PMC Sierra (PMCS) DEF 14A Definitive proxy

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PMC-SIERRA, INC.

3975 Freedom Circle
Santa Clara, California 95054
(408) 239-8000

Notice of Annual Meeting of Stockholders

TIME	May 25, 2005 at 9:00 a.m.
PLACE	Westin Santa Clara 5101 Great America Parkway Santa Clara, California 95054
ITEMS OF BUSINESS	(1) To elect directors to serve until PMC’s 2006 Annual Meeting of Stockholders. The nominees for the Board of Directors are Robert Bailey, Richard Belluzzo, James Diller, Jonathan Judge, William Kurtz, Frank Marshall and Lewis Wilks.
	(2) To ratify the appointment of Deloitte & Touche LLP as PMC’s independent auditors.
	(3) To consider such other business as may properly come before the annual meeting.
RECORD DATE	You are entitled to vote if you were a stockholder at the close of business on March 31, 2005.
ANNUAL MEETING ADMISSION	All PMC stockholders are cordially invited to attend the annual meeting in person. The annual meeting will begin promptly at 9:00 a.m.
VOTING BY PROXY	Please submit a proxy as soon as possible so that your shares can be voted at the annual meeting in accordance with your instructions. For specific instructions on voting, please refer to the instructions on the proxy card.

/s/ Robert Bailey

President and Chief Executive Officer

This proxy statement and accompanying proxy card are being distributed on or about April 22, 2005.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

PMC currently has eight directors.  Alexandre Balkanski will not stand for re-election as a director.  Dr. Balkanski, who has served on the Company’s Board of Directors since August 1993, will be focusing his attention on his responsibilities as a General Partner at Benchmark Capital, a venture capital fund management company.  Immediately after the 2005 Annual Meeting, PMC will have a Board of seven directors.  Unless otherwise instructed, the proxy holders will vote the proxies received by them for the seven nominees of the Board named below.  If any nominee is unable or declines to serve as a director at the time of the annual meeting, the proxies will be voted for any nominee designated by the present Board to fill the vacancy.  PMC does not expect that any nominee will be unable or will decline to serve as a director.  The term of office of each person elected as a director will continue until the next annual meeting of stockholders or until the director’s successor has been elected.  The table below sets forth information about each nominee as of March 31, 2005.

Recommendation

PMC’s Board of Directors recommends a vote FOR the nominees listed below:

Name of Nominee	Age	Principal Occupation	Director Since
Robert Bailey	47	President and Chief Executive Officer, PMC	1996
Richard Belluzzo	51	Chief Executive Officer, Quantum Corporation	2003
James Diller, Sr.	69	Retired	1983
Jonathan Judge	51	Chief Executive Officer, Paychex, Inc	2004
William Kurtz	47	Senior Vice President and Chief Financial Officer, Engenio Information Technologies, Inc.	2003
Frank Marshall	58	Private Investor and Management Consultant	1996
Lewis Wilks	51	Management Consultant	2001

Robert Bailey

Mr. Bailey has been a director of PMC since October 1996.  Mr. Bailey has served as PMC’s President and Chief Executive Officer since July 1997.  He also served as Chairman of the Board of Directors from February 2000 until February 2003, and he will serve as Chairman again after the 2005 Annual Meeting.  Mr. Bailey has served as President, Chief Executive Officer and director of PMC-Sierra, Ltd., PMC’s Canadian operating subsidiary (“LTD”) since December 1993.  Mr. Bailey was employed by AT&T-Microelectronics (now known as Agere Systems) from August 1989 to November 1993, where he served as Vice President and General Manager, and at Texas Instruments in various management positions from June 1979 to August 1989.

Richard Belluzzo

Mr. Belluzzo has been a director of PMC since June 2003.  He has served as Chief Executive Officer of Quantum Corporation, a computer storage solutions company, since September 2002.  From September 1999 to May 2002, Mr. Belluzzo held senior management positions with Microsoft Corp., most recently President and Chief Operating Officer.  From January 1998 to September 1999, Mr. Belluzzo was Chief Executive Officer of Silicon Graphics Inc.  From 1975 to January 1998, Mr. Belluzzo was with Hewlett-Packard Co., most recently as Executive Vice President of the printer business.  Mr. Belluzo is also a director of Quantum Corporation.

James Diller, Sr.

Mr. Diller, a founder of PMC, was PMC’s Chief Executive Officer from 1983 to July 1997 and President from 1983 to July 1993.  Mr. Diller has been a director of PMC since its formation in 1983.  Mr. Diller was Chairman of PMC’s Board of Directors from July 1993 until February 2000, when he became Vice Chairman.  He is also a director of Intersil Corporation, an analog semiconductor company, and Chairman of the Board of Directors of Summit Microelectronics.

Jonathan Judge

Mr. Judge has been a director since April 2004.  Since October 2004, Mr. Judge has served as the President, Chief Executive Officer of Paychex, Inc., a provider of payroll and human resource services.  Prior to joining Paychex, Mr. Judge served as President and Chief Executive Officer of Crystal Decisions, Inc. from October 2002 until the merger of Crystal Decisions with Business Objects S.A. in December 2003.  From 1976 until he joined Crystal Decisions, Mr. Judge was employed by International Business Machines Corporation, where he held senior management positions, most recently as General Manager of IBM’s personal computing division.   Mr. Judge was also a member of IBM’s Worldwide Management Committee from 1999 until 2002.  Mr. Judge is also a director of Paychex, Inc.

William Kurtz

Mr. Kurtz has been a director of PMC since April 2003.  Since March 2004, Mr. Kurtz has served as Senior Vice President and Chief Financial Officer of Engenio Information Technologies, Inc., a designer and manufacturer of high-performance modular enterprise storage systems.  From July 2001 to February 2004, Mr. Kurtz served as Chief Operating Officer and Chief Financial Officer of 3PARdata, Inc., a data storage company.  From August 1998 to June 2001, Mr. Kurtz served as Executive Vice President and Chief Financial Officer of Scient Corporation, a provider of professional services.  From July 1983 to August 1998, Mr. Kurtz served in various capacities at AT&T, including Vice President of Cost Management and Chief Financial Officer of AT&T’s Business Markets Division.  Prior to joining AT&T, he worked at Price Waterhouse, now PricewaterhouseCoopers LLP.  Mr. Kurtz is a certified public accountant.  He is also a director of Redback Networks, Inc., a broadband networking equipment company.

Frank Marshall

Mr. Marshall has been a director of PMC since April 1996.  Mr. Marshall is a private investor and management consultant to early stage high technology companies.  Mr. Marshall served as interim Chief Executive Officer of Covad Communications Group from November 2000 until July 2001.  From July 1995 to October 1997, Mr. Marshall was Vice President and General Manager, Core Products Business Unit of Cisco Systems, Inc.  From April 1992 to July 1995, Mr. Marshall was Vice President of Engineering for Cisco Systems, Inc.  He currently serves on the board of Juniper Networks Inc., a network equipment company.

Lewis Wilks

Mr. Wilks has been a director of PMC since August 2001.  Since September 2001, he has been a management consultant and advisor.  From October 2000 to September 2001, Mr. Wilks served as Executive Vice President, Internet Business Development and Chief Strategy Officer of Qwest Communications International, Inc., a telecommunications company.  From February 1998 to October 2000, Mr. Wilks served as President, Internet and Multimedia Markets of Qwest Communications and from October 1997 to February 1998, he served as President, Business Markets of Qwest Communications.  From June 1996 to September 1997, Mr. Wilks served as President of GTE Communications.

Vote Required

The seven nominees for director receiving the highest number of affirmative votes of shares shall be elected as directors.  Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum, but have no other legal effect under Delaware law.

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BOARD STRUCTURE

Board Independence

The Board has determined that all of the nominees, except Mr. Bailey, satisfy the definition of independent director as established in Nasdaq listing standards.  The Board has determined that each of the members of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee satisfies the definition of independent director as established in Nasdaq listing standards.

Meetings

During the 2004 fiscal year, the Board held six meetings.  Each director attended at least 75% of all Board and applicable Committee meetings.  Directors are encouraged to attend annual meetings of PMC stockholders.  Three directors attended the last annual meeting of stockholders.

Lead Independent Director

The Board has created the position of Lead Independent Director and has appointed Mr. Marshall to serve in this position after the 2005 Annual Meeting.  Mr. Bailey, our President and Chief Executive Officer, will become Chairman of the Board after the 2005 Annual Meeting.  In making these appointments, the Board considered its membership after the 2005 Annual Meeting, comprised of six independent directors and Mr. Bailey.  The Lead Independent Director will have the following responsibilities:

•authority to call meetings of the independent directors

•lead meetings of the independent directors in which the Chairman does not participate

•act as a liaison between the independent directors and the Chairman

•review agendas for Board meetings in consultation with the Chairman

•receive communications from stockholders in accordance with the procedures specified in this Proxy Statement for communications with the Board

•be available for consultation with stockholders to the extent determined by the independent directors

The Board believes that these responsibilities are substantially equal to the functions performed by an independent Chairman of the Board.

Audit Committee

The Audit Committee consists of Mr. Belluzzo, Mr. Judge, Mr. Kurtz (Chair), and Mr. Wilks and held eight meetings in the 2004 fiscal year.  The Board has determined that Mr. Kurtz is qualified as an “audit committee financial expert.”  The Audit Committee appoints, compensates and oversees the independent auditors.  The Audit Committee approves the independent auditor’s fees and pre-approves any audit and non-audit services to be provided by the independent auditors.  The Audit Committee also monitors the independence of the auditors.

The Audit Committee meets independently with PMC’s independent auditors and senior management to review the general scope of PMC’s accounting, financial reporting, annual audit and internal audit programs, matters relating to internal control systems and results of the annual audit.

The Audit Committee reviews and approves any proposed transactions between PMC and officers and directors or their affiliates.  The Audit Committee also constitutes PMC’s Qualified Legal Compliance Committee to review any reports from PMC’s counsel of material violations of laws.

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Compensation Committee

The Compensation Committee in fiscal 2004 consisted of Mr. Diller and Mr. Wilks and held one formal meeting and met several times informally. Mr. Judge joined the Committee in fiscal 2005.  The Compensation Committee reviews and approves PMC’s compensation policies, plans and programs, including the compensation of its executive officers and employment agreements.  The Committee also acts as administrator of PMC’s equity incentive plans and benefit programs.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee consists of Mr. Diller and Mr. Marshall.  The Committee held no meetings in the 2004 fiscal year but has met once during the first quarter of fiscal 2005.  The Nominating and Corporate Governance Committee makes recommendations to the entire Board as to the size and composition of the Board and its committees after considering many factors, including any nominees submitted by the stockholders.  The Committee is responsible for determining criteria for Board and committee membership, evaluating director compensation, and reviewing any actual or potential conflicts of interest.  The Committee is also responsible for issues of corporate governance as they apply to PMC.

Other Committees

The Board has authorized a committee, consisting of Mr. Bailey and any other director, to administer and amend any non-equity benefit plan of PMC or any PMC subsidiary, and to grant stock options to purchase up to 25,000 shares of PMC’s common stock to individuals not subject to Section 16 of the Exchange Act.  The Board has authorized a committee, consisting of Mr. Bailey and any two directors, to approve capital expenditures.

Consideration of Director Nominees

The Nominating and Corporate Governance Committee selects nominees for annual election by the stockholders by first evaluating the Board which would result from re-electing directors willing to continue serving on the Board.  If the Committee requires additional candidates, the directors and senior management suggest potential nominees.  PMC has also paid third party search firms to identify, screen and assist in recruiting potential nominees based on criteria provided by PMC.  The Committee, other Board members and senior management then meet with candidates so the Committee has broad input in evaluating the candidate.  The Committee also confirms the candidate’s independence under SEC and Nasdaq rules.  This process may also occur between annual meetings if the Committee determines that PMC would benefit from additional directors.

The Committee believes that in addition to factors such as the candidate’s integrity, judgment and reputation, PMC’s Board benefits from directors who share the following qualities or skills.  The Committee has no specific, minimum qualifications that it believes must be met for a position on PMC’s Board other than the financial expertise of potential Audit Committee members and whether at least one Audit Committee member qualifies as an “audit committee financial expert.”

•Independence from management (not applicable to PMC’s CEO).

•Extensive business and industry experience, particularly in the technology sector.

•Experience as an executive officer of a publicly traded corporation.

•Experience as a director of a publicly traded corporation.

•Knowledge about the industries in which PMC’s end user customers participate, or the markets which those customers serve.

•Absence of potential conflicts of interest.

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•Available time for service as a PMC director in light of the candidate’s other business and professional commitments.

The Committee will consider, through the process described above, director candidates recommended by stockholders.  To recommend a candidate, stockholders should submit to PMC’s CEO, who will provide it to the Committee, an analysis of the candidate’s independence and the factors listed above, and a description of any relationship between the stockholder and candidate.  To be considered for the 2006 annual meeting, suggestions meeting these criteria must be received before December 23, 2005.

Communications with the Board

Any stockholder who desires to contact our Lead Independent Director or the other members of our Board may do so by writing to: Board of Directors, c/o Corporate Secretary, PMC-Sierra, Inc., 3975 Freedom Circle, Santa Clara, California 95054.  Communications received in writing are reviewed internally by management and then distributed to the Lead Independent Director or the other members of the Board as appropriate, depending on the facts and circumstances outlined in the communication received.

Code of Business Conduct and Ethics

PMC has adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our Chief Executive Officer, our Chief Financial Officer, and our principal accounting officers.  PMC undertakes to provide any person, without charge, a copy of the Code of Business Conduct and Ethics upon written request to PMC’s Corporate Secretary.

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DIRECTOR COMPENSATION

In 2004, PMC engaged a compensation consultant to recommend changes in PMC’s Board compensation after surveying compensation practices of both comparable companies and a broader range of technology companies.  In February and March 2005, the Compensation Committee reviewed PMC’s compensation of non-employee directors and recommended to the Board the changes shown below.  The Board approved these changes in April 2005.  Directors employed by PMC (currently only Mr. Bailey) do not receive any compensation for their Board activities.

Compensation Item	Before 2005 Annual Meeting			After 2005 Annual Meeting
Annual Director Compensation	$		16,000	$	20,000	(1)
Per Meeting Payment	$		1,000	$	1,000
Initial Stock Option	40,000 shares			40,000 shares		(2)
Annual Stock Option		40,000 shares		40,000 shares		(3)
Annual Compensation for Audit Committee Chair	5,000 shares			$	15,000	(1)
Annual Compensation for Lead Independent Director or Independent Board Chair	5,000 shares			$	15,000	(1)
Annual Compensation for each committee member except Audit Committee Chair	None			$	3,000	(1)

(1)Directors may elect annually not to receive the cash payment and instead to receive a fully vested option, exercisable at fair market value on the date of grant, to purchase a number of shares equal to three times the cash payment, divided by the per share market value on the date of grant.

(2)Directors receive a stock option grant for 40,000 shares upon joining the Board.  This stock option vests 1/24 per month over two years and has an exercise price equal to the fair market value of the stock on the date of grant.

(3)Other than in the calendar year a director is first appointed to the Board, upon reelection to the Board at each annual meeting, each Board member receives four stock options for 10,000 shares – one on reelection and then one every 90 days thereafter.  These stock options have an exercise price equal to the fair market value of the stock on the date of grant.  The options are unvested on their grant date and vest evenly every month until they are fully vested two years after the Board member’s reelection to the Board.

PMC has agreed to indemnify each director and officer against certain claims and expenses for which the director might be held liable in connection with past or future services to PMC and its subsidiaries.  PMC maintains insurance policies insuring its officers and directors against such liabilities.

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EXECUTIVE OFFICERS

The following information about our executive officers is as of March 31, 2005.

Name of Officer	Age	Position
Robert Bailey	47	President, Chief Executive Officer and Director
Gregory Aasen	49	Vice President and General Manager
Thomas Brigiotta	42	Vice President, Worldwide Sales
Colin Harris	47	Vice President, Worldwide Operations
Alan Krock	44	Vice President and Chief Financial Officer
Steffen Perna	47	Vice President and General Manager
Tom Sun	42	Vice President, Asia-Pacific Operations

Mr. Bailey has served as PMC’s President and Chief Executive Officer since July 1997.  He also served as Chairman of the Board of Directors from February 2000 until February 2003, and he will serve as Chairman again after the 2005 Annual Meeting.  Mr. Bailey has been a director of PMC since October 1996.  Mr. Bailey has served as President, Chief Executive Officer and director of PMC-Sierra, Ltd., PMC’s Canadian operating subsidiary (“LTD”) since December 1993.  Mr. Bailey was employed by AT&T-Microelectronics (now known as Agere Systems) from August 1989 to November 1993, where he served as Vice President and General Manager, and at Texas Instruments in various management positions from June 1979 to August 1989.

Mr. Aasen has served as the Vice President and General Manager of PMC’s Communication Products Division since June 2004.  Previously, Mr. Aasen served as Chief Operating Officer from February 1997 to May 2004 and Chief Technology Officer from January 2003 to May 2004.  Mr. Aasen is a founder of LTD and served as its Chief Operating Officer and Secretary since its formation in June 1992. Before joining LTD, Mr. Aasen was a General Manager of the Pacific Microelectronics Center, a division of MPR Teltech, Ltd.  He is also a member of the Board of Directors of Convedia Corporation and Sierra Wireless, a wireless communication solutions company.

Mr. Brigiotta has served as the Vice President of Worldwide Sales at PMC since September 2004.  Prior to joining PMC, Mr. Brigiotta was employed by Cadence Design Systems from June 1987 to January 2004, most recently as the Vice President, Worldwide Service Sales and Business Development.

Mr. Harris has served as Vice President of Worldwide Operations at PMC since July 2004.  Previously, Mr. Harris was PMC’s Vice President of IC Technology from June 2001 to July 2003.  Mr. Harris joined PMC as Operations Manager in 1989. In 1992, he was promoted to director of Operations and subsequently director of Quality Assurance. Before joining PMC, Mr. Harris was employed by Mitel Semiconductor.

Mr. Krock joined PMC in November 2002 as Vice President and Chief Financial Officer.  He was Vice President and Chief Financial Officer of Integrated Device Technology, Inc. from January 1998 until November 2002, a Vice President from July 1997 until January 1998 and its Corporate Controller from February 1996 to July 1997.  Previously Mr. Krock held management positions at Rohm Corporation and Price Waterhouse, now PricewaterhouseCoopers LLP.

Mr. Perna has served as the Vice President and General Manager of PMC’s Microprocessor Products Division since June 2004.  Previously, he served as the Vice President and General Manager of the Communication Products Division from September 1998 to June 2004.  In February 1995, he joined PMC as Vice President of Marketing and Business Development. Prior to joining PMC, Mr. Perna was employed for 15 years at Texas Instruments where he held positions in operations, engineering and marketing.

Mr. Sun has served as Vice President, Asia-Pacific Operations at PMC since July 2002.  Mr. Sun joined PMC in 1995 as a product line manager and was promoted to director of marketing in 1999.  Mr. Sun was appointed Vice President and General Manager in 2001.  Prior to joining PMC, Mr. Sun was the manager for the Image Processing Group at MPR Teltech.

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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of December 26, 2004, concerning:

•beneficial ownership of PMC’s common stock by all persons known to PMC to be the beneficial owners of 5% or more of PMC’s common stock;

•beneficial ownership of PMC’s common stock by all directors, nominees and Named Executive Officers; and

•beneficial ownership of PMC’s common stock by all directors and executive officers as a group.

Under the rules of the U.S. Securities and Exchange Commission, “beneficial ownership” includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares which the individual has the right to acquire as of February 24, 2005 (60 days after December 26, 2004), through the exercise of any stock option or other right.  Unless otherwise indicated, each person or entity has sole investment and voting power, or shares such powers with his or her spouse, with respect to the shares set forth in the following table.  This information is not indicative of beneficial ownership for any other purpose.  Unless otherwise indicated, the address of each of the individuals named below is: c/o PMC-Sierra, Inc., 3975 Freedom Circle, Santa Clara, California 95054.

Name	Number of Shares	Approximate Percentage Ownership
FMR Corp.(1)	26,715,941	14.8	%
Massachusetts Financial Services Company(2)	14,906,290	8.3	%
Capital Group International, Inc(3)	12,837,890	7.1	%
Robert Bailey(4)	3,339,342	1.8	%
James Diller, Sr.(5)	3,022,884	1.7	%
Gregory Aasen(6)	2,066,005	1.1	%
Steffen Perna(7)	920,033		*
Frank Marshall(8)	405,051		*
Colin Harris(9)	323,928		*
Alexandre Balkanski(10)	313,980		*
Alan Krock(11)	259,340		*
Lewis Wilks(12)	146,098		*
William Kurtz(13)	49,523		*
Richard Belluzzo(14)	41,606		*
Jonathan Judge(15)	15,000		*
All current directors and executive officers as a group (14 persons)(16)	11,031,860	5.9	%

*Less than 1%.

(1)Based solely on information reported by FMR Corp. (“FMR”) on a Schedule 13G/A filed with the SEC on February 14, 2005. FMR has sole investment power with respect to all of such shares, sole voting authority with respect to 2,624,625 shares, shared voting power over none of the shares and shared investment power over none of the shares. The address of FMR is 82 Devonshire Street, Boston, Massachusetts 02109. Includes 24,026,516 shares beneficially owned by Fidelity Management & Research Company, an affiliate of FMR.

(2)Based solely on information reported by Massachusetts Financial Services Company (“MFS”) on a Schedule 13G filed with the SEC on February 8, 2005. MFS has sole investment power with respect to all of such shares, sole voting authority with respect to 14,498,750 shares, shared voting power over none of the shares and shared investment power over none of the shares. The address of MFS is 500 Boylston Street, Boston, MA 02116.

(3)Based solely on information reported by Capital Group International, Inc. (“CGII”) on a Schedule 13G/A filed with the SEC on February 14, 2005. CGII does not have investment power or voting power over any of these shares and disclaims beneficial ownership of the shares. CGII is the parent holding company of a group of investment management companies that, in the aggregate, hold sole investment power with respect to all of such shares, sole voting authority with respect to 10,605,760 shares, share voting power over none of the shares and shared investment power over none of the shares. The address of CGII is 11100 Santa Monica Blvd., Los Angeles, CA 90025.

(4)Includes 6,540 shares held jointly by Robert L. Bailey and Merry L. Bailey. Includes 2,140,309 shares subject to options exercisable within 60 days after December 26, 2004, 2,906 shares issuable pursuant to PMC’s 1991 Employee Stock

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Purchase Plan within 60 days after December 26, 2004 and 7,780 shares held by Mr. Bailey’s two children. Includes 1,181,807 shares issuable upon redemption of LTD Special Shares.

(5)Includes 849,180 shares held jointly by James Diller and June P. Diller, Trustees of the James Diller and June P. Diller Trust UA 07/20/77, includes 1,088,332 shares subject to options exercisable within 60 days after December 26, 2004, 542,686 shares held by the James Diller Annuity Trust (GRAT) and 542,686 shares held by his wife’s separate annuity trust, the June Diller Annuity Trust (GRAT). Voting and investment control of the shares held by the James Diller and June P. Diller Trust UA 07/20/77 is held by James Diller and June Diller. Voting and investment control of the shares held by the James Diller Annuity Trust (GRAT) is held by James Diller. Voting and investment control of the shares held by the June Diller Annuity Trust (GRAT) is held by James Diller.

(6)Includes 1,464,009 shares subject to options exercisable within 60 days after December 26, 2004, 2,937 shares issuable pursuant to PMC’s 1991 Employee Stock Purchase Plan within 60 days after December 26, 2004, and 15,600 shares held by Mr. Aasen in trusts for his two sons. Includes 331,923 shares issuable upon redemption of LTD Special Shares, 101,534 shares issuable upon redemption of LTD Special Shares held by Mr. Aasen’s wife and 63,012 shares issuable upon redemption of LTD Special Shares held by Mr. Aasen’s two sons.

(7)Includes 908,511 shares subject to options exercisable within 60 days after December 26, 2004 and 2,081 shares issuable pursuant to PMC’s 1991 Employee Stock Purchase Plan within 60 days after December 26, 2004.

(8)Includes 242,759 shares subject to options exercisable within 60 days after December 26, 2004. Includes 123,328 shares held by Timark, L.P. Mr. Marshall is a General Partner of Timark, L.P. and disclaims beneficial ownership except to the extent of his pecuniary interest therein. Mr. Marshall has voting and investment control over the shares held by Timark, L.P.

(9)Includes 290,456 shares subject to options exercisable within 60 days after December 26, 2004 and 2,434 shares issuable pursuant to PMC’s 1991 Employee Stock Purchase Plan within 60 days after December 26, 2004. Includes 28,416 shares issuable upon redemption of LTD Special Shares held by Mr. Harris’ spouse and three children.

(10)Includes 159,992 shares held by Alexandre Balkanski and Sybilla Balkanski, Trustees of the Balkanski Family Trust 2002 UTD 12/5/02 and 153,988 shares subject to options exercisable within 60 days after December 26, 2004.

(11)Includes 254,164 shares subject to options exercisable within 60 days after December 26, 2004 and 2,864 shares issuable pursuant to PMC’s 1991 Employee Stock Purchase Plan within 60 days after December 26, 2004.

(12)Includes 142,098 shares subject to options exercisable within 60 days after December 26, 2004 and 4,000 shares held by the Three Peaks Trust.

(13)Includes 49,523 shares subject to options exercisable within 60 days after December 26, 2004.

(14)Includes 41,606 shares subject to options exercisable within 60 days after December 26, 2004.

(15)Includes 15,000 shares subject to options exercisable within 60 days after December 26, 2004.

(16)Includes 6,899,710 shares subject to options exercisable within 60 days after December 26, 2004 and 15,690 shares issuable pursuant to PMC’s 1991 Employee Stock Purchase Plan within 60 days after December 26, 2004 held by the current executive officers and directors listed above and two executive officers not listed above. Includes 1,706,692 shares issuable upon redemption of LTD Special Shares held by three executive officers listed above. See notes (4), (6) and (9) above.

9

EXECUTIVE COMPENSATION AND OTHER MATTERS

The following table provides fiscal 2004 compensation information for the Chief Executive Officer and the four other executive officers of PMC who, based on their salary and bonus compensation, were the most highly compensated in fiscal year 2004 (the “Named Executive Officers”).

Summary Compensation Table

		Annual Compensation		Long-Term Compensation(1)		All Other
Name and Principal Position	Year	Salary ($)	Bonus ($)	Options (#)(3)		Compensation ($)(4)
Robert Bailey	2004	350,000	118,000	605,112	(5)	666
President and Chief Executive	2003	350,000	0	1,630,000	(2)	666
Officer	2002	350,000	0	0		641
Alan Krock(6)	2004	225,000	48,566	202,556	(7)	50,658	(8)
Vice President and Chief Financial	2003	225,000	0	400,000		211,760	(9)
Officer	2002	25,519	0			1,315	(10)
Gregory Aasen	2004	227,788	35,938	203,323	(11)	7,559	(12)
Chief Operating Officer and Chief	2003	198,769	0	825,000	(2)	6,540	(12)
Technology Officer	2002	196,392	0	0		6,462	(12)
Colin Harris(13)	2004	188,777	29,628	150,000	(14)	7,486	(15)
Vice President, Worldwide
Operations
Steffen Perna	2004	232,982	40,703	252,556	(7)	32,388	(16)
Vice President and General Manager	2003	188,000	60,000	600,000	(2)	249
	2002	188,000	0	0		159

(1)PMC made no restricted stock awards during the period presented.

(2)Options granted in fiscal year 2003 replaced options cancelled in fiscal year 2002.

(3)All options granted in fiscal year 2004, other than as described in the other footnotes, were options granted on December 29, 2003 at an exercise price of $20.13 per share, which vest ¼ one year from the date of grant and ^1/₄₈ monthly thereafter.

(4)Includes life insurance premiums.

(5)Includes a fully vested option to purchase 5,112 shares of common stock at an exercise price of $0.01 per share, which had an aggregate fair market value of $102,905 on the grant date of December 29, 2003.

(6)Mr. Krock became an executive officer in November 2002.

(7)Includes a fully vested option to purchase 2,556 shares of common stock at an exercise price of $0.01 per share, which had an aggregate fair market value of $51,452 on the grant date of December 29, 2003.

(8)Includes $7,134 for matching contributions made by PMC to Mr. Krock’s retirement account and $43,069 for relocation expenses paid in 2004.

(9)Includes $6,762 for matching contributions made by PMC to Mr. Krock’s retirement account and $204,466 for relocation expenses incurred in 2002 but paid in 2003.

(10)Includes $1,276 for matching contributions made by PMC to Mr. Krock’s retirement account.

(11)Includes a fully vested option to purchase 3,323 shares of common stock at an exercise price of $0.01 per share, which had an aggregate fair market value of $66,892 on the grant date of December 29, 2003.

(12)Includes $7,134, $6,110 and $6,037 for matching contributions made by PMC to Mr. Aasen’s retirement plan in 2004, 2003 and 2002.

(13)Mr. Harris became an executive officer in July 2004.

(14)Includes option for 50,000 shares granted on October 20, 2004 at an exercise price of $9.00 per share, which vests ¼ one year from the date of grant and ¹/₄₈ monthly thereafter.

(15)Includes $7,134 for matching contributions made by PMC to Mr. Harris’ retirement plan.

(16)Includes $32,264 for relocation expenses.

10

Option Grants In Last Fiscal Year

The following table sets forth each stock option grant made during fiscal year 2004 to each of the Named Executive Officers.  Under the terms of PMC’s 1994 Incentive Stock Plan, the Board of Directors retains discretion, subject to plan limits, to modify the terms of outstanding options and to reprice the options.

Name	Number of Securities Underlying Options Granted		% of Total Options Granted to Employees in Fiscal Year(4)		Exercise or Base Price ($/Sh)	Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(5)
							5%($)	10%($)
Robert Bailey	600,000	(1)	8.54	%	20.13	12/29/2013	7,595,789	19,249,221
	5,112	(2)	0.07	%	0.01	12/29/2013	167,570	266,857
Alan Krock	200,000	(1)	2.85	%	20.13	12/29/2013	2,531,930	6,416,407
	2,556	(2)	0.04	%	0.01	12/29/2013	83,785	133,428
Gregory Aasen	200,000	(1)	2.85	%	20.13	12/29/2013	2,531,930	6,416,407
	3,323	(2)	0.05	%	0.01	12/29/2013	108,927	173,467
Colin Harris	100,000	(1)	1.42	%	20.13	12/29/2013	1,265,965	3,208,204
	50,000	(3)	0.71	%	9.00	10/20/2014	283,003	717,184
Steffen Perna	250,000	(1)	3.56	%	20.13	12/29/2013	3,164,912	8,020,509
	2,556	(2)	0.04	%	0.01	12/29/2013	83,785	133,428

(1)The options granted vest as to 1/4^th of the shares on December 29, 2004; thereafter, 1/48 of the total granted vest on the 29^th day of each month.

(2)The options granted were fully vested on grant date.

(3)The options granted vest as to 1/4^th of the shares on October 20, 2005; thereafter, 1/48 of the total granted vest on the 20^th day of each month.

(4)PMC granted options to purchase 7,024,684 shares of Common Stock to employees in fiscal 2004.

(5)The 5% and 10% assumed annualized rates of compound stock price appreciation are mandated by rules of the Securities and Exchange Commission and do not represent PMC’s estimate or projection by PMC of future Common Stock prices.

Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Values

The following table shows aggregate exercises of options to purchase PMC’s common stock in fiscal 2004 by the Named Executive Officers.

Name	Shares Acquired on Exercise(1)	Value Realized(2)		Number of Securities Underlying Unexercised Options at Fiscal Year-End (#)(3)		Value of Unexercised In-The-Money Options at Fiscal Year-End($)(4)
				Exercisable	Unexercisable	Exercisable	Unexercisable
Robert Bailey	260,052	$	3,910,540	1,926,874	1,313,126	5,067,600	3,465,792
Alan Krock	7,496	$	88,911	183,332	416,668	1,083,492	1,280,508
Gregory Aasen	229,843	$	4,393,317	1,384,062	560,938	3,773,061	1,754,159
Colin Harris	96,186	$	1,700,051	251,499	197,501	1,147,585	321,355
Steffen Perna	4,539	$	49,023	822,055	512,501	3,263,888	1,275,755

(1)Includes shares purchased pursuant to PMC’s Employee Stock Purchase Plan.

(2)Market value of underlying securities at exercise date, minus the exercise price.

(3)Does not include outstanding LTD Special Shares redeemable for shares of common stock of PMC.  Includes options that are not “in-the-money” at year-end (the exercise price equals or exceeds $10.81, the closing market price for a share of PMC common stock on December 23, 2004, the last trading day of fiscal year 2004).

(4)Market value underlying securities at year-end, minus the exercise price.

11

Ten-Year Option Repricings

On September 26, 2002, holders of PMC stock options cancelled 19,269,960 stock options with exercise prices at or above $8.00 per share, in exchange for new options to be granted at least six months and one day after the cancellation.  Cancelled options with an exercise price of less than $60.00 were to be replaced with an option to purchase the same number of shares.  Cancelled options with an exercise price of $60.00 or more were to be replaced with one share for each four cancelled shares.  In exchange for these cancelled options, PMC granted 16,656,723 new options on March 31, 2003 at an exercise price of $5.95, the market price at the time of the repricing.

PMC’s executive officers participated in the option exchange and tendered stock options and received the number of stock options listed below.  With the exception of Mr. Harris, who was not an executive officer at the time, the new stock options vested 25% on their grant date, with the balance vesting on a monthly basis over the following 48 months.  The old stock options, if outstanding on the grant date, would have been approximately 54% vested, with the remainder vesting on a monthly basis over the following 24 to 33 months.  The new options expire on March 31, 2013.  Mr. Harris’ new options vested from 25% to 50% on the grant date, depending on the grant date of the cancelled option, with the remainder vesting on a monthly basis over the following 24 to 36 months.

The following table sets forth information concerning the grant of new options on March 31, 2003 to the executive officers in connection with the stock option exchange program.  Other than the grant of these new options, no other repricings have occurred during the last ten years.

Name	Number of Securities Underlying Options Repriced(1)	Exercise Price at Time of Repricing($ )	New Exercise Price(2)	Length of Original Option Term Remaining at Date of Repricing
Robert Bailey	480,000	52.375	5.95	6 years, 8 months
	400,000	19.87	5.95	8 years
	750,000	18.26	5.95	8 years, 8 months
Gregory Aasen	300,000	52.375	5.95	6 years, 8 months
	225,000	19.87	5.95	8 years
	300,000	18.26	5.95	8 years, 8 months
Steffen Perna	150,000	52.375	5.95	6 years, 8 months
	100,000	19.87	5.95	8 years
	350,000	18.26	5.95	8 years, 8 months
Colin Harris(3)	80,000	52.375	5.95	6 years, 8 months
	50,000	19.87	5.95	8 years
	65,000	18.26	5.95	8 years, 8 months
	80,000	15.9844	5.95	5 years, 9 months
Tom Sun	24,000	52.375	5.95	6 years, 8 months
	75,000	19.87	5.95	8 years
	150,000	18.26	5.95	8 years, 8 months

(1)The market price of PMC common stock on the date of cancellation, on September 26, 2002, was $4.13 per share.

(2)The exercise price of the new options equaled the market price of the underlying PMC common stock at the time of repricing.

(3)Mr. Harris became an executive officer in July 2004.

12

Employment Agreements

PMC’s executive officers each have entered into employment agreements with PMC.  Under the terms of the employment agreements, upon a termination without cause as defined in the employment agreements (if no change of control as defined in the employment agreements is reasonably expected within the next 60 days or has occurred in the past two years) the executive officers are entitled to receive their base salary and accrued vacation through the date of termination.

If the officers are terminated without cause or constructively terminated as defined in the employment agreements and a change of control is reasonably expected to occur within 60 days of the termination or has occurred within the past two years, then the officers are entitled to the following benefits:  (1) their base salary through the date of termination; (2) a lump-sum payment equal to four percent of their current base salary for each full month they were employed with PMC, provided that the total payment shall not exceed two times their current base salary; (3) a lump-sum payment equal to two percent of their prior year’s bonus for each full month they were employed with PMC; and (4) all accrued vacation through the date of termination.  In addition, the executive officers are entitled to execute consulting agreements with PMC that would require them to provide service to PMC during each calendar quarter and maintain the confidentiality of PMC’s trade secrets.  While they serve as consultants to PMC, their stock options would continue to vest and be exercisable until 30 days after all their options have vested.  Each of Mr. Bailey and Mr. Krock also has the right to receive the payments and benefits under (1) and (4) above, if on the first anniversary of a change of control they are still employed by PMC or its successor.  In addition, each of Mr. Bailey and Mr. Krock are entitled to terminate their employment and become a consultant to PMC or its successor on these terms if on the first anniversary of a change of control of PMC, he is an employee of PMC.

Under the terms of the employment agreements, “cause” means (i) gross dereliction of duties which continues after at least two notices, each 30 days apart, from the Chief Executive Officer (or in the case of the Chief Executive Officer, from a director designated by a majority of the Board), specifying in reasonable detail the tasks which must be accomplished and a timeline for their accomplishment to avoid termination for Cause; (ii) willful and gross misconduct which injures PMC; (iii) willful and material violation of laws applicable to PMC; or (iv) embezzlement or theft of PMC property.  “Change of control” under the employment agreements means the occurrence of any of the following events:

(1)any “person” or “group” as such terms are defined under Sections 13 and 14 of the Exchange Act (other than PMC, a subsidiary of PMC, or a PMC employee benefit plan) is or becomes the “beneficial owner” (as defined in Exchange Act Rule 13d-3), directly or indirectly, of PMC securities representing 50% or more of the combined voting power of PMC’s then outstanding securities;

(2)the closing of (a) the sale of all or substantially all of the assets of PMC if the holders of PMC securities representing all voting power for the election of directors before the transaction hold less than a majority of the total voting power for the election of directors of all entities which acquire such assets, or (b) the merger of PMC with or into another corporation if the holders of PMC securities representing all voting power for the election of directors before the transaction hold less than a majority of the total voting power for the election of directors of the surviving entity;

(3)the issuance of securities which would give a person or group beneficial ownership of PMC securities representing 50% or more of all voting power for the election of directors; or

(4)a change in the Board such that the incumbent directors and nominees of the incumbent directors are no longer a majority of the total number of directors.

“Constructive termination” under the employment agreements means (i) a material reduction in Executive’s Base Salary, target bonus or benefits; (ii) a material reduction in title, authority, status, obligations or responsibilities; or (iii) the requirement that Executive relocate more than 100 miles from the current PMC headquarters.

13

Compensation Committee Interlocks and Insider Participation

Mr. Diller served as PMC’s Chief Executive Officer from 1983 to 1997.  It has been greater than 5 years since Mr. Diller ceased to be an employee of the company

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act requires PMC’s executive officers and directors, and persons who own more than 10% of PMC’s common stock, to file reports regarding ownership of, and transactions in, PMC’s securities with the Securities and Exchange Commission and to provide PMC with copies of those filings.  Based solely on its review of the copies of such forms received by PMC, or written representations from certain reporting persons, PMC believes that during fiscal year 2004, each of the reporting persons complied with all applicable Section 16(a) filing requirements.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

This report summarizes the principles and other factors considered by the Compensation Committee in determining executive compensation.

Compensation Philosophy.  Under the Committee’s supervision, PMC has implemented compensation policies, plans and programs to achieve the following objectives:

•attract, retain and motivate talented executive officers

•provide them with cash bonus opportunities linked to achievement of business objectives and individual performance goals

•align the financial interests of executive officers with those of stockholders by providing executive officers with an equity stake in PMC.

Elements of Compensation.  Executive officer compensation consists of a base salary, quarterly bonuses and stock options.  Potential cash bonuses depend on achieving corporate objectives and enhancing stockholder value.  Stock option grants depend on personal and corporate performance and the retention value of the officer’s unvested options.  Each fiscal year the Chief Executive Officer submits for Committee review and approval an annual plan for base salary and quarterly bonuses for PMC’s executive officers (other than the CEO).  The Committee considers the total earned or potentially available compensation of each executive officer in establishing each element of the officer’s compensation.  The Committee compares total compensation and elements of compensation to companies in the semiconductor industry that have revenues comparable to PMC’s revenues, or that compete with PMC for executive talent irrespective of revenue level.

Cash Compensation.  PMC generally sets base salaries below amounts paid to senior managers with comparable qualifications, experience and responsibilities at comparable companies in order to emphasize quarterly and longer-term incentive compensation.  Base salaries are determined in light of industry and peer group surveys, compensation for the executives as a group, individual position and responsibilities, the individual’s total compensation in the prior year and PMC’s plan for the current fiscal year.  PMC did not increase base salaries in 2004, except for an increase to Steffen Perna to reflect changed responsibilities.  Due to the recent decline in the value of the U.S. dollar relative to the Canadian dollar, salaries of Canada-based officers, which remained flat in the local currency, increased in U.S. dollars.

Each executive officer is also eligible to receive a quarterly cash bonus equal to a percentage of PMC’s pre-tax profits for the quarter.  The Committee determines each officer’s annual percentage of profits based on the individual’s past and expected future contributions to PMC.

Stock Options.  During each fiscal year, the Committee considers whether to grant executive officers long-term equity incentives such as stock options.  The Committee believes stock option grants encourage the achievement of superior results over time and align employee and stockholder interests.  The Committee reviews

14

recommended awards, taking into account scope of accountability, strategic and operational goals, and anticipated performance requirements and contributions of the senior management group.

During fiscal 2004, PMC granted to executive officers other than the CEO options to purchase 825,000 shares exercisable at $20.13 per share, which options vest over four years, and fully vested options to purchase 10,991 shares exercisable at $0.01 per share.

Colin Harris became an executive officer in fiscal 2004 and received options to purchase 50,000 shares exercisable at $9.00 per share, which vest over four years.  Thomas Brigiotta joined PMC in fiscal 2004, as an executive officer, and received options to purchase 400,000 shares exercisable at $9.00 per share, which vest over four years.

Chief Executive Officer Compensation.  The Committee determines the CEO’s total cash compensation based on similar competitive compensation data as that used for other executive officers, the Committee’s assessment of his past performance and the Committee’s expectations as to his future contributions to PMC.  In fiscal 2004, PMC did not change the CEO’s base salary. He received a cash bonus for 2004 quarters in which PMC generated pre-tax profits on the same basis as other executives.  In connection with the fiscal 2002 option exchange, the CEO gave up options to buy 1,630,000 shares and PMC granted a stock option to its CEO to purchase 1,630,000 shares of Common Stock exercisable at $5.95 per share.  The Committee believes that the option exchange will help PMC retain its CEO, as the vesting period of the options was extended by the exchange.  During fiscal 2004, PMC granted its CEO a fully vested option to purchase 5,112 shares exercisable at $0.01 per share and an option to purchase 600,000 shares exercisable at $20.13 per share.

Respectfully submitted by:

James Diller, Sr.

Jonathan Judge

Lewis Wilks

15

STOCK PRICE PERFORMANCE GRAPH

The following graph shows a comparison of cumulative total stockholder returns for PMC, the Nasdaq National Market, the line-of-business index for semiconductors and related devices (SIC code 3674) published by Georgeson Shareholder Communications Inc., and the S&P 500 Index.  The graph assumes the investment of $100 on December 31, 1999.  The performance shown is not necessarily indicative of future performance.

Comparison of 5-Year Cumulative Total Return*

Among PMC-Sierra, Inc.,
S&P 500 Index and SIC Code Index

*  The total return on each of these investments assumes the reinvestment of dividends, although cash dividends have   never been paid on PMC’s common stock.

16

AUDIT COMMITTEE REPORT

The Audit Committee has reviewed PMC’s audited consolidated financial statements and discussed them with management.  The Audit Committee has discussed with Deloitte & Touche LLP, PMC’s independent auditors during the 2004 fiscal year, the matters required to be discussed by Statement on Auditing Standards No. 61.

The Audit Committee received from Deloitte & Touche LLP the written disclosures required by Independence Standards Board Standard No. 1 and discussed with them their independence.

Based on this review, the Audit Committee recommended to the Board that PMC’s audited consolidated financial statements be included in PMC’s Annual Report on Form 10-K for the fiscal year ended December 26, 2004.

This report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, or the Exchange Act, except to the extent that PMC specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

Audit Committee Members:

Richard Belluzzo

Jonathan Judge

William Kurtz, Chair

Lewis Wilks

17

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Audit Committee has retained Deloitte & Touche LLP as PMC’s independent auditors to audit its consolidated financial statements for the 2005 fiscal year.  During the 2004 fiscal year, Deloitte & Touche LLP served as PMC’s independent auditors and also provided certain tax and other audit-related services.  Although PMC is not required to seek stockholder ratification of this appointment, the Board believes it to be good corporate governance to do so.  If the appointment is not ratified, the Audit Committee will investigate the reasons and reconsider the appointment.  Representatives of Deloitte & Touche LLP are expected to attend the annual meeting where they will be available to respond to appropriate questions and, if they desire, to make a statement.

Fees Incurred by PMC for Deloitte & Touche LLP

The following table shows the fees paid or accrued by PMC for the audit and other services provided by Deloitte & Touche LLP for fiscal year 2004 and fiscal year 2003.

	2004		2003
Audit Fees (1)	$	466,538	$	295,702
Audit-Related Fees (2)	8,067		45,375
Tax Fees (3)	849,303		557,280
Total	$	1,323,908	$	898,357

(1)Audit fees billed by Deloitte & Touche LLP for review of PMC’s annual financial statements, the audit of management’s assessment of internal control over financial reporting, the audit of internal control over financial reporting and the review of those financial statements included in PMC’s quarterly reports on Form 10-Q and annual report on Form 10-K.

(2)Audit-related fees consisted of professional services in connection with PMC’s preparation for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and consultations concerning financial accounting and reporting.

(3)For fiscal 2004 tax fees included $527,285 for compliance and the balance for tax consulting and planning.  For fiscal 2003, tax fees included $298,823 for tax compliance and the balance related to tax consulting and planning.

The Audit Committee must approve all audit related and permitted non-audit services law to be performed by PMC’s independent auditors prior to the commencement of such services.  The Audit Committee concluded that the provision of such services by Deloitte & Touche LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

Recommendation

PMC’s Board of Directors recommends a vote FOR the ratification of the appointment of Deloitte &Touche LLP as PMC’s independent auditors.

Vote Required

The affirmative vote of a majority of the votes cast is required to confirm the appointment of Deloitte & Touche LLP as independent auditors of PMC for the 2005 fiscal year.

18

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

Q:Why am I receiving these materials?

A:PMC’s Board of Directors is providing these proxy materials to you in connection with PMC’s annual meeting of stockholders, which will take place on May 25, 2005.  Stockholders are invited to attend the annual meeting and are requested to vote on the proposals described in this proxy statement.

Q:What information is contained in these materials?

A:The information included in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, the compensation of directors and our most highly paid officers, and certain other required information.  PMC’s 2004 Annual Report on Form 10-K, Proxy Card and return envelope are also enclosed.

Q:What proposals will be voted on at the annual meeting?

A:There are two proposals scheduled to be voted on at the annual meeting:

•the election of directors

•the ratification of the appointment of Deloitte & Touche as PMC’s independent auditors

Q:What is the Board’s voting recommendation?

A:PMC’s Board recommends that you vote your shares “FOR” each of the nominees to the Board and “FOR” the ratification of the appointment of Deloitte & Touche as PMC’s independent auditors.

Q:Which of my shares can be voted?

A:You can vote all shares you owned as of the close of business on March 31, 2005 (the “Record Date”).  These shares include shares that are: (1) held directly in your name as the stockholder of record, and (2) held for you as the beneficial owner through a stockbroker, bank or other nominee.

Q:What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A:Most stockholders of PMC hold their shares through a stockbroker, bank or other nominee rather than directly in their own name.  As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Stockholder of Record

If your shares are registered directly in your name with PMC’s transfer agent, American Stock Transfer & Trust Company, you are considered the stockholder of record of those shares.  As the stockholder of record, you have the right to grant your voting proxy directly to PMC or to vote in person at the annual meeting.  PMC has enclosed a proxy card for you to use.

Beneficial Owner

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the stockholder of record.  As the beneficial owner, you have the right to direct your broker on how to vote and are also invited to attend the annual meeting.  However, since you are not the stockholder of record, you may not vote these shares in person at the annual meeting.  Your broker or nominee has enclosed a voting instruction card for you to use in directing the broker or nominee regarding how to vote your shares.

Q:How can I vote my shares in person at the annual meeting?

A:Shares held directly in your name as the stockholder of record may be voted in person at the annual meeting.  If you choose to do so, please bring the enclosed proxy card or proof of identification.

Even if you plan to attend the annual meeting, PMC recommends that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend the annual meeting.  Shares held in street name may be voted in person by you only if you obtain a signed proxy from the record holder giving you the right to vote the shares.

Q&A-1

Q:How can I vote my shares without attending the annual meeting?

A:Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct your vote without attending the annual meeting.  You may vote by granting a proxy for those shares you hold directly as the stockholder of record or, for shares held in street name, by submitting voting instructions to your broker or nominee using the voting instruction card provided by your broker or nominee.

Q:Can I change my vote?

A:You may change your proxy instructions at any time prior to the vote at the annual meeting.  For shares held directly in your name, you may accomplish this by granting a new proxy bearing a later date (which automatically revokes the earlier proxy) or by attending the annual meeting and voting in person.  Attendance at the annual meeting will not cause your previously granted proxy to be revoked unless you specifically so request.  For shares held beneficially by you, you may accomplish this by submitting new voting instructions to your broker or nominee.

Q:How are votes counted?

A:In the election of directors, you may vote “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees.  For the other proposals, you may vote “FOR”, “AGAINST” or “ABSTAIN”.  If you “ABSTAIN”, it has the same effect as a vote “AGAINST”.  If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of the Board.

Q:What is the voting requirement to approve each of the proposals?

A:The seven nominees receiving the highest number of affirmative votes of the shares present or represented and entitled to vote shall be elected as directors.  All other proposals require the affirmative “FOR” vote of a majority of those shares present and entitled to vote.  If you are a beneficial owner and do not provide the stockholder of record with voting instructions, your shares may constitute broker non-votes, as described below in “What is the quorum requirement for the annual meeting?”  In tabulating the voting result for any particular proposal, shares which constitute broker non-votes are not considered entitled to vote.

Q:What does it mean if I receive more than one proxy or voting instruction card?

A:It means your shares are registered differently or are in more than one account.  Please provide voting instructions for all proxy and voting instruction cards you receive.

Q:Where can I find the voting results of the annual meeting?

A:PMC will announce preliminary voting results at the annual meeting and publish final results in PMC’s quarterly report on Form 10-Q for the second quarter of fiscal year 2005.

Q:What happens if additional proposals are presented at the annual meeting?

A:Other than the proposals described in this proxy statement, PMC does not expect any matters to be presented for a vote at the annual meeting.  If you grant a proxy, the persons named as proxy holders, Robert Bailey, PMC’s President and Chief Executive officer, Alan Krock, PMC’s Vice President and Chief Financial Officer, will have the discretion to vote your shares on any additional matters properly presented for a vote at the annual meeting.  If for any unforeseen reason any of PMC’s nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.

Q:What class of shares is entitled to be voted?

A:Each share of PMC’s common stock outstanding as of the close of business on March 31, 2005, the Record Date, is entitled to one vote at the annual meeting.  In addition, since cumulative voting applies to PMC’s common stock in the election of directors, if any stockholder at the meeting and prior to the voting gives notice of the stockholder’s intention to cumulate votes for the election of directors, then the stockholder, or the stockholder’s proxy, may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of shares held by such stockholder, or distribute the stockholder’s votes on the same principle among as many candidates as the stockholder may select, provided that votes

Q&A-2

cannot be cast for more than seven nominees.  On the Record Date, PMC had approximately  180,262,582 shares of common stock issued and outstanding.

Q:What is the quorum requirement for the annual meeting?

A:The quorum requirement for holding the annual meeting and transacting business is a majority of the outstanding shares entitled to be voted as of the Record Date.  The shares may be present in person or represented by proxy at the annual meeting.  Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum.  Broker non-votes, however, are not counted as shares present and entitled to be voted with respect to the matter on which the broker has expressly not voted.  Thus, broker non-votes will not affect the outcome of any of the matters being voted on at the annual meeting.  Generally, broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner and (2) the broker lacks discretionary voting power to vote such shares.

Q:Who will count the vote?

A:A representative of Georgeson Shareholder Communications Inc. will tabulate the votes and act as the Inspector of Elections.

Q:Is my vote confidential?

A:Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy.  Your vote will not be disclosed either within PMC or to third parties except (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, or (3) to facilitate a successful proxy solicitation by the Board.  Occasionally, stockholders provide written comments on their proxy card which are then forwarded to PMC’s management.

Q:Who will bear the cost of soliciting votes for the annual meeting?

A:PMC will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials.  In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by PMC’s directors, officers, and employees, who will not receive any additional compensation for such solicitation activities.  PMC has retained the services of Georgeson Shareholder Communications Inc. to aid in the solicitation of proxies from banks, brokers, nominees and intermediaries.  PMC estimates that it will pay Georgeson Shareholder Communications Inc. a fee of $10,000 for its services.  In addition, PMC may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to such beneficial owners.

Q:May I propose actions for consideration at next year’s annual meeting of stockholders or nominate individuals to serve as directors?

A:You may submit proposals or nominate directors for consideration at future annual stockholder meetings.

Any stockholder who wants to make a proposal or director nomination that is to be included in PMC’s proxy statement for that annual meeting must deliver written notice to PMC’s corporate secretary at least 120 days before the one-year anniversary of the mailing date of the prior year’s proxy materials (in the case of the 2006 Annual Meeting, this date is December 23, 2005.  Any stockholder who wants to make a proposal or director nomination that is not to be included in PMC’s proxy statement for that annual meeting, must deliver written notice to PMC’s corporate secretary at least 45 days before the one-year anniversary of the mailing date of the prior year’s proxy materials (in the case of the 2006 annual meeting this date is March 8, 2006).  This notice must contain the information specified in PMC’s bylaws regarding the matters proposed to be brought before the annual meeting and the stockholder proposing such matters.  Such proposals will also need to comply with the U.S. Securities and Exchange Commission’s regulations regarding the inclusion of stockholder proposals in PMC-sponsored proxy materials.  If the date of next year’s annual meeting is more than 30 days after the one-year anniversary of this year’s annual meeting, then the deadline will be changed.

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