Proxy Advisory Firm Recommends that Zarlink Shareholders Reject Three Management Nominees

Vote your BLUE proxy for Change

OTTAWA, July 15 /PRNewswire/ -- 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 http://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.