MOSAID Rejects Activist Hedge Fund Demand

OTTAWA, Ontario - August 23, 2006 - MOSAID Technologies Incorporated (TSX: MSD) today issued a response to the letter from Loeb Partners Corporation, a New York City-based hedge fund, in which Loeb demanded that MOSAID be sold. The following response, which has been sent by letter to Loeb and is being disseminated by press release, was issued by the Special Committee of the board of MOSAID.

Response letter to Loeb Partners follows.

August 23, 2006

Mr. Gideon J. King
Loeb Partners Corporation
61 Broadway
New York, NY10006
U.S.A.

Dear Mr. King:

I am writing in response to your August 15, 2006 letter, addressed to the board of directors of MOSAID, in which you demand that we "hire an investment banking firm" in order to effect "the prompt sale of the company to the highest bidder", in a publicly disclosed process.

I am writing as chairman of the Special Committee of the board, comprised of three independent directors, which has been set up to deal with this matter as well as with any potential further related activity. The other two members of this Special Committee are John Millard and Donnie Moore.

At this point in time, I have five points to make.

1. Thank you for your intense interest in MOSAID. Your input is appreciated, and will certainly be taken into account in our ongoing work of shaping strategic directions for our company.

2. MOSAID's management is executing a board-approved business plan which is targeted at delivering superior financial results, both short-term and long-term, while giving thorough consideration to all potential strategic options, including the restructuring or sale of parts or all of the company. (As one might expect, we have sought investment banking advice with respect to such options.) We are confident that the successful execution of these plans will result in optimal value generation and is, therefore, in the best interest of our shareholders.

3. The MOSAID board has full confidence in the current management team of the company, led by George Cwynar and Richard Boadway.

4. We believe that "the prompt sale of the company" at this point in time, forced by a publicly dissenting shareholder demand and in a publicly disclosed process, is not in the best interest of our shareholders. (Nevertheless, we would consider, in good faith, any sufficiently attractive opportunity, consistent with our fiduciary duties.)

5. We would very much like to avoid a highly disruptive and costly proxy battle, with the attendant real risk of value erosion, but we are determined to act in the best interests of our company and our shareholders. We strongly believe that MOSAID's current board, current management team, and current strategic directions are focused on value generation for our shareholders. We have in-depth knowledge of this enterprise, and are driven by the success of our company, the confidence of our shareholders, the satisfaction of our customers, and the loyalty of our employees.

We intend to proceed with our 2006 annual general meeting in the ordinary course but are prepared, if necessary, to engage in a proxy contest to confirm the support of our shareholders.

Sincerely,

Thomas I. Csathy

About MOSAID
MOSAID Technologies Incorporated makes semiconductors better through the development and licensing of intellectual property and the supply of memory test and analysis systems. MOSAID counts many of the world's largest semiconductor companies among its customers. Founded in 1975, MOSAID is based in Ottawa, Ontario, with offices in Santa Clara, California; Newcastle upon Tyne, U.K; and Tokyo, Japan. For more information, visit www.mosaid.com.