Proxy Advisory Firm Recommends that Zarlink Shareholders Reject Three Management Nominees



    Vote your BLUE proxy for Change

    OTTAWA, July 15 /CNW/ - The Concerned Shareholders of Zarlink
Semiconductor Inc. today noted the report issued by RiskMetrics Group
(formerly Institutional Shareholder Services or "ISS") that recommends that
shareholders do not vote for three of the management nominees to the Board at
the annual and special meeting scheduled for July 23, 2008.
    RiskMetrics found that Adam Chowaniec, Jules Meunier, and Dennis
Roberson, the members of the Board's Compensation Committee, should be held
accountable for almost $390,000 in bonuses paid to three senior members of
management, including CEO Kirk Mandy for the acquisition of Legerity Holdings
Inc. in 2007 - despite the apparent damage to shareholder value caused by that
acquisition.
    "Why should they be paid a deal-based special bonus when the annual
target was not achieved?" the RiskMetrics report asks.
    The Concerned Shareholders believe that RiskMetrics should have assigned
responsibility to the entire Board which must have approved the committee's
recommendation for the unwarranted bonuses paid to Mr. Mandy and his
management colleagues.
    The Legerity acquisition has proved to be a disaster for Zarlink
shareholders. The Company paid $137 million for Legerity, which is more than
the total market capitalization of Zarlink a year later. In addition, the
acquisition contributed to the elimination of Zarlink's cash reserves and
encumbered the Company with a restrictive convertible debenture which severely
undermined the share price.
    The Concerned Shareholders believe that Kirk Mandy is responsible for the
Legerity disaster and that the Board should be replacing him, not paying him a
bonus. The Board's continuing support for Kirk Mandy is further evidence of
the need for a new Board at Zarlink.
    "We agree with the objection to the Legerity bonuses but do not agree
with the overall recommendation that a wholesale change is not needed," said
Scott Leckie of the Concerned Shareholders. "RiskMetrics is not a shareholder
of Zarlink and has not suffered through the Company's dismal performance of
the past six years under its current management and Board. The firm can afford
to sit on the sidelines and wait for improvement. Shareholders can not.
RiskMetrics can allow itself to be misled by the statements of the Board.
Shareholders can not. We believe that, after years of broken promises, they
will not allow themselves to be fooled by the current Board."
    Mr. Leckie noted that RiskMetrics has a history of supporting incumbent
Boards, sometimes to the detriment of shareholders as subsequent events
demonstrate that its support was ill-considered. In this case, RiskMetrics
appears to have simply reported Zarlink's letter to shareholders, which is
filled with inaccuracies, misleading statements and ungrounded personal
attacks on the Concerned Shareholders.
    Individual shareholders have no obligation to follow RiskMetrics'
recommendation but should be guided by the facts and their own view of whether
the current Mandy Board should be trusted to turn Zarlink around now, after
failing for so long:

    
    A weak and deteriorating share price:

    -   A decline of more than 60% since Kirk Mandy returned as CEO in
        February 2005.
    -   Significantly underperforming both Zarlink's direct peer group and
        other companies in the semiconductor industry.

    Poor financial performance:

    -   Almost $500 million in cumulative net losses from continuing
        operations since 1999.
    -   More than $300 million in lost shareholders' equity in the past eight
        years.
    -   Net cash has decreased from positive cash balances of more than
        $150 million to a current deficit of $17.5 million.
    -   Overhead and R&D costs are more than twice as high as industry
        norms - and rising.

    Poor acquisition track record:

    -   Over $600 million spent on acquisitions since 1996 have led to almost
        $500 million in losses since Kirk Mandy first became CEO in 1998.
    -   Rather than building Zarlink, acquisitions have left it smaller and
        weaker.

    Unfocused and weak product portfolio:

    -   Zarlink has no leading products in any of the three competitive
        segments it serves.
    -   Product misalignment has led to declining organic revenue for seven
        years in a row.

    Poor relationship with investors:

    -   Lack of transparency in financial reporting.
    -   Lack of responsiveness to, and communication with, shareholders.

    (All dollar amounts are in U.S. currency, which Zarlink uses for financial
reporting.)
    

    More information regarding the lost years under Mandy and his Board,
along with details of the Concerned Shareholders' plan for enhancing
shareholder value are provided at www.yourzarlink.com.

    Vote your BLUE proxy for Change

    The Concerned Shareholders remind their fellow Zarlink shareholders:
    Your vote is very important to the future of your investment in Zarlink.
If, after reading the Concerned Shareholder Proxy Circular, you agree that the
Concerned Shareholder Nominees will better serve your interests as a
shareholder of Zarlink, please vote the BLUE form of proxy distributed with
the Concerned Shareholder Proxy Circular.
    You may vote the BLUE proxy for change even if you have previously
deposited a management proxy or other proxy. A timely delivered and
later-dated BLUE proxy automatically revokes any earlier one.
    There is only a short time in which to make the needed change at Zarlink.

    
    -   In order to be deposited with Zarlink's registrar and transfer agent
        in time to be used at the meeting, your BLUE proxy should reach
        Kingsdale Shareholder Services Inc. before 5:00 p.m. (Eastern Time)
        on Friday, July 18, 2008.
    -   Please fax only your BLUE proxy to 416-867-2271 or toll free:
        1-866-545-5580. Hand delivered proxies should be returned to
        Kingsdale at the Exchange Tower, 130 King Street West, Suite 2950,
        P.O. Box 361, Toronto, Ontario, M5X 1E2.
    -   Non-registered shareholders are advised to refer to the information
        under "General Proxy Information - Non-Registered Shareholders" in
        the Concerned Shareholder Proxy Circular.

    (*) Permission to use quotations from the RiskMetrics report was neither
sought nor obtained
    





For further information:

For further information: The Concerned Shareholders of Zarlink
Semiconductor Inc., Scott Leckie, (416) 363-3399

Organization Profile

CONCERNED SHAREHOLDERS OF ZARLINK SEMICONDUCTOR INC.

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