http://www.zarlink.com

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 27, 2003

                           Commission File No. 1-8139

                           ZARLINK SEMICONDUCTOR INC.
             (Exact name of registrant as specified in its charter)

                   CANADA                                      NONE
      (State or other jurisdiction of                    (I.R.S. Employer
       incorporation or organization)                  Identification No.)

              400 March Road,
          Ottawa, Ontario, Canada                            K2K 3H4
   (Address of principal executive offices)               (Postal Code)

                                 (613)-592-0200
              (Registrant's telephone number, including area code)

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

Yes [X] No  [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act) Yes [X] No [ ]

As  at  August  1,  2003  there  were  127,273,898   Common  Shares  of  Zarlink
Semiconductor Inc., no par value, issued and outstanding.


<PAGE>

                           ZARLINK SEMICONDUCTOR INC.

                                TABLE OF CONTENTS

Item No.                                                                Page No.
--------                                                                --------

PART I - FINANCIAL INFORMATION (Unaudited).....................................3

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS.....................................3
              Consolidated Balance Sheets (Unaudited)..........................3
              Consolidated Statements of Loss (Unaudited)......................4
              Consolidated Statements of Cash Flows (Unaudited)................5
              Notes to the Consolidated Financial Statements
               (Unaudited).....................................................6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.....................................................14

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS..........22

ITEM 4.  DISCLOSURE CONTROLS AND PROCEDURES...................................22

PART II - OTHER INFORMATION...................................................23

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................23

Signatures....................................................................23

Certification Pursuant to Section 302 (a) of the
  Sarbanes-Oxley Act of 2002..................................................24

Certification Pursuant to Section 302 (a) of the
  Sarbanes-Oxley Act of 2002..................................................25


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION (Unaudited)

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                           Zarlink Semiconductor Inc.
                           CONSOLIDATED BALANCE SHEETS
                    (In millions of U.S. dollars, U.S. GAAP)

<TABLE>
<CAPTION>
                                                                                June 27,       March 28,
                                                                                  2003           2003
                                                                                --------       ---------
                                                                              (Unaudited)
<S>                                                                             <C>            <C>
ASSETS

Current assets:
  Cash and cash equivalents                                                     $   39.2       $   23.5
  Short-term investments                                                            62.3           89.5
  Restricted cash                                                                    6.2            6.2
  Trade accounts receivable, less allowance for doubtful accounts of $ 0.8          27.8           20.3
    (March 28, 2003 - $1.1)

  Other receivables                                                                  3.6            4.2
  Inventories                                                                       23.2           24.0
  Deferred income tax assets - net                                                   1.3            1.0
  Prepaid expenses and other                                                        10.4            7.3
                                                                                --------       --------
                                                                                   174.0          176.0
Fixed assets - net                                                                  53.8           56.4
Deferred income tax assets - net                                                    10.3           10.4
Other assets - net of deferred gain of $ 16.1 (March 28, 2003 - $15.8)               4.6            4.8
                                                                                --------       --------

                                                                                $  242.7       $  247.6
                                                                                ========       ========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Trade accounts payable                                                        $   13.6       $   10.1
  Employee-related accruals                                                         14.5           15.5
  Income and other taxes payable                                                    13.8           13.0
  Provisions for exit activities                                                     3.4            4.2
  Other accrued liabilities                                                         11.4           12.6
  Deferred credits                                                                   0.7            1.1
  Current portion of long-term debt                                                  0.4            0.6
                                                                                --------       --------
                                                                                    57.8           57.1
Long-term debt                                                                       0.1            0.2
Pension liabilities                                                                 15.4           14.3
Deferred income tax liabilities - net                                                2.3            2.0
                                                                                --------       --------
                                                                                    75.6           73.6
                                                                                --------       --------
Redeemable preferred shares, unlimited shares authorized; 1,451,600 shares
   issued and outstanding (March 28, 2003 - 1,451,600)                              18.5           18.9
                                                                                --------       --------

Commitments (Note 10)

Shareholders' equity:
  Common shares, unlimited shares authorized; no par value; 127,273,898 shares
    issued and outstanding (March 28, 2003 - 127,265,316)                          768.3          768.3
  Additional paid-in capital                                                         2.1            2.1
  Deficit                                                                         (589.5)        (582.8)
  Accumulated other comprehensive loss                                             (32.3)         (32.5)
                                                                                --------       --------
                                                                                   148.6          155.1
                                                                                --------       --------
                                                                                $  242.7       $  247.6
                                                                                ========       ========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       3
<PAGE>

                           Zarlink Semiconductor Inc.
                         CONSOLIDATED STATEMENTS OF LOSS
       (In millions of U.S. dollars, except per share amounts, U.S. GAAP)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                          June 27,          June 28,
                                                                                            2003              2002
                                                                                         ---------         ---------
<S>                                                                                      <C>               <C>
Revenue                                                                                  $    53.7         $    48.0
Cost of revenue                                                                               28.1              25.9
                                                                                         ---------         ---------
Gross margin                                                                                  25.6              22.1
                                                                                         ---------         ---------
Expenses:
  Research and development                                                                    19.2              20.4
  Selling and administrative                                                                  11.6              12.1
  Stock compensation recovery                                                                   --              (1.6)
                                                                                         ---------         ---------
                                                                                              30.8              30.9
                                                                                         ---------         ---------
Operating loss                                                                                (5.2)             (8.8)
Other income (expense) - net                                                                  (0.7)              0.5
Interest expense                                                                                --              (0.1)
                                                                                         ---------         ---------
Loss before income taxes                                                                      (5.9)             (8.4)
Income tax expense                                                                             0.3               0.3
                                                                                         ---------         ---------
Net loss for the period                                                                  $    (6.2)        $    (8.7)
                                                                                         =========         =========

Net loss attributable to common shareholders after preferred share dividends             $    (6.7)        $    (9.2)
                                                                                         =========         =========

Net loss per common share:
      Basic and diluted                                                                  $   (0.05)       $    (0.07)
                                                                                         =========         =========

Weighted average number of common shares outstanding (millions):
      Basic and diluted                                                                      127.3             126.6
                                                                                         =========         =========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       4
<PAGE>

                           Zarlink Semiconductor Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    (In millions of U.S. dollars, U.S. GAAP)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                    Three Months Ended
                                                                                                 June 27,         June 28,
                                                                                                   2003             2002
                                                                                                 --------         --------
<S>                                                                                              <C>              <C>
Cash flows from operating activities:
  Net loss for the period                                                                        $   (6.2)        $   (8.7)
  Depreciation of fixed assets                                                                        3.6              3.1
  Amortization of other assets                                                                        0.3              0.3
  Stock compensation recovery                                                                          --              (1.6)
  Deferred income taxes                                                                               0.1               --
  Change in pension liability                                                                         1.1               --
  Other non-cash changes in operating activities                                                       --              0.3
  Decrease (increase) in working capital:
      Accounts receivable                                                                            (7.4)             2.1
      Inventories                                                                                     0.8              2.7
      Prepaid expenses and other                                                                     (3.0)             1.9
      Accounts payable and accrued liabilities                                                        1.3             (4.7)
      Deferred credits                                                                               (0.2)            (0.1)
                                                                                                 --------         --------
    Total                                                                                            (9.6)            (4.7)
                                                                                                 --------         --------
Cash flows from investing activities:
  Purchased short-term investments                                                                  (62.3)           (86.0)
  Matured short-term investments                                                                     89.5             46.5
  Expenditures for fixed and other assets                                                            (1.2)            (2.7)
  Proceeds from disposal of fixed and other assets                                                    0.4               --
  Increase in long-term investments                                                                    --             (0.4)
                                                                                                 --------         --------
     Total                                                                                           26.4            (42.6)
                                                                                                 --------         --------
Cash flows from financing activities:
  Repayment of capital lease liabilities                                                             (0.2)            (0.7)
  Payment of dividends on preferred shares                                                           (0.5)            (0.5)
  Issue of common shares                                                                               --              0.6
  Repurchase of preferred shares                                                                     (0.4)            (0.2)
                                                                                                 --------         --------
     Total                                                                                           (1.1)            (0.8)
                                                                                                 --------         --------

Effect of currency translation on cash and cash equivalents                                            --              3.4
                                                                                                 --------         --------

Increase (decrease) in cash and cash equivalents                                                     15.7            (44.7)

Cash and cash equivalents, beginning of period                                                       23.5             75.6
                                                                                                 --------         --------

Cash and cash equivalents, end of period                                                         $   39.2         $   30.9
                                                                                                 ========         ========
</TABLE>

        (See accompanying notes to the consolidated financial statements)


                                       5
<PAGE>

                           Zarlink Semiconductor Inc.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
       (In millions of U.S. dollars, except per share amounts, U.S. GAAP)
                                   (Unaudited)

1.    Basis of presentation

      These  unaudited  interim  consolidated  financial  statements  have  been
      prepared by Zarlink  Semiconductor  Inc.  ("Zarlink" or the  "Company") in
      United States (U.S.) dollars,  unless otherwise stated,  and in accordance
      with  accounting  principles  generally  accepted in the U.S.  for interim
      financial statements and with the instructions to Form 10-Q and Regulation
      S-X pertaining to interim financial statements. Accordingly, these interim
      consolidated  financial  statements  do not  include all  information  and
      footnotes required by generally accepted  accounting  principles  ("GAAP")
      for complete  financial  statements.  In the opinion of  management of the
      Company, the unaudited interim  consolidated  financial statements reflect
      all adjustments,  which consist only of normal and recurring  adjustments,
      necessary to present  fairly the financial  position at June 27, 2003, and
      the  results of  operations  and cash flows of the  Company  for the three
      month  periods  ended June 27, 2003 and June 28,  2002,  respectively,  in
      accordance with U.S. GAAP, applied on a consistent basis. The consolidated
      financial  statements include the accounts of Zarlink and its wholly owned
      subsidiaries. Intercompany transactions and balances have been eliminated.
      Separate  Canadian  GAAP  financial   statements  are  also  prepared  and
      presented to shareholders.

      These  financial  statements  should  be  read  in  conjunction  with  the
      financial  statements and notes thereto  contained in the Company's Annual
      Report  on Form 10-K for the year  ended  March 28,  2003.  The  Company's
      fiscal year-end is the last Friday in March.

      The results of operations  for the periods  presented are not  necessarily
      indicative  of the  results  to be  expected  for the full  year or future
      periods.

2.    Change in functional currency

      Since the third  quarter of Fiscal  2002,  the Company has  presented  its
      financial   statements  in  U.S.   dollars.   However,   the  Company  has
      historically   measured  the  parent  company's  financial  statements  in
      Canadian  dollars  and its  subsidiaries'  financial  statements  in their
      respective  local  currencies.  Effective March 29, 2003, the beginning of
      Fiscal 2004, as a result of the Company's  increased  economic  activities
      denominated  in U.S.  dollars,  the U.S.  dollar has become the functional
      currency across the Company's operations.

      Prior  to  March  29,  2003,  the  financial  statements  of  the  foreign
      subsidiaries  were  measured  using the local  currency as the  functional
      currency.  All balance  sheet amounts were  translated  using the exchange
      rates in effect at the applicable period end, and income statement amounts
      were  translated  using  the  weighted  average  exchange  rates  for  the
      applicable  period.  Any gains and losses  resulting  from the  changes in
      exchange rates from year to year were reported as a separate  component of
      other comprehensive loss included in Shareholders' Equity.

      Effective  March  29,  2003,  the  carrying  value  of  monetary  balances
      denominated in currencies  other than U.S.  dollars were remeasured at the
      balance sheet date rates of exchange.  The gains or losses  resulting from
      the  remeasurement of these amounts have been reflected in earnings in the
      respective  periods.  Non-monetary  items and any related  amortization of
      such items are measured at the rates of exchange in effect when the assets
      were acquired or obligations incurred.  All other income and expense items
      have been remeasured at the average rates prevailing during the period.

3.    Recently issued accounting pronouncements

      On April 30,  2003,  the FASB issued  Statement  of  Financial  Accounting
      Standard No. 149 ("SFAS  149"),  "Amendment of Statement 133 on Derivative
      Instruments and Hedging Activities".  The amendments set forth in SFAS 149
      improve  financial  reporting by requiring that contracts with  comparable
      characteristics be accounted for similarly. In particular,  this statement
      clarifies  under  what  circumstances  a  contract  with  an  initial  net
      investment meets the  characteristic  of a derivative as discussed in SFAS
      133. In  addition,  it clarifies  when a  derivative  contains a financing
      component that warrants special  reporting in the statement of cash flows.
      SFAS 149 amends certain other existing pronouncements.  Those changes will
      result in more  consistent  reporting of contracts that are derivatives in
      their entirety or that contain embedded  derivatives that warrant separate
      accounting. This Statement


                                       6
<PAGE>

      is effective for contracts  entered into or modified  after June 30, 2003,
      except as stated below,  and for hedging  relationships  designated  after
      June 30, 2003. The guidance will be applied prospectively.  The provisions
      of this Statement that relate to Statement 133 Implementation  Issues that
      have been effective for fiscal quarters that began prior to June 15, 2003,
      will continue to be applied in accordance with their respective  effective
      dates. In addition,  certain  provisions  relating to forward purchases or
      sales of when-issued securities or other securities that do not yet exist,
      should be applied to existing  contracts as well as new contracts  entered
      into after June 30, 2003.  The Company has not yet evaluated the impact of
      this new pronouncement on its financial position, results of operations or
      cash flows.

      On May 15,  2003,  the  FASB  issued  Statement  of  Financial  Accounting
      Standard  No.  150  ("SFAS  150"),   "Accounting  for  Certain   Financial
      Instruments  with  Characteristics  of both  Liabilities and Equity".  The
      Statement improves the accounting for certain financial  instruments that,
      under  previous  guidance,  issuers could account for as equity.  SFAS 150
      requires  that those  instruments  be  classified  as  liabilities  in the
      statements of financial position,  whereas previously such instruments may
      have been classified as equity or as temporary  equity. In addition to its
      requirements   for  the   classification   and  measurement  of  financial
      instruments  in its  scope,  SFAS  150  also  requires  disclosures  about
      alternative ways of settling the instruments and the capital  structure of
      entities,  all of whose  shares are  mandatorily  redeemable.  Most of the
      guidance in SFAS 150 is effective  for all financial  instruments  entered
      into or modified  after May 31,  2003,  and  otherwise is effective at the
      beginning of the first interim period  beginning  after June 15, 2003. The
      Company has not yet evaluated the impact of this new  pronouncement on its
      financial position, results of operations or cash flows.

4.    Stock-based compensation

      Pro forma  information  regarding  net income (loss) and net income (loss)
      per share is  required by SFAS 123 for awards  granted or  modified  after
      April 1, 1995, as if the Company had accounted for its stock-based  awards
      to  employees  under the fair value  method of SFAS 123. The fair value of
      the  Company's  stock-based  awards to  employees  was  estimated  using a
      Black-Scholes  option pricing model.  The  Black-Scholes  option valuation
      model was developed for use in estimating the fair value of traded options
      that have no vesting restrictions and are fully transferable. In addition,
      option valuation models require the input of highly subjective assumptions
      including  the  expected  stock price  volatility.  Because the  Company's
      employee stock options have characteristics  significantly  different from
      those of traded  options,  and  because  changes in the  subjective  input
      assumptions can materially affect the fair value estimate, in management's
      opinion,  the existing models do not necessarily provide a reliable single
      measure of the fair value of its employee stock options.

                                                           Three Months Ended
                                                         June 27,      June 28,
                                                           2003          2002
                                                         --------      -------

      Net loss, as reported                              $  (6.2)      $ (8.7)
      Adjustments:
         Stock compensation recovery as reported              --         (1.6)
         Pro forma stock compensation expense               (3.1)        (3.3)
                                                         --------------------
      Pro forma net loss                                 $  (9.3)      $(13.6)
                                                         --------------------
      Net loss per common share, as reported
         Basic and diluted                               $ (0.05)     $ (0.07)
                                                         --------------------
      Pro forma net loss per common share:
         Basic and diluted                               $ (0.08)     $ (0.11)
                                                         --------------------

      Based  upon the fair value  method of  accounting  for stock  compensation
      expense,  the pro forma net loss for the quarter ended June 27, 2003,  was
      increased by $3.1 as compared to the net loss,  as reported  ($4.9 for the
      quarter ended June 28, 2002).


                                       7
<PAGE>

      Pro forma financial  information  required by SFAS 123 has been determined
      as if the Company had accounted  for its employee  stock options using the
      Black-Scholes   fair  value  option   pricing  model  with  the  following
      weighted-average assumptions for the three month fiscal periods ended June
      27, 2003 and June 28, 2002:

<TABLE>
<CAPTION>
                                                                                            Three Months Ended
                                                                                         June 27,        June 28,
                                                                                           2003            2002
                                                                                         -----------------------
<S>                                                                                    <C>             <C>
      Weighted  average fair value price of the options  granted  during the             $  2.31         $  3.43
         quarter

      Risk free interest rate                                                              3.19%           4.68%
      Dividend yield                                                                         Nil             Nil
      Volatility factor of the expected market price of the Company's
        common stock                                                                       0.682           0.561
      Weighted-average expected life of the options                                    3.3 Years       3.5 years
</TABLE>

      For purposes of pro forma  disclosures,  the  estimated  fair value of the
      options is  amortized to expense  over the  options'  vesting  period on a
      straight-line basis.

5.    Inventories

                                                      June 27,      March 28,
                                                       2003           2003
                                                     ---------      ---------

      Raw materials                                   $   2.3        $   2.6
      Work-in-process                                    18.5           18.3
      Finished goods                                      2.4            3.1
                                                      -------        -------
                                                      $  23.2        $  24.0
                                                      =======        =======

6.    Fixed assets

                                                      June 27,      March 28,
                                                        2003          2003
                                                      -------       ---------

      Cost                                            $ 164.7        $ 163.7
      Accumulated depreciation                          110.9          107.3
                                                      -------        -------
                                                      $  53.8        $  56.4
                                                      =======        =======

7.    Other assets

<TABLE>
<CAPTION>
                                                                June 27,       March 28,
                                                                  2003            2003
                                                                -------        ---------
<S>                                                             <C>             <C>
      Note receivable, non-interest bearing                     $  16.2         $  15.9
      Less: Deferred gain                                         (16.1)          (15.8)
                                                                -------         -------
                                                                    0.1             0.1
      Patents, trademarks, and other intangible assets:
        Cost                                                        9.8             9.5
        Accumulated amortization                                   (5.3)           (5.0)
                                                                -------         -------
        Patents, trademarks, and other intangible assets - net      4.5             4.5

      Other                                                          --             0.2
                                                                -------         -------
                                                                $   4.6         $   4.8
                                                                =======         =======
</TABLE>

      The  amortization  of  patents,  trademarks  and other  intangible  assets
      amounted to $0.3 for the  quarterly  period  ended June 27, 2003 (June 28,
      2002 - $0.3).


                                       8
<PAGE>

8.    Provisions for exit activities

                                                             June 27,  March 28,
                                                               2003      2003
                                                             -------   ---------
      Restructuring provisions                                $ 2.6     $ 2.9
      Provision for disposal of discontinued operations          --       0.1
      Provision for disposal of foundry businesses              0.8       1.2
                                                              -----     -----
                                                              $ 3.4     $ 4.2
                                                              =====     =====

      The remaining  restructuring  provision  relates mostly to idle and excess
      space as a result of exit  activities  implemented and completed in Fiscal
      2002 and Fiscal 2001.

      The following  table  summarizes  the  continuity  of these  restructuring
      provisions for the three months ended June 27, 2003:

                                                          Lease and
                                          Workforce        contract
                                          reduction       settlement     Total
                                          ---------       ----------   ---------

         Balance, March 28, 2003           $  0.3           $  2.6      $  2.9
         Cash drawdowns during quarter       (0.1)            (0.2)       (0.3)
                                           ------           ------      ------
         Balance, June 27, 2003            $  0.2           $  2.4      $  2.6
                                           ======           ======      ======

9.    Guarantees

      Performance   guarantees  are  contracts  that  contingently  require  the
      guarantor  to make  payments  to the  guaranteed  party  based on  another
      entity's failure to perform under an obligating agreement. The Company has
      an  outstanding  performance  guarantee  related  to  a  managed  services
      agreement ("project agreement") undertaken by the Systems business,  which
      was sold to companies  controlled  by Dr.  Terence H. Matthews on February
      16, 2001 and is now operated as Mitel Networks Corporation ("Mitel"). This
      performance  guarantee remained with the Company following the sale of the
      Systems business to Dr. Matthews.  The project agreement and the Company's
      performance guarantee extend until July 16, 2012. The terms of the project
      agreement  continue to be fulfilled by Mitel. The maximum potential amount
      of future  undiscounted  payments  the  Company  could be required to make
      under the guarantee,  at June 27, 2003,  was $33.0 (20.0 British  Pounds),
      assuming  the Company is unable to secure the  completion  of the project.
      The  Company is not aware of any  factors  as at June 27,  2003 that would
      prevent the project's completion under the terms of the agreement.  In the
      event that  Mitel is unable to  fulfill  the  commitments  of the  project
      agreement,  the Company believes that an alternate third-party  contractor
      could be secured to complete the agreement requirements. At June 27, 2003,
      the carrying value of this guarantee was nil.

      The Company  periodically  has entered into  agreements with customers and
      suppliers that include limited intellectual property indemnifications that
      are  customary in the industry.  These  guarantees  generally  require the
      Company  to  compensate  the other  party for  certain  damages  and costs
      incurred as a result of third party  intellectual  property claims arising
      from  these  transactions.   The  nature  of  the  intellectual   property
      indemnification  obligations prevents the Company from making a reasonable
      estimate  of the maximum  potential  amount it could be required to pay to
      its customers and  suppliers.  Historically,  the Company has not made any
      significant  indemnification  payments under such agreements and no amount
      has been accrued in the  accompanying  consolidated  financial  statements
      with respect to these indemnification obligations.

      In connection with the sale of the Systems  business on February 16, 2001,
      the Company provided to the purchaser  certain income tax indemnities with
      an indefinite life and with no maximum  liability for the taxation periods
      up to February  16,  2001,  the closing  date of the sale.  As at June 27,
      2003, the taxation years 2000 to February 16, 2001 are subject to audit by
      taxation authorities.

      As at June 27, 2003, the Company has guaranteed a custom bond amounting to
      $2.6 to a third party on behalf of a subsidiary.


                                       9
<PAGE>

      The Company records a liability based upon its historical  experience with
      warranty claims.  The table below presents a reconciliation of the changes
      in the Company's  product  warranty accrual for the quarter ended June 27,
      2003:

                                                             Three Months Ended
                                                                June 27, 2003
                                                             ------------------
      Balance, March 28, 2003                                      $ --
      Accruals for new and pre-existing warranties                   0.5
      Payments made during the quarter                               --
                                                                   -----
      Balance, June 27, 2003                                       $ 0.5
                                                                   =====

10.   Commitments

      The  Company  had  letters of credit  outstanding  as at June 27,  2003 of
      approximately  $6.2 (June 28, 2002 - $3.2).  Cash and cash  equivalents of
      $6.2 have been pledged as security against certain  outstanding letters of
      credit,  which expire  within 12 months,  and are  presented as restricted
      cash.

      As a result of the  non-cash  write-down  of the Mitel  investment  in the
      fourth  quarter  of Fiscal  2003,  the  Company  did not meet a  quarterly
      financial  covenant under the Company's  credit  facility during the first
      quarter of Fiscal 2004. A waiver was obtained  from the bank in respect of
      the financial covenant.

11.   Redeemable Preferred Shares

      There were 21,900 preferred shares purchased during the three months ended
      June 27, 2003 for cash consideration of $0.4. At June 27, 2003, there were
      31,800  repurchased  preferred shares,  including 9,900 shares repurchased
      during Fiscal 2003, that had not been cancelled by the end of the quarter.

      During the first quarter of Fiscal 2004, the Company paid dividends on its
      redeemable  preferred shares of $0.5 and declared a quarterly  dividend of
      $0.37 (Cdn $0.50) per share.

12.   Capital stock

      a)    The Company has not  declared  or paid any  dividends  on its common
            shares.

      b)    On June 6, 2002, the Company announced its intention to continue its
            normal course  issuer bid program for up to 6,358,203  common shares
            (5 percent of  127,164,078  common shares issued and  outstanding at
            May 31, 2002) between June 10, 2002 and June 9, 2003. No shares were
            repurchased under the normal course issuer bid program in the period
            ended June 9, 2003. The program was not renewed.

      c)    A summary of the Company's stock option activity is as follows:

                                                    Three Months Ended
                                               ----------------------------
                                                  June 27,        June 28,
                                                    2003            2002
                                               -------------     ----------
      Outstanding Options:
      Balance, beginning of period                10,828,557     10,914,962
      Granted                                        106,500         63,300
      Exercised                                       (8,582)       (93,818)
      Forfeited                                     (646,022)       (37,287)
                                               --------------    -----------
      Balance, end of period                      10,280,453     10,847,157
                                               ==============    ===========

      Available  for grant at June 27,  2003 were  4,253,644  (March 28,  2003 -
      3,714,122) common shares.  The exercise price of outstanding stock options
      ranges from $2.52 to $27.69 per share with exercise  periods  extending to
      June 2008.  The  exercise  price of stock  options  was based on prices in
      Canadian  dollars  translated at the U.S. dollar exchange rate on June 27,
      2003.

      d)    The net loss per common share figures were  calculated  based on the
            net loss after the deduction of preferred  share dividends and using
            the weighted monthly average number of shares outstanding during the
            respective  periods.  Diluted  earnings  per  share is  computed  in
            accordance  with the  treasury  stock  method  based on the  average
            number of common shares and dilutive common share equivalents.


                                       10
<PAGE>

      The following  potentially  dilutive  common share  equivalents  have been
      excluded from the  computation of diluted loss per share because they were
      anti-dilutive due to the reported net loss for the periods presented:

                                                         Three Months Ended
                                                       ----------------------
                                                       June 27,      June 28,
                                                        2003           2002
                                                       --------     ---------
      Stock options                                    612,952        774,049
      Restricted shares                                     --        570,897
                                                       --------     ---------
      Total                                            612,952      1,344,946
                                                       ========     =========

      The following  stock options were excluded from the  computation of common
      share equivalents because the options' exercise price exceeded the average
      market price of the common shares, thereby making them anti-dilutive:

                                                          Three Months Ended
                                                      --------------------------
                                                        June 27,       June 28,
                                                          2003           2002
                                                      -----------    -----------
      Number of outstanding options                     7,698,178      7,789,298

      Average exercise price per share                $     10.63    $     10.69

      The  average  exercise  price of stock  options  was  based on  prices  in
      Canadian  dollars  translated at the U.S. dollar exchange rate on June 27,
      2003.

13.   Accumulated other comprehensive income (loss)

      The components of other comprehensive income (loss) were as follows:

<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                                     June 27,      June 28,
                                                                       2003          2002
                                                                     --------      --------
<S>                                                                   <C>          <C>
      Net loss for the period                                         $ (6.2)      $  (8.7)
      Other comprehensive income (loss):
        Realized net derivative loss on cash flow hedges                 0.1           0.1
        Unrealized net derivative gains (losses) on cash flow hedges     0.1          (0.5)
        Change in cumulative translation adjustment                     --            12.3
                                                                      ------       -------

      Other comprehensive income (loss) for the period                $ (6.0)      $   3.2
                                                                      ======       =======
</TABLE>

      The changes to accumulated other  comprehensive  loss for the three months
      ended June 27, 2003 were as follows:

<TABLE>
<CAPTION>
                                                                       Realized
                                                                          and
                                                                      Unrealized
                                                        Cumulative     Net Gain
                                                       Translation     (Loss) on
                                                         Account      Derivatives   Total
                                                        ----------    ----------   -------
<S>                                                     <C>             <C>        <C>
      Balance, March 28, 2003                           $ (32.4)        $ (0.1)    $ (32.5)
      Change during the three months ended June 27,
          2003                                              -              0.2         0.2
                                                        -------         ------     -------
      Balance, June 27, 2003                            $ (32.4)        $  0.1     $ (32.3)
                                                        =======         ======     =======
</TABLE>

      The Company recorded a decrease in other  comprehensive  loss in the three
      months ended June 27, 2003 of $0.2 which was attributable to the change in
      the value of outstanding foreign currency forward contracts related to the
      Company's  hedging program that were  designated as cash flow hedges.  For
      the three months ended June 28, 2002, the Company  recorded an increase in
      other  comprehensive  loss of $0.4 related to losses on  derivatives.  The
      Company  estimates  that $0.1 of net  derivative  gain  included  in other
      comprehensive  loss will be  reclassified  into earnings within the next 3
      months.


                                       11
<PAGE>

14.   Other income (expense) (net)

                                                          Three Months Ended
                                                         June 27,     June 28,
                                                           2003         2002
                                                         --------     --------
      Interest income                                     $  0.3      $  0.9
      Foreign exchange loss                                 (1.0)       (0.4)
                                                          ------      ------
      Other income (expense) - net                        $ (0.7)     $  0.5
                                                          ======      ======

15.   Information on business segments

      Business Segments

      The  Company's  operations  are  comprised  of three  reportable  business
      segments  - Network  Communications,  Consumer  Communications,  and Ultra
      Low-Power  Communications.  Reportable  segments are  business  units that
      offer  different  products  and  services,   employ  different  production
      processes and methods of distribution,  sell to different  customers,  and
      are managed separately because of these differences.

      The  Company  targets  the  communications  industry  with  products  that
      specialize in broadband  connectivity  solutions over wired,  wireless and
      optical  media,  as  well  as  through  ultra   low-power   communications
      solutions.  The Network  Communications  business  segment offers products
      that provide  connectivity  to the  enterprise  and metro segments such as
      feeder,  aggregation  and  transmission  applications,  and products  that
      address the  multi-protocol  physical  and network  layers.  The  Consumer
      Communications  business  segment  offers  products  that  allow  users to
      connect to the network.  These  products  include  wireless  (for example,
      cellular  chipsets) and infotainment  applications  (for example,  set-top
      boxes  and  digital  TV).  The  Ultra  Low-Power  Communications  business
      provides ASIC solutions for applications such as pacemakers,  hearing aids
      and portable instruments.

      The Chief Executive Officer ("CEO") is the chief operating  decision maker
      in  assessing  the  performance  of the  segments  and the  allocation  of
      resources to the segments.  The CEO evaluates the financial performance of
      each business segment and allocates  resources based on operating  income.
      The Company does not allocate stock compensation expense,  special charges
      or gains,  interest  income or  interest  expense  or income  taxes to its
      reportable segments.  In addition,  total assets are not allocated to each
      segment as they are  primarily  tracked  by legal  entity  only;  however,
      depreciation  of fixed assets is  allocated  to the segments  based on the
      estimated asset usage. The accounting  policies of the reportable segments
      are the same as those of the  Company  as  reflected  in the  consolidated
      financial statements.

<TABLE>
<CAPTION>
Three Months Ended June 27, 2003                    Network          Consumer       Ultra Low-Power    Unallocated
                                                 Communications   Communications    Communications         Costs           Total
                                                 --------------   --------------    ---------------    ------------       -------
<S>                                                <C>               <C>               <C>                <C>             <C>
Total external sales revenue                       $  29.3           $  13.4           $  11.0            $  --           $  53.7
Amortization of buildings and equipment                1.8               1.1               0.7               --               3.6
Segment's operating income (loss) from
   continuing operations                              (2.4)             (3.8)              1.0               --              (5.2)

<CAPTION>
Three Months Ended June 28, 2002                    Network          Consumer       Ultra Low-Power    Unallocated
                                                 Communications   Communications    Communications         Costs           Total
                                                 --------------   --------------    ---------------    ------------       -------
<S>                                                <C>               <C>               <C>                <C>             <C>
Total external sales revenue                       $  28.4           $  12.6           $  7.0             $  --           $  48.0
Amortization of buildings and equipment                2.5               0.6              0.1                                 3.2
Stock compensation recovery                             --                --               --              (1.6)             (1.6)
Segment's operating loss from continuing
   operations                                         (5.3)             (5.1)              --               1.6              (8.8)
</TABLE>

16.   Subsequent event

      On July 16, 2003,  the Company  announced  further cost  reductions  as it
      finalizes its outsourcing programs and streamlines operations. The Company
      expects to record  additional  charges of  approximately  $8.0  related to
      reducing its global  workforce by  approximately  120 employees across all
      regions  and  business  units,   and  the  cost  of  further   outsourcing
      initiatives.


                                       12
<PAGE>

17.   Comparative figures

      Certain of the Fiscal 2003 comparative  figures have been  reclassified to
      conform to the presentation adopted in Fiscal 2004.


                                       13
<PAGE>

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

(in millions of U.S. dollars,  except per share amounts,  and in accordance with
U.S. GAAP)

Overview

For almost 30 years, Zarlink  Semiconductor has delivered the integrated circuit
(IC) building blocks that drive the capabilities of voice, enterprise, broadband
and wireless  communications.  Zarlink is a global provider of  microelectronics
for voice and data networks,  consumer and ultra low-power  communications,  and
high-performance analog.

The following  discussion and analysis  explains  trends in Zarlink's  financial
condition  and results of  operations  for the three months ended June 27, 2003,
compared  with the  corresponding  period  in the  previous  fiscal  year.  This
discussion is intended to help  shareholders  and other readers  understand  the
dynamics of Zarlink's  business  and the key factors  underlying  its  financial
results.  This discussion  should be read in conjunction  with the  consolidated
financial statements and notes thereto included elsewhere in this Form 10-Q, and
with the Company's audited  consolidated  financial statements and notes thereto
for the fiscal year ended March 28, 2003.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform  Act") that are based on current  expectations,  estimates and
projections  about the  industries in which the Company  operates,  management's
beliefs and assumptions made by management.  These statements are not guarantees
of future performance and involve certain risks,  uncertainties and assumptions,
which are  difficult to predict.  Accordingly,  actual  outcomes and results may
differ materially from results  forecasted or suggested in such  forward-looking
statements.

Such risks,  uncertainties and assumptions include, among others, the following:
increasing  price  and  product/service  competition  by  foreign  and  domestic
competitors,  including  new  entrants;  rapid  technological  developments  and
changes;  the ability to continue to  introduce  competitive  new  products on a
timely,  cost-effective  basis;  delays  in  product  development;  the  mix  of
products/services;  the  ability to ensure  continuity  of supply  from  outside
fabrication  services;  changes in environmental  and other domestic and foreign
governmental   regulations;   protection   and  validity  of  patent  and  other
intellectual  property  rights;  import  protection  and  regulation;   industry
competition;  industry  capacity and other industry  trends;  the ability of the
Company to  attract  and retain key  employees;  demographic  changes  and other
factors  referenced in the  Company's  Annual Report on Form 10-K for the fiscal
year ended March 28, 2003.

The above factors are representative of the risks, uncertainties and assumptions
that could affect the outcome of the  forward-looking  statements.  In addition,
such statements could be affected by general industry and market  conditions and
growth rates, general domestic and international economic conditions,  including
interest  rate  and  currency   exchange  rate  fluctuations  and  other  risks,
uncertainties  and  assumptions,  as described in the Company's Annual Report on
Form 10-K for the fiscal year ended March 28, 2003,  including those  identified
under   "Forward-Looking   Statements  and  Risk   Factors".   In  making  these
forward-looking  statements,  which  are  identified  by words  such as  "will",
"expects", "intends",  "anticipates" and similar expressions, the Company claims
the protection of the safe-harbor for  forward-looking  statements  contained in
the Reform Act. The Company  undertakes  no  obligation  to update  publicly any
forward-looking statements whether as a result of new information, future events
or otherwise.


                                       14
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 27, 2003

<TABLE>
<CAPTION>
  Summary of Results from Operations                                              Three Months Ended
  (millions of U.S. dollars, except per share amounts)                     June 27, 2003      June 28, 2002
                                                                           -------------      -------------
<S>                                                                            <C>                <C>
  Consolidated revenue                                                         $ 53.7             $ 48.0
     Network Communications segment revenue                                      29.3               28.4
     Consumer Communications segment revenue                                     13.4               12.6
     Ultra Low-Power Communications  segment revenue                             11.0                7.0

  Operating income (loss)                                                        (5.2)              (8.8)
     Network Communications segment operating loss                               (2.4)              (5.3)
     Consumer Communications segment operating loss                              (3.8)              (5.1)
     Ultra Low-Power Communications segment operating income                      1.0                 --
     Unallocated recovery                                                          --                1.6

  Net loss for the period                                                        (6.2)              (8.7)
  Net loss per common share - basic and diluted                                 (0.05)             (0.07)
  Weighted average common shares outstanding - millions                         127.3              126.6
</TABLE>

Revenue in the first quarter of Fiscal 2004 was $53.7,  an increase of 12%, from
the first  quarter of Fiscal 2003.  The market  continues to pose  challenges as
semiconductor  sales volumes  continue to be affected by the prolonged  downturn
impacting the semiconductor  industry.  The Company experienced lower sequential
bookings in the first  quarter of Fiscal  2004,  as expected  with the  seasonal
trends  for lower  shipments  through  the summer  months,  but  booking  levels
continue to remain  above  those  levels  experienced  during the same period in
Fiscal 2003.

In the first  quarter of Fiscal  2004,  the Company  recorded a net loss,  after
preferred share dividends,  of $6.7, or $0.05 per share.  This compares to a net
loss, after preferred share dividends, of $9.2, or $0.07 per share, in the first
quarter of Fiscal 2003.

The Company also announced that it would  implement  further cost  reductions in
the second quarter of Fiscal 2004 as it finalizes its  outsourcing  programs and
streamlines  operations.  The Company  expects to record  additional  charges of
approximately $8.0 related to reducing its global workforce by approximately 120
employees  across  all  regions  and  business  units,  and the cost of  further
outsourcing  initiatives.  The savings  that these  reductions  are  expected to
generate will be largely realized in the third quarter of Fiscal 2004.

Zarlink's  operations  are  comprised of three  reportable  business  segments -
Network   Communications,   Consumer   Communications,   and   Ultra   Low-Power
Communications.   Zarlink  targets  the  network  and  consumer   communications
industries  with offerings that specialize in broadband  connectivity  solutions
over wired, wireless and optical media. Zarlink's Ultra Low-Power communications
segment  provides  ultra  low-power  ASIC  solutions  for  applications  such as
pacemakers,  hearing aids and portable  instruments.  Zarlink sells its products
through both direct and indirect channels of distribution. Factors affecting the
choice of distribution  include,  among others,  end-customer type, the level of
product complexity,  the stage of product introduction,  geographic presence and
location of markets, and volume levels.

Network Communications

            Network Communications                   June 27,   June 28,
            (millions of U.S. dollars)                 2003       2002
                                                     --------   --------

            Revenue:                                 $ 29.3      $ 28.4
                                                     ------      ------
            As a % of total revenue                      55%         59%

            Operating loss                           $ (2.4)     $ (5.3)
                                                     ------      ------

Zarlink's  Network   Communications   segment   specializes  in  microelectronic
solutions for broadband  connectivity  over wired and optical media. The product
line  enables  voice  and data  convergence  for  high-speed  internet  systems,
switching  systems,  and subscriber  access  systems.  In simple terms,  Network
Communications semiconductor products connect network equipment together.


                                       15
<PAGE>

Revenue for the first quarter of Fiscal 2004 totaled $29.3,  up 3% from $28.4 in
the first quarter of Fiscal 2003.  Despite the revenue  improvement in the first
quarter of Fiscal 2004, as compared to the first quarter of Fiscal 2003, reduced
capital  spending  in the  market  continues  to  impact  demand  by  networking
companies.  Revenue  improvements  in the first  quarter  of Fiscal  2004 were a
result of increased  revenue from the Company's TDM Switching,  Voice and Packet
Processing, and Optical products.

The  segment's  operating  loss  improved to $2.4 in the first quarter of Fiscal
2004 from an operating  loss of $5.3 in Fiscal 2003,  partially  due to improved
margins on a stronger mix of products sold.

Consumer Communications

            Consumer Communications                 June 27,       June 28,
            (millions of U.S. dollars)                2003           2002
                                                    --------       --------

            Revenue:                                 $ 13.4         $ 12.6
                                                     ------         ------
            As a % of total revenue                      25%            26%

            Operating loss                           $ (3.8)        $ (5.1)
                                                     ------         ------

Zarlink's  Consumer  Communications  products  allow  users  to  connect  to the
network.  These products include wireless (for example,  cellular  chipsets) and
infotainment applications (for example,  terrestrial and satellite set-top boxes
and digital TV).

Revenue for the first quarter of Fiscal 2004 totaled $13.4,  up 6% from $12.6 in
the first  quarter of Fiscal  2003,  as a result of  improved  shipments  of the
Company's tuners and demodulators.

The segment's  operating  loss decreased to $3.8, in the first quarter of Fiscal
2004 from an operating  loss of $5.1 in the first  quarter of Fiscal  2003,  due
principally to cost control initiatives.

Ultra Low-Power Communications

            Ultra Low-Power Communications          June 27,       June 28,
            (millions of U.S. dollars)                2003           2002
                                                    --------       --------

            Revenue:                                 $ 11.0         $ 7.0
                                                     ------         -----
            As a % of total revenue                      20%           15%

            Operating income                         $  1.0         $  --
                                                     ------         -----

Zarlink's  Ultra  Low-Power  Communications  business  provides  ASIC  and  ASSP
solutions for applications such as cardiac  pacemakers,  hearing aids,  portable
instruments and personal area communications devices.

Revenue for the first quarter of Fiscal 2004 totaled $11.0,  up 57% from $7.0 in
the first quarter of Fiscal 2003 as a result of inventory  corrections and stock
replenishment  activities initiated by Zarlink's customers in the latter part of
Fiscal 2003.  The Company's  hearing aid  components  contributed to the largest
increase in revenues  in the  quarter,  as compared to the same period in Fiscal
2003,  and revenue  improvements  were also realized on the Company's  pacemaker
circuits.


                                       16
<PAGE>

GEOGRAPHIC REVENUE

Revenue,  based on the  geographic  location of customers,  was  distributed  as
follows:

                                                  Three Months Ended
                                    -------------------------------------------
                                    June 27,     % of        June 28,     % of
(millions of U.S. dollars)            2003       Total        2002        Total
                                    -------------------------------------------

Asia/Pacific                        $  22.5       42%        $  16.7       35%
Europe                                 16.8       31            16.3       34
United States                          12.3       23             9.8       20
Canada                                  1.6        3             4.2        9
Other Regions                           0.5        1             1.0        2
                                    -------      ---         -------      ---
Total                               $  53.7      100%        $  48.0      100%
                                    =======      ===         =======      ===

Asia/Pacific

Asia/Pacific  sales  increased  by 35% during the first  quarter of Fiscal  2004
compared to the first  quarter of Fiscal 2003,  and  continue to  represent  the
largest  geographic  segment of  customer  revenues.  The  increase in the first
quarter of Fiscal  2004 was  driven  primarily  from the  Network  and  Consumer
Communication  segments,  with moderate  improvements  from the Ultra  Low-Power
Communications segment.

Europe

European  sales  increased by 3% in the first quarter of Fiscal 2004 compared to
the first  quarter of Fiscal  2003 due to  improved  revenues in the Network and
Ultra Low-Power  Communications segments offset by declines in the revenues from
the Consumer Communications segments in the first quarter of Fiscal 2004.

United States

Sales to  customers  in the  United  States  increased  by 26%  during the first
quarter  of Fiscal  2004  compared  to the first  quarter  of Fiscal  2003.  The
increase  was  due   primarily  to  improved   Ultra   Low-Power   and  Consumer
Communications product sales.

Canada

Canadian  sales  decreased  by 62% in the first  quarter of Fiscal 2004 over the
same period in Fiscal 2003 due to lower Network  Communications segment sales to
Canadian customers.

GROSS MARGIN

                                                           Three Months Ended
                                                          ---------------------
                                                          June 27,      June 28,
  (millions of U.S. dollars)                                2003         2002
                                                          --------     --------

  Gross margin                                             $ 25.6      $ 22.1

  As a percentage of revenue                                   48%         46%

Gross margin  improved by two  percentage  points in the first quarter of Fiscal
2004 compared to the same period in Fiscal 2003. The improvement in margin was a
result  of lower  overall  manufacturing  costs  and a  favorable  product  mix,
particularly in the Network Communication segment.


                                       17
<PAGE>

OPERATING EXPENSES

Research and Development ("R&D")

                                                           Three Months Ended
                                                          ---------------------
                                                          June 27,      June 28,
  (millions of U.S. dollars)                                2003         2002
                                                          --------     --------

  R&D expenses                                             $ 19.2      $ 20.4

  As a percentage of revenue                                   36%         43%

R&D expenses  decreased by 6%, or $1.2, in the first quarter of Fiscal 2004 from
the same period in Fiscal 2003,  primarily due to the timing of certain material
spending and cost reduction initiatives  implemented in Fiscal 2003. The Company
continues to refocus its R&D resources on programs and products that demonstrate
superior  potential for near- and medium-term  revenue.  Management expects that
R&D  spending  will  decrease  over the  balance  of Fiscal  2004 as a result of
optimizing electronic design automation and cost control.

The Company  continued its investment in research and development to develop and
launch new products, with 11 new products being released in the first quarter of
Fiscal 2004.  The impact of new products on revenue in the year of  introduction
is not  normally  significant.  However,  management  believes  that new product
introductions  are critical to supporting  future revenue  growth.  For example,
initial  shipments of the Company's new DTV chip  commenced in the first quarter
of Fiscal 2004.

In the  Network  Communications  product  line,  R&D  activities  focused on the
following areas:

      o     Time  Division  Multiplex  ("TDM")  switch  development  to set  new
            industry   standards  in  terms  of  channel   density,   levels  of
            integration, feature sets and power density;
      o     Development  of  Voice  Processing  products  for  today's  emerging
            Carrier  Class  Gateways  and  Voice  over  IP  (Internet  Protocol)
            Networks for mobile telephony,  addressing the problem of voice echo
            cancellation  in the  system.  New  products  will  include  Zarlink
            technology to improve  convergence  time and voice  quality  thereby
            allowing  the  product  to consume  even less power and also  enable
            better power  consumption for voice  transmitted  through the mobile
            network;
      o     Planned  development  of higher  speed Phase Lock Loops  ("PLL") for
            Network Timing & Synchronization. These high speed PLLs will be used
            to provide the timing for  transporting  information  over SONET/SDH
            links that operate up to 622 Mbits/s;
      o     Meeting convergence with TDM/IP Processing in Packet Processing, and
            Ethernet Switching for backplanes,  linecard, edge/metro and Virtual
            Private Network ("VPN") switches in Packet Switching;
      o     Utilization  of its analog and mixed  signal  expertise  for Timing,
            Synthesizers,   Interface  drivers,  and  Amplifiers  for  its  High
            Performance Analog product development; and
      o     Very Short Reach  ("VSR")  parallel  optical  solutions  targeted at
            terabit speeds and higher.

In the Consumer  Communications  product  line,  R&D  activities  focused on the
following areas:

      o     Providing a 2G cellular phone radio transceiver chip, compliant with
            2G standards for Time  Division  Multiple  Access  ("TDMA")/Advanced
            Mobile Phone Service/System  ("AMPS"), and developing a 2-chip radio
            solution for 3rd  generation  GSM/Wideband  Code  Division  Multiple
            Access ("WCDMA") cellular phones;
      o     Providing  tuner,  demodulator  and peripheral  chips for satellite,
            cable and  terrestrial  digital  set-top boxes,  integrated  digital
            televisions and adapter boxes; and
      o     Development of the most highly integrated  system-on-a-chip solution
            for integrated Digital Terrestrial Televisions,  Digital Terrestrial
            Set-top boxes,  adapter boxes and media centers,  compliant with the
            Digital Video Broadcasting - Terrestrial ("DVB-T") standard.

In the Ultra Low-Power  Communications  business segment, R&D activities focused
on  semiconductor  solutions  and  technologies  for a variety  of  in-vivo  and
audiological applications, including:

      o     High performance custom Coder/Decoders ("CODECs") and digital signal
            processing ("DSP") chips for major hearing aid companies;
      o     Application-specific  standard  products  ("ASSPs")  as  opposed  to
            custom ASICs;
      o     Surge   protection   chips  used  in   implantable   pacemakers  and
            defibrillators for cardiac rhythm management;


                                       18
<PAGE>

      o     High  performance,   ultra  low-power  audio  converters   (CODECs),
            technology  also  used in  digital  hearing  aids,  for high  growth
            communications and entertainment applications; and

      o     Ultra low-power integrated circuits supporting  short-range wireless
            communications  for  healthcare  and other  applications,  including
            implantable and in-vivo systems.

Selling and Administrative ("S&A")

                                                           Three Months Ended
                                                          ---------------------
                                                          June 27,      June 28,
  (millions of U.S. dollars)                                2003         2002
                                                          --------     --------

  S&A Expenses                                             $ 11.6      $ 12.1

  As a percentage of revenue                                   22%         25%

In the first  quarter of Fiscal  2004,  S&A expenses  decreased  by $0.5,  or 4%
compared to the first  quarter of Fiscal 2003,  principally  as a result of cost
reduction activities  implemented through Fiscal 2003. S&A expenses in the first
quarter of Fiscal 2004 included $0.2 of severance,  as the Company continued its
cost reduction  activities.  The Company anticipates a reduction in S&A expenses
by the third quarter of Fiscal 2004, as it  implements  certain cost  reductions
programs in the second quarter of Fiscal 2004.

Stock Compensation

The Company  records  stock  compensation  expense  arising from  certain  stock
options subjected to option exchange programs.  In prior years, the Company also
recorded stock compensation expense arising from retention conditions associated
with the stock awarded to certain  employees of Vertex  Networks,  Incorporated,
which was acquired in July 2000.

During the three  months ended June 27,  2003,  there was no stock  compensation
recorded,  as the intrinsic value of options under the exchange program was nil.
During  the three  months  ended June 28,  2002,  the  Company  recorded a stock
compensation  recovery of $1.6 related to the amortization of intrinsic value of
unexercised stock options modified by the option exchange  programs,  net of the
vesting of  restricted  stock.  No further  stock  compensation  expense will be
recorded against the formerly restricted shares.

OTHER INCOME (EXPENSE)

Other income  (expense) was comprised of interest  income,  and foreign exchange
losses.

Interest income was $0.3 for the three months ended June 27, 2003 as compared to
$0.9 in the same  period of Fiscal  2003.  The  decrease  compared  to the first
quarter of Fiscal 2003 was mainly due to reduced average cash balances and lower
interest rates.

Foreign  exchange losses in the first quarter of Fiscal 2004 amounted to $1.0 as
compared to losses of $0.4 for the same period in Fiscal  2003.  In Fiscal 2004,
net losses were  recorded  on monetary  assets and  liabilities  denominated  in
currencies  other than the U.S.  dollar  functional  currency,  and according to
month-end  market  rates.  In Fiscal  2003,  the losses were  related to foreign
exchange hedging losses.

INTEREST EXPENSE

Interest expense was nil for the three months ended June 27, 2003, compared with
$0.1 for the first  quarter of Fiscal  2003.  The  interest  expense  related to
capital leases.

INCOME TAXES

Income tax expense for the first  quarter of Fiscal 2004 was $0.3,  comprised of
domestic  income and  capital  taxes,  compared  with an expense of $0.3 for the
corresponding period in Fiscal 2003.

The Company has a valuation  allowance  against its  deferred tax assets at June
27, 2003 of $121.3  (March 28, 2003 - $106.0).  The increase  relates  mainly to
losses incurred in the Company's foreign jurisdictions and temporary differences
in the Company's foreign and domestic operations. Management has determined that
sufficient  uncertainties  exist  regarding  the  realization  of certain of its
deferred tax assets.


                                       19
<PAGE>

BACKLOG

                                                          June 27,      June 28,
  (millions of U.S. dollars)                                2003         2002
                                                          --------     --------

  90-Day Backlog                                           $ 32.5      $ 38.5

Generally,  manufacturing  lead  times for  semiconductor  products  are  longer
because  of the  nature  of the  production  process.  However,  as  orders  are
sometimes  booked and shipped within the same fiscal quarter (often  referred to
as "turns"),  order backlog is not necessarily indicative of a sales outlook for
the quarter or year.

As usual,  the  activity  over the summer is slower,  as was  evidenced by lower
bookings through the first quarter of Fiscal 2004. As a result of lower bookings
during  the  quarter  in both the  Network  and  Ultra  Low-Power  Communication
segments,  the  backlog  has  decreased  as compared  against  recent  quarters.
Bookings  also  continue  to be  affected  by  the  continued  downturn  in  the
communications  semiconductor industry, described elsewhere in this Management's
Discussion and Analysis.

NET LOSS

The Company recorded a net loss,  after preferred share  dividends,  of $6.7, or
$0.05 per share,  in the first  quarter of Fiscal 2004.  This  compares to a net
loss, after preferred share dividends,  of $9.2, or $0.07 per share, in the same
period in Fiscal 2003.

The net loss for the three months ended June 27, 2003, was primarily a result of
low revenues, caused by the continued downturn in the semiconductor industry.

LIQUIDITY AND CAPITAL RESOURCES

At June 27, 2003, cash, cash equivalents,  short-term investments and restricted
cash balances totaled $107.7,  down from $119.2 at March 28, 2003. Cash and cash
equivalents at June 27, 2003, included in the amount above, totaled $39.2 (March
28, 2003 - $23.5).

Cash used in operations  before working capital changes  amounted to $1.1 during
the first  three  months of Fiscal  2004,  as compared to $6.6 used in the first
three  months of Fiscal  2003.  Since  March 28,  2003,  the  Company's  working
capital, as reflected in the consolidated statements of cash flows, increased by
$8.5,  mainly as a result of increases in accounts  receivable and other prepaid
expenses  totaling  $10.4 and a  reduction  in  deferred  credits  of $0.2.  The
increase in accounts  receivable was a result of the timing of sales late in the
quarter,  resulting in the cash inflow not occurring until the second quarter of
Fiscal  2004.  The  increase  in other  prepaid  expenses  was due to  scheduled
payments for certain design tool licenses.  These  increases in working  capital
were offset by reducing  inventories by $0.8 and an increase in accounts payable
and other accrued liabilities totaling $1.3.  Management expects to further draw
down  inventory  levels  through the remainder of Fiscal 2004 by reducing  cycle
times and managing  inventories on a  build-to-order  basis. In comparison,  the
Company's  working  capital  decreased  by $1.9 during the first three months of
Fiscal 2003,  mainly as a result of reductions in inventories  and improved cash
collections against trade receivables.

Cash provided  from  investing  activities  was $26.4 for the three months ended
June 27, 2003,  primarily from matured  short-term  investments  totaling $89.5,
offset by purchases of  short-term  investments  of $62.3.  Cash  balances  were
reduced by  purchases  of fixed and other  assets  amounting  to $1.2 during the
first three months of the year, offset by proceeds from disposal of fixed assets
of $0.4.  The  fixed  asset  additions  were  primarily  related  to  continuing
improvements to existing test equipment and the Company's information technology
resources.  Management expects quarterly capital spending to remain flat through
the rest of  Fiscal  2004 in  comparison  to the  first  quarter  of this  year.
Additions to fixed and other assets during the first three months of Fiscal 2003
mainly consisted of continuing improvements to information technology resources.
Net purchases of short-term  investments in the amount of $39.5 also contributed
to the net cash outflow from investing  activities during the first three months
of Fiscal 2003.

Cash used in financing  activities  during the first three months of Fiscal 2004
was $1.1.  The use of cash was  primarily  the  result of  repayment  of $0.2 of
capital  leases,  the repurchase of $0.4 of the Company's  redeemable  preferred
shares, and the payment of $0.5 for dividends on the preferred shares. Cash used
in financing  activities in the first three months of Fiscal 2003 was $0.8.  The
use of cash was  primarily  the result of the repayment of $0.7 of capital lease
liabilities, the repurchase of $0.2 of preferred shares, and the payment of $0.5
for  dividends  on the  preferred  shares,  offset by $0.6 of new common  shares
issued from exercised stock options.


                                       20
<PAGE>

During  Fiscal  2002,  the  Company  took steps to wind up its  defined  benefit
pension plan in the United  Kingdom and replaced it with a defined  contribution
plan. The Company expects to make a final payment of approximately $2.3 later in
Fiscal 2004 after the final adjustments are calculated.

During the first three  months of Fiscal  2004,  the Company  declared  and paid
dividends of $0.5 on its redeemable preferred shares based on a $0.37 (Cdn$0.50)
per share dividend.  In addition,  the Company purchased 21,900 preferred shares
under its  purchase  obligation  during this period.  As at June 27,  2003,  the
Company has repurchased  31,800 preferred shares that had not yet been cancelled
by the transfer agent.

On June 6, 2002, the Company announced its Board of Directors had authorized the
continuation  of its normal  course  issuer  bid  program  to  repurchase  up to
6,358,203 common shares, representing 5% of the 127,164,078 common shares issued
and  outstanding  at May 31, 2002.  The purchases were to take place on the open
market  through the stock  exchanges of New York and Toronto over a twelve-month
period  beginning on June 10, 2002 and ending on June 9, 2003.  No common shares
were repurchased under the program during the period from March 28, 2003 to June
9,  2003.  The  program  expired  on June 9,  2003,  and was not  renewed by the
Company.

In addition to cash, cash equivalents, short-term investment and restricted cash
balances of $107.7 as at June 27,  2003,  the  Company  had a  revolving  global
credit facility of approximately  $18.5 (Cdn$25.0),  of which $6.2 in letters of
credit were  outstanding.  Accordingly,  the  Company  had unused and  available
demand bank lines of credit  totaling  $12.3 as at June 27, 2003.  Cash and cash
equivalents  totaling $6.2 were hypothecated  under the credit facility to cover
outstanding  letters of credit.  As a result of the non-cash  write-down  of the
Mitel  investment in the fourth quarter of Fiscal 2003, the Company did not meet
a quarterly financial covenant under the Company's credit facility. A waiver was
obtained from the bank in respect of the financial covenant. The credit facility
is  subject  to  periodic  review,  including  the  determination  of  financial
covenants.  It is uncertain if the Company will be able to meet these  financial
covenants in the future and, if not, to obtain a waiver from the bank, which may
result in the  availability  of the credit facility being reduced or restricted.
Management does not anticipate that this would have a material adverse effect on
the financial position of the Company.  Management  believes the Company is in a
position to meet all foreseeable  business cash  requirements  and capital lease
and preferred share payments from its cash balances on hand,  existing financing
facilities and cash flow from operations.

OTHER

Critical Accounting Policies and Significant Estimates

The Company's  consolidated  financial statements are based on the selection and
application of significant accounting policies, which require management to make
significant  estimates and assumptions.  As a result of writing off the carrying
value of the Company's  remaining  investment in Mitel  Networks  Corporation in
Fiscal 2003,  management believes the policy on investments in private companies
is no longer a critical accounting policy of the Company.  Other than the policy
on  investments  in  private  companies,  there is no  change  in the  Company's
critical  accounting  policies included in Item 7,  Management's  Discussion and
Analysis of Financial  Condition  and Results of  Operations,  of the  Company's
Annual Report on Form 10-K for the year ended March 28, 2003.

Foreign Currency Translation

Prior to March 29, 2003,  the financial  statements of the foreign  subsidiaries
were measured using the local currency as the functional  currency.  All balance
sheet  amounts  were  translated  using  the  exchange  rates in  effect  at the
applicable  period end, and income  statement  amounts were translated using the
weighted average exchange rates for the applicable  period. Any gains and losses
resulting  from the changes in exchange rates from year to year were reported as
a separate  component  of other  comprehensive  loss  included in  Shareholders'
Equity.

Effective   March  29,  2003,  the  functional   currency  of  Zarlink  and  its
subsidiaries is the U.S. dollar.  Monetary assets and liabilities denominated in
currencies  other than the U.S. dollar are remeasured at the closing  period-end
rates of exchange. The gains or losses resulting from the remeasurement of these
amounts have been reflected in earnings in the respective periods.  Non-monetary
items and any related  amortization  of such items are  measured at the rates of
exchange in effect when the assets were acquired or  obligations  incurred.  All
other  income  and  expense  items have been  remeasured  at the  average  rates
prevailing  during the period.  Gains  (losses)  relating  to  external  foreign
exchange  contracts are  recognized  in income as they mature,  or to the extent
they are ineffective hedges.

Recently Issued Accounting Standards

On April 30, 2003, the FASB issued  Statement of Financial  Accounting  Standard
No. 149 ("SFAS 149"),  "Amendment of Statement 133 on Derivative Instruments and
Hedging  Activities".  The  amendments  set forth in SFAS 149 improve  financial
reporting  by  requiring  that  contracts  with  comparable  characteristics  be
accounted for similarly. In particular, this


                                       21
<PAGE>

statement  clarifies  under what  circumstances  a contract  with an initial net
investment meets the characteristic of a derivative as discussed in SFAS 133. In
addition,  it clarifies  when a derivative  contains a financing  component that
warrants  special  reporting  in the  statement  of cash flows.  SFAS 149 amends
certain  other  existing  pronouncements.  Those  changes  will  result  in more
consistent reporting of contracts that are derivatives in their entirety or that
contain embedded derivatives that warrant separate accounting. This Statement is
effective for contracts  entered into or modified after June 30, 2003, except as
stated below, and for hedging relationships  designated after June 30, 2003. The
guidance will be applied  prospectively.  The  provisions of this Statement that
relate to  Statement  133  Implementation  Issues that have been  effective  for
fiscal  quarters that began prior to June 15, 2003,  will continue to be applied
in  accordance  with their  respective  effective  dates.  In addition,  certain
provisions  relating to forward purchases or sales of when-issued  securities or
other securities that do not yet exist,  should be applied to existing contracts
as well as new contracts  entered into after June 30, 2003.  The Company has not
yet evaluated the impact of this new  pronouncement  on its financial  position,
results of operations or accounting for derivatives.

On May 15, 2003, the FASB issued Statement of Financial  Accounting Standard No.
150  ("SFAS  150"),   "Accounting  for  Certain   Financial   Instruments   with
Characteristics  of both  Liabilities  and Equity".  The Statement  improves the
accounting for certain  financial  instruments  that,  under previous  guidance,
issuers could account for as equity. SFAS 150 requires that those instruments be
classified  as  liabilities  in the  statements of financial  position,  whereas
previously  such  instruments may have been classified as equity or as temporary
equity. In addition to its requirements for the  classification  and measurement
of financial  instruments in its scope, SFAS 150 also requires disclosures about
alternative  ways of  settling  the  instruments  and the capital  structure  of
entities, all of whose shares are mandatorily  redeemable.  Most of the guidance
in SFAS 150 is effective for all financial  instruments entered into or modified
after May 31, 2003,  and  otherwise  is effective at the  beginning of the first
interim period  beginning after June 15, 2003. The Company has not yet evaluated
the impact of this new pronouncement on its financial position.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Market Risk.  Market risk represents the risk of loss that may impact  Zarlink's
financial  statements due to adverse  changes in financial  markets.  Zarlink is
exposed to market  risk from  changes in  interest  rates and  foreign  exchange
rates.  To  manage  these  risks,  Zarlink  uses  certain  derivative  financial
instruments,   including  interest  rate  swaps,  forward  contracts  and  other
derivative  instruments from time to time, that have been authorized pursuant to
board-approved policies and procedures. Zarlink does not hold or issue financial
instruments for trading or speculative purposes.

Foreign Exchange Risk. The Company  currently uses forward  contracts,  and to a
lesser  extent  foreign  currency  options,  to reduce the  exposure  to foreign
exchange risk. The most significant  foreign exchange  exposures for the Company
relate to the Canadian dollar,  the U.K. pound sterling,  and the Swedish Krona.
At June 27, 2003, there were unrealized  gains of $0.1 on the forward  contracts
relating to Fiscal 2004.  The  unrealized  gain is calculated as the  difference
between the actual  contract rates and the applicable  current market rates that
would be used to terminate the forward  contracts on June 27, 2003, if it became
necessary to unwind these  contracts.  Management  believes that the established
hedges are  effective  against its known and  anticipated  cash flows,  and that
potential  future  losses  from these  hedges  being  marked to market  would be
largely offset by gains on the underlying hedged transactions.

Interest Rate Risk. The Company's primary exposure to interest rates is expected
to be in the rollover of its short-term investment portfolio. In accordance with
Company  policy,  cash  equivalents  and  short-term   investment  balances  are
primarily  comprised  of  high-grade  money  market  instruments  with  original
maturity  dates  of  less  than  one  year.  The  Company  does  not  hedge  the
re-investment risk on its short-term investments.

Management  does not foresee any  significant  changes in the strategies used to
manage interest and foreign exchange rate risks in the near future.

As at June 27, 2003, there were no material changes in information  about market
risks as disclosed in the  Company's  Annual  Report on Form 10-K for the fiscal
year ended March 28, 2003.

ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES

As of June 27, 2003, an evaluation was performed  under the supervision and with
the  participation  of  the  management  of the  Company,  including  its  Chief
Executive  Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness
of the design and operation of the Company's disclosure controls and procedures.
Based on that evaluation,  the Company's management,  including the CEO and CFO,
concluded that the Company's  disclosure  controls and procedures were effective
as of June 27, 2003.  There have been no  significant  changes in the  Company's
internal controls or in other factors that could  significantly  affect internal
controls subsequent to June 27, 2003.


                                       22
<PAGE>

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

99.1  Selected  Consolidated   Financial  Statements  in  U.S.  Dollars  and  in
      accordance with Canadian Generally Accepted Accounting Principles

99.2  Management's Discussion and Analysis of Financial Condition and Results of
      Operations - Canadian Supplement

99.3  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.4  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

b) Reports on Form 8-K

Date of Filing        Description
--------------------------------------------------------------------------------

June 25, 2003     Certification  Pursuant to 18 U.S.C.  Section 1350, As Adopted
                  Pursuant  To Section  906 of The  Sarbanes-Oxley  Act of 2002,
                  President and Chief Executive Officer

                  Certification  Pursuant to 18 U.S.C.  Section 1350, As Adopted
                  Pursuant  To Section  906 of The  Sarbanes-Oxley  Act of 2002,
                  Senior Vice President of Finance and Chief Financial Officer

June 20, 2003     Press  Release:  "Notice of Annual  General  Meeting and Proxy
                  Circular dated May 30, 2003"

May 8, 2003       Press Release:  "Financial  Results for Quarter and Year Ended
                  March 28, 2003"

April 8, 2003     Press Release:  "Zarlink To Write Down Its Investment in Mitel
                  Networks Corporation in the Fourth Quarter of Fiscal 2003"

SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934, the Registrant,  Zarlink  Semiconductor  Inc., has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

Zarlink Semiconductor Inc.
(Registrant)

 Name                      Title                                      Date
---------------------     --------------------------------       --------------

 /s/ SCOTT MILLIGAN
---------------------
 Scott Milligan           Senior Vice President of Finance       August 5, 2003
                          and Chief Financial Officer
                          (Principal Financial and
                          Accounting Officer)


                                       23
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

I,  Patrick  J.  Brockett,  President  and Chief  Executive  Officer  of Zarlink
Semiconductor Inc., certify that:

      1.    I have  reviewed  this  quarterly  report  on Form  10-Q of  Zarlink
            Semiconductor Inc. (the "registrant");

      2.    Based on my knowledge,  this quarterly  report on Form 10-Q does not
            contain any untrue  statement of a material  fact or omit to state a
            material fact necessary to make the statements made, in light of the
            circumstances  under which such statements were made, not misleading
            with respect to the period covered by this quarterly report;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this quarterly report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the  registrant as of, and for, the periods  presented
            in this quarterly report;

      4.    The registrant's other certifying officers and I are responsible for
            establishing and maintaining  disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant
            and we have:

                  a)    designed  such  disclosure  controls and  procedures  to
                        ensure  that  material   information   relating  to  the
                        registrant,  including its consolidated subsidiaries, is
                        made  known  to  us by  others  within  those  entities,
                        particularly  during the period in which this  quarterly
                        report is being prepared;

                  b)    evaluated   the   effectiveness   of  the   registrant's
                        disclosure  controls and  procedures as of a date within
                        90 days  prior  to the  filing  date  of this  quarterly
                        report (the "Evaluation Date"); and

                  c)    presented in this quarterly report our conclusions about
                        the   effectiveness  of  the  disclosure   controls  and
                        procedures  based on our evaluation as of the Evaluation
                        Date;

      5.    The  registrant's  other  certifying  officers and I have disclosed,
            based on our most recent  evaluation,  to the registrant's  auditors
            and the audit  committee  of  registrant's  board of  directors  (or
            persons performing the equivalent function):

                  a)    all significant  deficiencies in the design or operation
                        of internal  controls which could  adversely  affect the
                        registrant's ability to record,  process,  summarize and
                        report  financial  data  and  have  identified  for  the
                        registrant's   auditors  any  material   weaknesses   in
                        internal controls; and

                  b)    any  fraud,  whether  or  not  material,  that  involves
                        management  or other  employees  who have a  significant
                        role in the registrant's internal controls; and

      6.    The registrant's  other certifying  officers and I have indicated in
            this quarterly report whether or not there were significant  changes
            in internal  controls or in other  factors that could  significantly
            affect internal  controls  subsequent to the date of our most recent
            evaluation,   including  any  corrective   actions  with  regard  to
            significant deficiencies and material weaknesses.

                  Date: August 5, 2003

                                                   /s/ PATRICK J. BROCKETT
                                                   -----------------------------
                                                   Patrick J. Brockett
                                                   President and Chief Executive
                                                   Officer


                                       24
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

I, Scott Milligan,  Senior Vice-President of Finance and Chief Financial Officer
of Zarlink Semiconductor Inc., certify that:

      1.    I have  reviewed  this  quarterly  report  on Form  10-Q of  Zarlink
            Semiconductor Inc. (the "registrant");

      2.    Based on my knowledge,  this quarterly  report on Form 10-Q does not
            contain any untrue  statement of a material  fact or omit to state a
            material fact necessary to make the statements made, in light of the
            circumstances  under which such statements were made, not misleading
            with respect to the period covered by this quarterly report;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this quarterly report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the  registrant as of, and for, the periods  presented
            in this quarterly report;

      4.    The registrant's other certifying officers and I are responsible for
            establishing and maintaining  disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant
            and we have:

                  a)    designed  such  disclosure  controls and  procedures  to
                        ensure  that  material   information   relating  to  the
                        registrant,  including its consolidated subsidiaries, is
                        made  known  to  us by  others  within  those  entities,
                        particularly  during the period in which this  quarterly
                        report is being prepared;

                  b)    evaluated   the   effectiveness   of  the   registrant's
                        disclosure  controls and  procedures as of a date within
                        90 days  prior  to the  filing  date  of this  quarterly
                        report (the "Evaluation Date"); and

                  c)    presented in this quarterly report our conclusions about
                        the   effectiveness  of  the  disclosure   controls  and
                        procedures  based on our evaluation as of the Evaluation
                        Date;

      5.    The  registrant's  other  certifying  officers and I have disclosed,
            based on our most recent  evaluation,  to the registrant's  auditors
            and the audit  committee  of  registrant's  board of  directors  (or
            persons performing the equivalent function):

                  a)    all significant  deficiencies in the design or operation
                        of internal  controls which could  adversely  affect the
                        registrant's ability to record,  process,  summarize and
                        report  financial  data  and  have  identified  for  the
                        registrant's   auditors  any  material   weaknesses   in
                        internal controls; and

                  b)    any  fraud,  whether  or  not  material,  that  involves
                        management  or other  employees  who have a  significant
                        role in the registrant's internal controls; and

      6.    The registrant's  other certifying  officers and I have indicated in
            this quarterly report whether or not there were significant  changes
            in internal  controls or in other  factors that could  significantly
            affect internal  controls  subsequent to the date of our most recent
            evaluation,   including  any  corrective   actions  with  regard  to
            significant deficiencies and material weaknesses.

                  Date: August 5, 2003

                                                /s/ SCOTT MILLIGAN
                                                --------------------------------
                                                Scott Milligan
                                                Senior Vice-President of Finance
                                                and Chief Financial Officer


                                       25
<PAGE>

                                  EXHIBIT INDEX

  Exhibit
<TABLE>
<CAPTION>
   Number                                   Description                                          Page
------------   -----------------------------------------------------------------------          ------

<S>            <C>                                                                                <C>
    99.1       Selected Consolidated Financial Statements in U.S. Dollars and in                  27
               accordance with Canadian Generally Accepted Accounting Principles

    99.2       Management's Discussion and Analysis of Financial Condition and                    37
               Results of Operations - Canadian Supplement

    99.3       Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002            39

    99.4       Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002            40
</TABLE>