrealized gain or loss is recognized immediately.

One of the Company's subsidiaries has entered into forward foreign
currency contracts to hedge foreign currency exposures on future sales. As
the contracts do not meet the criteria for hedge accounting, the Company
records those contracts on the balance sheet at their fair values and any
corresponding unrealized gains or losses are recognized in the statements
of operations.

(n) Impairment of long-lived assets:

The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairments whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of
the assets.

(o) Comprehensive income:

Comprehensive income includes all changes in equity (net assets) during
a period from non-owner sources. During each of the years in the three-year
period ended December 31, 2000 comprehensive income was equal to net
earnings (loss).

(p) Recently issued accounting pronouncements:

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133
establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. SFAS No. 133 requires all derivatives to be recognized either
as assets or liabilities and measured at fair value. The Company will
implement SFAS No. 133 for its first quarter ended March 31, 2001. In
accordance

F-17

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

with the new standard, the Company will account for its existing interest
rate swaps as cash flow hedges. If the Company applied the new standard at
December 31, 2000, the Company would record an $85 liability on its balance
sheet and an $85 charge to other comprehensive income as a cumulative
effect type adjustment to reflect the initial mark to market on the
interest rate swaps.

3. Acquisitions:

In addition to the business combination between HTM Holdings, Inc. and
SMTC Corporation (note 2(a)(i)), the Company completed two acquisitions
during 1999 and two acquisitions during 2000, which were accounted for as
purchases. The results of operations of the facilities acquired are
included in these financial statements from their respective dates of
acquisition.

Acquisitions completed in 1999:

(a) In July 1999, the Company acquired a manufacturing facility
operated by Zenith Electronics Corporation in Chihuahua, Mexico. Zenith
used the facility to manufacture components included in Zenith products.
The transaction was effected through the acquisition of the outstanding
shares of Cableproducts de Chihuahua, S.A. de C.V. ("Cableproducts") and
Radio Components de Mexico, S.A. de C.V. ("Radio"). The total purchase
price of $8,352 was financed with cash. Under the provisions of the
purchase agreement, Zenith may claim additional consideration in the form
of cash if certain production volumes are achieved. The contingent
consideration will be amortized over the remaining term of the supply
contract with Zenith if and when paid. Of the purchase price, $5,735 is
being held in escrow and will be released pending the resolution of certain
liabilities, including the settlement of a portion of the contingent
consideration.

(b) In September 1999, the Company acquired 100% of the issued and
outstanding shares of W.F. Wood, Incorporated. W.F. Wood, Incorporated
operates a manufacturing facility that provides high precision enclosures,
located in Boston, Massachusetts. The total purchase price of $19,672 was
financed with cash.

Acquisitions completed in 2000:

(a) On July 27, 2000, simultaneously with the closing of the initial
public offering, the Company acquired Pensar Corporation, an electronics
manufacturing services company specializing in design services and located
in Appleton, Wisconsin. The total purchase price including transaction
costs was $37,019 resulting in goodwill of approximately $26,563. The
purchase consideration consisted of $18,000 cash and the balance in
1,188,682 shares of common stock of the Company. The cash portion of the
acquisition was financed with a portion of the proceeds from the initial
public offering.

(b) On November 22, 2000, the Company acquired Qualtron Teoranta, a
provider of specialized custom made cable harnesses and fibre optic
assemblies located in Donegal, Ireland. The total purchase price including
transaction costs was $26,900 resulting in goodwill of approximately
$18,075. The final purchase price is subject to a working capital
adjustment. The purchase consideration consisted of $14,355 cash and the
balance in 547,114 exchangeable shares of SMTC Manufacturing Corporation of
Canada, a subsidiary of the Company.

F-18

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

Details of the net assets acquired in these acquisitions, at fair value,
are as follows:

Chihuahua
Manufacturing W.F. Wood, Pensar Qualtron
Facility Incorporated Corporation Teoranta
------------- ------------ ----------- --------

Current assets............. $ -- $ 6,354 $16,609 $13,041
Capital assets............. 9,094 1,695 5,299 1,858
Other long-term assets..... -- 20 581 --
Goodwill................... -- 17,468 26,563 18,075
Liabilities assumed........ -- (5,865) (12,033) (6,074)
Deferred income taxes...... (742) -- -- --
------ ------- ------- -------
Net assets acquired........ $8,352 $19,672 $37,019 $26,900
====== ======= ======= =======

The following unaudited pro forma consolidated financial information for
the year ended December 31, 1999 reflects the impact of the business
combination with SMTC Corporation and the acquisitions of W.F. Wood,
Incorporated, Pensar Corporation and Qualtron Teoranta assuming the
acquisitions had occurred at the beginning of 1999. The following unaudited
pro forma consolidated financial information for the year ended December
31, 2000 reflects the impact of the acquisitions of Pensar Corporation and
Qualtron Teoranta assuming the acquisitions had occurred at the beginning
of 2000. This unaudited pro forma consolidated financial information has
been provided for information purposes only and is not necessarily
indicative of the results of operations or financial condition that
actually would have been achieved if the acquisitions had been on the date
indicated, or that may be reported in the future:

1999 2000
-------- --------
(Unaudited)

Revenue.................................................. $530,690 $842,563
Earnings (loss) before extraordinary loss................ (1,767) 5,662
Net earnings (loss)...................................... (3,046) 2,984
Basic earnings (loss) per share.......................... (1.46) 0.22
Diluted earnings (loss) per share........................ (1.46) 0.21

4.Accounts receivable:

Accounts receivable at December 31, 2000 are net of an allowance for
doubtful accounts of $2,368 (1999--$514).

5.Inventories:

1999 2000
------- --------

Raw materials............................................... $35,371 $107,767
Work in progress............................................ 17,124 56,521
Finished goods.............................................. 8,578 25,493
Other....................................................... 607 2,040
------- --------
$61,680 $191,821
======= ========

F-19

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

6.Capital assets:

Accumulated Net book
1999 Cost depreciation value
---- ------- ------------ --------

Land........................................... $ 2,060 $ -- $ 2,060
Buildings...................................... 5,099 59 5,040
Machinery and equipment........................ 31,150 12,789 18,361
Office furniture and equipment................. 2,540 479 2,061
Computer hardware and software................. 3,838 1,371 2,467
Leasehold improvements......................... 6,065 1,051 5,014
------- ------- -------
$50,752 $15,749 $35,003
======= ======= =======

Accumulated Net book
2000 Cost depreciation value
---- ------- ------------ --------

Land........................................... $ 3,134 $ -- $ 3,134
Buildings...................................... 11,653 313 11,340
Machinery and equipment........................ 41,301 17,953 23,348
Office furniture and equipment................. 3,965 1,091 2,874
Computer hardware and software................. 8,004 3,339 4,665
Leasehold improvements......................... 15,726 2,523 13,203
------- ------- -------
$83,783 $25,219 $58,564
======= ======= =======

Property and equipment under capital leases included in capital assets
at December 31, 2000 was $2,027 (1999--$8,981) and accumulated depreciation
of equipment under capital leases at December 31, 2000 was $917 (1999--
$8,123).

Included in the total depreciation expense for the year ended December
31, 2000 of $9,595 (1999--$6,452; 1998--$2,869) is $273 (1999--$1,358;
1998--$1,305) relating to the depreciation of equipment under capital
leases.

7.Goodwill:

Accumulated Net book
1999 Cost depreciation value
---- ------- ------------ --------

Goodwill....................................... $42,331 $1,531 $40,800
======= ====== =======

Accumulated Net book
2000 Cost depreciation value
---- ------- ------------ --------

Goodwill....................................... $86,969 $6,820 $80,149
======= ====== =======

8.Other assets:

1999 2000
------- ------

Deferred financing costs, net of accumulated amortization
of $868 (1999--$277)...................................... $ 3,698 $1,696
Restricted cash and cash held in escrow.................... 5,985 5,985
Deferred lease costs, net of accumulated amortization of
$379 (1999--$30).......................................... 1,430 1,072
Other...................................................... 32 1,106
------- ------
$11,145 $9,859
======= ======

F-20

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

9.Long-term debt and capital leases:

1999 2000
-------- --------

Revolving credit facilities (a)........................... $ 35,942 $ 68,305
Term loans (a)............................................ 85,000 47,500
Subordinated debt......................................... 10,000 --
-------- --------
130,942 115,805
Less current portion...................................... 2,000 7,500
-------- --------
$128,942 $108,305
======== ========

For the period from January 1, 1999 to July 26, 2000:

Concurrent with the business combination of HTM Holdings, Inc. and SMTC
Corporation, the Company and certain of its subsidiaries entered into a
senior credit facility that provided for $85,000 in terms loans, $10,000 in
subordinated debt and $60,000 in revolving credit loans, swing-line loans
and letters of credit. The senior credit facility was secured by a security
agreement over all assets and required the Company to meet certain
financial ratios and benchmarks and to comply with certain restrictive
covenants. The revolving credit facilities terminated in July 2004. The
term loans matured in quarterly instalments from September 2000 to June
2004 for $35,000 of the term loans and from September 2000 to December 2005
for $50,000 of the term loans. Term loans totalling $35,000 were repaid
from proceeds of the initial public offering. The $10,000 subordinated debt
was payable in one instalment on September 30, 2006 and was repaid from
proceeds of the initial public offering.

The revolving credit loans and term loans bore interest at varying rates
based on either the Eurodollar base rate plus 2.25% to 3.50%, the U.S. base
rate plus 0.50% to 1.75% or the Canadian prime rate plus 0.50% to 1.75%.

The subordinated debt bore interest at the Eurodollar base rate plus
4.75% or the U.S. base rate plus 3.00%.

In May 2000, the Company's lenders increased the revolving credit
facility from $60,000 to $67,500. The Company issued senior subordinated
notes to certain shareholders for proceeds of $5,000. The notes bore
interest at 15% per annum. The notes were repaid from proceeds of the
initial public offering.

On July 3, 2000, the Company issued demand notes in the aggregate
principal amount of $9,925. Of these demand notes, $5,925 in aggregate
principal amount was secured by a portion of the capital assets of the
Company and certain of its subsidiaries. The demand notes bore a fee of 3%
of the principal amount accruing on the date of issuance and interest of
13.75% per year and were payable to the holders of the notes at any time
upon demand. The demand notes were repaid of proceeds of the initial public
offering.

For the period from July 27, 2000 to December 31, 2000:

(a) In connection with the initial public offering, the Company and
certain of its subsidiaries entered into an amended and restated credit
agreement that provides for $50,000 in an initial term loan and $100,000 in
revolving credit loans, swing-line loans and letters of credit. The senior
credit facility is secured by a security agreement over all assets and
requires the Company to meet certain financial ratios and benchmarks and to
comply with certain restrictive covenants. The revolving credit facilities
terminate in July 2004. The term loans mature in quarterly instalments from
September 2000 to June 2004.

F-21

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

The revolving credit loans and term loans bear interest at varying rates
based on either the Eurodollar base rate plus 2.00% to 3.00%, the U.S. base
rate plus 0.25% to 1.25% or the Canadian prime rate plus 0.25% to 1.25%.

The Company has entered into interest rate swaps to exchange the 90-day
floating LIBOR rates on $65,000 of borrowings for a two-year fixed interest
rate of 6.16% (before credit spread) per annum (note 12).

The weighted average interest rate on the borrowings in 2000 was 9.9%.

The Company is required to pay the lenders a commitment fee of 0.5% of
the average unused portion of the revolving credit facility. Commitment
fees of $128 were incurred in 2000.

As at December 31, 2000, principal repayments due within each of the next
four years are as follows:

2001................................................................ $ 7,500
2002................................................................ 12,500
2003................................................................ 17,500
2004................................................................ 78,305
--------
$115,805
========

(b) Senior notes payable outstanding in 1998 and through to July 30,
1999 bore interest based on the prime rate or LIBOR. The weighted average
interest rate was 7.64% in 1999.

(c) Subordinated notes outstanding in 1998 and through July 30, 1999
were held by affiliates of certain shareholders of HTM Holdings, Inc. The
weighted average interest rate was 11.5% in 1999.

(d) Lines of credit:

For the period up to July 30, 1999, the Company had a line of credit for
borrowings up to a maximum of $15,000. The weighted average interest rate
on the line of credit was 7.35% in 1999.

(e) Capital lease obligations:

Minimum lease payments for capital leases consist of the following at
December 31, 2000:

2001................................................................. $1,143
2002................................................................. 619
2003................................................................. 551
2004................................................................. 152
2005................................................................. 46
------
Total minimum lease payments......................................... 2,511
Less amount representing interest of 8% to 11%....................... 274
------
2,237
Less current portion................................................. 995
------
$1,242
======

F-22

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

The Company is required to maintain $250 in a certificate of deposit in
connection with certain capital lease obligations.

(f) Interest expense:

1998 1999 2000
------ ------ -------

Short-term obligations.............................. $ 584 $ 702 $ --
Long-term debt...................................... 1,105 6,061 13,765
Obligations under capital leases.................... 341 303 72
------ ------ -------
$2,030 $7,066 $13,837
====== ====== =======

10.Income taxes:

The components of income taxes are:

1998 1999 2000
----- ---- ------

Current:
Federal............................................... $ 15 $-- $3,448
Foreign............................................... -- 442 4,506
----- ---- ------
15 442 7,954
Deferred:
Federal............................................... (198) (267) (582)
State................................................. (10) (47) (68)
Foreign............................................... -- (21) 43
----- ---- ------
(208) (335) (607)
----- ---- ------
$(193) $107 $7,347
===== ==== ======

The overall effective income tax rate (expressed as a percentage of
financial statement earnings (loss) before income taxes) varied from the
U.S. statutory income tax rate as follows:

1998 1999 2000
---- ----- ----

Federal tax rate....................................... 34.0% 34.0% 34.3%
State income tax, net of federal tax benefit........... 3.0 6.0 4.0
Income of international subsidiaries taxed at different
rates................................................. -- 4.9 4.2
Change in valuation allowance.......................... -- (6.3) 1.5
Non-deductible goodwill amortization................... -- (50.1) 6.8
Other.................................................. -- (2.6) 3.0
---- ----- ----
Effective income tax rate.............................. 37.0% (14.1)% 53.8%
==== ===== ====

A tax benefit of $1,640 (1999--$811) has been allocated to the
extraordinary loss.

A tax benefit of $2,694 relating to share issue costs has been recorded
in capital stock and additional paid-in-capital.

F-23

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

Worldwide earnings (loss) before income taxes consisted of the
following:

1998 1999 2000
------ ------- -------

U.S................................................. $ (521) $(1,269) $ 5,651
Non-U.S............................................. -- 512 8,012
------ ------- -------
$(521) $ (757) $13,663
====== ======= =======

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
The Company's deferred tax liabilities and assets are comprised of the
following at December 31:

1999 2000
------ ------

Deferred tax assets:
Net operating loss carryforwards........................... $1,275 $1,485
Reserves, allowances and accruals.......................... 1,429 3,682
------ ------
2,704 5,167
Valuation allowance........................................ (554) (764)
------ ------
2,150 4,403
Deferred tax liabilities:
Capital and other assets................................... (2,733) (2,221)
------ ------
Net deferred tax assets (liabilities)........................ $ (583) $2,182
====== ======

At December 31, 2000, the Company had total net operating loss
carryforwards of approximately $9,300, which begin to expire in 2013.
Losses of $1,400 in one of the subsidiaries may only be used against
taxable income generated by that subsidiary. In assessing the realization
of deferred tax assets, management considers whether it is more likely than
not that some portion or all of its deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income by the appropriate subsidiaries
during those periods when the temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
change of control limitations, projected future taxable income and tax
planning strategies in making this assessment. Based upon consideration of
these factors, management believes the recorded valuation allowance related
to the loss carryforwards of a specific subsidiary is appropriate.

The valuation allowance in 1999 is higher than 1998 by $554 due to the
acquisition of certain loss carryforwards in the business combination
between HTM Holdings, Inc. and SMTC Corporation. The valuation allowance in
2000 is $210 higher than 1999 due to losses generated in one of the
Company's subsidiaries in 2000.

F-24

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

11.Capital stock:

(a) Authorized:

To July 30, 1999:

The authorized share capital of HTM Holdings, Inc. consisted of:

(i) 10,000,000 common shares, $0.01 par value per share;

(ii) 100,000 Series A preferred shares, convertible, $0.001 par value
per share, mandatorily redeemable for $11.48 per share;

(iii) 100,000 Series B preferred shares--$0.001 par value per share,
mandatorily redeemable for $11.48 per share; and

(iv) 250,000 Series C preferred shares, convertible, $0.001 par value
per share, mandatorily redeemable for $11.25 per share.

As a result of the business combination, described in note 2(a)(i),
HTM Holdings, Inc. became a wholly owned subsidiary of SMTC Corporation
on July 30, 1999. The authorized share capital of SMTC Corporation at
December 31, 1999 consists of:

(i) 11,720,000 Class A-1 voting common shares, par value $0.001 per
share:

Holders are entitled to one vote per share and to share in
dividends pro rata subject to any preferential rights of the Class L
shares.

(ii) 1,100,000 Class A-2 voting common shares, par value $0.001 per
share:

Holders are entitled to one vote per share and to share in
dividends pro rata subject to any preferential rights of the Class L
shares.

(iii) 300,000 Class L voting common shares, par value $0.001 per
share:

The number of votes per share is determined by a prescribed
formula and the holders are entitled to receive all dividends
declared on common stock until there has been paid a specified
amount based on an internal rate of return of 12% compounded
quarterly and a recovery of the initial amount of $162 per Class L
share, after which point, they are entitled to receive dividends pro
rata.

(iv) 125,000 Class N voting common shares, par value $0.001 per
share:

The number of votes per share are determined by a prescribed
formula and the holders are not entitled to receive dividends. The
holders of the Class N shares hold the exchangeable shares described
in note 11(c).

Each share of Class L and Class A-2 stock shall convert
automatically, under certain conditions, into Class A-1 shares based
on a prescribed formula for Class L shares and on a one-for-one
basis for Class A-2 shares.

F-25

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

As a result of the share reclassification and the initial public
offering, the authorized share capital of SMTC Corporation at December
31, 2000 consists of:

(i) 60,000,000 shares of common stock, par value $0.01 per share:

Holders are entitled to one vote per share and to share in dividends
pro rata subject to any preferential dividend rights of any then
outstanding preferred stock.

(ii) 5,000,000 shares of preferred stock, par value $0.01 per share:

The Company may from time to time issue preferred stock in one or
more series and fix the terms of that series at the time it is created.

(b) Issued and outstanding:

HTM Holdings, Inc. to July 30, 1999:

Common Preferred
Number of shares shares shares
---------------- ---------- ---------

Balance, December 31, 1997......................... 4,361,621 450,000
Shares issued...................................... 1,800,424 --
Shares repurchased................................. (4,215,641) (450,000)
---------- --------
Balance, December 31, 1998, being balance, July 30,
1999.............................................. 1,946,404 --
========== ========

The 4,215,641 common shares repurchased were held in treasury stock.

Common Preferred
Amount shares shares
------ ---------- ---------

Balance, December 31, 1997......................... $ 4 $ 1
Shares issued...................................... 2 --
Shares repurchased................................. -- (1)
---------- --------
Balance, December 31, 1998, being balance, July 30,
1999.............................................. $ 6 $ --
========== ========

In connection with the recapitalization, the Company contributed
substantially all of its assets and liabilities to a newly formed
subsidiary in exchange for 100% of the subsidiary's stock and changed its
name from Hi-Tech Manufacturing, Inc. The subsidiary borrowed $13,000 in
senior debt and $12,000 in subordinated debt and entered into a $15,000
revolving line of credit agreement. The stock of the subsidiary was pledged
as collateral for the senior debt and line of credit. The subsidiary loaned
approximately $21,000 to the Company.

F-26

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

SMTC Corporation from July 30, 1999 to December 31, 2000:

As a result of the application of reverse acquisition accounting to the
business combination with HTM Holdings, Inc., the number of outstanding
shares of the continuing consolidated entity consists of the number of
outstanding shares of SMTC Corporation outstanding at July 30, 1999.

Special
Class A Class L Class N Exchangeable Common voting
Number of shares shares shares shares shares stock stock
---------------- ---------- -------- -------- ------------ ---------- -------

Balance, July 29, 1999.. 1,020,671 -- 86,707 -- -- --
Issued to existing
shareholders (i)....... -- -- 26,701 113,408 -- --
Share transactions
related to the reverse
acquisition (ii)....... 1,393,971 154,168 -- -- -- --
Options exercised
(iii).................. 33,140 -- -- -- -- --
---------- -------- -------- --------- ---------- ----
Balance, December 31,
1999................... 2,447,782 154,168 113,408 113,408 -- --
Share reorganization
(i).................... (2,447,782) (154,168) (113,408) 1,356,037 11,871,517 1
Warrants exercised
(ii)................... -- -- -- -- 477,049 --
Shares issued on
completion of initial
public offering (iii).. -- -- -- 4,375,000 8,275,000 --
Acquisition of Pensar
Corporation (iv)....... -- -- -- -- 1,188,682 --
Options exercised (v)... -- -- -- -- 20,053 --
Acquisition of Qualtron
Teoranta (vi).......... -- -- -- 547,114 -- --
Conversion of shares
from exchangeable to
common stock (vii)..... -- -- -- (20,600) 20,600 --
---------- -------- -------- --------- ---------- ----
Balance, December 31,
2000.................... -- -- -- 6,370,959 21,852,901 1
========== ======== ======== ========= ========== ====

F-27

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

Special
Class A Class L Class N Exchangeable Common voting
Amount shares shares shares shares stock stock
------ ------- ------- ------- ------------ ------ -------

Ascribed value at the
date of the reverse
takeover (ii).......... $ 3 $ -- $ -- $ -- $-- $ --
Options exercised
(iii).................. -- -- -- -- -- --
----- ----- ----- ------- ---- -----
Balance, December 31,
1999................... 3 -- -- -- -- --
Share reorganization
(i).................... (3) -- -- -- 119 --
Warrants exercised
(ii)................... -- -- -- -- 4 --
Shares issued on
completion of initial
public offering (iii).. -- -- -- 64,893 83 --
Shares issued on
acquisition of Pensar
Corporation (iv)....... -- -- -- -- 12 --
Options exercised (v)... -- -- -- -- -- --
Shares issued on
acquisition of Qualtron
Teoranta (vi).......... -- -- -- 12,545 -- --
Conversion of shares
from exchangeable to
common stock (vii)..... -- -- -- (229) -- --
----- ----- ----- ------- ---- -----
Balance, December 31,
2000................... $ -- $ -- $ -- $77,209 $218 $ --
===== ===== ===== ======= ==== =====

The difference between the par value of the capital stock and the
accounting value ascribed at the date of the reverse takeover has been
credited to additional paid-in capital.

Capital transactions from July 30, 1999 to December 31, 1999:

(i) In connection with the business combination on July 30, 1999,
SMTC Corporation issued 26,701 Class N shares to its existing
shareholders for nominal cash consideration. The existing
shareholders also received the exchangeable shares described in
(c) below.

(ii) On July 30, 1999, SMTC Corporation issued 1,393,971 Class A-1
shares and 154,168 Class L shares to the shareholders of HTM
Holdings, Inc. in exchange for $16,739 cash consideration and
100% of the outstanding shares of HTM Holdings, Inc. The
ascribed value of the shares issued is equal to the $20,410 fair
value of SMTC Corporation at the time of the transaction.

(iii) On July 30, 1999, 33,140 Class A-1 restricted shares were
granted upon the exercise of options for consideration of $60 in
promissory notes receivable. The notes are secured by the shares
granted and bear interest at 5.7%. The notes have been recorded
as a reduction of shareholders' equity. The restrictions vest
over the original vesting period of the underlying 1998 HTM Plan
options. At December 31, 1999, 24,855 of the issued Class A
shares are subject to restrictions.

Capital transactions from January 1, 2000 to December 31, 2000:

(i) Concurrent with the effectiveness of the initial public offering
(see (iii) below), the Company completed a share capital
reorganization as follows:

(a) Each outstanding Class Y share of SMTC Corporation's
subsidiary, SMTC Manufacturing Corporation of Canada, was
purchased in exchange for shares of Class L common stock.

F-28

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(b) Each outstanding share of Class L common stock was converted
into one share of Class A common stock plus an additional
number of shares of Class A common stock.

(d) All outstanding shares of Class N common stock were redeemed
and one share of special voting stock was issued and is held by
a trustee for the benefit of the holders of the exchangeable
shares.

(e) Each SMTC Canada Class L exchangeable share was converted into
exchangeable shares of the same class as those being offered in
the offering in the same ratio as shares of Class L common
stock which were converted to shares of common stock.

(ii) On July 27, 2000, the Company issued 477,049 shares of common
stock on the exercise of 41,667 warrants.

(iii) On July 27, 2000, the Company completed an initial public
offering of its common stock in the United States and
exchangeable shares of its subsidiary, SMTC Manufacturing
Corporation of Canada, in Canada. The offering consisted of
6,625,000 shares of common stock at a price of $16.00 per share
and 4,375,000 exchangeable shares at a price of Cdn. $23.60 per
share (described in (c) below). The total net proceeds to the
Company from the offering of approximately $157,400 were used to
reduce its indebtedness under the senior credit facility, repay
the subordinated stockholders' notes issued in May 2000, repay
the demand notes issued in July 2000 and finance the cash
portion of the purchase price of the Pensar Corporation
acquisition. On August 18, 2000, the underwriters exercised
their over-allotment option with respect to 1,650,000 shares of
common stock at a price of $16.00 per share. The net proceeds to
the Company from the sales of those shares of $24,600 were used
to reduce indebtedness under the senior credit facility.

(iv) On July 27, 2000, simultaneously with the closing of the initial
public offering, the Company issued 1,188,682 shares of common
stock at a price of $16.00 per share to finance the share
portion of the purchase price of the Pensar Corporation
acquisition.

(v) Pursuant to employee share purchase and option plans, the
Company issued 20,053 shares from treasury for cash of $160.

(vi) On November 22, 2000, the Company issued 547,114 exchangeable
shares at a price of $22.93 per share to finance the share
portion of the Qualtron Teoranta acquisition.

(vii) During the year, 20,600 exchangeable shares were exchanged for
common stock.

On July 30, 1999, SMTC Manufacturing Corporation of Canada, a 100%
owned subsidiary of the Company, issued two classes of non-voting
shares which can be exchanged into 113,408 Class L common shares of the
Company on a one-for-one basis. The holders of the exchangeable shares
are entitled to receive dividends equivalent to the dividends declared
on Class L shares. The holders of exchangeable shares exercise, through
the special voting stock, essentially the same voting rights in respect
of the Company as they would if they had exchanged their shares into
shares of the Company's common stock.

F-29

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

On July 27, 2000, pursuant to the initial public offering, the
exchangeable shares convertible into 113,408 Class L common shares,
were converted to 1,469,445 exchangeable shares. The shares are
exchangeable into shares of the Company's common stock on a one-for-one
basis.

On July 27, 2000, pursuant to the initial public offering, SMTC
Manufacturing Corporation of Canada issued an additional 4,375,000
exchangeable shares at a price of Cdn. $23.60 per share.

On November 22, 2000, 547,114 exchangeable shares were issued to
finance the share portion of the purchase price of the Qualtron
Teoranta acquisition.

(d) Warrants:

Common
Class A Class L stock
Number warrants warrants warrants
------ -------- -------- --------

Balance, December 31, 1999................... 103,895 12,088 --
Warrants issued (i).......................... -- -- 41,667
Warrants conversion (ii)..................... (103,895) (12,088) 578,441
Warrants exercised (iii)..................... -- -- (41,667)
-------- ------- -------
Balance, December 31, 2000................... -- -- 578,441
======== ======= =======

1999 transactions:

In connection with the business combination between SMTC Corporation
and HTM Holdings, Inc., each existing warrant holder of HTM Holdings,
Inc. was granted equivalent warrants in SMTC Corporation and the
previous HTM Holdings, Inc. warrants were cancelled.

2000 transactions:

(i) On May 18, 2000, the Company issued 41,667 warrants for $2,500
cash consideration in connection with the issue of $5,000 in
subordinated notes (note 9). The value of the warrants in excess
of proceeds received, $1,098, was recorded as a deferred
financing cost and was written off upon early repayment of the
subordinated notes as an extraordinary loss (note 17).

(ii) On July 27, 2000, pursuant to the initial public offering, the
Class A and Class L warrants were converted into common stock
warrants.

(iii) On July 27, 2000, the Company issued 477,049 shares of common
stock on the exercise of warrants.

The Class A warrants and Class L warrants had an exercise price of
$1.82 and $147.57, respectively. The common stock warrants have a
weighted average exercise price of $3.41. The warrants have a term of
10 years and are exercisable from the date of grant. Each common stock
warrant is convertible into one common share.

F-30

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(e) Stock options:

1993 HTM Holdings Equity Plan:

In connection with the leveraged recapitalization in 1998, the stock
option plan adopted by HTM Holdings, Inc. in 1993 (the "1993 Plan") was
cancelled. HTM Holdings, Inc. permitted its employees to exercise all
outstanding options prior to the cancellation of the 1993 Plan by
executing notes payable for the exercise price. The shares issued to the
exercising employees were reacquired in connection with the leveraged
recapitalization and both the shares issued and the notes payable were
retired, resulting in a $2,108 non-recurring charge.

The weighted average grant date fair value of options granted during
1998 was $3.46 per share.

1998 HTM Plan:

In June 1998, HTM Holdings, Inc. adopted a new stock option plan (the
"1998 Plan") pursuant to which incentive stock options and non-qualified
stock options to purchase shares of common stock may be issued. The
Board of Directors authorized 122,685 shares to be issued under the 1998
Plan. Incentive stock options are granted at an exercise price not less
than the fair market value of the common stock on the date of grant, as
determined by the Board of Directors. Options generally vest over four
years and expire 10 years from their respective dates of grant.

1998 SMTC Plan:

In July 1999, the Company replaced the 1998 Plan with an equivalent
stock option plan. Each HTM option holder was granted equivalent options
in SMTC Corporation's stock. The Board of Directors authorized 165,000
Class A and 4,000 Class L options to be issued under the plan. The Class
A options vest immediately and are exercisable for Class A restricted
shares. The restrictions expire on the same basis as the Class L vesting
periods. The Class L options vest over a four-year period and expire
after 10 years from the original grant date of the 1998 Plan options.

2000 Equity Incentive Plan:

In July 2000, the Company approved a new stock option plan, the
SMTC/SMTC Manufacturing Corporation of Canada 2000 Equity Incentive Plan
(the "2000 Equity Incentive Plan"), pursuant to which a variety of
stock-based incentive awards may be granted. The plan permits the
issuance of up to 1,727,052 shares plus an additional number of shares
determined by the Board but not to exceed 1% of the total number of
shares outstanding per year. Options generally vest over a four-year
period and expire ten years from their respective date of grant.

F-31

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

Stock option transactions were as follows:

1993 Plan 1998 Plan 1998 SMTC Plan
-------------------- ------------------ ----------------------------------
Weighted Weighted Weighted Weighted
average average average average
exercise exercise Class A exercise Class L exercise
Shares price Shares price shares price shares price
---------- -------- -------- -------- ------- -------- ------- --------

Balance, December 31,
1997................... 1,250,492 $3.48 -- $ -- -- $ -- -- $ --
Granted................. 33,212 3.10 115,603 5.14 -- -- -- --
Forfeited............... (26,000) 3.67 -- -- -- -- -- --
Exercised............... (1,257,704) 3.46 -- -- -- -- -- --
---------- ----- -------- ----- ------- ------ ----- -------
Balance, December 31,
1998................... -- -- 115,603 5.14 -- -- -- --
Exchanged and issued at
combination date....... -- -- (115,603) (5.14) 33,140 1.82 3,856 147.57
Issued.................. -- -- -- -- 116,860 19.68 -- --
Exercised............... -- -- -- -- (33,140) (1.82) -- --
---------- ----- -------- ----- ------- ------ ----- -------
Balance, December 31,
1999................... -- $ -- -- $ -- 116,860 $19.68 3,856 $147.57
========== ===== ======== ===== ======= ====== ===== =======

1998 SMTC Plan 2000 Equity Incentive Plan
------------------------------------ ------------------------------------
Weighted Weighted Weighted Weighted
average average average average
Class A exercise Class L exercise Common exercise Common exercise
shares price shares price stock price stock price
-------- -------- ------- -------- ------- -------- --------- --------

Balance, December 31,
1999................... 116,860 $19.68 3,856 $147.57 -- $ -- -- $ --
Converted pursuant to
initial public
offering............... (116,860) 19.68 (3,856) 147.57 486,448 5.78 -- --
Issued.................. -- -- -- -- -- -- 1,397,000 19.05
Exercised............... -- -- -- -- (20,053) 5.78 -- --
-------- ------ ------ ------- ------- ----- --------- ------
Balance, December 31,
2000................... -- $ -- -- $ -- 466,395 $5.78 1,397,000 $19.05
======== ====== ====== ======= ======= ===== ========= ======

F-32

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

The following options were outstanding as at December 31, 2000:

Outstanding Weighted average Exercisable Weighted average Remaining
Option plan options exercise price options exercise price contractual life
----------- ----------- ---------------- ----------- ---------------- ----------------

1998 SMTC Plan.......... 466,395 $5.78 135,393 $5.78 3
2000 Equity Incentive
Plan................... 1,397,000 19.05 -- 19.05 4

The Company accounts for its employee stock plans using the intrinsic
value method under APB No. 25. Compensation expense related to these plans
has been recognized in the Company's financial statements as follows:

1998 1999 2000
------ ----- -----

Compensation expense...................................... $2,108 $ -- $ --
====== ===== =====

The weighted average grant date fair value of options granted for the
year ended December 31, 2000 was $19.05 (1999--$17.13; 1998--$0.95).

The following table sets out the pro forma amounts of net earnings
(loss) before extraordinary loss and net earnings (loss) per share that
would have resulted if the Company had accounted for its employee stock
plans under the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation."

1998 1999 2000
------ ------ ------

Earnings (loss) before extraordinary loss:
As reported....................................... $ (328) $ (864) $6,316
Pro forma......................................... 975 (1,122) 4,934
------ ------ ------
Basic earnings (loss) per share before extraordinary
loss:
As reported....................................... $(0.44) $(1.89) $ 0.24
Pro forma......................................... 0.16 (2.04) 0.13
====== ====== ======

For purposes of computing pro forma net earnings prior to January 1,
2000, the fair value of each option grant is estimated on the date of grant
using the minimum value method under which no volatility is assumed. For
the year ended December 31, 2000, the Black-Scholes option pricing model
was used. Assumptions used to calculate the fair value were:

1998 1999 2000
---- ----- ----

Risk-free interest rate................................... 5.5% 6.0% 5.2%
Dividend yield............................................ -- -- --
Expected life............................................. 4 3 - 4 4
Volatility................................................ N/A N/A 79.0%
=== ===== ====

12.Financial instruments:

(a) Interest rate swaps:

On September 30, 1999, the Company entered into two interest rate swap
transactions with a Canadian chartered bank for hedging purposes. The swaps
expire on September 22, 2001 and involve the exchange of 90-day floating
LIBOR rates for a two-year fixed interest rate of 6.16% before credit
spread of 2.00% to 3.00% per annum on a notional amount of $65,000.

F-33

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(b) Forward exchange contracts:

One of the Company's subsidiaries has entered into forward foreign
currency contracts with a foreign bank to sell U.S. dollars for Irish
punts. The aggregate principal amount of the contracts was $6,250 at
December 31, 2000 with an average contract rate of $1.38 compared to a
closing dollar exchange rate of $1.19. These contracts mature at
various dates through July 31, 2001.

The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:

(i) The carrying amounts of cash and short-term investments, restricted
cash, accounts receivable, accounts payable and accrued liabilities
approximate fair values due to the short-term nature of these
instruments.

(ii) The fair value of long-term debt, including the current portion,
is based on rates currently available to the Company for debt with
similar terms and maturities.

(iii) The fair values of interest rate swap contracts and forward
exchange contracts are estimated by obtaining quotes from a
financial institution.

The carrying amounts and fair values of the Company's financial
instruments, where there are differences at December 31, 2000 and 1999,
are as follows:

1999 2000
-------------------- --------------------
Carrying Fair Carrying Fair
Asset (liability) amount value amount value
----------------- --------- --------- --------- ---------

Long-term debt................ $(130,942) $(130,942) $(115,805) $(115,805)
Interest rate swaps........... -- 478 -- (85)
Forward exchange contracts.... -- -- (855) (855)
========= ========= ========= =========

13.Related party transactions:

The Company entered into related party transactions with certain
shareholders as follows:

1998 1999 2000
---- ------ ------

Management fees expensed under formal management
agreements.......................................... $136 $ 717 $ 74
Share issue costs incurred........................... 650 -- 1,800
Financing and acquisition related fees paid.......... -- 1,741 674
Lease costs expensed for the Colorado facility....... 535 535 --
==== ====== ======

F-34

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

14.Supplemental cash flow information:

1998 1999 2000
------ ------ -------

Interest paid.......................................... $1,627 $6,767 $13,064
Income taxes paid...................................... 15 1,460 1,983

Non-cash financing and investing activities:

1998 1999 2000
------ ------- -------

Acquisition of equipment under capital leases....... $2,673 $ -- $ 541
Acquisition of SMTC Corporation for capital stock... -- 20,410 --
Acquisition of Pensar Corporation for capital
stock.............................................. -- -- 19,019
Acquisition of Qualtron Teoranta for exchangeable
shares............................................. -- -- 12,545
Deferred lease costs arising from trade in of
equipment.......................................... -- 1,460 --
Issuance of capital stock for notes receivable under
option plan........................................ -- 60 --
Value of warrants issued in excess of proceeds
received........................................... -- -- 1,098
Tax benefit of share issues costs................... -- -- 2,694

15.Commitments:

(a) The Company leases manufacturing equipment and office space under
various non-cancellable operating leases. Minimum future payments under
non-cancellable operating lease agreements are as follows:

2001............................................................... $19,152
2002............................................................... 17,529
2003............................................................... 13,755
2004............................................................... 8,814
2005............................................................... 1,312
Thereafter......................................................... 1,638
-------
$62,200
=======

Operating lease expense was $12,864 for the year ended December 31,
2000 (1999--$4,585; 1998--$1,414).

(b) Pursuant to an agreement in connection with the share reorganization,
as described in note 11(b), the Company agreed to lend, on an interest
free basis, approximately $2,000 to a certain shareholder to fund any
tax liability incurred as a result of the reorganization. The loan will
be secured by a first priority security interest over all of the shares
of capital stock of the Company held by the shareholder, and will be
repayable at such time and to the extent that the shareholder receives
after-tax proceeds in respect of such shares.

F-35

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(c) Pursuant to an agreement in connection with the acquisition of Pensar
Corporation, as described in note 3, the Company requested that the
former shareholders of Pensar Corporation file an election, allowing
the Company to deduct for income tax purposes the goodwill related to
the acquisition. In conjunction with this agreement, the Company agreed
to lend, on an interest-free basis, approximately $4,500 to the former
shareholders of Pensar Corporation to fund any tax liability incurred
as a result of the election. The loans will be secured by a first
priority security interest over all of the shares of capital stock of
the Company held by the shareholders, and will be repayable at such
time and to the extent that the shareholders receive after-tax proceeds
in respect of such shares.

16.Contingencies:

General:

In the normal course of business, the Company may be subject to
litigation and claims from customers, suppliers and former employees.
Management believes that adequate provisions have been recorded in the
accounts where required. Although it is not possible to estimate the extent
of potential costs, if any, management believes that ultimate resolution of
such contingencies would not have a material adverse effect on the
financial position, results of operations and cash flows of the Company.

17.Extraordinary loss:

(a) 1999:

As a result of the early payment of the senior notes payable and
subordinated notes that occurred concurrent with the business
combination between SMTC Corporation and HTM Holdings, Inc., the
Company incurred charges of $2,090 ($1,279 after tax) in 1999 related
to early payment penalties, the write-off of unamortized deferred
financing fees and the write-off of the unamortized debt discount.

(b) 2000:

Approximately $143,700 of the proceeds of the initial public
offering were used to reduce the Company's indebtedness under its
credit facility. As a result, the Company incurred charges of $4,318
($2,678 after tax) in 2000 related to early payment penalties, the
write-off of a portion of the unamortized deferred financing fees and
the write-off of the value of the warrants issued in May 2000 in excess
of the proceeds received in connection with the subordinated notes.

F-36

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

18.Segmented information:

The Company derives its revenue from one dominant industry segment, the
electronics manufacturing services industry. The Company is operated and
managed geographically and has eleven facilities in the United States,
Canada, Europe and Mexico. The Company monitors the performance of its
geographic operating segments based on EBITA (earnings before interest,
taxes and amortization). Intersegment adjustments reflect intersegment
sales that are generally recorded at prices that approximate arm's-length
transactions. Information about the operating segments is as follows:

1999 2000
---------------------------------- ----------------------------------
Total Intersegment Net external Total Intersegment Net external
revenue revenue revenue revenue revenue revenue
-------- ------------ ------------ -------- ------------ ------------

United States........... $223,006 $(1,419) $221,587 $633,959 $ (9,403) $624,556
Canada.................. 21,675 (2,676) 18,999 79,923 (5,165) 74,758
Europe.................. 9,507 (1,995) 7,512 21,037 (2,997) 18,040
Mexico.................. 9,864 -- 9,864 79,612 (14,203) 65,409
-------- ------- -------- -------- -------- --------
$264,052 $(6,090) $257,962 $814,531 $(31,768) $782,763
======== ======= ======== ======== ======== ========

1999 2000
------------ ------------

EBITA:
United States......... $ 6,917 $ 24,813
Canada................ 2,107 10,638
Europe................ (222) (1,053)
Mexico................ (503) (669)
-------- --------
8,299 33,729

Interest................ 7,066 13,837
Amortization............ 1,990 6,229
-------- --------
Earnings (loss) before
income taxes........... $ (757) $ 13,663
======== ========

Capital expenditures:
United States......... $ 2,713 $ 16,456
Canada................ 840 3,141
Europe................ 30 724
Mexico................ 547 5,896
-------- --------
$ 4,130 $ 26,217
======== ========

Prior to 1999, the Company operated in one geographic segment--the
United States.

This segmented information incorporates the operations of SMTC
Corporation as discussed in note 2(a). SMTC Corporation has operated
facilities in Canada, the United States and Europe for 15 years, 5 years
and 3 years, respectively.

F-37

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

The following enterprise-wide information is provided. Geographic
revenue information reflects the destination of the product shipped. Long-
lived assets information is based on the principal location of the asset.

1998 1999 2000
------- -------- --------

Geographic revenue:
United States.................................... $84,668 $225,772 $694,290
Canada........................................... -- 8,983 18,844
Europe........................................... 5,019 19,965 53,588
Asia............................................. -- 3,242 16,041
------- -------- --------
$89,687 $257,962 $782,763
======= ======== ========

1999 2000
------- --------

Long-lived assets:
United States............................................. $40,304 $ 79,136
Canada.................................................... 25,585 24,540
Europe.................................................... 735 20,410
Mexico.................................................... 9,179 14,627
------- --------
$75,803 $138,713
======= ========

In 1998, all of the Company's long-lived assets were located in the
United States.

19.Significant customers and concentration of credit risk:

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Sales of the Company's products are concentrated among specific customers
in the same industry. The Company generally does not require collateral.
The Company considers concentrations of credit risk in establishing the
reserves for bad debts and believes the recorded reserves are adequate.

During 1998, one customer individually comprised 43% of total revenue
generated in the U.S. At December 31, 1998, this customer represented 48%
of the Company's accounts receivable.

During 1999, three customers individually comprised 29%, 10% and 10% of
total revenue across all geographic segments. At December 31, 1999, these
customers represented 33%, 6% and 3%, respectively, of the Company's
accounts receivable.

During 2000, two customers individually comprised 16% and 10% of total
revenue across all geographic segments. At December 31, 2000, these
customers represented 10% and 10%, respectively, of the Company's accounts
receivable.

F-38

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

20.Earnings per share:

The following table sets forth the computation of basic net earnings
(loss) per share before extraordinary loss:

1998 1999 2000
---------- ---------- -----------

Numerator:
Earnings (loss) before extraordinary
loss............................... $ (328) $ (864) $ 6,316
Preferred share dividends........... (609) -- --
Class L preferred entitlement....... -- (2,185) (3,164)
---------- ---------- -----------
Earnings (loss) before extraordinary
loss available to common
shareholders......................... $ (937) $ (3,049) $ 3,152
========== ========== ===========
Denominator:
Weighted average shares--basic...... 2,147,130 1,617,356 13,212,076
Effect of dilutive securities:
Employee stock options............ -- -- 155,744
Warrants.......................... -- -- 368,796
---------- ---------- -----------
Weighted average shares--diluted...... 2,147,130 1,617,356 13,736,616
========== ========== ===========
Net earnings (loss) per share before
extraordinary loss:
Basic............................... $ (0.44) $ (1.89) $ 0.24
Diluted............................. (0.44) (1.89) 0.23
========== ========== ===========

For purposes of calculating the basic number of weighted average shares
outstanding, the Class A restricted shares have been excluded. Under
reverse takeover accounting, the number of shares outstanding prior to July
30, 1999 is deemed to be the number of shares of SMTC Corporation issued to
the shareholders of HTM Holdings, Inc., appropriately adjusted to take into
account the effect of any change in the number of HTM Holdings, Inc. shares
outstanding in that period.

During fiscal 1999 and fiscal 1998, the exercise prices of the options
and warrants were less than the average fair value price and were not
included in the calculation of diluted loss per share as the effect would
have been anti-dilutive. In addition, in fiscal 1999, the calculation did
not include the Class A shares issuable upon conversion of the Class L
shares and exchangeable shares as the effect would have been anti-dilutive.
During fiscal 2000, the calculation did not include 1,097,000 options as
the effect would have been anti-dilutive.

21.Comparative figures:

Certain of the 1999 and 1998 figures presented for comparative purposes
have been reclassified to conform with the current year's presentation.

F-39

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

22.United States and Canadian accounting policy differences:

The consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles ("GAAP") as
applied in the United States ("U.S."). The significant differences between
U.S. GAAP and Canadian GAAP and their effect on the consolidated financial
statements of the Company are described below:

The following table reconciles net earnings (loss) as reported in the
accompanying consolidated statements of operations to net earnings (loss)
that would have been reported under Canadian GAAP:

1998 1999 2000
-------- ------- --------

Net earnings (loss) in accordance with U.S.
GAAP......................................... $ (328) $(2,143) $ 3,638
Amortization (a).............................. -- -- 20
-------- ------- --------
Net earnings (loss) in accordance with
Canadian GAAP................................ $ (328) $(2,143) $ 3,658
======== ======= ========

Net earnings (loss) for the year under Canadian GAAP is comprised of the
following:

1998 1999 2000
-------- ------- --------

Operating income.............................. $ 1,509 $ 6,309 $ 27,520
Interest...................................... 2,030 7,066 13,837
Debt extinguishment costs (b)................. -- 2,090 4,318
-------- ------- --------
Earnings (loss) before income taxes........... (521) (2,847) 9,365
Income taxes (recovery)....................... (193) (704) 5,707
-------- ------- --------
Net earnings (loss)........................... $ (328) $(2,143) $ 3,658
======== ======= ========

1998 1999 2000
-------- ------- --------

Shareholders' equity (deficiency), in
accordance with U.S. GAAP.................... $(10,468) $ 7,799 $228,486
Shares issued to acquire Qualtron Teoranta
(a).......................................... -- -- (2,445)
Amortization of goodwill (a).................. -- -- 20
-------- ------- --------
Shareholders' equity (deficiency) in
accordance with Canadian GAAP................ $(10,468) $ 7,799 $226,061
======== ======= ========

(a) Acquisitions:

Under U.S. GAAP, shares issued as consideration in a business
combination are valued using the share price at the announcement date of
the acquisition. Under Canadian GAAP the shares are valued on the
consummation date. As a result, under Canadian GAAP, the total purchase
price for Qualtron Teoranta would be $24,455, resulting in goodwill of
$15,630. Under the U.S. GAAP, the purchase price was $26,900, resulting in
goodwill of $18,075.

F-40

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars, except share quantities and per share
amounts)
Years ended December 31, 1998, 1999 and 2000

(b) Extraordinary loss:

Under U.S. GAAP, the charges incurred as a result of the early payment
of the senior notes payable and subordinated notes described in note 17 are
recorded as an extraordinary loss. Under Canadian GAAP, the charges would
have been included in earnings (loss) before income taxes and the related
tax benefit recorded in income tax expense.

In fiscal 2000, the Company adopted the new accounting standard approved
by The Canadian Institute of Chartered Accountants dealing with the
computation of earnings per share.

F-41

AUDITORS' REPORT

To the Directors of SMTC Corporation (formerly The Surface Mount Technology
Centre Inc.) ("Surface Mount"):

We have audited the consolidated balance sheets of SMTC Corporation
(formerly The Surface Mount Technology Centre Inc.) as at July 29, 1999 and
August 31, 1998 and the consolidated statements of earnings and retained
earnings (deficit) and cash flows for the period from September 1, 1998 to July
29, 1999 and for each of the years ended August 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at July 29,
1999 and August 31, 1998 and the results of its operations and its cash flows
for the period from September 1, 1998 to July 29, 1999 and for each of the
years ended August 31, 1998 and 1997 in accordance with Canadian generally
accepted accounting principles.

Canadian generally accepted accounting principles vary in certain
significant respects from accounting principles generally accepted in the
United States. Application of accounting principles generally accepted in the
United States would have affected results of operations for the period from
September 1, 1998 to July 29, 1999 and each of the years ended August 31, 1998
and 1997 and shareholders' equity (deficiency) as at July 29, 1999 and August
31, 1998, to the extent summarized in note 17 to the consolidated financial
statements.

/s/ KPMG LLP
Chartered Accountants

Toronto, Canada
December 3, 1999

F-42

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars)

August 31, July 29,
1998 1999
---------- --------

Assets
Current assets:
Cash and short-term investments......................... $ 4,704 $ 698
Accounts receivable..................................... 39,379 51,639
Inventories............................................. 31,067 30,388
Prepaid expenses........................................ 864 1,698
------- --------
76,014 84,423
Capital assets (note 4)................................... 18,501 21,093
------- --------
$94,515 $105,516
======= ========
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Bank indebtedness (note 5).............................. $27,099 $ --
Accounts payable and accrued liabilities................ 34,839 36,183
Income taxes payable.................................... 1,860 2,247
Note payable............................................ 3,335 --
Preferred and non-voting shares of subsidiary (note 8).. -- 42,035
Current portion of long-term debt (note 6).............. 2,378 --
Current portion of obligations under capital leases
(note 7)............................................... 191 95
------- --------
69,702 80,560
Long-term debt (note 6)................................... 4,098 43,376
Obligations under capital leases (note 7)................. 88 --
Deferred income taxes..................................... 787 512
Shareholders' equity (deficiency):
Share capital (note 8).................................. 3,604 1
Additional paid-in capital.............................. -- 4
Retained earnings (deficit)............................. 15,856 (19,317)
Currency translation account (note 2(c))................ 380 380
------- --------
19,840 (18,932)
Commitments (note 13).....................................
Contingencies (note 14)...................................
Subsequent events (note 16)...............................
------- --------
$94,515 $105,516
======= ========

See accompanying notes to consolidated financial statements.

F-43

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)
(Expressed in thousands of U.S. dollars)

Year ended Year ended September 1, 1998
August 31, August 31, to July 29,
1997 1998 1999
---------- ---------- -----------------

Revenue............................... $96,761 $210,213 $270,578
Cost of sales......................... 81,662 188,397 245,575
------- -------- --------
Gross profit.......................... 15,099 21,816 25,003
Selling, general and administrative... 5,132 11,774 14,978
------- -------- --------
Operating income...................... 9,967 10,042 10,025
Interest (note 9)..................... 955 2,468 3,111
------- -------- --------
Earnings before income taxes.......... 9,012 7,574 6,914
Income taxes:
Current............................. 3,335 4,195 3,251
Deferred (recovery)................. 176 (71) (195)
------- -------- --------
3,511 4,124 3,056
------- -------- --------
Net earnings.......................... 5,501 3,450 3,858
Retained earnings, beginning of
period............................... 7,517 12,856 15,856
Dividends (note 8).................... (162) (450) (387)
Increase in stated capital (note 8)... -- -- (17,582)
Premium on redemption of shares of
subsidiary (note 8).................. -- -- (20,850)
Reorganization costs, net of tax of
$79 (note 2(a))...................... -- -- (212)
------- -------- --------
Retained earnings (deficit), end of
period............................... $12,856 $ 15,856 $(19,317)
======= ======== ========

See accompanying notes to consolidated financial statements.

F-44

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)

September 1,
Year ended Year ended 1998
August 31, August 31, to July 29,
1997 1998 1999
---------- ---------- ------------

Cash provided by (used in):
Operating activities:
Net earnings............................. $ 5,501 $ 3,450 $ 3,858
Items not involving cash:
Depreciation of capital assets......... 2,558 3,899 4,005
Loss (gain) on disposal of capital
assets................................ 37 (23) --
Unrealized foreign exchange loss
(gain)................................ (96) (422) 8
Deferred income taxes.................. 176 (71) (195)
Change in non-cash operating working
capital................................. (8,557) (19,777) (10,684)
------- -------- --------
(381) (12,944) (3,008)
Financing activities:
Increase (decrease) in bank
indebtedness............................ 878 22,589 (27,099)
Increase in long-term debt............... 3,610 1,793 39,348
Repayment of long-term debt.............. (3,008) (2,260) (2,450)
Repayment of note payable................ -- -- (3,335)
Issuance of shares....................... -- -- 5
Redemption of shares..................... -- -- (1)
Decrease in obligations under capital
leases.................................. (214) (458) (184)
Dividends paid........................... (162) (450) (387)
------- -------- --------
1,104 21,214 5,897
Investing activities:
Purchase of capital assets............... (3,657) (1,555) (6,596)
Reorganization costs..................... -- -- (291)
Acquisitions............................. -- (1,744) --
Proceeds on disposal of capital assets... 176 72 --
------- -------- --------
(3,481) (3,227) (6,887)
Foreign exchange gain (loss) on cash held
in foreign currency....................... 69 55 (8)
------- -------- --------
Increase (decrease) in cash................ (2,689) 5,098 (4,006)
Cash and short-term investments (bank
indebtedness), beginning of period........ 2,295 (394) 4,704
------- -------- --------
Cash and short-term investments (bank
indebtedness), end of period.............. $ (394) $ 4,704 $ 698
======= ======== ========

Cash is defined as cash and short-term investments.

Supplemental cash flow disclosures (note 11).

See accompanying notes to consolidated financial statements.

F-45

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except for share quantities and per
share amounts)

1. Nature of business:

SMTC Corporation (formerly The Surface Mount Technology Centre Inc.)
(the "Company") is a worldwide provider of electronics manufacturing
services to original equipment manufacturers. The Company services its
customers through five manufacturing and technology centres located in the
United States, Canada and Europe.

The Company's accounting principles are in accordance with accounting
principles generally accepted in Canada, and, except as outlined in note
17, are in all material respects, in accordance with accounting principles
generally accepted in the United States.

2. Significant accounting policies:

(a) Basis of presentation:

On July 28, 1999, The Surface Mount Technology Centre Inc. and its 100%
owned U.S. subsidiary, SMTC Corporation, completed a reorganization such
that SMTC Corporation then became the parent company of the group of
companies which includes The Surface Mount Technology Centre Inc. ("the
Reorganization.") The Reorganization provides a more effective corporate
structure for tax, investing and financing purposes. As the Reorganization
involved the transfer of entities under common control, the Reorganization
has been accounted for as a continuity of interests in a manner similar to
a pooling of interests. The expenses incurred in connection with the
Reorganization have been charged directly to retained earnings.

(b) Principles of consolidation:

As a result of changes in underlying circumstances resulting in the U.S.
dollar becoming the measurement currency in which most of the Company's and
its subsidiaries' business was transacted, effective September 1, 1997 the
Company adopted the U.S. dollar as its measurement currency for preparation
of its consolidated financial statements resulting in a change from the
previous use of the Canadian dollar as its measurement currency.

(d) Revenue recognition:

Revenue from sales of products is recognized when goods are shipped.
Revenue from services is recognized when the services are provided.

(e) Income taxes:

The Company follows the deferral method of tax allocation in accounting
for income taxes whereby the provision for income taxes is based on
accounting income. Income taxes related to timing differences between
accounting and taxable income are recorded as deferred income taxes.

(f) Cash and short-term investments:

Cash and short-term investments include cash on hand and deposits with
banks with original maturities of less than three months.

F-46

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

(g) Inventories:

Inventories are valued at the lower of cost, on a first-in, first-out
basis, and net realizable value. Inventories include an application of the
relevant overhead.

(h) Capital assets:

Capital assets are stated at cost. Depreciation is provided using the
following methods and annual rates:

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

Asset Basis Rate
---------------------------------------------------------------------------

Manufacturing machinery and equipment..... Straight line 5-10 years
Furniture and equipment................... Declining balance 20%
Computer software and hardware............ Straight line 3 years
Leasehold improvements.................... Straight line Term of lease
---------------------------------------------------------------------------
---------------------------------------------------------------------------

(i) Foreign currency translation:

Transactions in foreign currencies are translated at the exchange rate
in effect on the transaction date. Monetary items expressed in foreign
currencies are translated at the exchange rate in effect at the balance
sheet date. The resulting exchange gains and losses are included in the
determination of net earnings for the period.

The Company's foreign subsidiaries are classified as integrated foreign
operations. As such, their monetary assets and monetary liabilities are
translated using period-end exchange rates, and other assets and
liabilities are translated at applicable historical rates of exchange.
Revenue and expenses are translated at monthly average exchange rates,
except for depreciation, which is translated at historical rates. Exchange
gains and losses are included in earnings in the period they are incurred.

(j) Accounting estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the period. Actual results could differ from those estimates.

(k) Statement of cash flows:

Effective September 1, 1998, the Company adopted retroactively, the new
recommendations of The Canadian Institute of Chartered Accountants ("CICA")
with respect to the preparation of the statement of cash flows. As a
result, this change has revised the definition of cash and cash equivalents
to include only cash and highly liquid investments with a maturity of 90
days or less and does not include the Company's bank indebtedness under its
credit facilities as was the case in prior years. In addition, non-cash
transactions previously presented in the statement of changes in financial
position are no longer presented in the statement of cash flows.

F-47

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

(l) Recently issued accounting pronouncements:

The CICA has issued Section 3465, "Income Taxes", that establishes new
standards for accounting for income taxes. The recommendations require the
use of the liability method whereby deferred income taxes are recognized
for the tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts at
each year end. The Company will adopt the new recommendations effective
July 30, 1999 and has estimated that the impact would be to decrease the
recorded deferred income tax liability by $247.

3. Acquisitions:

(a) On January 1, 1998, the Company acquired 100% of the issued and
outstanding shares of Ogden Atlantic Design (Europe) Ltd. for $353. The
purchase price consisted of $219 paid at closing and $134 of acquisition-
related expenses. This acquisition was accounted for by the purchase method
with the purchase price being allocated to capital assets.

(b) Effective September 1, 1997, the Company acquired certain assets of
Ogden Atlantic Design Company, Inc. located in Charlotte, North Carolina
for $4,726. Under the terms of the purchase, the Company also assumed the
property lease and certain operating leased equipment. The purchase price
consisted of $1,155 paid at closing, $236 of acquisition related expenses
and a $3,335 one year note, subordinated to the bank and bearing interest
at 9% per annum. $1,391 of the purchase price was allocated to capital
assets and $3,335 was allocated to inventory.

4. Capital assets:

Accumulated Net book
August 31, 1998 Cost depreciation value
--------------- ------- ------------ --------

Manufacturing machinery and equipment.......... $21,904 $ 7,623 $14,281
Furniture and equipment........................ 1,331 489 842
Computer software and hardware................. 2,210 1,080 1,130
Leasehold improvements......................... 3,513 1,265 2,248
------- ------- -------
$28,958 $10,457 $18,501
======= ======= =======

Accumulated Net book
July 29, 1999 Cost depreciation value
------------- ------- ------------ --------

Manufacturing machinery and equipment.......... $23,791 $ 9,571 $14,220
Furniture and equipment........................ 2,114 866 1,248
Computer software and hardware................. 3,296 1,691 1,605
Leasehold improvements......................... 6,005 1,985 4,020
------- ------- -------
$35,206 $14,113 $21,093
======= ======= =======

Included in machinery and equipment at December 31, 1999 is equipment
under capital lease with a cost of $443 (1998--$1,133) and accumulated
depreciation of $203 (1998--$757).

Included in the total depreciation expense for the year ended December
31, 1999 of $4,005 (1998--$3,899; 1997--$2,558) is $128 (1998--$402; 1997--
$363) relating to the depreciation of equipment under capital lease.

F-48

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

5. Bank indebtedness:

Up to July 29, 1999, the operating lines of credit were due on demand,
bore interest at LIBOR plus 0.45% and rates ranging from the Company's bank
prime rate (prime) plus 0.25% to prime plus 1% and were secured by a
general security agreement covering all assets of the Company. All bank
indebtedness outstanding on July 29, 1999 was refinanced under a new senior
credit facility on July 30, 1999. The indebtedness has been classified as
long-term, consistent with the terms of that facility (note 6).

6. Long-term debt:

Up to July 29, 1999, the term loans bore interest at rates ranging from
the Company's bank prime or base rate plus 0.50% to prime or base rate plus
1.5%. The loans could be repaid at any time or times without payment of
bonus interest.

On July 30, 1999, concurrent with the business combination with HTM
Holdings, Inc. ("HTM") (note 16) the Company and HTM entered into a new
senior credit facility that provides for $95,000 in term loans and $60,000
in revolving credit loans, swing line loans and letters of credit. The
senior credit facility is secured by a security agreement over all assets
and requires the Company to meet certain financial ratios and benchmarks
and to comply with certain restrictive covenants. The revolving credit
facilities terminate in July 2004. The term loans mature in quarterly
instalments from September 2000 to June 2004 for $35,000 of the term loans
and from September 2000 to December 2005 for $50,000 of the term loans.
$10,000 of the term loans is payable in one instalment on September 30,
2006. The borrowings will bear interest at varying rates based on either
the Eurodollar base rate plus 3%, the U.S. bank rate plus 1.25% or the
Canadian prime rate plus 1.25%.

The future minimum repayments under the new senior credit facility are:

2000................................................................. $ --
2001................................................................. 2,668
2002................................................................. 5,335
2003................................................................. 8,003
2004 and thereafter.................................................. 27,370
-------
$43,376
=======

7. Obligations under capital leases:

Obligations under capital leases consist of several leases for equipment
bearing interest from 7% to 8% per annum.

8. Share capital:

(a) Authorized:

At July 29, 1999 (SMTC Corporation):

(i) 1,720,000 Class A-1 voting common shares, par value $0.001 per
share, holders are entitled to one vote per share, entitled to
share in dividends pro rata subject to any preferential rights to
the Class L shares;

F-49

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

(ii) 1,100,000 Class A-2 voting common shares, par value $0.001 per
share, holders are entitled to one vote per share, entitled to
share in dividends pro rata subject to any preferential rights of
the Class L shares;

(iii) 300,000 Class L voting common shares, par value $0.001 per share,
the number of votes per share is determined by a prescribed
formula, entitled to receive all dividends declared on common
stock until there has been paid a specified amount based on an
internal annual rate of return of 12%; and

(iv) 125,000 Class N voting common shares, par value $0.001 per share,
the number of votes per share are determined by a prescribed
formula, not entitled to receive dividends.

Each share of Class L and Class A-2 stock shall convert automatically
under certain conditions into Class A-1 shares based on a prescribed
formula for Class L shares and on a one-for-one basis for Class A-2
shares.

Prior to July 28, 1999 (The Surface Mount Technology Centre Inc.):

The Company completed a capital reorganization on July 28, 1999 such that
The Surface Mount Technology Centre Inc. became a wholly owned subsidiary
of SMTC Corporation. Prior to the reorganization, the authorized capital
stock of The Surface Mount Technology Centre Inc. was:

(i) An unlimited number of Class B common shares, voting, convertible
into 0.78 common or Class D shares and 0.22 Class C or Class E
shares each;

(ii) An unlimited number of Class C non-cumulative shares, voting,
redeemable at $3.03 each, convertible into one common share each,
and subject to a maximum dividend of $0.33 per share per year;

(iii) An unlimited number of Class D non-cumulative shares, voting,
convertible into one common share each;

(iv) An unlimited number of Class E non-cumulative shares, voting,
redeemable at $3.03 each, convertible into one common share each,
and subject to a maximum dividend of $0.33 per share per year;
and

(v) An unlimited number of common shares.

In order to facilitate the share capital reorganization, the Company
amended its authorized share capital on July 28, 1999 to include new
classes of shares including:

(i) Unlimited number of Class A, Class B and Class C preferred
shares, redeemable by the Company at $0.66 per share with an
annual 6% non-cumulative dividend;

(ii) Unlimited number of subordinate non-voting Class D and Class E
shares; the Class D shares are convertible into Class E shares;
and

(iii) Class V voting shares.

F-50

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

(b) Issued and outstanding:

The Surface Mount Technology Centre Inc.

1998
-----------------------------------
Common Class C Class D Class E
Number of shares shares shares shares shares
---------------- --------- -------- ------- -------

Balance, August 31, 1997.............. 1,272,224 169,444 390,278 84,722
Share conversion (i).................. 254,166 (169,444) -- (84,722)
--------- -------- ------- -------
Balance, August 31, 1998.............. 1,526,390 -- 390,278 --
========= ======== ======= =======

Common Class C Class D Class E
Amount shares shares shares shares
------ --------- -------- ------- -------

Balance, August 31, 1997.............. $ 2,392 $ 319 $ 734 $ 159
Share conversion (i).................. 478 (319) -- (159)
--------- -------- ------- -------
Balance, August 31, 1998.............. $ 2,870 $ -- $ 734 $ --
========= ======== ======= =======

1998 capital transactions:

(i) On September 5, 1997, the issued Class C and Class E shares were
converted into an equal number of common shares.

(ii) During fiscal 1998, the Company paid dividends on its common and
Class C shares in the amount of $397 and $53, respectively.

1999
------------------------------------------------------
Class D Class E
Class D shares shares
Common shares (non- (non- Preferred
Number of shares shares (voting) voting) voting) shares
---------------- ---------- -------- ---------- ---------- ----------

Balance, August 31,
1998................... 1,526,390 390,278 -- -- --
Share capital
reorganization (i)..... (1,521,390) (390,278) 12,301,570 26,399,229 32,731,788
---------- -------- ---------- ---------- ----------
Balance, July 29, 1999.. 5,000 -- 12,301,570 26,399,229 32,731,788
========== ======== ========== ========== ==========

Class D Class E
Class D shares shares
Common shares (non- (non- Preferred
Amount shares (voting) voting) voting) shares
------ ---------- -------- ---------- ---------- ----------

Balance, August 31,
1998................... $ 2,870 $ 734 $ -- $ -- $ --
Share capital
reorganization (i)..... (2,865) (734) -- -- 21,185
---------- -------- ---------- ---------- ----------
Balance, July 29, 1999.. $ 5 $ -- $ -- $ -- $ 21,185
========== ======== ========== ========== ==========

As a result of the capital reorganization, The Surface Mount
Technology Centre Inc. acquired 100% of the outstanding voting shares
of SMTC Corporation. The number of issued and outstanding shares of
SMTC Corporation become the number of issued and outstanding shares of
the continuing consolidated entity. The recorded value of the issued
and outstanding shares of the continuing

F-51

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

consolidated entity is the recorded value of the capital stock of The
Surface Mount Technology Centre Inc. The issued and outstanding shares
of the continuing consolidated entity are as follows:

Number Amount
------ ------

Class A-2 shares:
Recorded value of The Surface Mount Technology Centre Inc.
shares................................................... 2,500 $ 1
----- ---
Balance, July 29, 1999...................................... 2,500 $ 1
===== ===

The $4 excess of The Surface Mount Technology Centre Inc. shares
recorded value over the $1 par value of the Class A-2 shares has been
recorded as additional paid-in capital.

1999 capital transactions:

(i) On July 27, 1999 and July 28, 1999, The Surface Mount Technology
Centre Inc. and SMTC Corporation completed a series of
transactions to complete the reorganization described in note
2(a). As a result of the reorganization, the Company increased the
stated capital of certain classes of common shares with a
corresponding charge to retained earnings of $17,582 and reduced
the stated capital of other classes of shares; converted common
shares into Class A, B or C common shares which in turn were
exchanged into Class E non-voting shares, preferred shares and
Class V voting shares; exchanged Class D shares into Class D non-
voting shares and Class V voting shares; issued 5,000 common
shares for $5 cash consideration; and redeemed the outstanding
Class V voting shares for $1 cash consideration.

(ii) In connection with the reorganization agreement and the business
combination with HTM Holdings, Inc. that was consummated on July
30, 1999 (note 16), the Company committed to redeem the
outstanding preferred shares and a portion of the outstanding
Class D non-voting and Class E non-voting shares of The Surface
Mount Technology Centre Inc. for $42,035. The redemption amount
of these shares has been presented as a current liability in the
consolidated financial statements at July 29, 1999. The $20,850
excess of the redemption amount over the $21,185 stated capital
for the Class D, Class E and preferred shares has been recorded
as a charge to retained earnings.

(iii) During fiscal 1999, The Surface Mount Technology Centre Inc.
paid dividends on its common shares in the amount of $387. The
dividends were paid prior to the reorganization.

Due to the corporate reorganization that took place effective July 29,
1999, the capital stock amount for accounting purposes differs from the
legal stated capital amount.

F-52

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

9. Interest expense:

Year ended Year ended September 1, 1998
August 31, 1997 August 31, 1998 to July 29, 1999
--------------- --------------- -----------------

Short-term:
Bank indebtedness...... $533 $1,665 $2,615
Interest on acquisition
note payable.......... -- 288 --
---- ------ ------
533 1,953 2,615
Long-term:
Interest on bank debt.. 349 469 478
Interest on obligations
under capital leases.. 73 46 18
---- ------ ------
422 515 496
---- ------ ------
$955 $2,468 $3,111
==== ====== ======

10. Income taxes:

Certain of the Company's subsidiaries have approximately $7,322 of
losses available to reduce income taxes in future years. The losses begin
to expire in 2017. The benefit of approximately $991 of these losses has
been recognized in the financial statements as a reduction in the deferred
tax liability. In fiscal 1998, tax expense was reduced by the benefit of
losses of $1,100 which had not been previously recognized.

11. Cash flows:

Change in non-cash operating working capital:

Year ended Year ended September 1, 1998
August 31, August 31, to July 29,
1997 1998 1999
---------- ---------- -----------------

Accounts receivable................ $(3,188) $(24,289) $(12,260)
Inventories........................ (7,355) (18,787) 679
Prepaid expenses................... (147) (553) (835)
Accounts payable and accrued lia-
bilities.......................... 1,727 23,704 1,345
Income taxes payable............... 406 148 387
------- -------- --------
$(8,557) $(19,777) $(10,684)
======= ======== ========

Cash paid for interest and income taxes:

Year ended Year ended September 1, 1998
August 31, August 31, to July 29,
1997 1998 1999
---------- ---------- -----------------

Interest............................. $1,023 $2,258 $3,193
Income taxes......................... 2,998 4,062 3,054

F-53

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

Non-cash financing and investing activities:

1999:

Certain transactions arising from the share capital reorganization
(notes 2(a) and 8) were non-cash transactions including the increase in
stated capital and the exchange of common shares for preferred and non-
voting shares.

1998:

On September 1, 1997, the Company acquired certain assets of Ogden
Atlantic Design Company, Inc. located in Charlotte, North Carolina. A
portion of the acquisition was financed by the issuance of a $3,335 one
year note payable.

12. Economic dependence and concentration of credit risk:

84% of sales for the period ended July 29, 1999 (year ended August 31,
1998--74%; year ended August 31, 1997--84%) and 81% of accounts receivable
at July 29, 1999 (August 31, 1998--61%) arise from transactions with the
Company's five largest customers.

13. Commitments:

The Company is committed to future payments on operating leases for
premises and equipment at July 29, 1999 as follows:

2000.................................................................. $7,294
2001.................................................................. 6,635
2002.................................................................. 5,650
2003.................................................................. 2,659
2004.................................................................. 635
Subsequent years...................................................... 169

14. Contingencies:

(a) General:

In the normal course of business, the Company may be subjected to
litigation and claims from customers, suppliers and former employees.
Management believes that adequate provisions have been recorded in the
accounts where required. Although it is not possible to estimate the extent
of potential costs, if any, management believes the ultimate resolution of
such contingencies would not have a material adverse effect on the
financial position, results of operations or cash flows of the Company.

(b) Uncertainty due to the Year 2000 Issue:

The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to a significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not possible
to be certain that

F-54

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

all aspects of the Year 2000 Issue affecting the Company, including those
related to the efforts of customers, suppliers, or other third parties,
will be fully resolved.

15. Comparative figures:

Certain prior years' figures presented have been reclassified to conform
with the current year's presentation.

16. Subsequent events:

(a) Capital transactions:

On July 30, 1999, the Company issued 1,018,171 Class A shares and 86,707
Class N shares to its existing shareholders for $2,036 cash consideration.

(b) Business combination between HTM Holdings, Inc. and SMTC Corporation:

Effective July 30, 1999, the Company acquired 100% of the outstanding
common shares of HTM Holdings, Inc., a contract manufacturer in Denver,
Colorado. The Company issued 1,393,971 Class A shares and 154,168 Class L
shares to the shareholders of HTM Holdings, Inc. for $16,739 cash
consideration and 100% of the outstanding shares of HTM Holdings, Inc.
Simultaneously, the former shareholders of the Company subscribed for an
additional 26,701 Class N shares for nominal consideration.

Upon completion of these transactions, the former shareholders of HTM
Holdings, Inc. held 58% of the outstanding shares of the Company and HTM
Holdings, Inc. became a wholly owned subsidiary of the Company. As a
result, the acquisition will be recorded as a reverse takeover of the
Company by HTM Holdings, Inc. and accounted for using the purchase method.
The purchase price is $24,703, including transaction costs of $4,293. The
purchase price will be allocated to the fair value of the Company's net
assets as follows:

Current assets.................................................. $ 84,423
Capital assets.................................................. 21,093
Goodwill........................................................ 24,863
Liabilities and other........................................... (105,676)
---------
Net assets acquired............................................. $ 24,703
=========

On July 30, 1999, in connection with the business combination described
in note 16(b), each existing warrant holder and stock option holder of HTM
Holdings, Inc. was granted equivalent warrants and stock options for Class
A and Class L shares of SMTC Corporation.

On September 30, 1999, the Company issued an additional 116,860 Class A
stock options to certain employees.

F-55

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

(d) Hedging activities:

On September 20, 1999, the Company entered into, for hedging purposes,
two interest rate swap transactions with a Canadian chartered bank. The
swaps expire on September 22, 2001 and involve the exchange of 90-day
floating LIBOR rates for a two-year fixed interest rate of 6.16% (before
credit spread) per annum on a notional amount of $65,000.

17. Canadian and United States accounting policy differences:

The consolidated financial statements of the Company have been prepared
in accordance with the generally accepted accounting principles ("GAAP") in
Canada. Material measurement differences between Canadian and U.S. GAAP and
their effect on the Company's consolidated financial statements are
summarized below:

Consolidated statements of earnings:

Year ended Year ended September 1, 1998
August 31, August 31, to July 29,
1997 1998 1999
---------- ---------- -----------------

Net earnings for the year in
accordance with Canadian GAAP.... $5,501 $3,450 $3,858
Adjustment to foreign
exchange(i)...................... -- (87) (58)
Adjustment to deferred income
taxes(ii)........................ (143) 48 152
Adjustment to reorganization
costs(iii)....................... -- -- (212)
------ ------ ------
Net earnings for the year in
accordance with U.S. GAAP........ 5,358 3,411 3,740
Currency translation adjustment... 380 -- --
------ ------ ------
Comprehensive income--U.S. GAAP... $5,738 $3,411 $3,740
====== ====== ======

As a result of the adjustments to foreign exchange and deferred taxes,
deferred income taxes would be $600 and $969 at July 29, 1999 and August
31, 1998, respectively and shareholders' equity (deficiency) would be
$(19,020) and $19,658 at July 29, 1999 and August 31, 1998, respectively.

(i) Under Canadian GAAP, deferred taxes of operations using the
temporal method are translated at historical exchange rates,
while under U.S. GAAP, deferred income taxes are translated at
current exchange rates.

(ii) Under Canadian GAAP, deferred income taxes are computed based on
accounting income using the deferral method. Under U.S. GAAP,
deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year
end, based on enacted tax rates applicable in periods in which
the differences are expected to reverse.

(iii) Under Canadian GAAP, the costs associated with the
Reorganization are charged directly to retained earnings. Under
U.S. GAAP, because the transaction is between entities under
common control and is accounted for in a manner similar to a
pooling of interests, these costs are recorded as a charge to
earnings.

(iv) U.S. GAAP requires the reporting of comprehensive income in
addition to net earnings. Comprehensive income includes net
earnings plus other comprehensive income; specifically, all

F-56

SMTC CORPORATION
(FORMERLY THE SURFACE MOUNT TECHNOLOGY CENTRE INC.) ("SURFACE MOUNT")

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Expressed in thousands of U.S. dollars except for share quantities and per
share amounts)

changes in equity of a company during the period arising from
transactions and other events from non-owner sources.

(v) Under Canadian GAAP, changes in bank overdraft balances are
considered cash reductions and are not presented as financing
activities. Under U.S. GAAP, any changes in bank overdrafts are
considered to be financing activities. Accordingly, the cash
provided by financing activities would have been $1,498 and
$20,820 for the years ended August 31, 1998 and 1997,
respectively, in accordance with U.S. GAAP. In addition, at the
end of 1997 and beginning of 1998 cash would have been nil.

F-57

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of SMTC Corporation (formerly HTM Holdings, Inc):

We have audited the accompanying balance sheets of W.F. Wood, Incorporated
(a Massachusetts corporation and a wholly owned subsidiary of HTM Holdings,
Inc.) as of September 3, 1999, December 31, 1998, and 1997, and the related
statements of income, stockholders' equity, and cash flows for the period ended
September 3, 1999 and the years ended December 31, 1998, 1997 and 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of W.F. Wood, Incorporated as
of September 3, 1999, December 31, 1998, and 1997, and the results of its
operations and its cash flows for the period ended September 3, 1999 and the
years ended December 31, 1998, 1997, and 1996 in conformity with United States
generally accepted accounting principles.

Boston, Massachusetts /s/ Canby, Maloney & Co., Inc.
February 9, 2000.

F-58

W.F. WOOD, INCORPORATED

BALANCE SHEETS
AS OF THE DATES INDICATED

December 31, December 31, September 3,
1997 1998 1999
------------ ------------ ------------

Assets
Current Assets:
Cash.................................. $ 70,282 $ 22,991 $ 3
Accounts receivable, net of allowance
for doubtful accounts of $20,000..... 1,953,774 2,599,745 2,619,517
Inventories........................... 3,011,002 2,971,547 3,590,236
Prepaid state income taxes............ -- -- 59,820
Other current assets.................. 33,041 91,347 84,751
---------- ---------- ----------
Total current assets................ 5,068,099 5,685,630 6,354,327
---------- ---------- ----------
Equipment and Improvements, Net......... 1,412,241 1,414,924 1,695,208
---------- ---------- ----------
Other Assets:
Due from related party................ 624,609 484,609 --
Deposits.............................. 8,732 8,732 20,160
---------- ---------- ----------
633,341 493,341 20,160
---------- ---------- ----------
$7,113,681 $7,593,895 $8,069,695
========== ========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Demand note payable to a bank......... $1,670,764 $ -- $ --
Current maturities of capital lease
obligations.......................... 63,088 33,726 6,626
Current maturities of long-term debt.. 350,744 275,930 183,835
Accounts payable...................... 1,879,225 2,710,425 3,855,502
Accrued expenses...................... 211,369 279,862 570,166
Accrued state income taxes............ 26,703 26,000 --
---------- ---------- ----------
Total current liabilities........... 4,201,893 3,325,943 4,616,129
---------- ---------- ----------
Capital Lease Obligations, less current
maturities............................. 43,303 -- --
---------- ---------- ----------
Long-Term Debt, less current
liabilities............................ 473,529 465,013 394,833
---------- ---------- ----------
Total Liabilities................... 4,718,725 3,790,956 5,010,962
========== ========== ==========
Stockholders' Equity:
Common stock, no par value
Authorized--200,000 shares
Issued and outstanding--80,000
shares................................ 985,000 985,000 3,806,393
Retained earnings (accumulated
deficit)............................... 1,409,956 2,817,939 (747,660)
---------- ---------- ----------
2,394,956 3,802,939 3,058,733
---------- ---------- ----------
$7,113,681 $7,593,895 $8,069,695
========== ========== ==========

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

F-59

W.F. WOOD, INCORPORATED

STATEMENTS OF INCOME
FOR THE PERIODS INDICATED

For the Years Ended December 31,
-------------------------------------
For the Period Ended
1996 1997 1998 September 3, 1999
----------- ----------- ----------- --------------------

Net Sales............... $16,822,612 $25,618,654 $30,783,620 $23,198,095
Cost of Sales........... 12,700,384 20,883,967 25,196,045 20,071,521
----------- ----------- ----------- -----------
Gross profit.......... 4,122,228 4,734,687 5,587,575 3,126,574
----------- ----------- ----------- -----------
Selling, General, and
Administrative
Expenses:
Stockholders'
compensation......... 166,057 248,805 214,619 135,525
Professional fees
related to sale
transaction.......... -- -- -- 402,610
Bonuses paid to
management and
employees related to
sale transaction..... -- -- -- 2,571,176
Other selling,
general, and
administrative
expenses............. 2,204,506 2,370,845 2,965,395 1,717,789
----------- ----------- ----------- -----------
Total selling,
general, and
administrative
expenses........... 2,370,563 2,619,650 3,180,014 4,827,100
----------- ----------- ----------- -----------
Income (loss) from
operations......... 1,751,665 2,115,037 2,407,561 (1,700,526)
----------- ----------- ----------- -----------
Other Income (Expense):
Interest expense,
net.................. (179,160) (220,593) (132,578) (58,078)
Income (loss) before
provision for state
income taxes....... 1,572,505 1,894,444 2,274,983 (1,758,604)
Provision for State
Income Taxes........... 45,000 79,000 103,000 --
----------- ----------- ----------- -----------
Net income (loss)..... $ 1,527,505 $ 1,815,444 $ 2,171,983 $(1,758,604)
=========== =========== =========== ===========

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

F-60

W.F. WOOD, INCORPORATED

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIODS INDICATED

Common Stock
--------------------
Number of Retained
Shares Earnings
Issued Amount (Deficit)
--------- ---------- -----------

BALANCE, December 31, 1995................... 80,000 $ 985,000 $ 220,385
Net income................................. -- -- 1,527,505
Distributions to stockholders.............. -- -- (1,069,810)
------ ---------- -----------
BALANCE, December 31, 1996................... 80,000 985,000 678,080
Net income................................. -- -- 1,815,444
Distributions to stockholders.............. -- -- (1,083,568)
------ ---------- -----------
BALANCE, December 31, 1997................... 80,000 985,000 1,409,956
Net income................................. -- -- 2,171,983
Distributions to stockholders.............. -- -- (764,000)
------ ---------- -----------
BALANCE, December 31, 1998................... 80,000 985,000 2,817,939
Additional paid-in capital................. -- 2,821,393 --
Net loss................................... -- -- (1,758,604)
Distributions to stockholders.............. -- -- (1,806,995)
------ ---------- -----------
BALANCE, September 3, 1999................... 80,000 $3,806,393 $ (747,660)
====== ========== ===========

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

F-61

W.F. WOOD, INCORPORATED

STATEMENTS OF CASH FLOWS
FOR THE PERIODS INDICATED

For the Years Ended December 31,
----------------------------------------
For the
Period Ended
September 3,
1996 1997 1998 1999
------------ ------------ ------------ ------------

Operating Activities:
Collections from
customers............ $ 15,693,172 $ 26,008,142 $ 30,137,649 $ 23,178,323
Interest income
collected............ 3,750 4,143 555 36
Payment of state
income taxes......... (22,033) (103,730) (111,470) (82,564)
Payment of operating
expenses............. (14,290,962) (24,485,261) (27,127,288) (23,798,966)
Payment of interest... (193,518) (215,707) (161,872) (66,169)
------------ ------------ ------------ ------------
Net cash provided by
(used for)
operating
activities......... 1,190,409 1,207,587 2,737,574 (769,340)
------------ ------------ ------------ ------------
Investing Activities:
Proceeds from sale of
equipment............ 18,500 10,301 45,757 5,704
Purchase of equipment
and improvements..... (638,596) (281,560) (181,863) (222,911)
Payment of deposits... (19,402) (3,576) -- (11,428)
------------ ------------ ------------ ------------
Net cash used for
investing
activities......... (639,498) (274,835) (136,106) (228,635)
------------ ------------ ------------ ------------
Financing Activities:
Net proceeds from
(payment of) demand
note payable to a
bank................. 232,734 259,581 (1,670,764) --
Proceeds from long-
term debt............ 389,920 71,469 -- --
Payment of long-term
debt................. (181,605) (205,387) (281,330) (227,776)
Payment of capital
lease obligations.... (8,219) (62,674) (72,665) (27,100)
Proceeds from
(payments to) related
party................ (11,622) 27,101 140,000 83,496
Additional paid-in
capital.............. -- -- -- 2,552,249
Distributions to
stockholders......... (1,069,810) (1,083,568) (764,000) (1,405,882)
------------ ------------ ------------ ------------
Net cash provided by
(used for)
financing
activities......... (648,602) (993,478) (2,648,759) 974,987
------------ ------------ ------------ ------------
Net decrease in cash.... (97,691) (60,726) (47,291) (22,988)
Cash balance, beginning
of period.............. 228,699 131,008 70,282 22,991
------------ ------------ ------------ ------------
Cash balance, end of
period................. $ 131,008 $ 70,282 $ 22,991 $ 3
============ ============ ============ ============

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

F-62

W.F. WOOD, INCORPORATED

STATEMENTS OF CASH FLOWS--(Continued)
FOR THE PERIODS INDICATED

For the Years Ended December 31,
-----------------------------------
For the
Period
Ended
September
1996 1997 1998 3, 1999
----------- ---------- ---------- -----------

Reconciliation of Net Income
(Loss) to Net Cash Provided
by (Used for) Operating
Activities
Net income (loss)........... $ 1,527,705 $1,815,444 $2,171,983 $(1,758,604)
Adjustments to reconciled
net income (loss) to net
cash provided by (used for)
operating activities:
Depreciation and
amortization............. 242,315 321,615 365,624 264,160
(Gain) loss on disposal of
equipment................ 19,339 (8,307) (34,301) 7,408
(Increase) decrease in:
Accounts receivable..... (1,129,440) 389,488 (645,971) (19,772)
Inventories............. (1,166,871) (591,976) 39,455 (618,689)
Prepaid state income
taxes.................. -- -- -- (59,820)
Other current assets.... (1,957) 18,588 (58,306) 6,596
Increase (decrease) in:
Accounts payable........ 1,576,965 (656,910) 831,200 1,145,077
Accrued expenses........ 99,386 (65,737) 68,493 290,304
Accrued state income
taxes.................. 22,967 (14,618) (703) (26,000)
----------- ---------- ---------- -----------
Net cash provided by
(used for) operating
activities............. $ 1,190,409 $1,207,587 $2,737,574 $ (769,340)
=========== ========== ========== ===========
Non-Cash Investing and
Financing Activities
Payment of long-term debt
with stockholders'
additional paid-in
capital.................... $ -- $ -- $ -- $ 269,144
=========== ========== ========== ===========
Distribution of due from
related party to
stockholders............... $ -- $ -- $ -- $ 401,113
=========== ========== ========== ===========
Purchase of equipment in
exchange for long-term
debt....................... $ 32,778 $ -- $ 198,000 $ 334,645
=========== ========== ========== ===========
Purchase of equipment in
exchange for capital lease
obligations................ $ 105,689 $ 71,595 $ -- $ --
=========== ========== ========== ===========
Deposit applied to equipment
purchase................... $ -- $ 17,746 $ -- $ --
=========== ========== ========== ===========

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

F-63

W.F. WOOD, INCORPORATED

NOTES TO FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

W.F. Wood, Incorporated (the "Company"), is engaged in the design,
manufacture, finishing, and sale of sheet metal fabrication and metal products.
The accompanying financial statements reflect the application of certain
accounting policies as described in this note. Other policies and practices are
covered in the remaining notes.

(a) Inventories:

Inventories, which include material, labor, and manufacturing overhead, are
stated at the lower of cost (first-in, first-out) or market.

(b) Equipment and Improvements:

Purchased property and equipment is recorded at cost. Capital lease property
and equipment is recorded at the lesser of cost or the present value of minimum
lease payments required. The Company provides for depreciation and amortization
by charges to income in amounts estimated to recover the cost of its equipment
and improvements over their estimated useful lives or term of lease, using the
straight-line method, as follows:

Machinery and equipment........................................ 5-10 Years
Building improvements.......................................... Term of Lease
Office equipment............................................... 3-10 Years
Vehicles....................................................... 5 Years
Office equipment under capital lease........................... Term of Lease

As discussed in Note 10, the outstanding common stock of the Company was
sold effective September 3, 1999 to HTM Holdings, Inc. This transaction
terminated the Company's subchapter "S" status. Prior to this transaction, the
former stockholders of the Company had elected subchapter "S" status for
federal and Massachusetts income tax purposes, thereby consenting to include
the Company's income in their individual income tax returns. Massachusetts "S"
corporations with sales over $9 million are subject to a state corporate income
tax of 4.5%. The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
Statement requires the use of the asset and liability approach for financial
accounting and reporting for income taxes.

(d) Reclassification:

Certain accounts in the financial statements for the years ended December
31, 1998 and 1997 have been reclassified to conform to the financial statement
presentation for the period ended September 3, 1999.

(e) Estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results may differ from those estimates.

(2) Related Party Transactions

(a) Due from Related Party:

Due from related party represents an amount due from Airedale Realty Trust
(the "Trust"), which is an entity that the former majority stockholders of the
Company are beneficiaries of. On September 3, 1999, the amount due from the
Trust was distributed to the former majority stockholders. The due from related
party was unsecured with no interest.

F-64

W.F. WOOD, INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)

(b) Facility Lease:

In connection with the sale of stock described in Note 10, the Company
entered into a lease agreement with the Trust to lease a manufacturing facility
for a term of one year with a four-year extension at the option of the Company.
The annual base rent is $300,000, plus operating costs, as defined. The annual
rent will range from approximately $319,000 in the first extension year to
approximately $362,000 in the fourth extension year.

Prior to the lease agreement described above, the Company leased the
facility from the Trust on a tenant-at-will basis. Total rent expense was
$202,500 for the period ended September 3, 1999 and $300,000 for each of the
years ended December 31, 1998, 1997, and 1996.

(3) Inventories

December 31, December 31, September 3,
1997 1998 1999
------------ ------------ ------------

Raw material.......................... $1,642,463 $1,360,722 $1,556,381
Work in process....................... 1,228,417 1,524,611 1,994,284
Finished goods........................ 140,122 86,214 39,571
---------- ---------- ----------
$3,011,002 $2,971,547 $3,590,236
========== ========== ==========

(4) Equipment and Improvements

Equipment and improvements consisted of the following:

December 31, December 31, September 3,
1997 1998 1999
------------ ------------ ------------

Machinery and equipment............. $1,823,555 $2,003,146 $2,484,866
Building improvements............... 251,093 325,593 377,248
Office equipment.................... 525,855 584,989 609,169
Vehicles............................ 49,023 32,778 --
---------- ---------- ----------
2,649,526 2,946,506 3,471,283
Less--Accumulated depreciation and
amortization....................... 1,237,285 1,531,582 1,776,075
---------- ---------- ----------
$1,412,241 $1,414,924 $1,695,208
========== ========== ==========

Depreciation and amortization expense related to equipment and improvements,
including the equipment under capital lease, was $264,160 for the period ended
September 3, 1999 and $365,624, $321,615, and $242,315 for the years ended
December 31, 1998, 1997, and 1996, respectively.

(5) Demand Note Payable to a Bank

In connection with the sale of common stock described in Note 10, the demand
note payable to a bank and the security interest provided to the bank was
terminated.

In 1998 and 1997, the demand note payable to a bank represents borrowings
under a line-of-credit agreement, renewable annually, in which the Company may
borrow against qualified accounts receivable and inventories, less letters of
credit, as defined in the loan agreement, subject to a maximum limit of
$2,500,000. Borrowings under the agreement bear interest at the bank's prime
rate (7.75% at December 31, 1998) plus 0.5%, are collateralized by
substantially all assets of the Company and the Trust and are fully guaranteed
by the Trust.

The provisions of this agreement require, among other things, the Company to
(a) maintain a minimum cash flow coverage ratio as defined, (b) maintain a
minimum tangible capital base (stockholders' equity less intangibles plus
subordinated debt) as defined, (c) not allow senior debt to be four times
greater than the tangible capital base and (d) places certain limits on
distributions to the Company's stockholders.

F-65

W.F. WOOD, INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)

(6) Capital Lease Obligations

The Company leases various office equipment under capital lease agreements
with monthly principal and interest installments ranging from $3,300 to $6,672,
expiring at various dates through October 2000, with effective interest rates
of approximately 8% to 10%. The related equipment collateralizes each lease.

At September 3, 1999, and December 31, 1998 and 1997, the capitalized cost
of leased office equipment was approximately $177,000 as of each date and the
related accumulated amortization was approximately $167,000, $126,000, and
$67,000, respectively.

(7) Long-Term Debt

Long-term debt at September 3, 1999, and December 31, 1998 and 1997,
consists of the following:

December 31, December 31, September 3,
1997 1998 1999
------------ ------------ ------------

(a) Installment note payable to a
bank, due in monthly principal
payments of $8,929 through January
1999, with a final payment of
$61,343 due February 1999. The
note bears interest at the bank's
prime rate (7.75% at December 31,
1998) plus 0.5% and is
collateralized by substantially
all assets of the Company and the
Trust. This note payable was
refinanced in 1998 to extend its
maturity date from November 1998
to February 1999.................. $177,415 $ 70,272 $ --
(b) Installment note payable to a
bank, due in monthly principal
payments of $7,690 plus interest
at the bank's prime rate (7.75% at
December 31, 1998) plus 0.5%
through August 2002. Borrowings
are collateralized by
substantially all assets of the
Company and the Trust ............ 430,631 338,353 --
(c) 9.9% Installment note payable to a
finance company, due in monthly
principal and interest payments of
$833 through March 2000. The note
is collateralized by a motor
vehicle .......................... 19,934 11,534 --
(d) 8.0% Installment note payable to a
finance company, due in monthly
principal and interest payments of
$4,015 through August 2003. The
note is collateralized by the
related equipment ................ -- 187,115 164,456
(e) 7.25% Installment note payable to
a finance company, due in monthly
principal and interest payments of
$6,666 through May 2004. The note
is collateralized by the related
equipment......................... -- -- 320,628
(f) 10.2% Installment note payable to
a finance company, due in monthly
principal and interest payments of
$6,672 through October 2000. The
note is collateralized by the
related equipment................. 196,293 133,669 93,584
-------- -------- --------
824,273 740,943 578,668
Less--Current maturities............... 350,744 275,930 183,835
-------- -------- --------
$473,529 $465,013 $394,833
======== ======== ========

F-66

W.F. WOOD, INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)

The installment notes payable to a bank in (a) and (b) were fully repaid in
connection with the sale of common stock described in Note 10, and the security
interest provided to the bank was terminated.

Principal payments on the long-term debt at September 3, 1999 are due as
follows:

Year Ending September 3, Amount
------------------------ --------

2000......................................................... $183,835
2001......................................................... 116,058
2002......................................................... 111,110
2003......................................................... 115,771
2004......................................................... 51,894
--------
$578,668
========

(8) Commitments

(a) Facility Lease:

The Company leases a second manufacturing facility under a five-year lease
agreement expiring January 2004. The lease requires the Company to pay annual
base rent, plus a share of real estate taxes, operating costs and management
fees as defined in the agreement. The agreement provides for one five-year
option to extend the lease term.

Future minimum lease payments (without regard to real estate taxes,
operating costs and management fees) on the operating lease are as follows:

Year Ending September 3, Amount
------------------------ --------

2000......................................................... $189,092
2001......................................................... 189,092
2002......................................................... 198,791
2003......................................................... 203,637
2004......................................................... 67,877
--------
$848,489
========

(b) Employment Agreements:

The Company has entered into employment agreements with two officers of the
Company. The Company is obligated to pay the officers one year's salary as
severance if their employment is terminated by the Company without cause or
terminated by the officers with good reason, as defined. The terms of the
agreements expire in December 2001 and are automatically renewed each year
until terminated by either party.

In connection with the sale of stock described in Note 10, the Company
adopted an employee bonus plan in which the Company provided a $250,000 bonus
to its employees in recognition of their past service and will pay a $250,000
retention bonus as an incentive for employees to remain with the Company for at
least six months subsequent to the sale of stock. As of September 3, 1999, the
past service bonus of $250,000 has been reflected in the accompanying financial
statements. The retention bonus will be recognized upon the completion of the
required term of employment.

F-67

W.F. WOOD, INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)

(9) Profit Sharing Plan

The Company has a defined contribution profit sharing plan covering both
salaried and hourly employees under Section 401(k) of the Internal Revenue
Code. Under the plan, employees may reduce up to 15% of their compensation per
year as a contribution to the plan, subject to the limitations imposed under
Section 401(k). The matching contribution to the plan, if any, is determined
annually at the discretion of the Company's directors. During the period ended
September 3, 1999 and the years ended December 31, 1998, 1997, and 1996, there
were no matching contributions by the Company.

(10) Concentrations

(a) Concentration of Credit Risk:

The Company extends credit to customers primarily located in Massachusetts
who are manufacturers of various equipment, such as computers, computer-related
equipment, and production equipment.

The Company generally does not require its customers to secure the accounts
receivable. Total accounts receivable outstanding at September 3, 1999, and
December 31, 1998 and 1997, from Massachusetts customers in computer-related
industries is approximately $1,794,000, $2,083,000, and $1,317,000,
respectively.

(b) Concentration of Credit Risk Arising from Cash Deposits in Excess of
Insured Limits:

The Company maintains its cash balances in one financial institution. The
balances are insured up to $100,000. At September 3, 1999, the Company's
uninsured cash balances totaled $1,021,812. The Company has not experienced any
losses in such cash accounts and believes it is not exposed to any significant
credit risk on cash.

One customer accounted for approximately 80%, 87%, and 77% of net sales for
the period ended September 3, 1999 and the years ended December 31, 1998 and
1997, respectively. Two customers accounted for approximately 67% of net sales
for the year ended December 31, 1996. Total receivables from this significant
customer was approximately $1,850,000, $1,989,000, and $1,033,000 at September
3, 1999 and December 31, 1998 and 1997, respectively.

(11) Sale of Common Stock and Change in Tax Status

Effective on September 3, 1999, the stockholders sold their common stock of
the Company to HTM Holdings, Inc. This transaction terminated the Company's
subchapter "S" status and will become a taxable corporation. SFAS No. 109
requires recognizing a deferred tax asset and liability for temporary
differences that exist at the date the Company's tax status changes from
nontaxable to taxable. The deferred tax liability due to this change was
immaterial and has not been reflected in the accompanying financial statements.

As part of the stock purchase agreement relating to the sale of stock, HTM
Holdings, Inc. may make an election under Section 338(h)(10) of the Internal
Revenue Code, thereby treating the common stock sale of the Company as a sale
of assets for tax reporting purposes. This would result in a gain on sale of
assets for Massachusetts income tax reporting purposes. The potential state tax
liability as a result of this election would be approximately $680,000. The
accompanying financial statements do not reflect any adjustments for this as
the election has not been made as of the date of this report.

F-68

W.F. WOOD, INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)

(12) Sale Related Professional Fees and Bonuses Paid to Management and
Employees

Professional fees reflected in the accompanying statements of income for the
period ended September 3, 1999 are non-recurring professional fees related to
the Sale of the Company. Acquisition-related bonuses paid to management and
employees reflect non-recurring bonuses paid by the Company upon sale of the
Company to HTM Holdings, Inc.

(13) Additional paid-in capital

The existing shareholders of the Company funded the bonuses paid to
management and employees and certain professional fees (notes 12 and 8(c)) and
paid off certain bank debt by contributing cash of $2,821,393 to the Company.

(14) Material Differences Between Generally Accepted Accounting Principles
(GAAP) in United States and Canada

The financial statements have been prepared in accordance with generally
accepted accounting principles as applied in the United States. The financial
statements also conform, in all material respects, with Canadian generally
accepted accounting principles.

F-69

INDEPENDENT AUDITORS' REPORT

Board of Directors
Pensar Corporation:

We have audited the accompanying balance sheets of Pensar Corporation as of
December 31, 1998 and 1999, and the related statements of income, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pensar Corporation as of
December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999 in
conformity with United States generally accepted accounting principles.

KPMG LLP

Milwaukee, Wisconsin
May 9, 2000

F-70

PENSAR CORPORATION

BALANCE SHEETS
December 31, 1998, 1999 and June 30, 2000

December 31,
------------------------ June 30,
1998 1999 2000
----------- ----------- -----------
(unaudited)

Assets
Current assets:
Cash.................................. $ 427,285 $ 511,740 $ 23,676
Trade accounts receivable, net of
allowance for doubtful receivables of
$20,000 in 1998 and 1999............. 7,506,530 9,780,860 9,057,170
Inventories........................... 2,473,339 5,273,489 6,947,732
Prepaid expenses...................... 65,960 200,994 220,319
----------- ----------- -----------
Total current assets.............. 10,473,114 15,767,083 16,248,897
----------- ----------- -----------
Property, plant and equipment, net...... 3,436,303 4,720,574 5,191,316
Other assets............................ 456,085 511,048 580,837
----------- ----------- -----------
$14,365,502 $20,998,705 $22,021,050
=========== =========== ===========
Liabilities and Stockholders' Equity

Current liabilities:
Lines of credit....................... $ 1,500,000 $ 4,215,000 $ 3,650,000
Current installments of long-term
debt................................. 290,000 331,631 80,110
Accounts payable...................... 2,810,627 5,138,413 5,308,418
Accrued liabilities................... 1,239,201 1,292,407 1,966,098
Stockholders' distributions payable... 560,000 138,666 --
----------- ----------- -----------
Total current liabilities......... 6,399,828 11,116,117 11,004,626
Long-term debt, less current
installments........................... 830,000 1,080,867 1,255,867
----------- ----------- -----------
Total liabilities................. 7,229,828 12,196,984 12,260,493
----------- ----------- -----------

Stockholders' equity:
Common stock, $1 par value:
Voting; 10,000 shares authorized,
1,000 shares issued and
outstanding........................ 1,000 1,000 1,000
Nonvoting; 40,000 shares authorized,
no shares issued................... -- -- --
Additional paid-in capital.......... 1,209,423 1,209,423 1,209,423
Retained earnings................... 6,564,314 8,046,298 8,965,134
Notes receivable from officers and
stockholders....................... (639,063) (455,000) (415,000)
----------- ----------- -----------
Total stockholders' equity........ 7,135,674 8,801,721 9,760,557
----------- ----------- -----------
$14,365,502 $20,998,705 $22,021,050
=========== =========== ===========

See accompanying notes to financial statements.

F-71

PENSAR CORPORATION

STATEMENTS OF INCOME
Years ended December 31, 1997, 1998, 1999 and
six months ended June 30, 1999 and 2000

Six months ended
Year ended December 31, June 30,
----------------------------------- -----------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)

Revenue:
Manufacturing......... $49,863,694 $48,919,471 $50,018,206 $20,198,874 $31,820,078
Engineering services.. 1,167,940 1,978,051 2,977,675 1,059,767 1,736,534
----------- ----------- ----------- ----------- -----------
Total revenue....... 51,031,634 50,897,522 52,995,881 21,258,641 33,556,612
Cost of goods sold or
services provided...... 41,858,905 41,867,805 43,858,748 18,133,024 28,387,010
----------- ----------- ----------- ----------- -----------
Gross profit........ 9,172,729 9,029,717 9,137,133 3,125,617 5,169,602
Operating expenses:
Executive bonus
compensation......... 642,037 528,764 497,692 23,730 225,750
Professional fees
related to sale
transaction.......... -- -- 75,000 -- --
Other selling, general
and administrative... 4,482,527 4,408,246 4,532,716 2,159,083 2,842,092
----------- ----------- ----------- ----------- -----------
Total selling,
general
administrative
expenses........... 5,124,564 4,937,010 5,105,408 2,182,813 3,067,842
----------- ----------- ----------- ----------- -----------
Operating income........ 4,048,165 4,092,707 4,031,725 942,804 2,101,760
Other expense:
Interest expense...... 387,891 216,985 267,697 91,168 199,945
----------- ----------- ----------- ----------- -----------
Net income.............. $ 3,660,274 $ 3,875,722 $ 3,764,028 $ 851,636 $ 1,901,815
=========== =========== =========== =========== ===========
Basic net income per
common share........... $ 3,812.79 $ 3,875.72 $ 3,764.03 $ 851.64 $ 1,901.82
=========== =========== =========== =========== ===========
Weighted average shares
of common stock
outstanding............ 960 1,000 1,000 1,000 1,000
=========== =========== =========== =========== ===========
Diluted net income per
common share........... $ 3,734.97 $ 3,875.72 $ 3,764.03 $ 851.64 $ 1,901.82
=========== =========== =========== =========== ===========
Weighted average shares
of common stock
outstanding............ 980 1,000 1,000 1,000 1,000
=========== =========== =========== =========== ===========

See accompanying notes to financial statements.

F-72

PENSAR CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1998 and 1999 and
six months ended June 30, 2000

Notes
Additional receivable from Total
Voting Nonvoting paid-in Retained officers and stockholders'
Shares common common capital earnings stockholders equity
------ ------ --------- ---------- ---------- --------------- -------------

Balance at December 31,
1996................... 960 $ 960 -- 809,463 4,116,635 (416,000) 4,511,058
Net income.............. -- -- -- -- 3,660,274 -- 3,660,274
Distributions........... -- -- -- -- (2,256,121) -- (2,256,121)
Collections of notes
receivable............. -- -- -- -- -- 69,600 69,600
----- ------ --- --------- ---------- -------- ----------
Balance at December 31,
1997................... 960 960 -- 809,463 5,520,788 (346,400) 5,984,811
Issuance of voting
common stock........... 40 40 -- 399,960 -- (400,000) --
Net income.............. -- -- -- -- 3,875,722 -- 3,875,722
Distributions........... -- -- -- -- (2,832,196) -- (2,832,196)
Collections of notes
receivable............. -- -- -- -- -- 107,337 107,337
----- ------ --- --------- ---------- -------- ----------
Balance at December 31,
1998................... 1,000 1,000 -- 1,209,423 6,564,314 (639,063) 7,135,674
Net income.............. -- -- -- -- 3,764,028 -- 3,764,028
Distributions........... -- -- -- -- (2,282,044) -- (2,282,044)
Collections of notes
receivable............. -- -- -- -- -- 184,063 184,063
----- ------ --- --------- ---------- -------- ----------
Balance at December 31,
1999................... 1,000 $1,000 -- 1,209,423 8,046,298 (455,000) 8,801,721
Net income.............. -- -- -- -- 1,901,815 -- 1,901,815
Distributions........... -- -- -- -- (982,979) -- (982,979)
Collections of notes
receivable............. -- -- -- -- 40,000 40,000
----- ------ --- --------- ---------- -------- ----------
Balance at June 30,
2000................... 1,000 $1,000 -- 1,209,423 8,965,134 (415,000) 9,760,557
===== ====== === ========= ========== ======== ==========

See accompanying notes to financial statements.

F-73

PENSAR CORPORATION

STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1998, 1999 and
six months ended June 30, 1999 and 2000

Six months ended
Year ended December 31, June 30,
-------------------------------------- ------------------------
1997 1998 1999 1999 2000
------------ ----------- ----------- ----------- -----------
(unaudited) (unaudited)

Cash flows from
operating activities:
Net income............. $ 3,660,274 3,875,722 3,764,028 851,636 1,901,815
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation........... 623,057 631,904 752,457 324,880 440,135
Amortization of debt
issuance costs........ 15,684 15,680 26,729 16,667 5,628
Loss (gain) on sale of
property, plant and
equipment............. -- (2,913) 4,004 -- --
Increase in cash
surrender value of
life insurance........ (72,040) (78,119) (83,766) (43,200) (75,417)
Changes in assets and
liabilities:
Accounts receivable... (1,416,342) 419,131 (2,274,330) 1,034,445 723,690
Inventories........... 675,672 136,718 (2,800,150) (2,237,996) (1,674,243)
Prepaid expenses...... 194 (17,837) (135,034) (77,582) (19,325)
Accounts payable...... (331,939) (541,775) 2,327,786 650,715 170,005
Accrued liabilities... 441,783 (16,695) 53,206 111,163 535,025
------------ ----------- ----------- ---------- -----------
Net cash provided by
operating
activities.......... 3,596,343 4,421,816 1,634,930 630,728 2,007,313
------------ ----------- ----------- ---------- -----------
Cash flows from
investing activities:
Purchase of property,
plant and equipment... (321,365) (691,407) (2,054,857) (679,619) (910,877)
Proceeds from sale of
property, plant and
equipment............. -- 3,325 14,125 -- --
(Increase) decrease in
debt service trust
funds................. (3) (8) 2,074 (1,226) --
------------ ----------- ----------- ---------- -----------
Net cash used for
investing
activities.......... (321,368) (688,090) (2,038,658) (680,845) (910,877)
------------ ----------- ----------- ---------- -----------
Cash flows from
financing activities:
Proceeds from lines of
credit................ 30,385,000 18,625,000 26,050,000 8,250,000 17,955,000
Payments on lines of
credit................ (31,450,000) (18,325,000) (23,335,000) (7,000,000) (18,520,000)
Repayment of
stockholders' notes
payable............... -- (300,000) -- -- --
Proceeds from issuance
of long-term debt..... -- -- 500,000 -- --
Repayments of long-term
debt.................. (442,250) (928,865) (207,502) -- (76,521)
Distributions to
stockholders.......... (1,402,121) (3,126,196) (2,703,378) (1,653,544) (982,979)
Proceeds from
collection of notes
receivable from
officers and
stockholders.......... 91,700 107,337 184,063 84,000 40,000
------------ ----------- ----------- ---------- -----------
Net cash provided by
(used for) financing
activities.......... (2,817,671) (3,947,724) 488,183 (319,544) (1,584,500)
------------ ----------- ----------- ---------- -----------
Increase (decrease)
in cash............. 457,304 (213,998) 84,455 (369,661) (488,064)
Cash:
Beginning of period.... 183,979 641,283 427,285 427,285 511,740
------------ ----------- ----------- ---------- -----------
End of period.......... $ 641,283 $ 427,285 $ 511,740 $ 57,624 $ 23,676
============ =========== =========== ========== ===========
Supplemental cash flow
information--Cash paid
for interest........... $ 372,467 $ 213,917 $ 227,749 $ 77,805 $ 194,317
============ =========== =========== ========== ===========
Non-cash investing and
financing activities--
Receipt of notes
receivable for issuance
of common stock........ $ -- $ 400,000 $ -- $ -- $ --
============ =========== =========== ========== ===========

See accompanying notes to financial statements.

F-74

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1998 and 1999

(1)Nature of Business

Pensar Corporation (the Company), based in Appleton, Wisconsin, designs
and assembles custom made electronic products, most of which include
printed circuit boards, for domestic manufacturers. The Company also
provides engineering services relating to board design and microchip
programming. The Company's raw materials are readily available, and the
Company is not dependent on a single supplier or a limited number of
suppliers.

The Company's accounting principles are in accordance with accounting
principles generally accepted in the United States, and, except as outlined
in note 15, are, in all material respects, in accordance with accounting
principles generally accepted in Canada.

(2)Summary of Significant Accounting Policies

(a) Use of Estimates

(b) Revenue Recognition

Revenue from the sale of products is recognized when goods are shipped
to customers. Revenue from the provision of engineering services is
recognized as services are provided.

Inventories are valued on a first-in, first-out basis at the lower of
cost or replacement value for raw materials and at the lower of cost or net
realizable value for work in process and finished goods.

(d) Property, Plant and Equipment

Property, plant and equipment are recorded at cost and depreciated
predominantly on a straight-line basis over their estimated useful lives as
follows:

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

Building........................................................ 40 years
Building improvements........................................... 5 years
Machinery and equipment......................................... 5-10 years
Office furniture and equipment.................................. 7 years
Computer hardware and software.................................. 3-5 years
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(e) Other Assets

Costs incurred relating to the issuance of debt are deferred and
amortized to interest expense over the term of the related debt.

(f) Income Taxes

The Company has elected to be taxed as an S corporation under the
provisions of the Internal Revenue Code and Wisconsin state statutes. Under
those provisions, the Company does not pay Federal or Wisconsin corporate
income taxes on its taxable income. Rather, the stockholders are
individually liable

F-75

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

for Federal and Wisconsin income taxes on their respective shares of the
Company's taxable income. The Company makes periodic distributions to its
stockholders to enable them to pay the personal income taxes related to
their respective shares of the Company's taxable income.

(g) Impairment of Long-Lived Assets

The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered permanently impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying value or the
fair value less costs to sell.

(h) Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
This Statement establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments as well as
other hedging activities. The Statement requires all derivatives to be
recognized either as assets or liabilities and measured at fair value. In
1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities Deferral of the Effective Date of SFAS 133, which
defers the effective date of SFAS No. 133. The Company will be required to
implement SFAS No. 133 for its fiscal year ended December 31, 2001. It is
anticipated that SFAS No. 133 will not have a significant impact on the
Company's financial position, results of operations or cash flows since it
does not maintain any derivative financial instruments.

(i) Advertising

Advertising costs are charged to operations as selling expense when
incurred. Advertising expense for the years ended December 31, 1997, 1998
and 1999 was approximately $21,700, $21,200 and $34,100, respectively.

(j) Research and Development

The Company expenses all research and development costs as incurred. For
the years ending December 31, 1997, 1998 and 1999, research and development
costs included in the respective statements of income were not significant
to the Company's operations.

(k) Earnings Per Share

Basic net income per common share is computed by dividing net income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Basic net income per common share does
not consider common stock equivalents. Diluted net income per common share
reflects the dilution that would occur if convertible debt securities and
stock options were exercised or converted into common shares or resulted in
the issuance of common shares that then shared in the net income of the
entity. The computation of diluted net income per common share uses the "if
converted" and "treasury stock" methods to reflect dilution. The difference
between basic net income per common

F-76

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

share and diluted net income per common share in 1997 relates to the
outstanding stock options discussed in note 12.

(l) Unaudited Financial Information

The unaudited interim financial statements furnished herein reflect all
adjustments which are, in the opinion of management, necessary to present
fairly the financial position of the Company as of June 30, 2000 and the
results of its operations and its cash flows for the six months ended June
30, 1999 and 2000. The unaudited interim financial statements should be
read in conjunction with the annual financial statements and notes thereto
included herein.

(3)Inventories

Inventories as of December 31, 1998 and 1999 and June 30, 2000 are
summarized as follows:

December 31,
-------------------- June 30,
1998 1999 2000
---------- --------- -----------
(unaudited)

Raw materials.................................. $1,646,169 2,865,416 $4,130,105
Work in process................................ 806,766 2,406,257 2,725,114
Finished goods................................. 20,404 1,816 92,513
---------- --------- ----------
Total inventories............................ $2,473,339 5,273,489 $6,947,732
========== ========= ==========

(4)Property, Plant and Equipment

Property, plant and equipment at December 31, 1998 and 1999 are
summarized as follows:

1998
---------------------------------
Accumulated Net book
Cost depreciation value
---------- ------------ ---------

Land.................................... $ 162,847 -- 162,847
Building and building improvements...... 2,497,237 418,633 2,078,604
Machinery and equipment................. 4,032,582 3,261,890 770,692
Office furniture and equipment.......... 190,846 139,749 51,097
Computer hardware and software.......... 1,188,601 815,538 373,063
---------- --------- ---------
$8,072,113 4,635,810 3,436,303
========== ========= =========

1999
---------------------------------
Accumulated Net book
Cost depreciation value
---------- ------------ ---------

Land.................................... $ 162,847 -- 162,847
Building and building improvements...... 2,596,407 495,301 2,101,106
Machinery and equipment................. 5,529,471 3,676,185 1,853,286
Office furniture and equipment.......... 318,068 160,244 157,824
Computer hardware and software.......... 1,389,469 943,958 445,511
---------- --------- ---------
$9,996,262 5,275,688 4,720,574
========== ========= =========

F-77

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

(5)Other Assets

Other assets at December 31, 1998 and 1999 are summarized as follows:

1998 1999
-------- -------

Cash surrender value of life insurance.................... $396,559 480,325
Deferred financing costs, net............................. 57,452 30,723
Debt service trust funds.................................. 2,074 --
-------- -------
$456,085 511,048
======== =======

(6)Accrued Liabilities

Accrued liabilities at December 31, 1998 and 1999 are summarized as
follows:

1998 1999
---------- ---------

Salaries and wages, payroll taxes and related
withholdings...................................... $ 402,571 574,595
Vacation........................................... 429,889 480,381
Health and dental benefits......................... 133,806 144,000
Warranty costs..................................... 90,000 --
Property taxes..................................... 68,691 64,392
Customer rebates................................... 63,000 9,436
Other.............................................. 51,244 19,603
---------- ---------
$1,239,201 1,292,407
========== =========

(7)Lines of Credit

The lines of credit balance at December 31, 1998 and 1999 is summarized
as follows:

1998 1999
---------- ---------

Bank line of credit, $3,800,000 maximum available,
interest at the prime rate minus 0.75% (7.75% at
December 31, 1999) on the principal balance
outstanding of $1,900,000 or less and prime rate
minus 1.00% (7.50% at December 31, 1999) on the
principal balance outstanding in excess of
$1,900,000, due July 31, 2000.................... $1,500,000 3,800,000
Bank line of credit, $500,000 maximum available,
interest at the prime rate minus 0.75% (7.75% at
December 31, 1999), due December 20, 2001........ -- 415,000
---------- ---------
$1,500,000 4,215,000
========== =========

At December 31, 1998 and 1999, the Company also has available a $400,000
line of credit with interest at prime minus 0.75% (7.75% at December 31,
1999). The line of credit is available through July 2000. At December 31,
1998 and 1999, there were no outstanding borrowings on this line of credit.

The weighted average interest rates for the lines of credit outstanding
during 1998 and 1999 were 7.85% and 7.35% respectively.

The Company pays a commitment fee on the unused portion of its lines of
credit at an annual rate of 0.25%.

F-78

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

The line of credit agreements contain various restrictive covenants
including maintaining certain working capital and net worth requirements
and prohibition against change in control of the Company. At December 31,
1999, the Company was in compliance with or has obtained waivers for
covenants with which it was not in compliance. It is management's intent to
pay off the $415,000 line of credit within the next year, and accordingly,
it is presented as a current liability.

(8)Long-term Debt

Long-term debt at December 31, 1998 and 1999 is summarized as follows:

1998 1999
---------- ----------

1993 City of Appleton, Wisconsin Industrial
Development Revenue Bonds, due December 2003,
variable interest rate adjusted weekly (5.6% at
December 31, 1999), interest payments due
monthly.......................................... $ 600,000 $ 600,000
1994 City of Appleton, Wisconsin Industrial
Development Revenue Bonds, due August 2001,
variable interest rate adjusted weekly (5.6% at
December 31, 1999), interest payments due
monthly, with mandatory sinking fund payments of
$175,000 due each August......................... 520,000 350,000
Note payable to a financial institution, with
interest at 7.9%, principal and interest payments
of $15,660 due monthly through September 2002.... -- 462,498
---------- ----------
Total long-term debt............................ 1,120,000 1,412,498
Less current installments......................... 290,000 331,631
---------- ----------
Long-term debt, less current installments....... $ 830,000 $1,080,867
========== ==========

The 1993 City of Appleton, Wisconsin Industrial Development Revenue
Bonds are secured by an irrevocable bond letter of credit in the amount of
$607,398. The letter of credit expires on December 15, 2003 and is secured
by the assets of the Company.

The 1994 City of Appleton, Wisconsin Industrial Development Revenue
Bonds are secured by an irrevocable bond letter of credit in the amount of
$354,375. The letter of credit expires on August 15, 2001 and is secured by
the assets of the Company.

The Industrial Development Revenue Bonds contain various restrictive
covenants including maintaining certain working capital and net worth
requirements and prohibition against change in control of the Company. At
December 31, 1999, the Company was in compliance with or has obtained
waivers for covenants with which it was not in compliance.

Aggregate long-term debt principal payments and mandatory sinking fund
payments due within the next five years and thereafter follows:

Year ending December 31,
------------------------

2000.......................................................... $ 331,631
2001.......................................................... 344,674
2002.......................................................... 136,193
2003.......................................................... 600,000
----------
$1,412,498
==========

F-79

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

(9)Leases

The Company leases certain manufacturing equipment and vehicles under
noncancellable operating leases with initial or remaining terms in excess of
one year.

Future minimum rental payments required under these operating leases for
the next five years and thereafter follows:

Year ending December 31,
------------------------

2000.......................................................... $ 708,657
2001.......................................................... 426,172
2002.......................................................... 327,461
2003.......................................................... 211,876
2004.......................................................... 211,876
Thereafter.................................................. 12,397
----------
$1,898,439
==========

Rent expense, including executory costs, under all operating leases for
the years ended December 31, 1997, 1998 and 1999 amounted to $322,568,
$416,133 and $463,378, respectively.

(10)Employee Benefit Plans

Substantially all employees participate in a discretionary bonus program
in which cash payments are made to participants based on a guideline of net
income in excess of a minimum return on total stockholders' equity at the
beginning of the year. Bonus expense amounted to $1,658,620, $1,575,823 and
$1,422,469 for the years ended December 31, 1997, 1998 and 1999,
respectively.

The Company maintains a 401(k) profit sharing plan. Virtually all
employees are eligible to participate in the plan. During 1997 and 1998,
employees could elect to contribute up to 20% of their compensation to the
plan and during 1999, employees could elect to contribute up to 25% of
their compensation to the plan. The Company's contribution to the plan is
determined annually by the Board of Directors. There were no Company
contributions for the years ended December 31, 1997, 1998 and 1999.

On September 1, 1998, the Company entered into a Phantom Stock Agreement
with an officer of the Company. Under the agreement, the officer received
50 phantom share units. Upon separation from service, the officer will
receive his vested portion of the difference between the ending certificate
of agreed value of the shares over the beginning certificate of agreed
value of the shares. The agreed value is established at the discretion of
the Board of Directors. The officer was immediately 40% vested and will
vest an additional 15% per year on January 1, 2000 through January 1, 2003.
At December 31, 1998 and 1999, the certificate of agreed value of the
phantom shares was the same as the beginning certificate of agreed value,
and thus the Company has not recorded a liability for this agreement.

(11)Stock and Related Party Transactions

In the event of the death of a stockholder, the deceased stockholder's
estate has the option to require the Company to purchase all stock owned by
the estate. The Company is the beneficiary on life insurance policies of
the major shareholders that would help cover the Company's obligation to
purchase stock from a deceased stockholder's estate. The Company has the
right of first refusal on all other transfers of common stock. Also, upon
termination of employment, certain stockholders are required to sell and
the Company is obligated to buy all of their shares of stock.

F-80

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

During 1994 and 1998, certain officers purchased common stock partially
financed with notes payable to the Company. The notes, with interest at
6.25%, are collateralized by the stock. Interest is payable quarterly and
principal is due annually in minimum amounts of $84,000 through 2004 and
then $32,000 through 2008. During 1997, 1998 and 1999, the Company received
$69,600, $107,337 and $184,063, respectively, in principal repayments and
recorded approximately $26,000, $41,000 and $33,200, respectively, of
interest income in connection with these notes.

The Company recorded approximately $20,388 of interest expense for the
year ended December 31, 1998, in connection with certain notes payable to
the stockholders. The notes payable to the stockholders were paid in full
by the Company during 1998.

(12)Stock Options

In 1994, the Company awarded an employee stockholder options to purchase
40 shares of voting common stock at $10,000 per share, the estimated fair
market value of the common stock. The employee vested in 10 shares of the
options each January 1 from 1995 through 1998. The options were exercised
on January 1, 1998 with the issuance to the Company of a $400,000 note, as
discussed in note 11.

The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees; as permitted by Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. Under APB Opinion No. 25, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeds the exercise price of the stock option.

The table below sets out the pro forma amounts of net income and net
income per common share that would have resulted if the Company had
accounted for its employee stock plans under the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation.

1997
----------

Net income:
As reported.................................................. $3,660,274
Pro forma.................................................... 3,638,363
==========
Basic net income per common share:
As reported.................................................. 3,812.79
Pro forma.................................................... $ 3,712.62
==========

For purposes of computing pro forma net income, the fair value of each
optional grant is estimated on the date of grant using the minimum value
method under which no volatility is assumed. Assumptions used to calculate
the fair value was a risk-free interest rate of 6.3%, no dividend yield and
an expected life of 4 years.

(13)Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:

(i) The carrying amounts of cash, trade accounts receivable, accounts
payable, accrued liabilities and stockholders' distribution payable
approximate fair values due to the short-term nature of these
instruments.

F-81

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

(ii) The carrying amounts of the bank lines of credit approximate fair
values due to the current interest rates approximating interest
rates currently available to the Company for bank lines of credit
with similar terms and availability.

(iii) The fair value of long-term debt, including the current portion,
is based on interest rates currently available to the Company for
debt with similar terms and maturities. The fair value of long-
term debt at December 31, 1998 and 1999 approximates book value.

(14)Segment Information

The Company's principal operating segments are identified by the types
of products and services from which revenues are derived and are consistent
with the reporting structure of the Company's internal organization.

The Company has two reportable segments: printed circuit boards and
engineering services. The printed circuit boards segment includes the
manufacture of surface mount, through-hole and mixed technology custom
printed circuit boards for industrial uses. The engineering services
segment includes various engineering services such as custom design,
product research and development, prototyping and testing.

The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on gross profit, which excludes operating expenses and
other income and expenses. The Company's reportable segments are strategic
business units that offer different products and services. They are managed
separately due to the difference in the products and services offered by
each segment.

F-82

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

The following is a summary of financial information concerning each of
the Company's reportable segments:

Printed
circuit Engineering Total
December 31, 1997 boards services Segments Corporate Total
----------------- ----------- ------------ ------------ --------- ----------

Total revenue........... $49,863,694 1,167,940 51,031,634 -- 51,031,634
Depreciation and
amortization........... 357,387 38,372 395,759 242,982 638,741
Gross profit (loss)..... 9,351,413 (178,684) 10,093,536 -- 9,172,729
Total assets............ 10,957,829 328,742 11,286,571 3,709,403 14,995,974
Capital expenditures.... 88,180 68,496 156,676 164,689 321,365

Printed
circuit Engineering Total
December 31, 1998 boards services Segments Corporate Total
----------------- ----------- ------------ ------------ --------- ----------

Total revenue........... $48,919,471 1,978,051 50,897,522 -- 50,897,522
Depreciation and
amortization........... 362,400 63,600 426,000 221,584 647,584
Gross profit............ 8,912,281 117,436 9,029,717 -- 9,029,717
Total assets............ 10,486,696 464,438 10,951,134 3,414,368 14,365,502
Capital expenditures.... 445,562 107,478 553,040 138,367 691,407

Printed
circuit Engineering Total
December 31, 1999 boards services Segments Corporate Total
----------------- ----------- ------------ ------------ --------- ----------

Total revenue........... $50,018,206 2,977,675 52,995,881 -- 52,995,881
Depreciation and
amortization........... 461,492 107,942 569,434 209,752 779,186
Gross profit............ 8,564,217 572,916 9,137,133 -- 9,137,133
Total assets............ 16,296,672 1,039,411 17,336,083 3,662,622 20,998,705
Capital expenditures.... 1,673,837 201,282 1,875,119 179,738 2,054,857

Printed
June 30, 1999 circuit Engineering Total
(unaudited) boards services Segments Corporate Total
------------- ----------- ------------ ------------ --------- ----------

Total revenue........... $20,198,874 1,059,767 21,258,641 -- 21,258,641
Depreciation and
amortization........... 185,939 52,694 238,633 102,914 341,547
Gross profit (loss)..... 3,263,446 (137,829) 3,125,617 -- 3,125,617
Total assets............ 11,909,241 610,452 12,519,693 3,139,780 15,659,473
Capital expenditures.... 421,364 47,573 468,937 210,682 679,619

Printed
June 30, 2000 circuit Engineering Total
(unaudited) boards services Segments Corporate Total
------------- ----------- ------------ ------------ --------- ----------

Total revenue........... $31,820,078 1,736,534 33,556,612 -- 33,556,612
Depreciation and
amortization........... 271,925 77,910 349,835 95,928 445,763
Gross profit............ 5,059,336 110,266 5,169,602 -- 5,169,602
Total assets............ 16,423,189 852,570 17,275,759 4,745,291 22,021,050
Capital expenditures.... 564,744 63,761 628,505 282,372 910,877

Reconciliation of
segment December December 31, December 31, June 30, June 30,
data to net income: 31, 1997 1998 1999 1999 2000
------------------- ----------- ------------ ------------ --------- ----------

Gross profit............ $ 9,172,729 9,029,717 9,137,133 3,125,617 5,169,602
Selling, general
administrative
expenses............... 5,124,564 4,937,010 5,105,408 2,182,813 3,067,842
----------- --------- ---------- --------- ----------
Operating income........ 4,048,165 4,092,707 4,031,725 942,804 2,101,760
Interest expense........ 387,891 216,985 267,697 91,168 199,945
----------- --------- ---------- --------- ----------
Net income.............. $ 3,660,274 3,875,722 3,764,028 851,636 1,901,815
=========== ========= ========== ========= ==========

F-83

PENSAR CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1998 and 1999

At December 31, 1997, 1998 and 1999 segment assets represent the
segments' respective share of trade accounts receivable, inventories and
net property plant and equipment. All other assets are considered corporate
assets.

All of the Company's long-lived assets are located within the United
States. Further, all of the Company's shipments of goods or engineering
services are provided to domestic manufacturers.

During 1997, a significant portion of the Company's net sales were
generated from two customers, accounting for approximately 41% and 22% of
the Company's total net sales. During 1998, a significant portion of the
Company's net sales were generated from two customers, which comprised
approximately 26% and 25%, of the Company's net sales, respectively and
comprising approximately $1,251,000 and $1,477,000 of total trade accounts
receivable, respectively at December 31, 1998. During 1999, a significant
portion of the Company's net sales were generated from two customers, which
comprised approximately 22% and 11%, of the Company's net sales,
respectively and comprising approximately $1,404,000 and $1,305,000 of
total trade accounts receivable, respectively at December 31, 1999.

(15)United States and Canadian Accounting Principle Differences

The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles (GAAP) as applied in the
United States (U.S.). The significant differences between U.S. GAAP and
Canadian GAAP and their effect on the consolidated financial statements of
the Company are described below and relate to the calculation of diluted
net income per common share.

Under Canadian GAAP, fully diluted net income per common share is
calculated by assuming that all of the outstanding options at the end of
the year have been exercised at the beginning of the year or at the date
granted, if later, and proceeds from the exercise of options have been used
to generate investment income. Under U.S. GAAP, fully diluted net income
per common share is calculated by assuming that the proceeds were used to
acquire common shares of the Company at the average market price. Diluted
net income per common share under Canadian GAAP is $3,681.61 in 1997.

(16)Subsequent Event

Subsequent to December 31, 1999, the Company's shareholders signed a
memorandum of understanding to sell all of its outstanding common stock to
SMTC Corporation. In 2000, 100% of the Company's outstanding common stock
will be sold to SMTC Corporation.

F-84

AUDITORS' REPORT TO THE DIRECTORS AND STOCKHOLDERS OF
QUALTRON TEORANTA AND SUBSIDIARIES

We have audited the accompanying consolidated balance sheets of Qualtron
Teoranta and subsidiaries at 30 September 1999 and 2000 and the related
consolidated statements profit and loss accounts and statements of consolidated
cash flows for the years ended 30 September 1998, 1999 and 2000, all expressed
in US Dollars. The financial statements are the responsibility of the directors
of Qualtron Teoranta. Our responsibility is to express an opinion on those
financial statements based on our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Qualtron Teoranta and subsidiaries as of 30
September 1999 and 2000, results of operations and cash flows for each of the
years ended 30 September 1998, 1999 and 2000 in conformity with accounting
principles generally accepted in the Republic of Ireland (which differ in
certain significant respects from generally accepted accounting principles in
the United States of America--see pages F-102 to F-105) on the basis set out in
the Accounting Policies on pages F-86 to F-88.

KPMG
Chartered Accountants

Dublin, Ireland
November 26, 2000

F-85

QUALTRON TEORANTA AND SUBSIDIARIES

The Group has operations in Ireland and the United States. Qualtron
Teoranta, an Irish incorporated entity, is a leading provider of specialised
cable and harness assemblies to the telecommunications industry and has two
subsidiaries, Qualtron Inc. and Qualtron R&D Teoranta.

The Group operates in the United States through Qualtron Inc.

Qualtron R&D Teoranta holds patents over certain processes and has licensed
the use of those patents to Qualtron Teoranta and Qualtron Inc.; accordingly
all of the income earned by Qualtron R&D represents intercompany profits.

ACCOUNTING POLICIES

The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the financial
statements of Qualtron Teoranta and Subsidiaries ("Qualtron" or the "Group").

Basis of preparation

The financial statements are prepared in accordance with Irish generally
accepted accounting principles under the historical cost convention and comply
with financial reporting standards of the Accounting Standards Board.
Significant differences between Irish GAAP and US GAAP are described on pages
F-102 to F-105.

Basis of consolidation

The consolidated financial statements include the results of Qualtron
Teoranta and its subsidiary undertakings. All significant inter-company
profits, transactions and account balances have been eliminated on
consolidation.

Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less accumulated depreciation.

Provision is made for depreciation on all tangible assets, at rates
calculated to write off the cost of each asset over its expected useful life on
a straight line basis at the following annual rates:

Plant and equipment...................................................... 15%
Fixtures and fittings.................................................... 20%
Computer equipment....................................................... 25%
Motor vehicles........................................................... 20%

Goodwill

Purchased goodwill arising on the acquisition of a business represents the
excess of the acquisition cost over the fair value of the identifiable net
assets when they were acquired.

Purchased goodwill arising on acquisitions is capitalised and amortised over
its estimated economic life of three years.

F-86

QUALTRON TEORANTA AND SUBSIDIARIES

ACCOUNTING POLICIES--(Continued)

Stock valuation

Stocks are stated at the lower of cost and net realisable value.

Cost includes all expenditure which has been incurred in the normal course
of business in bringing the products to their present location and condition.
In the case of finished goods and work in progress, cost is defined as the
aggregate cost of raw material, direct labour and the attributable proportion
of direct production overheads.

Net realisable value is the actual or estimated selling price net of trade
discounts, less all further costs to completion and all costs to be incurred or
likely to be incurred in the realisation of such selling price.

Government grants

Capital grants are treated as deferred income. Such income is credited to
the profit and loss account over the same period and on the same basis as the
related tangible assets are written off to the profit and loss account.

Revenue grants are credited to the profit and loss account in the same
period as the related expenditure is incurred.

Foreign currencies

The functional currency of the parent company is Irish pounds and the
functional currency of the company's US subsidiary is the US Dollar.

Transactions during the period in currencies other than the functional
currency, for each of the entities, have been translated at the rate of
exchange prevailing at the date of transaction or at a contracted rate. The
resulting monetary assets and liabilities denominated in currencies other than
the functional currency are translated at the balance sheet rate or the
contracted rate and the exchange differences are dealt with in the profit and
loss account.

The assets and liabilities of subsidiary undertakings are translated using
year-end exchange rates and income is translated at average rates. The
cumulative effect of exchange rate movements is included in shareholders'
equity.

The Group's reporting currency is the US Dollar (US$). Assets and
liabilities so determined are translated into the Group's reporting currency at
the exchange rate at the balance sheet date. Revenues, expenses, gains and
losses are translated at the average exchange rate during the period and all
translation effect of exchange rate changes are included in the foreign
currency reserve as a separate component of shareholders' equity.

The Group enters into forward foreign currency contracts to eliminate the
currency exposures that arise on sales denominated in foreign currencies
immediately after those sales are transacted. Changes in fair value of
instruments used as hedges are not recognised in the financial statements until
the hedge position matures.

Dividends declared by Qualtron Teoranta will be declared in Irish pounds.

Leased assets

Tangible fixed assets acquired under finance leases are included in the
balance sheet at their fair value and are depreciated over the shorter of the
lease term and their useful lives. The corresponding liabilities are recorded
as a liability and the interest element of the finance lease rentals is charged
to the profit and loss account during the lease term to reflect a constant rate
of interest on the remaining balance of the obligation for each accounting
period.

F-87

QUALTRON TEORANTA AND SUBSIDIARIES

ACCOUNTING POLICIES--(Continued)

Operating lease rentals are charged to the profit and loss account on a
straight line basis over the lease term.

Pensions

Pension benefits for employees are met by payments to a defined contribution
pension fund. Contributions are charged to the profit and loss account in the
year in which they fall due.

Taxation

The charge for corporation tax is based on the results for the year.
Deferred tax assets and liabilities are recognised for the future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these differences are expected to be recovered or
settled.

Turnover

Turnover represents the value of goods invoiced to customers outside the
Group and excludes value added tax. Revenue is recognised at the point at which
title passes.

Research and development

Research and development expenditure is written off as incurred.

Liquid resources

In the consolidated cash flow statement, liquid resources are represented by
cash on deposit at bank requiring more than 24 hours notice of withdrawal.

F-88

QUALTRON TEORANTA AND SUBSIDIARIES

CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE YEARS ENDED 30 SEPTEMBER

Note 1998 1999 2000
------- ------- -------
US$ US$ US$
------- ------- -------
(in thousands)

Turnover--continuing
operations................... 1 16,093 27,981 23,403
Cost of sales................. (10,487) (19,636) (18,199)
------- ------- -------
Gross profit.................. 5,606 8,345 5,204
Distribution costs............ (236) (274) (264)
Administrative expenses....... (2,756) (2,986) (1,577)
Research and development
costs........................ (97) (368) (247)
Other operating income........ 268 146 99
------- ------- -------
Operating profit--continuing
operations................... 2 2,785 4,863 3,215
Interest receivable and
similar income............... 5 188 130 92
Interest payable and similar
charges...................... 6 (10) (6) (5)
Foreign exchange losses....... -- (266) (22)
------- ------- -------
Profit on ordinary activities
before taxation.............. 2,963 4,721 3,280
Taxation on profit on ordinary
activities................... 7 (308) (418) (281)
------- ------- -------
Profit on ordinary activities
after taxation............... 2,655 4,303 2,999
Minority interests............ 25 (32) (1) 23
------- ------- -------
Profit for the financial
year......................... 2,623 4,302 3,022
Dividends paid--equity........ 8 -- (673) (341)
--non equity............ (46) -- --
Dividends proposed--equity.... 8 (142) (313) (680)
------- ------- -------
Retained profit for the
financial year............... 2,435 3,316 2,001
======= ======= =======

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

F-89

QUALTRON TEORANTA AND SUBSIDIARIES

CONSOLIDATED MOVEMENTS ON PROFIT AND LOSS ACCOUNTS
for the years ended 30 September

1999 2000
----- ------
US$ US$
----- ------
(in
thousands)

Profit for the financial year.................................... 4,302 3,022
Dividends--paid.................................................. (673) (341)
--proposed................................................... (313) (680)
Profit and loss account at beginning of year..................... 6,092 9,408
----- ------
Profit and loss account at end of financial year................. 9,408 11,409
===== ======

CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
for the years ended 30 September

1999 2000
----- ------
US$ US$
----- ------
(in
thousands)

Retained profit for the financial year........................... 3,316 2,001
Currency translation adjustment.................................. (762) (1,968)
----- ------
Total recognised gains and losses for the year................... 2,554 33
===== ======

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

F-90

QUALTRON TEORANTA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
At 30 September

Note 1999 2000
------ ------
US$ US$
------ ------
(in
thousands)

Fixed assets
Tangible assets........................................... 9 2,163 1,958
Intangible fixed assets--goodwill......................... 10 -- 361
------ ------
2,163 2,319
Current assets
Current assets Stocks..................................... 11 3,847 3,994
Debtors................................................... 12 4,145 3,990
Cash at bank and in hand.................................. 5,408 4,484
------ ------
13,400 12,468
Creditors: amounts falling due within one year............ 13 (5,530) (4,781)
------ ------
Net current assets........................................ 7,870 7,687
------ ------
Total assets less current liabilities..................... 10,033 10,006
Creditors: amounts falling due after more than one year... 14 (64) (21)
Provisions for liabilities and charges--deferred tax...... 15 -- (10)
------ ------
Net assets................................................ 9,969 9,975
====== ======
Capital and reserves
Called up share capital................................... 16 -- --
Additional paid in capital................................ 18 508 508
Capital reserve........................................... 18 509 509
Profit and loss account................................... 18 9,408 11,409
Foreign currency reserve.................................. 18 (489) (2,457)
------ ------
Shareholders' funds--equity............................... 9,936 9,969
Minority interests--equity................................ 25 33 6
------ ------
9,969 9,975
====== ======

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

F-91

QUALTRON TEORANTA AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS
for the year ended 30 September

Note 1998 1999 2000
------ ------ ------
US$ US$ US$
------ ------ ------
(in thousands)

Cash inflow from operating activities............. 21 788 4,652 1,982
Returns on investments and servicing of finance... 22 178 124 87
Taxation.......................................... 22 (292) (297) (356)
Capital expenditure and financial investment...... 22 (890) (1,312) (1,087)
Dividends paid.................................... 22 (171) (812) (618)
Management of liquid resources.................... 22 (1,826) 1,296 384
Financing activities.............................. 22 (542) (80) (35)
------ ------ ------
Increase/(decrease) in cash in the year........... (2,755) 3,571 357
====== ====== ======

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
for the year ended 30 September

Note 1998 1999 2000
------ ------ -----
US$ US$ US$
------ ------ -----
(in thousands)

Increase/(decrease) in cash for the year.......... (2,755) 3,571 357
Cash outflow from decrease in debt and lease
financing........................................ 34 80 35
Cash (inflow)/outflow from movement in liquid
resources........................................ 1,826 (1,296) (384)
Foreign exchange difference....................... 97 (308) (894)
------ ------ -----
Movement in net funds in the year................. (798) 2,047 (886)
Net funds at beginning of year.................... 23 4,164 3,366 5,307
New finance leases................................ -- (106) --
------ ------ -----
Net funds at end of year.......................... 23 3,366 5,307 4,421
====== ====== =====

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

F-92

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

1 Turnover

All turnover derives from the manufacture of telecommunications equipment
and components in Ireland and the United States.

Year ended
30 September
----------------------
1998 1999 2000
------ ------ ------
US$ US$ US$
(in thousands)

By geographical area
Republic of Ireland................................. 16 11 2,325
Rest of Europe...................................... 583 1,245 2,301
United States....................................... 15,494 26,725 17,500
Asia................................................ -- -- 1,277
------ ------ ------
16,093 27,981 23,403
====== ====== ======

2 Statutory and other information

Year ended
30 September
----------------------
1998 1999 2000
------ ------ ------
US$ US$ US$
(in thousands)

Depreciation of tangible assets..................... 175 371 479
Amortisation of goodwill............................ -- -- 139
Auditors' remuneration, including expenses.......... 20 22 26
Government grants amortised......................... (268) (146) (99)
====== ====== ======

3 Employees

The aggregate payroll costs of these persons were as follows:

Year ended
30 September
----------------------
1998 1999 2000
------ ------ ------
US$ US$ US$
(in thousands)

Wages and salaries.................................. 4,319 7,447 6,487
Social welfare costs................................ 358 586 487
Pensions cost....................................... 179 176 219
------ ------ ------
4,856 8,209 7,193
====== ====== ======
Excluding non-executive directors, the average
number of persons employed in each financial year
was................................................ 202 316 269
====== ====== ======

F-93

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

4 Directors' remuneration

Year ended
30 September
------------------
1998 1999 2000
----- ----- ----
US$ US$ US$
(in thousands)

Directors' remuneration
Other remuneration.................................... 920 1,474 352
Pension contributions................................. 152 147 189
----- ----- ----
1,072 1,621 541
===== ===== ====

5 Interest receivable and similar income

Year ended
30 September
------------------
1998 1999 2000
----- ----- ----
US$ US$ US$
(in thousands)

Bank deposit interest................................... 188 130 92
===== ===== ====

6 Interest payable and similar charges

Year ended
30 September
------------------
1998 1999 2000
----- ----- ----
US$ US$ US$
(in thousands)

On bank loans and overdraft repayable within 5 years.... 4 5 4
On finance leases....................................... 6 1 1
----- ----- ----
10 6 5
===== ===== ====

7 Taxation on profit on ordinary activities

The taxation charge on the profit on ordinary activities as adjusted for
tax purposes for the year is as follows:

Year ended
30 September
------------------
1998 1999 2000
----- ----- ----
US$ US$ US$
(in thousands)

Corporation tax......................................... 870 1,150 642
Manufacturing relief.................................... (562) (732) (371)
----- ----- ----
308 418 271
Deferred tax (net)...................................... -- -- 10
----- ----- ----
308 418 281
===== ===== ====

Qualtron Teoranta is entitled to claim 10% Manufacturing Relief until 31
December 2010 in accordance with Section 448 of the Irish Taxes
Consolidation Acts, 1997.

F-94

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

8 Dividends

Dividends paid

Year ended
30 September
--------------
1998 1999 2000
---- ---- ----
US$ US$ US$
(in thousands)

8% cumulative redeemable preference shares (Series 1)........ 39 -- --
8% cumulative redeemable preference shares (Series 2)........ 7 -- --
Equity dividends paid undertaking............................ -- 673 341
--- --- ---
46 673 341
=== === ===

Dividends proposed--equity

Year ended
30 September
--------------
1998 1999 2000
---- ---- ----
US$ US$ US$
(in thousands)

Proposed dividend............................................ 142 313 680
=== === ===

9 Tangible assets

Plant & Fixtures Computer Motor
equipment & fittings equipment vehicles Total
Group US$ US$ US$ US$ US$
----- --------- ---------- --------- -------- -----
(in thousands)

Cost
At beginning of year......... 1,939 322 294 282 2,837
Additions.................... 432 37 97 21 587
Exchange difference.......... (308) (49) (53) (43) (453)
----- --- --- --- -----
At end of year............... 2,063 310 338 260 2,971
===== === === === =====
Accumulated depreciation
At beginning of year......... 382 127 135 31 675
Charge for the year.......... 304 55 67 53 479
Exchange difference.......... (79) (25) (28) (9) (141)
----- --- --- --- -----
At end of year............... 607 157 174 75 1,013
===== === === === =====
Net book value
At 30 September 2000......... 1,456 153 164 185 1,958
===== === === === =====
At 30 September 1999......... 1,557 195 159 251 2,163
===== === === === =====

The net book amount of the tangible assets includes US$130,315
(1999:US$200,972; 1998:US$127,340) in respect of assets held under finance
leases. The depreciation charge for the year in respect of these assets
amounts to US$39,387 (1999: US$16,105; 1998: US$36,096).

F-95

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

10 Goodwill

2000
--------------
US$
(in thousands)

Cost
At beginning of year.......................................... --
Acquisition in year........................................... 500
---
At end of year................................................ 500
---
Amortisation
At beginning of year.......................................... --
Amortisation in year.......................................... 139
---
At end of year................................................ 139
---
Net book value
At 30 September 2000.......................................... 361
===
At 30 September 1999.......................................... --
===

On 21 October 1999, the Group, through its wholly owned subsidiary Qualtron
Inc., acquired certain assets and the customer list of Belden Equipment
Company for cash. The payment of US$500,000 in respect of the customer
list, in accordance with Irish GAAP, has been capitalised as goodwill and
is being written off over its estimated useful life of 3 years on a
straight line basis.

11 Stocks

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Raw materials................................................ 1,944 2,635
Work in progress............................................. 536 334
Finished goods............................................... 1,367 1,025
------- -------
3,847 3,994
======= =======

There are no material differences between the replacement cost of stock and
the balance sheet amounts.

12 Debtors

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Amounts falling due within one year
Trade debtors............................................... 3,982 3,858
Prepayments................................................. 54 81
Other debtors............................................... 139 51
------- -------
4,175 3,990
======= =======

F-96

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

13 Creditors: amounts falling due within one year

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Bank overdraft............................................... -- 12
Obligations under finance leases (note 20)................... 37 30
Trade creditors and accruals................................. 4,617 3,730
Tax and social welfare....................................... 525 390
Government grants deferred (note 19)......................... 46 --
Dividend proposed............................................ 305 619
------- -------
5,530 4,781
======= =======

Tax and social welfare included in other creditors

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Value added tax.............................................. 31 53
Payroll taxes................................................ 87 80
Corporation tax.............................................. 407 257
------- -------
525 390
======= =======

14 Creditors: amounts falling due after more than one year

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Obligations under finance leases (note 20)................... 64 21
======= =======

15 Provision for liabilities and charges

Deferred tax

1999 2000
------- -------
US$ US$
(in thousands)

At beginning of year......................................... -- --
Charged during the year (net)................................ -- 10
------- -------
At end of year............................................... -- 10
======= =======

F-97

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

16 Called up share capital

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Equity shares
Authorised
900,000 ordinary shares of IR(Pounds)1 each................ 1,145 1,145
======= =======
Allotted called up and fully paid
136 ordinary shares of IR(Pounds)1 each.................... -- --
======= =======
Non equity shares
Authorised
300,000 cumulative redeemable preference shares of
IR(Pounds)1 each (series 1)............................... 382 382
100,000 cumulative redeemable preference shares of
IR(Pounds)1 each (series 2)............................... 127 127
------- -------
509 509
======= =======

17 Redemption of preference shares (Series 1) and (Series 2)

On 1 June 1998 the preference shares were redeemed at par. On the same date
US$509,000 was transferred from the profit and loss account to a capital
reserve.

18 Reserve movements

Additional Foreign Profit and
Capital paid in currency loss
reserve capital reserve account
------- ---------- -------- ----------
US$ US$ US$ US$
(in thousands)

At 1 October 1998................... 509 508 273 6,092
Profit for the year................. -- -- -- 3,316
Currency translation difference on
foreign exchange net investment.... -- -- (762) --
--- --- ------ ------
At 30 September 1999................ 509 508 (489) 9,408
Profit for the year................. -- -- -- 2,001
Currency translation difference on
foreign exchange net investment.... -- -- (1,968) --
--- --- ------ ------
At 30 September 2000................ 509 508 (2,457) 11,409
--- --- ------ ------

19 Government grants

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Included as accruals and deferred income under creditors
--amounts falling due within one year.................... 46 --
--amounts falling due after more than one year........... -- --
------- -------
46 --
======= =======

F-98

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

20 Finance leases

Finance lease obligations are due for repayment as follows:

At 30 September
---------------
1999 2000
------- -------
US$ US$
(in thousands)

Within one year.............................................. 37 30
Between two and five years................................... 64 21
------- -------
101 51
======= =======

21 Reconciliation of operating profit to net cash inflow from operating
activities

At 30 September
---------------------
1998 1999 2000
------ ------ -----
US$ US$ US$
(in thousands)

Operating profit...................................... 2,785 4,863 3,212
Depreciation charges.................................. 175 372 479
Government grants amortised........................... (268) (146) (99)
Goodwill amortised.................................... -- -- 139
Increase in stocks.................................... (996) (1,107) (892)
Increase in debtors................................... (3,173) (32) (730)
(Decrease)/increase in creditors...................... 2,372 939 (100)
Profit on disposal of fixed assets.................... -- (27) --
Unrealised exchange gain.............................. (107) (210) (27)
------ ------ -----
Cash inflow from operating activities................. 788 4,652 1,982
====== ====== =====

F-99

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

22 Gross cash flows

At 30 September
----------------------
1998 1999 2000
------ ------ ------
US$ US$ US$
(in thousands)

Returns on investments and servicing of finance
Interest received.................................. 188 130 92
Interest paid...................................... (4) (4) (1)
Interest element on finance lease payments......... (6) (2) (4)
------ ------ ------
Net cash inflow from returns on investments and
servicing of finance.............................. 178 124 87
====== ====== ======
Taxation
Corporation tax paid............................... (292) (297) (356)
------ ------ ------
Net cash outflow from the payment of taxation...... (292) (297) (356)
====== ====== ======
Capital expenditure and financial investment
Payments to acquire tangible fixed assets.......... (890) (1,312) (587)
Payments to acquire intangible fixed assets........ -- -- (500)
------ ------ ------
Net cash outflow from investing activities and
servicing of finance.............................. (890) (1,312) (1,087)
====== ====== ======
Dividends paid
Dividends on equity shares......................... (125) (812) (618)
Dividends on non-equity shares..................... (46) -- --
------ ------ ------
Equity dividends paid.............................. (171) (812) (618)
====== ====== ======
Management of liquid resources
Cash taken off/(placed on) one month deposit....... (1,826) 1,296 384
------ ------ ------
Cash inflow/(outflow) from management of liquid
resources......................................... (1,826) 1,296 384
====== ====== ======
Financing
Capital element of finance lease rentals........... (34) (80) (35)
Preference shares redeemed......................... (509) -- --
Shares issued for cash............................. 1 -- --
------ ------ ------
Net cash outflow from financing.................... (542) (80) (35)
====== ====== ======

F-100

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

23 Analysis of changes in net funds

At Exchange At
30 September Cash rate 30 September
1999 flow movement 2000
------------ ---- -------- ------------
US$ US$ US$ US$
(in thousands)

Cash at bank........................ 4,934 369 (860) 4,443
Current asset investments........... 474 (384) (49) 41
----- ---- ---- -----
Cash at bank and in hand............ 5,408 (15) (909) 4,484
Bank overdraft...................... -- (12) -- (12)
Finance leases...................... (101) 35 15 (51)
----- -----
Total............................... 5,307 4,421
===== =====

24 Reconciliation of movement in shareholders' funds

1999 2000
----- -----
US$ US$
(in
thousands)

Opening shareholders' funds.................................... 7,382 9,936
Total recognised gains and losses for the year................. 2,554 33
----- -----
Closing shareholders' funds.................................... 9,936 9,969
===== =====

25 Minority interest--equity

1999 2000
----- -----
US$ US$
(in
thousands)

At beginning of year........................................... 34 33
Share of (loss)/profit after taxation for the year............. 1 (23)
Exchange difference............................................ (2) (4)
----- -----
At end of year................................................. 33 6
===== =====

The minority interest relates to the "B" to "J" ordinary shares in
Qualtron R & D Teoranta, which are held by certain directors and managers
of Qualtron Teoranta.

Qualtron Teoranta holds all of the "A" ordinary shares in Qualtron R & D
Teoranta, amounting to 91.7% of the issued ordinary share capital.

26 Pensions

The Group operates defined contribution pension schemes for employees
and executive directors. The assets of the schemes are held separately from
those of the Group in independently administered funds. The pension cost
charge represents contributions payable to the funds and amounted to
US$218,764 (1999: US$176,463; 1998: US$179,122).

F-101

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

27 Charge over property

The bank facilities of Qualtron Teoranta are secured by a floating
debenture over the assets of the Group in the amount of US$808,012. The
Group had no borrowings at 30 September 2000.

28 Related party disclosures

The company is availing of the exemption under Financial Reporting
Standard No. 8 "Related Party Disclosures' not to disclose details of
transactions with companies within the Qualtron Teoranta Group.

Dividends of US$1,021,000 (1999: US$986,000; 1998: US$Nil) were paid and
proposed during the financial year from Qualtron R & D Teoranta to
directors and managers employed by Qualtron Teoranta.

29 Post balance sheet events

There have been no events since the year end which require disclosure in
the financial statements.

30 Foreign exchange hedge contracts

The Group has entered into forward foreign currency contracts to
eliminate the currency exposures that arise on sales denominated in foreign
currencies immediately after those sales are translated. Changes in the
fair value of instruments used as hedges are not recognised in the
financial statements until the hedge position matures. The unrecognised
loss on hedges at 30 September 2000 amounted to US$1,279,000.

31 Summary of differences between Irish and United States generally accepted
accounting principles

(a) Significant differences

The financial statements of Qualtron are prepared in accordance with
generally accepted accounting principles ("GAAP") applicable in Ireland
which differ significantly in certain respects from those generally
accepted in the United States (US). These significant differences are
described below:

(i) Forward exchange contracts

Certain outstanding foreign currency forward exchange contracts
which hedge anticipated future transactions and qualify for hedge
contracts treatment under Irish GAAP would not qualify as hedges under
US GAAP. Such contracts would be recorded at fair value at each balance
sheet date based on the forward rates of exchange ruling at that date
and the corresponding unrealised gain or loss would be included in the
determination of net income.

(ii) Executive Compensation

Under Irish GAAP dividends paid to management and directors by a
subsidiary are shown as a distribution from net income. Under US GAAP
these payments are shown as executive compensation.

(iii) Minority Interests

The Company is entitled to all of the undistributed profits of its
subsidiary Qualtron R & D Teoranta. Accordingly the minority interest
presented under Irish GAAP has been eliminated.

F-102

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

31 Summary of differences between Irish and United States generally accepted
accounting principles (continued)

(b) Net Income under US GAAP

Year ended Year ended
30 September 30 September
1999 2000
------------ ------------
US$ US$
(in thousands)

Net income (Irish GAAP).......................... 4,302 3,022
Adjustments
Unrealised loss on forward exchange contracts.... (88) (1,192)
Dividend treated as executive compensation....... (608) (960)
Deferred tax asset arising on recognition of
foreign exchange losses......................... -- 128
Elimination of minority interest................. 1 (23)
----- ------
Net income as adjusted to accord with US GAAP.... 3,607 975
===== ======

Year ended Year ended
30 September 30 September
1999 2000
------------ ------------
US$ US$
(in thousands)

Shareholders' equity as reported in the
consolidated balance sheets (Irish GAAP)........ 9,936 9,969
Adjustments
Unrealised loss on forward exchange contracts.... (88) (1,280)
Deferred tax..................................... -- 128
Elimination of minority interest................. 33 6
----- ------
Shareholders' equity as adjusted................. 9,881 8,823
===== ======

(d) Cash flows

In accordance with UK and Irish GAAP, the Group complies with Financial
Reporting Standard No. 1--"Cash flow statements" (FRS 1). Its objective and
principles are similar to those set out in SFAS No. 95 "Statement of Cash
Flows". The principal difference between the standards is in respect of
classification. Under FRS 1, the Group presents its cash flows for (a)
operating activities; (b) returns on investments and servicing of finance;
(c) taxation; (d) capital expenditure; (e) acquisitions and disposals; and
(f) financing activities. SFAS No. 95 requires only three categories of
cash flow activity (a) operating; (b) investing; and (c) financing.

Cash flows arising from taxation and returns on investments and
servicing of finance under FRS 1 are included as operating activities under
SFAS No. 95. In addition, under FRS 1, cash and liquid resources included
short term borrowings repayable on demand. SFAS No. 95 requires movements
in such borrowings to be included in financing activities.

F-103

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

31 Summary of differences between Irish and United States generally accepted
accounting principles (continued)

(e) Profit and loss account as restated under US GAAP in US Dollars

For the year ended
30 September
-------------------------
1998 1999 2000
------- ------- -------
US$ US$ US$
(in thousands)

Turnover......................................... 16,093 27,981 23,403
Cost of sales.................................... (10,024) (19,636) (18,199)
------- ------- -------
Gross profit..................................... 6,069 8,345 5,204
Distribution costs............................... (236) (274) (264)
Administrative expenses.......................... (3,384) (3,594) (2,537)
Research and development costs................... (97) (368) (247)
Other operating income........................... 268 146 99
Foreign exchange loss............................ (355) (354) (1,214)
------- ------- -------
Operating profit................................. 2,265 3,901 1,041
Interest receivable and similar income........... 188 130 92
Interest payable and similar charges............. (10) (6) (5)
------- ------- -------
Profit on ordinary activities before taxation.... 2,443 4,025 1,128
Taxation on profit on ordinary activities........ (308) (418) (153)
------- ------- -------
Profit on ordinary activities after taxation..... 2,135 3,607 975
======= ======= =======

The Irish pound profit and loss accounts for each of the years ended 30
September have been converted at the average US Dollar exchange rates for
each year.

F-104

QUALTRON TEORANTA AND SUBSIDIARIES

NOTES FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)

31 Summary of differences between Irish and United States generally accepted
accounting principles (continued)

(f) Balance Sheet as restated under US GAAP in US Dollars

For the year ended
30 September
--------------------
1999 2000
--------- ---------
US$ US$
(in thousands)

Fixed assets
Tangible assets...................................... 2,163 1,958
Intangible assets--goodwill.......................... -- 361
--------- ---------
2,163 2,319
Current assets
Deferred tax asset................................... -- 118
Stocks............................................... 3,847 3,994
Debtors.............................................. 4,254 4,141
Cash at bank and in hand............................. 5,474 4,492
--------- ---------
13,575 12,745
Creditors: amounts falling due within one year....... (5,793) (6,220)
--------- ---------
Net current assets................................... 7,782 6,525
--------- ---------
Total assets less current liabilities................ 9,945 8,844
Creditors: amounts falling due after more than one
year................................................ (64) (21)
--------- ---------
Net assets........................................... 9,881 8,823
========= =========
Capital and reserves
Called up share capital.............................. -- --
Additional paid-in capital........................... 508 508
Capital reserve...................................... 509 509
Profit and loss account.............................. 9,353 10,267
Foreign currency reserve............................. (489) (2,461)
--------- ---------
Shareholders' funds--equity.......................... 9,881 8,823
========= =========

The Irish pound balance sheets for each of the years ended 30 September
have been converted at the closing US Dollar exchange rates for each year
end.

(g) New Accounting Pronouncements

In 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133). This is
effective for the Company's financial statements beginning September 1,
2000. SFAS No. 133 requires a Company to recognise all derivative
instruments as assets or liabilities in its balance sheet and measure them
at fair value. The Company does not expect that the adoption of this
statement will have any material effect on the Company's financial
statements.

In December 1999 the SEC issued Staff Accounting Bulletin No. 101
"Revenue Recognition in Financial Statements" (SAB 101). SAB 101 provides
guidance on revenue recognition and related disclosures in financial
statements. The SEC issued guidance on October 12, 2000 with respect to the
interpretation of SAB 101. The adoption of SAB 101 did not have any
material effect on the Company's financial statements.

F-105

4,375,000 Shares

[LOGO OF SMTC]
SMTC Corporation

Common Stock
------------------
PROSPECTUS
April 4, 2001
------------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the various expenses in connection with the
sale and distribution of the securities registered in connection with our
initial public offering, other than the underwriting discounts and commissions.
All amounts shown are estimates, except the Securities and Exchange Commission
registration fee and the National Association of Securities Dealers, Inc.
filing fee.

Securities and Exchange Commission Registration fee.............. $ 53,434
National Association of Securities Dealers, Inc. filing fee...... 13,000
Nasdaq National Market listing fee............................... 95,000
Printing and engraving expenses.................................. 800,000
Legal fees and expenses.......................................... 2,615,000
Accounting fees and expenses..................................... 950,000
Blue sky fees and expenses....................................... 5,000
Transfer agent and Registrar fees................................ 3,500
Miscellaneous.................................................... 63,500
----------
Total.......................................................... $4,598,434
==========

Item 14. Indemnification of Directors and Officers.

The Registrant's Certificate of Incorporation provides that the Registrant's
directors shall not be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent that the exculpation from liabilities is not permitted under the
Delaware General Corporation Law as in effect at the time such liability is
determined. The By-Laws provide that the Registrant shall indemnify its
directors to the full extent permitted by the laws of the State of Delaware.

Prior to the consummation of this offering, the Company will enter into
indemnification agreements with each of its directors and executive officers
that provide for indemnification and expense advancement to the fullest extent
permitted under the Delaware General Corporation Law.

Item 15. Recent Sales of Unregistered Securities.

Since its incorporation in 1998, SMTC has issued the following securities
without registration under the Securities Act of 1933, as amended (the
"Securities Act"):

(1) In connection with the combination of Surface Mount and HTM, which
was completed on July 30, 1999, SMTC issued an aggregate of 2,447,782
shares of its Class A common stock, 154,167.8 shares of its Class L common
stock, 113,407.9 shares of its Class N common stock and warrants
exercisable for an aggregate of 103,894.9 shares of its Class A common
stock and 12,088.2 shares of its Class L common stock to pre-combination
stockholders of Surface Mount, including certain members of management of
Surface Mount and other investors and pre-combination stockholders of HTM,
including affiliates of Bain Capital, Inc., affiliates of Celerity
Partners, L.L.C., certain members of management of HTM and other investors,
in exchange for pre-combination securities of Surface Mount, pre-
combination securities of HTM and an aggregate of approximately $16.7
million.

(2) On July 30, 1999, pursuant to an employee stock option plan, SMTC
issued an aggregate of 33,140.2 options to purchase its Class A common
stock and 3,855.9 options to purchase its Class L common stock. The options
to purchase Class A common stock were fully vested when granted, and were
immediately exercised for an aggregate of 33,140.2 shares of Class A common
stock at an aggregate

II-1

exercise price of $60,374. These shares are subject to certain restrictions
on transferability and certain repurchase rights.

(3) On September 30, 1999, pursuant to an employee stock option plan,
SMTC issued an aggregate of 116,860 shares of its Class A common stock.

(4) On May 18, 2000, we issued warrants to purchase 41,666.67 shares of
Class L common stock and 375,000.03 shares of Class A common stock, subject
to adjustment provisions in the warrants and sold notes in the aggregate
amount of $5 million. The issuance of the notes and warrants was exempt
from registration under the Securities Act because the purchasers of the
notes and warrants included only foreign persons, qualified institutional
buyers and three large institutional accredited investors.

All shares referred to in (1) through (4) were exempt from registration
under the Securities Act pursuant to Section 4(2) thereof or Rule 701
thereunder.

(5) On July 27, 2000, simultaneously with the closing of our initial
public offering, we acquired Pensar Corporation (now SMTC Manufacturing
Corporation of Wisconsin), an EMS company specializing in design services
and located in Appleton, Wisconsin. The purchase consideration consisted of
$18 million in cash and the balance in shares of common stock of the
Company. We issued 1,188,682 shares of common stock valued at $16 per share
to five accredited investors to finance the share portion of the purchase
price of the Pensar Corporation acquisition. The cash portion of the
acquisition was financed with a portion of the proceeds from the initial
public offering. The total purchase price, including transaction costs, was
approximately $37 million. The 1,188,682 shares issued were exempt from
registration under the Securities Act pursuant to Section 4(2) thereof and
Rule 506 thereunder.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits:

II-2

4.13# Demand Note of SMTC Manufacuring Corporation of Canada dated July 3,
2000.
4.14# Secured Demand Note of HTM Holdings, Inc. dated July 3, 2000.
4.15# Secured Demand Note of HTM Holdings, Inc. dated July 3, 2000.
4.16# Demand Note of HTM Holdings, Inc. dated July 3, 2000.
5.1# Opinion of Ropes & Gray.
10.1.1#+ Credit and Guarantee Agreement dated as of July 28, 1999.
10.1.2# First Amendment dated as of November 4, 1999 to the Credit and
Guarantee Agreement dated as of July 28, 1999.
10.1.3# Second Amendment dated as of December 14, 1999 to the Credit and
Guarantee Agreement dated as of July 28, 1999.
10.1.4# Third Amendment dated as of May 15, 2000 to the Credit and Guarantee
Agreement dated as of
July 28, 1999.
10.1.5 Amended and Restated Credit and Guarantee Agreement dated as of July
27, 2000.(3)
10.1.6 Amended and Restated Guarantee and Collateral Agreement dated as of
July 27, 2000.(3)
10.1.7 First Amendment dated as of November 17, 2000 to the Amended and
Restated Credit and Guarantee Agreement.(1)
10.1.8 Second Amendment dated as of December 28, 2000 to the Amended and
Restated Credit and Guarantee Agreement.(1)
10.1.9 Third Amendment dated as of February 6, 2001 to the Amended and
Restated Credit and Guarantee Agreement.(1)
10.2# Amended and Restated SMTC (HTM) 1998 Equity Incentive Plan dated as
of September 30, 1999.
10.3.1# Management Agreement dated July 30, 1999.
10.3.2 Termination Agreement dated as of July 27, 2000.(1)
10.4.1# Real Property Lease dated September 1, 1993 between Ogden Atlantic
Design Company, Inc. and Garrett and Garrett.
10.4.2# Lease Renewal Agreement dated as of September 1, 1996 between
Atlantic Design Company, Inc. and Garrett and Garrett.
10.4.3# Assignment of Lease dated as of September 16, 1997 between Ogden
Atlantic Design Company, Inc. and The SMT Centre S.E. Inc.
10.5# Form of Real Property Lease dated December 22, 1998 between Third
Franklin Trust and W.F. Wood, Incorporated.
10.6# Real Property Lease dated May 9, 1995 between Logitech Ireland
Limited and Ogden Atlantic Design (Europe) Limited.
10.7# Real Property Sublease Agreement dated March 29, 1996 between Radian
International, LLC and The SMT Centre of Texas Inc.
10.8# Real Property Lease dated August 11, 1997 between Edwin A. Helwig and
Barbara G. Helwig and The SMT Centre, Inc., Lease Addendum and Work
Letter Agreement.
10.9# Real Property Lease dated as of September 15, 1998 between Warden-
McPherson Developments Ltd. and The Surface Mount Technology Centre
Inc.
10.10# Real Property Lease dated September 3, 1999 between Airedale Realty
Trust and W. F. Wood, Incorporated.
10.11.1# Real Property Revised Lease Agreement dated January 14, 1994 between
HTM Building Investors, LLC and Hi-Tech Manufacturing, Inc.
10.11.2# First Amendment to Lease.
10.11.3# Second Amendment to Lease.
10.12#* Derek D'Andrade Employment Agreement dated July 30, 1999.
10.13#* Edward Johnson Employment Agreement dated May 18, 2000.
10.14#* Gary Walker Employment Agreement dated July 30, 1999.
10.15#* Paul Walker Employment Agreement dated July 30, 1999.
10.16#* Philip Woodard Employment Agreement dated July 30, 1999.
10.17* Stanley Plzak Employment Agreement dated as of July 27, 2000.(1)
10.18# Warrant Subscription Agreement dated as of May 18, 2000.
10.19# Senior Subordinated Loan Agreement dated as of May 18, 2000.

II-3

10.20 SMTC Corporation/SMTC Manufacturing Corporation of Canada 2000 Equity
Incentive Plan.(3)
10.21# Letter Agreement dated June 19, 2000 regarding Stockholders Agreement
Lock-Up.
10.22 Lease Agreement dated as of June 1, 2000 between SMTC Manufacturing
Corporation of North Carolina and Garrett and Garrett.(3)
10.23 Lease Agreement dated as of August 11, 2000 between SMTC Manufacturing
Corporation of Massachusetts and Lincoln-Franklin LLC.(3)
10.24 Class N Common Stock Redemption Agreement dated July 26, 2000.(1)
10.25 Lease Agreement dated as of May 12, 1998 between the Haverdyne Company,
LLC and Qualtron, Inc.(1)
10.26 Share Purchase Agreement dated July 26, 2000 for the purchase of Gary
Walker's Class Y shares.(1)
10.27 Funding Agreement dated July 26, 2000.(1)
10.28 Promissory Note dated July 26, 2000.(1)
10.29 Pledge Agreement dated July 26, 2000 with respect to shares of common
stock of SMTC owned by Gary Walker.(1)
10.30 Class N Common Stock Redemption Agreement dated July 26, 2000.(1)
10.31 Real Estate Agreement between Flextronics International USA, Inc., as
Seller, and SMTC Manufacturing Corporation of Texas, as Purchaser,
dated February 23, 2001.(1)
16.1# Letter from PricewaterhouseCoopers LLP regarding change in certifying
accountants.
16.2# Letter from Arthur Andersen LLP regarding change in certifying
accountants.
21.1 Subsidiaries of the registrant.(1)
23.1 Consent of KPMG LLP, Toronto, Canada.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Canby, Maloney & Co., Inc.
23.4# Consent of Ropes & Gray (included in the opinion filed as Exhibit 5.1).
23.5 Consent of KPMG LLP, Milwaukee, Wisconsin.
23.6 Consent of KPMG LLP, Ireland.
24.1# Power of attorney pursuant to which amendments to this registration
statement may be filed.

--------
# Previously filed in connection with this registration statement.
+ The registrant agrees to furnish supplementally to the SEC a copy of any
omitted schedule or exhibit to such agreement upon request by the SEC.
* Management contract or compensatory plan.
(1) Filed as an Exhibit to the Company's Report on Form 10-K filed on April 2,
2001 (File No. 0-31051) and incorporated by reference herein.
(2) Filed as an Exhibit to the Company's Report on Form 8-K filed on December
7, 2000 (File No. 0-31051) and incorporated by reference herein.
(3) Filed as an Exhibit to the Company's Report on Form 10-Q for the quarterly
period ended October 1, 2000 filed on November 15, 2000 (File No. 0-31051)
and incorporated by reference herein.
(4) Filed as an Exhibit to the Company's Registration Statement on Form S-8
filed on August 22, 2000 (File No. 333-44250) and incorporated by reference
herein.

(b) Financial Statement Schedules.

Schedule II-Valuation and Qualifying Accounts

The schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission (other than the schedule
listed above) are not required under the related instructions, are inapplicable
or not material, or the information called for thereby is otherwise included in
the financial statements.

II-4

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such manner as requested by the underwriters to
permit prompt delivery to each purchaser.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.

(4) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(5) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14--Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, SMTC
Corporation has duly caused this Post-Effective Amendment to the Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Markham, Province of Ontario, on this 2nd day
of April, 2001.

SMTC Corporation

By: /s/ Paul Walker
----------------------------------
Name: Paul Walker
Title: President

* * * *

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

/s/ Paul Walker President, Chief Executive April 2, 2001
______________________________________ Officer (Principal
Paul Walker Executive Officer) and
Director

/s/ Richard Smith Vice President, Chief April 2, 2001
______________________________________ Financial Officer
Richard Smith (Principal Financial and
Accounting Officer)

/s/ * Executive Vice President, April 2, 2001
______________________________________ Business Programs Manager
Gary Walker and Director

/s/ * Director April 2, 2001
______________________________________
David Dominik

/s/ * Director April 2, 2001
______________________________________
Prescott Ashe

/s/ * Director April 2, 2001
______________________________________
Stephen Adamson

/s/ * Director April 2, 2001
______________________________________
Mark Benham

/s/ * Director April 2, 2001
______________________________________
Michael Griffiths

/s/ * Director April 2, 2001
______________________________________
Anthony Sigel

*See Power of Attorney executed by each such officer and/or director on the
Registration Statement on Form S-1 previously filed with the SEC on March 24,
2000, appointing Paul Walker and Richard Smith, and each of them singly, as
true and lawful attorney-in-fact and agent with full power to sign this and any
and all amendments (including post-effective amendments) to this Registration
Statement.

II-6

Report of Independent Public Accountants

To the Board of Directors of SMTC Corporation (formerly HTM Holdings, Inc.):

We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements as of and for the year
ended December 31, 1998, of SMTC Corporation (a Delaware corporation, formerly
HTM Holdings, Inc.) and its subsidiary included in this registration statement
and have issued our report thereon dated March 10, 1999. Our audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The Schedule II--Valuation and Qualifying Accounts is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the 1998 financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

/s/ Arthur Andersen LLP

Denver, Colorado
March 10, 1999

S-1

The Board of Directors of SMTC Corporation

The audit referred to in our report dated February 9, 2001 included the
related financial statement schedule of SMTC Corporation (formerly HTM
Holdings, Inc.) for the years ended December 31, 1999 and 2000 included in the
registration statement. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein for the years ended
December 31, 1999 and 2000.

We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

/s/ KMPG LLP

Chartered Accountants

Toronto, Canada
May 23, 2000

S-2

SMTC CORPORATION
(FORMERLY HTM HOLDINGS, INC.)

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Expressed in thousands of U.S. dollars)

Years ended December
31,
-----------------------
1998 1999 2000
----- ------- -------

Reserves for Inventory
Balance, beginning of year............................ $(354) $ (521) $(1,828)
Charge to expense .................................... (255) (915) (2,222)
Written off........................................... 88 560 272
Added through acquisition............................. -- (952) (261)
----- ------- -------
Balance, end of year................................ $(521) $(1,828) $(4,039)
===== ======= =======

Years ended December
31,
-----------------------
1998 1999 2000
----- ------- -------

Reserves for Accounts Receivable
Balance, beginning of year............................ $(180) $ (195) $ (514)
Charge to expense .................................... (120) (120) (2,003)
Written off........................................... 105 50 169
Added through acquisition............................. -- (249) (20)
----- ------- -------
Balance, end of year................................ $(195) $ (514) $(2,368)
===== ======= =======

S-3

EXHIBIT INDEX

Exhibit No. Description of Exhibit
----------- ----------------------

1.1# Form of Underwriting Agreement.
2.1.1#+ Reorganization and Merger Agreement dated as of July 26, 1999.
2.1.2 Amendment to Reorganization and Merger Agreement dated as of July
27, 2000.(1)
2.2#+ Stock Purchase Agreement dated as of September 3, 1999.
2.3#+ Stock Purchase Agreement dated as of May 23, 2000.
2.4 Stock Purchase Agreement dated as of November 22, 2000.(2)
3.1 Amended and Restated Certificate of Incorporation.(3)
3.2 Amended and Restated By-laws.(3)
3.3 Certificate of Designation.(3)
4.1.1 Stockholders Agreement dated as of July 27, 2000.(4)
4.1.2 Amended and Restated Stockholders Agreement dated as of November
22, 2000.(1)
4.2# Form of certificate representing shares of common stock.
4.3# Warrant to purchase shares of Class L common stock and schedule of
warrants attached thereto.
4.4# Warrant to purchase shares of Class A-1 common stock and schedule
of warrants attached thereto.
4.5# Warrant to purchase units of Class A-1 common stock and Class L
common stock and schedule of warrants attached thereto.
4.6# 15% Senior Subordinated Note and schedule of notes attached
thereto..
4.7 Exchangeable Share Provisions attaching to the exchangeable shares
of SMTC Manufacturing Corporation of Canada.(3)
4.8 Exchangeable Share Support Agreement among SMTC, SMTC Nova Scotia
Company and SMTC Manufacturing Corporation of Canada.(3)
4.9 Voting and Exchange Trust Agreement among SMTC, SMTC Nova Scotia
Company, SMTC Manufacturing Corporation of Canada and CIBC Mellon
Trust Company.(3)
4.10# Secured Demand Note of SMTC Manufacturing Corporation of Canada
dated July 3, 2000.
4.11# Secured Demand Note of HTM Holdings, Inc. dated July 3, 2000.
4.12# Secured Demand Note of HTM Holdings, Inc. dated July 3, 2000.
4.13# Demand Note of SMTC Manufacuring Corporation of Canada dated July
3, 2000.
4.14# Secured Demand Note of HTM Holdings, Inc. dated July 3, 2000.
4.15# Secured Demand Note of HTM Holdings, Inc. dated July 3, 2000.
4.16# Demand Note of HTM Holdings, Inc. dated July 3, 2000.
5.1# Opinion of Ropes & Gray.
10.1.1#+ Credit and Guarantee Agreement dated as of July 28, 1999.
10.1.2# First Amendment dated as of November 4, 1999 to the Credit and
Guarantee Agreement dated as of July 28, 1999.
10.1.3# Second Amendment dated as of December 14, 1999 to the Credit and
Guarantee Agreement dated as of July 28, 1999.
10.1.4# Third Amendment dated as of May 15, 2000 to the Credit and
Guarantee Agreement dated as of
July 28, 1999.
10.1.5 Amended and Restated Credit and Guarantee Agreement dated as of
July 27, 2000.(3)
10.1.6 Amended and Restated Guarantee and Collateral Agreement dated as
of July 27, 2000.(3)
10.1.7 First Amendment dated as of November 17, 2000 to the Amended and
Restated Credit and Guarantee Agreement.(1)
10.1.8 Second Amendment dated as of December 28, 2000 to the Amended and
Restated Credit and Guarantee Agreement.(1)
10.1.9 Third Amendment dated as of February 6, 2001 to the Amended and
Restated Credit and Guarantee Agreement.(1)
10.2# Amended and Restated SMTC (HTM) 1998 Equity Incentive Plan dated
as of September 30, 1999.
10.3.1# Management Agreement dated July 30, 1999.
10.3.2 Termination Agreement dated as of July 27, 2000.(1)
10.4.1# Real Property Lease dated September 1, 1993 between Ogden Atlantic
Design Company, Inc. and Garrett and Garrett.

10.4.2# Lease Renewal Agreement dated as of September 1, 1996 between
Atlantic Design Company, Inc. and Garrett and Garrett.
10.4.3# Assignment of Lease dated as of September 16, 1997 between Ogden
Atlantic Design Company, Inc. and The SMT Centre S.E. Inc.
10.5# Form of Real Property Lease dated December 22, 1998 between Third
Franklin Trust and W.F. Wood, Incorporated.
10.6# Real Property Lease dated May 9, 1995 between Logitech Ireland
Limited and Ogden Atlantic Design (Europe) Limited.
10.7# Real Property Sublease Agreement dated March 29, 1996 between Radian
International, LLC and The SMT Centre of Texas Inc.
10.8# Real Property Lease dated August 11, 1997 between Edwin A. Helwig and
Barbara G. Helwig and The SMT Centre, Inc., Lease Addendum and Work
Letter Agreement.
10.9# Real Property Lease dated as of September 15, 1998 between Warden-
McPherson Developments Ltd. and The Surface Mount Technology Centre
Inc.
10.10# Real Property Lease dated September 3, 1999 between Airedale Realty
Trust and W. F. Wood, Incorporated.
10.11.1# Real Property Revised Lease Agreement dated January 14, 1994 between
HTM Building Investors, LLC and Hi-Tech Manufacturing, Inc.
10.11.2# First Amendment to Lease.
10.11.3# Second Amendment to Lease.
10.12#* Derek D'Andrade Employment Agreement dated July 30, 1999.
10.13#* Edward Johnson Employment Agreement dated May 18, 2000.
10.14#* Gary Walker Employment Agreement dated July 30, 1999.
10.15#* Paul Walker Employment Agreement dated July 30, 1999.
10.16#* Philip Woodard Employment Agreement dated July 30, 1999.
10.17* Stanley Plzak Employment Agreement dated as of July 27, 2000.(1)
10.18# Warrant Subscription Agreement dated as of May 18, 2000.
10.19# Senior Subordinated Loan Agreement dated as of May 18, 2000.
10.20 SMTC Corporation/SMTC Manufacturing Corporation of Canada 2000 Equity
Incentive Plan.(3)
10.21# Letter Agreement dated June 19, 2000 regarding Stockholders Agreement
Lock-Up.
10.22 Lease Agreement dated as of June 1, 2000 between SMTC Manufacturing
Corporation of North Carolina and Garrett and Garrett.(3)
10.23 Lease Agreement dated as of August 11, 2000 between SMTC
Manufacturing Corporation of Massachusetts and Lincoln-Franklin
LLC.(3)
10.24 Class N Common Stock Redemption Agreement dated July 26, 2000.(1)
10.25 Lease Agreement dated as of May 12, 1998 between the Haverdyne
Company, LLC and Qualtron, Inc.(1)
10.26 Share Purchase Agreement dated July 26, 2000 for the purchase of Gary
Walker's Class Y shares.(1)
10.27 Funding Agreement dated July 26, 2000.(1)
10.28 Promissory Note dated July 26, 2000.(1)
10.29 Pledge Agreement dated July 26, 2000 with respect to shares of common
stock of SMTC owned by Gary Walker.(1)
10.30 Class N Common Stock Redemption Agreement dated July 26, 2000.(1)
10.31 Real Estate Agreement between Flextronics International USA, Inc., as
Seller, and SMTC Manufacturing Corporation of Texas, as Purchaser,
dated February 23, 2001.(1)
16.1# Letter from PricewaterhouseCoopers LLP regarding change in certifying
accountants.
16.2# Letter from Arthur Andersen LLP regarding change in certifying
accountants.
21.1 Subsidiaries of the registrant.(1)
23.1 Consent of KPMG LLP, Toronto, Canada.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Canby, Maloney & Co., Inc.

23.4# Consent of Ropes & Gray (included in the opinion filed as Exhibit 5.1).
23.5 Consent of KPMG LLP, Milwaukee, Wisconsin.
23.6 Consent of KPMG LLP, Ireland.
24.1# Power of attorney pursuant to which amendments to this registration statement may be filed.