BENEFICIAL OWNERSHIP OF SECURITIES

The table below indicates the number of shares of the Company’s common stock owned by each person known to the Company to be the beneficial owner of more than 5% of the outstanding shares. All information regarding shareholders who are not directors or officers is based on the Company’s review of information filed with the SEC on Schedule 13G. The information provided to the SEC is as of December 31, 2007.

This table also shows the number of shares held as of May 2, 2008, and stock options exercisable within 60 days of such date, by each of our Named Executive Officers (as described later in this proxy); each Director; and by all Directors, Named Executive Officers and other executive officers as a group.

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The ownership percentage is based on 61,731,622 shares outstanding as of May 2, 2008 and the numerator and denominator include the shares, shown above, which the individual has the right to acquire within 60 days thereof through the exercise of stock options. Although the shares that could be acquired by an individual are deemed to be outstanding in calculating the ownership percentage of that individual and of the group, they are not deemed to be outstanding as to any other individual.

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Mr. Maheswaran joined the Company in April 2006 as President and Chief Executive Officer (“CEO”). He was Executive Vice President, General Manager of Intersil Corporation, a company that designs and manufactures analog semiconductors, from June 2002 until March 2006. From June 2001 to May 2002, he was Vice President of Marketing, Business Development and Corporate Strategy for Elantec Semiconductor, Inc., a company that designed and manufactured analog integrated circuits before its acquisition by Intersil in May 2002. He was Vice President of Business Development and Corporate Strategy of Elantec Semiconductor from January 2001 to June 2001. Mr. Maheswaran has also been employed by Allayer Communications, a communications IC startup acquired by Broadcom; IBM Microelectronics; Texas Instruments; Hewlett Packard and Nortel Communications.

Mr. Chukwu joined the Company in November 2006 as Chief Financial Officer. He previously had been employed in various financial positions at Intersil Corporation, a company that designs and manufactures analog semiconductors, since 2002. His most recent position was Vice President, Finance, in which capacity he served since February 2006. He served as the Controller of Intersil’s Analog Signal Processing Group and Worldwide Operations from May 2002 through January 2006. From July 1999 through April 2002, he was the Corporate Controller of Elantec Semiconductor, Inc., a manufacturer of analog integrated circuits that was acquired by Intersil in 2002.

Mr. Barry joined the Company in December 2006 as Vice President of Human Resources. From August 2004 to September 2006 he was the Senior Vice President of Human Resources at Move.com and he was the Senior Vice President Human Resources for SuperConductor Technologies from 2002 until July 2004. He has more than 30 years of experience working in a broad range of industries, including positions with Nortel, Harman International, and Exel Logistics.

Mr. Beltran joined the Company as Vice President of Operations in July 2006. He was previously employed in various operations positions at Intersil Corporation, a company that designs and manufactures analog semiconductors, since 2002. His most recent position was Director of Backend Operations, in which capacity he served since February 2006. He also served as Director of Worldwide Operations Planning and Backend Operations from January 2003 to February 2006. From May 2002 to December 2002, he was the Director of Backend Operations. From June 2000 through May 2002, he was the Director of Operations for Elantec Semiconductor, Inc., a manufacturer of analog integrated circuits that was acquired by Intersil in 2002.

Mr. Caffey joined the Company in June 2004 as Vice President of Quality, Reliability and Technology. He was employed by LSI Logic Corporation from 1998 to 2004, last serving as Director of Worldwide Reliability. Mr. Caffey has also been employed by Symbios Logic, Hyundai Electronics America, AT&T and NCR Corporation.

Mr. Dantec was promoted to Senior Vice President of Advanced Communications and Sensing Products in June 2007. He joined us as result of the June 2005 acquisition of XEMICS S.A., where he was Chief Executive Officer since 2001. Following the acquisition, he became Vice President of Wireless and Sensing Products. Prior to joining XEMICS, he was the President and CEO of MHS SA in Nantes, France, a semiconductor company acquired by Atmel Corporation in 1998 and now known as ATMEL Nantes S.A, where he had been employed since 1979.

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Ms. Fabos joined us as Corporate Counsel in April 2000 and was elected Assistant Secretary in June 2000 and Secretary in November 2003. She was promoted to General Counsel in November 2006. She had been employed in the legal department of Lockheed Martin Corporation for twelve years, where her last post was as Assistant General Counsel – Finance. She has also been employed by Owens-Illinois, Inc. and Coopers & Lybrand. .

Mr. Kim was appointed Vice President of Worldwide Sales and Marketing in February 2007, after serving as Vice President of Global Handset Sales since March 2004. He was Director of Sales and Marketing for Korea and Japan from April 2000 to March 2004. He was Marketing Manager from May 1997 to April 2000. He has also held various engineering positions since beginning his employment with the Company in 1986.

Mr. Necar was appointed Vice President of Strategy and Business Development in December 2007 after serving as Vice President of Marketing for Power Management from September 2006 to December 2007 and Vice President of Business Development from 1999 to September 2006. Prior to joining the Company in 1997 as Director of Business Development, Mr. Necar held engineering and marketing management positions with Exar and Interdesign.

Mr. Pohlman was promoted to Senior Vice President of Protection Products in June 2007 after serving as Vice President of Protection Products since 1998. He has worked for the Company in various engineering roles since 1988. Mr. Pohlman was previously employed by Supertex Inc., Fairchild Camera and Instrument, Inc., and National Semiconductor in various technical and managerial roles.

Mr. Wilson was promoted to Senior Vice President of Power Management Products in June 2007, after serving as Vice President of that unit since 2001. He joined us as the result of the 1995 acquisition of ECI Semiconductor where he was Vice President and Chief Operating Officer. He has more than 20 years experience in the semiconductor industry in a broad range of technical and management positions.

Some of the personnel listed above also serve as directors or officers of one or more of our wholly-owned subsidiaries. All personnel listed above are employed on at-will basis. The Board elects officers annually and those elected serve at the discretion of the Board.

CERTAIN LEGAL PROCEEDINGS

The Company is party to five purported shareholder derivative lawsuits (suits brought on the Company’s behalf) making allegations regarding stock option improprieties and financial reporting. Mr. Pohlman,Mr. Wilson, and all Directors, other than Directors Baker and Edwards, are among the defendants. A tentative settlement has been reached in these cases. See Note 13 to the financial statements in Item 8 of the FY2008 Form 10-K.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the ”Exchange Act”), requires the Company’s directors, officers and holders of more than 10% of the Company’s common stock to file with the SEC initial reports of ownership and reports of changes of ownership of common stock and other equity securities of the Company. Based solely on its review of the forms received by it, or written representations from reporting persons that they were not required to file such forms, the Company believes that, with respect to transactions during the fiscal year ended January 27, 2008, its officers and directors complied with all Section 16(a) filing requirements.

COMPENSATION DISCUSSION AND ANALYSIS

This section contains a discussion of the material elements of compensation awarded to, earned by or paid to the individuals who served as our principal executive and principal financial officers during fiscal year 2008 and our three other most highly compensated individuals who were serving as executive officers at the end of fiscal year 2008. These individuals are referred to as the “Named Executive Officers” or “NEOs”.

Role of Executive Officers in Determining Compensation

The Company’s current executive compensation programs are determined and approved by the Compensation Committee. None of the NEOs is a member of the Compensation Committee. However, certain of our NEOs support and assist the Compensation Committee in performing its duties. The CEO and the Vice President of Human Resources (“VP HR”), who is not an NEO, are involved with setting the agenda for Compensation Committee meetings, which is partially driven by a calendar adopted by the

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Compensation Committee meant to insure all duties set forth in the Compensation Committee’s charter are addressed at the appropriate time. In addition to regularly scheduled meetings, the CEO and/or the VP HR call Compensation Committee meetings from time to time if a matter requiring committee attention arises between regularly scheduled meetings. Both the CEO and VP HR normally attend the meetings, although they are not present when their own compensation is being discussed. The CEO and VP HR make recommendations to the Compensation Committee regarding the design of the compensation programs, sometimes working with compensation consultants in this regard, and report to the Compensation Committee on the operation and effectiveness of the Company’s compensation and benefits programs. The CEO recommends to the Compensation Committee the base salary, target annual bonus and long-term compensation levels for other NEOs. Before making such recommendations, the CEO typically consults with the VP HR.

Our Chief Financial Officer (“CFO”) supervises the calculation of the bonus awards payable under the Company’s bonus plans, which calculated awards are presented to the Compensation Committee for approval. The CFO also advises the Compensation Committee regarding the financial aspects of various elements of the compensation package. Other than the CEO, none of the other Named Executive Officers currently has any role in determining or recommending the form or amount of compensation paid to the other Named Executive Officers or persons reporting to the CEO.

Executive Compensation Program Objectives and Overview

The Company’s current executive compensation programs are intended to achieve three fundamental objectives: (1) attract, retain and motivate qualified executives; (2) hold executives accountable for performance; and (3) align executives’ interests with the interests of our stockholders. The programs seek to ensure that high levels of individual performance are recognized and rewarded and that the compensation of Named Executive Officers is consistent with the levels of compensation of comparable companies, general economic conditions and the Company’s performance.

The Compensation Committee believes that a fair and motivating compensation program plays a critical role in the performance of the Company and, to that end, it reviews the program on an ongoing basis to evaluate its continued effectiveness. The Company’s overall financial performance is a significant consideration in establishing total compensation for Named Executive Officers. The Compensation Committee believes that at the executive officer level, a greater proportion of total compensation should consist of variable, performance-based components, such as bonuses, which can increase or decrease to reflect changes in corporate and individual performance. Equity compensation programs are intended to reinforce management’s commitment to enhancing profitability and stockholder value.

As described in more detail below, the material elements of our current executive compensation program for NEOs include a base salary, an annual cash incentive opportunity, long-term equity incentives, retirement benefits, the ability to receive compensation on a deferred basis (with matching contributions and earnings mirroring selected investments), modest perquisites and other personal benefits and, in the case of the CEO, severance protection for certain actual or constructive terminations of employment.

Each element of the executive compensation program is designed to aid in achievement of one or more compensation objectives. The table below lists each material element of the executive compensation program and the compensation objective or objectives that it is designed to achieve.

As illustrated by the table above, base salaries, retirement benefits, perquisites and other personal benefits, non-qualified deferred compensation opportunities and severance and other termination benefits are all primarily intended to attract, retain and motivate qualified executives. These are the elements of our current executive compensation program where the value of the component in any given year is generally not variable, although certain elections made by executives impact the Company’s expense. We believe that in order to attract, retain and motivate top-caliber executives, we need to provide executives with some predictable level of remuneration that rewards the executive’s continued service. Some of the elements, such as base salaries, are generally paid out on a short-term or current basis. The other elements are generally paid out on a longer-term basis, such as upon retirement or other termination of employment. We believe that this mix of longer-term and short-term elements allows us to

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achieve our dual goals of attracting and retaining executives (with the longer-term benefits geared toward retention and the short-term awards focused on recruitment).

Our annual cash incentive opportunity is primarily intended to hold executives accountable for performance, although we also believe it aligns Named Executive Officers’ interests with those of our stockholders and helps us attract, retain and motivate executives. Our long-term equity incentives are primarily intended to align Named Executive Officers’ interests with those of our stockholders, although we also believe they help hold executives accountable for performance and help us attract, retain and motivate executives. These are the elements of our current executive compensation program that are designed to reward performance and the creation of stockholder value, and therefore the value of these benefits is dependent on performance. Each Named Executive Officer’s annual cash incentive opportunity is paid out on an annual short-term basis and is designed to reward performance for the just completed fiscal year. Long-term equity incentives are generally earned (vested) on a longer-term basis and are designed to reward performance over one or more years.

Benchmarking and Compensation Consultants

The individual elements of the compensation program are selected to create a total compensation package for each Named Executive Officer that is intended to achieve our compensation objectives and provide competitive compensation opportunities. The Compensation Committee evaluates the Company’s total compensation package in light of compensation data from the competitive marketplace in general, and our industry in particular, to ensure that the Company’s executive compensation program as a whole is within the broad middle range of comparative pay for similar positions in the industry and similar sized companies.

The Compensation Committee does not target a specific position in the range of comparative data for each individual or for each component of compensation. Individual compensation for each Named Executive Officer is established by considering the comparative data and other relevant factors such as level of responsibility, prior experience and the Compensation Committee’s subjective judgment as to the individual’s contribution and potential.

When deemed appropriate by management or the Compensation Committee, independent compensation and benefits consultants are retained to assist in evaluating the Company’s executive compensation programs. The use of compensation consultants also provides additional insight and assurance that the Company’s compensation programs are reasonable and appropriate to the Company’s objectives.

During fiscal year 2008, Mercer Consulting (“Mercer”), an independent compensation consultant, was retained with the endorsement of the Compensation Committee to assist in developing a long-term incentive compensation program for executive officers in order to encourage business growth and aid in retention of the executives. Specifically, Mercer assisted in reviewing and identifying our peer group companies, obtaining and evaluating current executive compensation data for these peer group companies and making recommendations to the Compensation Committee in light of the compensation data for our peer group companies. This compensation review was based primarily on general survey data and a peer group of eleven companies chosen after considering the Company’s revenues, assets, and market capitalization. The survey data consisted of semiconductor analog device companies with operations in California. The peer group of eleven companies consisted of the following companies: Linear Technology, Intersil Corporation, Amis Holdings, Silicon Laboratories, PMC-Sierra, Microsemi Corporation, TriQuint Semiconductor, Standard Microsystems, Micrel Inc, Cirrus Logic, and Power Integrations. A long-term incentive plan, discussed below, developed with Mercer’s assistance was implemented by the Committee during fiscal year 2008 .

Mercer also was retained in fiscal year 2008 to assist in the preparation of executive stock ownership guidelines, which were approved by the Compensation Committee in fiscal year 2009. Finally, Mercer was retained to advise the Compensation Committee on whether any of the performance-based stock options granted to Mr. Maheswaran in connection with his hire by the Company vested in fiscal year 2008 in accordance with the terms of Mr. Maheswaran’s March 8, 2006 offer letter.

Current Executive Compensation Program Elements

None of our Named Executive Officers is employed pursuant to an employment agreement. All are at will employees. However, Mr. Maheswaran’s offer letter provides for severance benefits in certain situations, as described below. The following section describes the principal components of the Company’s executive compensation program for fiscal 2008.

Base Salaries

Initial base salaries were set forth in offer letters to the Named Executive Officers. From time to time, the Compensation Committee reviews the base salary level for NEOs in light of the individual’s scope of responsibilities, years of experience, past and expected future contributions to the Company’s success and other elements of the compensation package. The Compensation Committee also considers industry and peer group comparisons. Salaries are benchmarked against median salaries for similarly situated executives of our peer group companies.

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The Compensation Committee reviewed the base salary level for Named Executive Officers then employed in the second quarter of fiscal year 2008, taking into consideration various factors, including competitive salary survey data and tally sheets of all elements of each individual’s compensation package. The Compensation Committee determined to increase the base salaries of Mr. Pohlman and Mr. Wilson from $205,000 to $225,000, an approximately 9.75% percent increase. The increases were made in conjunction with their promotions to Senior Vice President. The base salaries of the remaining NEOs were not increased during fiscal year 2008. Mr. Maheswaran’s base salary was not increased in fiscal year 2008 because fiscal year 2008 was Mr. Maheswaran’s first full fiscal year of employment with the Company. Similarly, Mr. Chukwu’s base salary was not increased in fiscal year 2008 as his employment had just commenced with the Company at the end of fiscal year 2007 (on November 20, 2006). Mr. Kim’s base salary was not increased in fiscal year 2008 because he had just been promoted to the Vice President, Worldwide Sales and Marketing position at the end of fiscal year 2007 and was given a base salary increase in 2007 in connection with this promotion.

In addition, for fiscal year 2009, the Compensation Committee considered the base salaries of the Named Executive Officers and determined not to increase them. However, during fiscal year 2008, the executives and certain senior managers, including all of the Named Executive Officers, received an annual automobile allowance of $7,650, which included an allowance for maintenance and insurance, and were reimbursed for business and non-business gasoline expenses. In lieu of receiving the automobile allowance and reimbursement of gasoline expenses for non-business purposes going forward, the annual base salary of each Named Executive Officer was increased by $10,050. The increase in base salary and discontinuance of the automobile allowance and reimbursement of non-business gasoline expenses became effective on March 3, 2008.

Annual Cash Incentive Award

On June 6, 2007, the Compensation Committee approved an amended and restated version of the Semtech Corporation Bonus Plan (the “Bonus Plan”) effective for fiscal year 2008. The Plan provides participants, including the Named Executive Officers, an opportunity to earn an annual cash incentive award based on the performance of the Company, as measured by year-over-year improvement in operating income and the performance of the individual participant during the fiscal year. Each participant is assigned a target award for the fiscal year (expressed as a percentage of the participant’s annual base salary), and the target award is weighted 60% based on Company performance (the “organizational performance factor”) and 40% based on individual performance (the “individual performance factor”). The organizational and individual performance factors are determined as follows:

The Compensation Committee determines the Company’s operating income for purposes of the Bonus Plan calculation for each fiscal year based on the Company’s operating income as reported in the Company’s 10-K. The Compensation Committee may take into account or disregard any items or events that it determines in its discretion to be non-recurring or extraordinary and as it determines to be necessary to best reflect the operating income from ordinary business operation.

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Awards to participants may be adjusted upward or downward in the discretion of the Committee. This flexibility provides an additional means of considering the executive’s individual performance and contributions, thereby furthering our objective of holding executives accountable for performance.

Target awards for the Named Executive Officers participating in the Bonus Plan ranged from 60% of base salary to 125% of base salary for fiscal year 2008. The operating income improvement for fiscal year 2008 was 115%, after the Committee exercised its discretion to adjust operating income as reported in the Company’s 10-K to neutralize the impact of extraordinary items in each fiscal year. This resulted in an organizational performance factor of 53% for fiscal year 2008.

For fiscal year 2008, each Named Executive Officer was paid a cash incentive under the Bonus Plan. The following table shows the amounts actually paid to the NEOs and the percentage of the actual award to the NEO’s annual base salary:

The Compensation Committee awarded Mr. Maheswaran a cash incentive greater than his target to reward him for his outstanding performance in fiscal year 2008. Specifically, the Compensation Committee based the award to Mr. Maheswaran on the following factors for fiscal year 2008:

For fiscal year 2009, the cash incentive which Mr. Maheswaran may receive will be based on meeting the goals established for operating income growth, on achievements in revenue, earnings per share and gross margin growth, on the financial performance of Semtech relative to a peer group of companies and on the Compensation Committee’s evaluation of the effectiveness and quality of leadership.

The Compensation Committee awarded Mr. Chukwu a cash incentive at his target level to reward him for his outstanding performance during fiscal year 2008 in completing the Company’s restatement of the Company’s consolidated financial statements and related disclosures for the three years ended January 29, 2006 and selected consolidated financial data for the five years ended January 29, 2006 and for his leadership in managing the Company’s finance department. In addition, the Compensation Committee granted Mr. Chukwu a special $50,000 cash bonus in April 2007 in immediate recognition of his efforts related to completion of the restated financial statements. The Compensation Committee awarded Mr. Pohlman a cash incentive at his target to reward him for his outstanding performance in achieving record revenue in his business unit. The

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Compensation Committee awarded Mr. Wilson an amount that was less than his target level because of less than expected performance in his business unit. The Compensation Committee awarded Mr. Kim a cash incentive at his target level to reward him for outstanding performance in driving record revenue for fiscal year 2008.

Long-Term Equity Incentive Awards

The Company operates on the general premise that the Named Executive Officers’ long-term compensation should be directly linked to the value provided to our stockholders. Therefore, 100% of the Named Executive Officers’ long-term compensation is currently awarded in the form of equity instruments that are in or valued by reference to our stock. Prior to fiscal year 2008, for at least the last decade, the Company made annual equity incentive grants to employees solely in the form of stock options, with the exception of some restricted stock awards to senior executives made as an inducement to join the Company. In connection with the long-term equity incentive program for fiscal year 2008, the Compensation Committee decided to make awards that included stock options, restricted stock awards and performance-based restricted stock units. The Compensation Committee added restricted stock awards and performance-based restricted stock units (and not solely stock options) in order to attract, retain and motivate qualified executives and, with respect to performance-based restricted stock units which vest upon achievement of certain net revenue and operating income improvement in an approximately three year period, to reward executives for their performance.

The stock options awarded to the Named Executive Officers in fiscal year 2008 have six-year terms and vest in three approximately equal annual installments beginning one year after the date of the award. The restricted stock awarded to the Named Executive Officers in fiscal year 2008 vests in three approximately equal annual installments beginning one year after the date of the award. The performance-based restricted stock units awarded to the Named Executive Officers in fiscal year 2008 will vest only upon achievement of certain goals related to cumulative net revenue and cumulative operating income over a 2.75-year performance period ending with fiscal year 2010. The performance-based restricted stock units are intended to reward the Named Executive Officers for increasing the Company’s net revenue and operating income performance over a period of 2.75 years. A 2.75 year review period was selected because the awards were issued in the second quarter of fiscal year 2008. The number of performance-based restricted stock units that vest could range from 0% to 200% of the award, if the performance goals are surpassed by a specified margin. One half of any performance-base restricted stock units so vested will be payable in an equal number of shares of the Company’s common stock; the other half will be payable in cash based on the closing price of the Company’s common stock on the last day of the performance period. Each award is subject to the terms and conditions of the 1998 Plan and the applicable Form of Employee Stock Option, Restricted Stock or Performance Unit Award Certificate, which are attached as Exhibits 10.2 through 10.4 of the Company’s Current Report on Form 8-K filed on June 12, 2007.

The number of shares of stock subject to the equity awards is intended to create a meaningful opportunity for stock ownership in light of the Named Executive Officer’s current position with the Company, the size of comparable awards to comparable executives at our peer companies, the individual’s personal performance in recent periods, and the individual’s potential for increased responsibility and promotion over the award term. In addition, the Committee also takes into account the number of unvested equity awards held by the NEO in order to maintain an appropriate level of equity incentive for that individual. However, the Committee does not adhere to any specific guidelines as to the relative equity award holdings of the Company’s Named Executive Officers.

The Compensation Committee determined to issue these long-term equity incentive awards to the Named Executive Officers in fiscal year 2008 based on its desire to target long-term incentive opportunities to the 75 ^th percentile of companies in the survey data presented to the Compensation Committee by Mercer. The Compensation Committee felt that targeting this percentile in terms of long-term equity awards to executives was necessary to appropriately align the interests of executives with those of stockholders and to provide total compensation opportunities that were in the range of the medians of our peer group so as to appropriately attract, motivate and retain executives.

For fiscal year 2008, the Committee awarded the Named Executive Officers the equity grants that are identified in the “Grants of Plan-Based Awards – Fiscal Year 2008” table contained in the Executive Compensation section that follows this report.

Retirement Benefits

The Company makes retirement benefits available to the Named Executive Officers under the terms of a tax-qualified 401(k) plan. In fiscal 2008, the Company made a discretionary matching contribution on behalf of each participant equal to 65% of the first 5% of compensation contributed to the plan by the participant. These Company contributions function as a retention incentive as they vest ratably over the first three years of service (as determined under the plan) with the Company and any Company contributions made after the third year of service are immediately vested. The Named Executive Officers who elect to participate in the plan do so on substantially the same terms as our other participating employees.

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Non-Qualified Deferred Compensation Opportunities

As a means of providing a retention incentive to executives and other key employees, the Company maintains the Executive Compensation Plan, a non-qualified deferred compensation plan. Under the plan, executives selected by the Compensation Committee, including the Named Executive Officers, may defer up to 100% of their base salary, as defined by the plan. As currently implemented, the Company matches, on a dollar for dollar basis, up to the first 20% of employee contributions for the CEO and CFO, up to the first 15% for participants at the Vice President level; and up to the first 10% for other participants.

The plan also permits the Company to make other contributions on a discretionary basis. No discretionary contributions were made for Named Executive Officers during fiscal year 2008. Amounts deferred by participants are immediately vested. Company matching contributions are credited each pay period. Each Company contribution vests separately in equal annual installments over four years beginning one year after the contribution is made.

The Company believes that providing the Named Executive Officers with these deferred compensation opportunities is a cost-effective way to permit officers to receive the tax benefits associated with delaying the income tax event on the compensation deferred, even though the related deduction for the Company is also deferred. The Company believes that making a matching contribution to the plan, which is subject to a vesting schedule, is a cost-effective way to provide an additional retirement benefit to the Named Executive Officers and to encourage executive retention. With respect to cost, the Company has purchased whole life insurance on the lives of certain current and former deferred compensation plan participants. This company-owned life insurance is intended to cover a majority of the accrued liability for the deferred compensation plan. See Note 13 to the financial statements included in our FY2008 Form 10-K.

Perquisites and Other Personal Benefits

For fiscal year 2008, the Company provided modest perquisites to the Named Executive Officers, including a monthly car allowance, reimbursement for gasoline expenses, and cellular telephones and/or other communication devices that may also be used for non-business purposes. Some NEOs are provided enhanced vacation benefits in addition to the paid vacation based on the schedule applicable to employees generally. In addition, to induce Mr. Maheswaran and Mr. Chukwu to take their respective positions with the Company (which would require relocation to the Company’s corporate office in Camarillo, California) the Company offered both NEOs certain relocation benefits. Both Messrs. Maheswaran and Chukwu received relocation benefits in fiscal year 2008. We do not establish the value of each Named Executive Officer’s perquisites and personal benefits in a vacuum. Rather, we view the value of these benefits as another component of annual compensation that is merely paid in a different form. When determining each Named Executive Officer’s base salary and other compensation, we take the value of the officer’s perquisites and personal benefits into consideration.

As noted in the discussion concerning Base Salaries, the monthly automobile allowance and reimbursement for non-business gasoline expenses has been discontinued in fiscal year 2009, effective March 3, 2008.

Severance and Other Benefits Upon Termination of Employment or Change in Control

The Company believes that severance and other post-termination benefits can play a valuable role in attracting and retaining key executive officers. Accordingly, the Company provides certain of these protections to Mr. Maheswaran, pursuant to his offer letter, as described in more detail below. Our other Named Executive Officers are not currently covered by any severance arrangement. The Compensation Committee evaluates the level of severance benefits, if any, to be provided to a Named Executive Officer on a case-by-case basis. The Company’s practice is to require a release of claims in exchange for payment of severance benefits.

The Company has determined that providing Mr. Maheswaran with severance protections in such circumstances is appropriate in light of his position within the Company and as part of his overall compensation package. In the event the employment of Mr. Maheswaran is terminated for other than death, disability or “cause” or if he terminates the employment for “good reason”, as those terms are defined in his offer letter, he will be entitled to 12 months’ salary continuation payments and continued welfare plan coverage, and accelerated vesting of 25% of the equity awards granted to him in connection with the commencement of his employment. These severance benefits, which are described in more detail below under “Potential Payments Upon Termination or Change in Control”, are contingent upon Mr. Maheswaran’s execution of a release agreement, the form of which is attached to the offer letter, and are in consideration of his agreement to comply with the restrictive covenant contained in the offer letter regarding employment with or consultation for the Company’s competitors.

The occurrence, or potential occurrence, of a change in control transaction may create uncertainty regarding the continued employment of Mr. Maheswaran because many change in control transactions result in significant organizational changes, particularly at the Chief Executive Officer level. In order to encourage Mr. Maheswaran to remain employed with the Company during a critical time, we provide Mr. Maheswaran with certain enhanced severance benefits if his employment is terminated for

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other than death, disability or “cause” or if he voluntarily terminates for “good reason” within twelve (12) months following a “change in control”, as those terms are defined in his offer letter. In the event the employment of Mr. Maheswaran is terminated under the circumstances described above, he will be entitled to cash severance benefits equal to two times his annual base salary, two times his annual target bonus, a pro-rated bonus for the fiscal year of the termination, up to 24 months’ continued welfare plan coverage (or cash equivalent), and accelerated vesting of the all equity awards granted to him in connection with the commencement of his employment. These change in control severance benefits, which are described in more detail below under “Potential Payments Upon Termination or Change in Control”, are contingent upon Mr. Maheswaran’s execution of a release.

In addition to the change in control severance benefits described in the preceding paragraph, Mr. Maheswaran will be reimbursed for the full amount of any excise taxes imposed on his severance payments and any other payments under Section 4999 of the Internal Revenue Code (“Section 4999”). We provide Mr. Maheswaran with a “gross-up” for any parachute payment excise taxes that may be imposed because we have determined the appropriate level of severance protections for Mr. Maheswaran without factoring in the adverse tax effects that may result under Section 4999. The excise tax gross-up is intended to make Mr. Maheswaran whole for any adverse tax consequences he may become subject to under Section 4999, and to preserve the level of severance protections that we have determined to be appropriate.

We generally do not believe that any Named Executive Officer should be entitled to severance benefits merely because a change in control transaction occurs. Other than the arrangements with Mr. Maheswaran described above, we have no individual change in control severance arrangements in place with our NEOs. However, under the terms of our equity incentive plans, if there is a change in control of the Company, then most unvested stock options will become fully vested if the employee is terminated by the Company without “cause” or by the employee for “good reason” within 12 months following a “change in control”, as those terms are defined in the applicable stock incentive plans. In addition, our Executive Compensation Plan (the deferred compensation plan in which the NEOs, including Mr. Maheswaran, participate) provides for vesting of account balances upon involuntary termination within 18 months of a change in control (as defined by the plan). See Note 2 to the Non-Qualified Deferred Compensation table.

See the “Potential Payments Upon Termination or Change in Control” section below for a description of the potential payments that may be made to the Named Executive Officers in connection with their termination of employment or a change in control.

Executive Stock Ownership Guidelines

Although not an element of executive compensation for fiscal year 2008, on March 14, 2008, the Compensation Committee approved executive stock ownership guidelines which take effect in fiscal year 2009. Specifically, the Compensation Committee approved guidelines pursuant to which certain executives, including all of the Named Executive Officers, are (within the next five years) to acquire a level of ownership of stock that has a value equal to at least one times the executive’s base salary. The Compensation Committee believes that the guidelines further its goal of aligning executives’ interests with those of stockholders by rewarding executives for long-term performance. This is achieved by a grant of restricted stock units to certain executives that vest on the five year anniversary of the grant date, subject to the executive’s continued employment through that date. These restricted stock units are generally payable six months after the executive’s employment with the Company terminates.

In connection with adopting these guidelines, on March 14, 2008, the Compensation Committee granted restricted stock unit awards to certain executives, including the Named Executive Officers, and may make future restricted stock unit awards in its discretion. The awards to the Named Executive Officers are as follows:

Each restricted stock unit represents a contingent right to receive one share of Company common stock or, in the Committee’s discretion, cash of equivalent value at the time of payment.

Equity Grant Policy

In April 2007, the Compensation Committee approved a policy regarding approval of equity awards that sets forth our processes, procedures and controls in connection with grants under our equity-based incentive plans. The policy detailed procedures for the

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approval of equity awards, providing that annual equity awards be approved at the regularly scheduled Compensation Committee meeting that occurs in the third quarter of each fiscal year and that new-hire awards will be approved at the next regularly scheduled Compensation Committee meeting that occurs more than two weeks after commencement of employment.

The Compensation Committee has further revised the policy to allow the Committee to approve annual awards to executives (including awards pursuant to the executive stock ownership guidelines and long-term equity incentive program) during the regularly scheduled first quarter Compensation Committee meetings of the fiscal year. This policy better aligns the approval of equity awards to the Compensation Committee’s approval of the Company’s annual long-term incentive program performance goals (which are based on fiscal year revenue and operating income) and review of executive base salary (which is used in determining awards under the executive stock ownership guidelines), as both topics are reviewed during the regular first quarter meeting.

The revised policy further provides that annual awards to non-executive employees may only be approved during the regularly scheduled third quarter Compensation Committee meeting of the fiscal year and all other equity awards to executives and other employees (including new hire, promotion, performance and retention awards) may be approved at regularly scheduled quarterly Compensation Committee meetings and once the dates are set, they may not be changed for equity award purposes without full Board approval. The policy prohibits approval of equity awards by written consent. The revised procedures also reflect the Board’s October 2006 determination that the exercise price of stock options will be set based on the closing price of a share of our common stock on the date of Compensation Committee approval (or the next succeeding trading day if the date of Compensation Committee approval is not a trading day), a change from the Company’s past convention of using the closing price on the day preceding the grant. No authority to grant equity awards is delegated to management. A key goal of the procedures is to set equity award grant dates sufficiently in advance, and fix which grants (annual or new-hire/promotion) will be considered at each meeting, to mitigate concerns that grants could be timed based on the release of positive or negative earnings reports or other material information.

Section 162(m) Considerations

For federal and most state income tax purposes, no more than $1 million of compensation paid to the chief executive officer and the certain other executive officers may be deducted in a taxable year unless the compensation is commission or performance based, as those terms are defined by tax regulations. Stock options awarded under the Company’s stock option plans are intended to meet the requirements for deductible performance-based compensation. However, the Company’s goal of preserving the deductibility of compensation is secondary in importance to achievement of its compensation objectives. Thus, the Compensation Committee retains discretion to grant time-based restricted stock and other forms of non-performance-based compensation when it determines their importance to meeting the Company’s compensation objectives outweighs the potential loss of a tax deduction to the Company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this proxy statement. Based upon this review and our discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement, portions of which are incorporated by reference in the Company’s Annual Report on Form 10-K for fiscal year 2008.

Respectfully submitted by THE COMPENSATION COMMITTEE

This Compensation Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended 9 (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically incorporates the Compensation Committee Report by reference therein.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee members whose names appear on the Compensation Committee Report above currently comprise the Compensation Committee. All three Directors served on the Committee during all of fiscal 2008. No member of our Compensation Committee during fiscal year 2008 has ever been an executive officer or employee of the Company. None of our executive officers now serve, or served during fiscal year 2008, as a director or a member of a compensation committee (or other committee performing an equivalent function) of another entity that had one of its executive officers serving on our Board or Compensation Committee during fiscal 2008 or currently.

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Restricted Stock Awards . Awards of restricted stock are valued as of the grant date and amortized over the vesting period. Only Mr. Maheswaran received a grant of restricted stock during fiscal year 2007. The grant was related to the beginning of his employment as CEO.

Performance Stock Units . Awards of performance stock units are valued as of the grant date and amortized over the vesting period. However, because these performance stock units are to be settled half in cash and half in stock, liability accounting rules apply to the portion to be cash settled. The rules require that the initial valuation be remeasured at each reporting period until settlement and the pro-rata vested portion be recognized as a liability. The remeasurement takes into consideration the Company’s assessment of the likelihood of meeting the performance measures and the Company’s stock price at the end of the reporting period. The amount shown in the table above is the expense recognized in fiscal year 2008 after making the required valuation adjustment.

Additional Information . For a description of the stock based awards made in fiscal year 2008, see “Description of Plan Based Awards” below. See note 7 to the “Grants of Plan Based Awards – Fiscal Year 2008” table below for the grant date values of the stock awards made in fiscal year 2008 and an explanation of the Company’s basis for calculating the fair market value of the restricted stock awards and performance stock units at the grant date. For the award agreement for the restricted stock granted to Mr. Maheswaran in fiscal year 2007, see Exhibit 10.1 to Company’s Current Report on Form 8-K filed April 5, 2006.

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