40-F

Page 1 of 134

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 40-F

[Check one]
[    ]    Registration Statement Pursuant to Section 12 of the Securities Exchange Act of 1934
                                                                          or
[X]    Annual Report Pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended: August 31, 2003            Commission File Number 029872

ATI TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Province of Ontario, Canada	5045, 3575
(Province or other jurisdiction of	(Primary Standard Industrial
incorporation or organization)	Classification Code Number (if
	applicable)

1 Commerce Valley Drive East	CT Corporation System
Markham, Ontario, Canada L3T 7X6	111 Eighth Avenue
(905) 882-2600	New York, NY 10011
	(212) 894-8700
(Address and telephone number of	(Name, address (including zip code)
Registrant's principal executive offices)	and telephone number (including
	area code) of agent for service
	in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act:   None

Securities registered or to be registered pursuant to Section 12(g) of the Act.    Common Shares

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.    None

For annual reports, indicate by check mark the information filed with this Form:

[X]   Annual information form          [X]   Audited annual financial statements

        Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

As at August 31, 2003, 241,742,113 Commom Share oustanding

        Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the filing number assigned to the Registrant in connection with such Rule.

Yes  ______          No  ___X___

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

Yes  ___X___          No  ______

The total number of pages in this document is 134
The exhibit index is located on page 48.

Page 2 of 134

ATI TECHNOLOGIES INC.

RENEWAL ANNUAL INFORMATION FORM

For the Fiscal Year Ended August 31, 2003

January 16, 2004

Page 3 of 134

TABLE OF CONTENTS

ITEM 1	CORPORATE STRUCTURE	6
ITEM 2	GENERAL DEVELOPMENT OF THE BUSINESS	7
	2.1 ACQUISITIONS	9
ITEM 3	NARRATIVE DESCRIPTION OF THE BUSINESS	10
	3.1 OVERVIEW	10
	3.2 OUR MARKETS	10
	3.3 BUSINESS STRATEGY	12
	3.4 PRODUCTS AND TECHNOLOGY	13
	3.4.1 PC PRODUCTS	13
	3.4.2 CONSUMER ELECTRONICS PRODUCTS	15
	3.5 RESEARCH AND DEVELOPMENT	16
	3.6 SALES	17
	3.7 COMPETITION	20
	3.8 MANUFACTURING	21
	3.9 CUSTOMER SERVICE AND SUPPORT	21
	3.10 HUMAN RESOURCES	22
	3.11 FACILITIES	22
	3.12 RISKS AND UNCERTAINTIES	23
	3.13 LEGAL PROCEEDINGS AND REGULATORY MATTERS	34
ITEM 4	SELECTED CONSOLIDATED FINANCIAL INFORMATION	36
ITEM 5	MANAGEMENT'S DISCUSSION AND ANALYSIS	37
ITEM 6	MARKET FOR SECURITIES	37
ITEM 7	DIRECTORS AND OFFICERS	37
	7.1 DIRECTORS	37
	7.2 CORPORATE OFFICERS	39
ITEM 8	ADDITIONAL INFORMATION	41
	8.1 ANNUAL REPORT AND MANAGEMENT INFORMATION CIRCULAR	41
	8.2 DESCRIPTION OF SHARE CAPITAL	41
	8.3 SHARE OPTION PLANS	41
	8.4 EMPLOYEE SHARE PURCHASE PLAN	43
	8.5 RESTRICTED SHARE UNIT PLANS	43

Page 4 of 134

3

GLOSSARY OF TECHNICAL TERMS AND OTHER INFORMATION

In this Annual Information Form, “we”, “us”, “our” and “ATI” mean ATI Technologies Inc. and its subsidiaries. In addition, certain technical terms used in this Annual Information Form are defined as follows:

“2.5G and 3G” means second generation wireless technology (2G) with incomplete third generation (3G) technology added to it. 3G refers to the phase of wireless communications expected to be prevalent by 2005 and that will feature faster wireless data transfer speeds, full roaming throughout Japan, the United States and Europe, enhanced multimedia capabilities and a standard features set including cellular voice, e-mail, paging and internet functionality.

“AGP” means accelerated graphics port. This is a dedicated expansion port located on a motherboard which allows higher throughput from the graphics card to the processor for faster 3D graphics rendering.

“AIB” means add-in board. AIB refers to graphics boards that can be added to a computer at any time, including by an OEM at the time it is manufactured, by a reseller at the time of distribution or by an end-user.

“ASIC” means application-specific integrated circuit. An ASIC is a circuit designated for a very specific purpose, such as the processors used in PDAs or designed for graphics. ASICs contrast with more general-purpose devices, such as memory chips, that can be used in many different applications.

“ASP” means average selling price.

“CPU” means central processing unit, the central unit in a computer which contains the logic circuitry that performs the instructions of a computer’s programs.

“DVD” means digital versatile disc. DVDs are similar to compact discs, but store up to 12 times as much data.

“DTV” means digital television (including set-top boxes). Digital television refers to the standard of transmitting and receiving television signals using digital rather than analog transmission.

“GPU” means graphics processing unit. A GPU is a microprocessor specifically designed for processing 3D graphics data. GPU is also used to generally describe the complex chips that power graphics cards.

“IGP”means integrated graphics processor. An IGP includes both the functionality of a chipset (which controls the functions and features on a motherboard) and graphics.

“I/O”means input/output. I/O refers to any operation in a computer where data is transferred either in or out of the computer.

“ITC”means investment tax credit.

“JPEG”refers to the photographic image compression standard formulated by the Joint Photographic Experts Group.

“MPEG”refers to the digital video and digital audio compression standard formulated by the Moving Picture Experts Group.

“OEM”means original equipment manufacturer.

“ODM” means original design manufacturer.

“PC”means personal computer and generally refers to a computer designed for use by one person at a time.

“PCB”means printed circuit board. PCBs are imprinted with one or more layers of circuitry and are used to hold and link together microchips and other components. Examples of common PCBs include motherboards, and AGP graphics cards.

“PDA”means personal digital assistant, a small, mobile, hand-held device that provides computing and information storage and retrieval capabilities for personal or business use, often for keeping calendars and address book information.

“SI”means system integrator, a manufacturer of “whitebox, clone or non-branded” PCs.

“VPU”means visual processing unit, an advanced GPU that provides greater graphics functionality, such as cinematic rendering in real time.

Page 5 of 134

All dollar amounts referred to in this document are stated in U.S. dollars, unless otherwise indicated.

The information in this Annual Information Form is disclosed as at December 31, 2003, unless otherwise indicated.

“ATI” and the ATI logo are our properties and registered trademarks. Our product names are also our trademarks and/or registered trademarks. This Annual Information Form includes references to the trademarks, products and company names of other corporations, which are the properties of their respective owners.

FORWARD-LOOKING STATEMENTS

Publicly held companies are encouraged by securities regulations to provide forward-looking information to assistinvestors
in assessing the company’s prospects.

Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as “plans,” “intends,” “anticipates,” “should,” “estimates,” “expects,” “believes,” “indicates,” “targeting,” and “suggests”.

This Annual Information Form contains forward-looking statements about our objectives, strategies, financial condition and results. These statements are “forward-looking” because they are based on current expectations and include various risks and uncertainties.

It must be noted that:

o Forward-looking statements describe our expectations on the day they are made. For this Annual Information Form, it is December 31, 2003.

o Our actual results may materially differ from our expectations if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. Therefore we cannot provide any assurance that forward-looking statements will materialize.

o We assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason.

For a description of risks that could cause our actual results to materially differ from our currentexpectations,
please see Item 3.12 “Narrative Description of the Business — Risks and Uncertainties” at page 23.

Page 6 of 134

ITEM 1. CORPORATE STRUCTURE

ATI Technologies Inc. was incorporated on August 20, 1985, as Array Technology Inc. pursuant to the Business Corporations Act (Ontario). The name was subsequently changed to Array Technologies Inc. pursuant to articles of amendment dated September 13, 1985, and then to ATI Technologies Inc. pursuant to articles of amendment dated December 18, 1985.

On December 31, 1987, our articles were amended to divide the 1,000 common shares then outstanding into 1,000,000 common shares. In conjunction with our initial public offering in November 1993, articles of amendment were filed on October 14, 1993, to create an unlimited number of non-voting preference shares and subdivide the 1,100,000 common shares then outstanding into 40,000,000 common shares.

On April 8, 1998, our board of directors approved a stock dividend on a four-for-one basis effective for registered common shareholders at the close of business on April 23, 1998. The stock dividend increased the number of common shares then outstanding from approximately 48.9 million to approximately 195.9 million common shares.

Our principal and head office is located at 1 Commerce Valley Drive East, Markham, Ontario, L3T 7X6. Below is a summary of our principal operating subsidiaries as at December 31, 2003, all of which are directly or indirectly wholly owned:

Subsidiary	Incorporation	Activity
ATI Technologies (Europe) GmbH	Germany	Sales and marketing support in Europe
ATI Research, Inc.	California	Research and development
ATI Technologies Systems Corp.	California	U.S. sales and distribution
ATI Technologies (Japan) Inc.	Japan	Sales and marketing support in Japan
ATI International SRL	Barbados	Research and development and sales
ATI Technologies (L) Inc.	Malaysia	Asia-Pacific sales and distribution
ATI Technologies Ltd.	Malaysia	International purchasing
ATI Research Silicon Valley Inc.	California	Research and development
ATI Technologies (Hungary) KFT	Hungary	Research and development, licensing and
		inter-company lending
ATI Research GmbH	Germany	Research and development

We operate technology centres and sales support offices in Canada, the United States, Europe and the Asia-Pacific region.

Page 7 of 134

ITEM 2. GENERAL DEVELOPMENT OF THE BUSINESS

ATI is a world leader in the supply of graphics processing products and technology for desktop and notebook personal computers (“PCs”), consumer electronic devices, digital televisions (including set-top boxes) (“DTVs”) and video game consoles. ATI’s main product lines, visual and graphics processors, increase the speed and complexity of the images that can be displayed on PC monitors and improve image resolution and colour definition.

Rich and intuitive visual experiences make digital electronic products such as PCs and consumer electronic devices more accessible and more compelling to the mass market. Increasingly, computing, entertainment and communications product platforms rely on graphics or visual processors to deliver an engaging experience and enrich the utility of their products for the user.

We believe that the visual experience is a key element of differentiation among various digital product platforms. PC users clearly prefer a rich visual experience, particularly in the high-end enthusiast market where consumers seek out the fastest and highest performing visual processing product to deliver the most compelling and immersive gaming experiences. Even in commercial settings, however, users clearly prefer an intuitive and graphical visual experience which results in enhanced productivity. The mobile phone market has begun to rapidly transition from monochrome to colour visual displays to provide customers with a richer visual experience.

The following outlines a number of the important events in our business over the course of the last three fiscal years:

2003

o We delivered new product line-ups for both the spring and fall design cycles with original equipment manufacturers (“OEMs”). The RADEON 9800XT, 9600XT and RADEON 9200 currently lead our enthusiast, performance and value desktop discrete product offerings.

o We introduced our MOBILITY RADEON 9600 and MOBILITY RADEON 9200 which now lead our notebook PC family of discrete chips.

o We introduced the FireGL X2-256 and FireGL T2-128 graphics boards into the workstation segment.

o We launched the ALL-IN-WONDER 9800 graphics board to lead our home media PC product offerings.

o We introduced the IMAGEON 3200, an advanced multimedia co-processor for handheld devices, including colour mobile phones.

o We were the first company to introduce visual processors compatible with Microsoft’s DirectX 9.0 multimedia application programming interface.

o We captured new OEM design wins and established new channel partnerships with original design manufacturers (“ODMs”) such as Asustek and Micro-Star International.

o We introduced a new generation of integrated graphics processors (“IGPs”) with the launch in June 2003 of the MOBILITY RADEON 9100 IGP and the RADEON 9100 IGP for the notebook and desktop markets, respectively.

o We commenced volume shipments of our IMAGEON multimedia co-processor products to Motorola for their V300, V500 and V600 colour and feature mobile phones.

Page 8 of 134

o We secured design wins for our DTV products from television, projector and set-top box manufacturers including Sony, Samsung, Epson, Scientific Atlanta, Funai Electric (Sylvania brand) and Changhong Electric (Apex brand).

o We signed agreements with Nintendo Co., Ltd. (“Nintendo”) and Microsoft Corporation (“Microsoft”) with respect to the development of new technology to be used in their future products.

o We increased the level of support we provide to our existing customers with monthly postings of our CATALYST software suite. Each CATALYST release features performance improvements, stability and quality improvements and new capabilities, thus permitting us to continuously enhance the value our customers receive from ATI’s products.

2002

o We introduced the RADEON 9700, RADEON 9000, FireGL X1 and the MOBILITY RADEON 9000, all of which were industry-leading products that garnered a significant number of design wins from OEMs.

o We launched a full line of IGP products. The RADEON family of IGP products address the desktop and mobile PC markets and support Intel Pentium 4, AMD Athlon and AMD Duron platforms.

o We introduced IMAGEON 100, a multimedia co-processor for handheld devices, including colour mobile phones. IMAGEON includes capabilities such as enhanced 2D graphics and hardware and MPEG-4 decoding and offers high performance, crisp images and low power consumption.

o We introduced the XILLEON 220, a highly integrated system-on-chip for DTV products. The XILLEON 220 integrates into a single chip all processor, graphics, video, audio and input/output (“I/O”) processing capabilities required for DTV applications.

o We acquired NxtWave Communications Inc. (“NxtWave”) and broadened our DTV product capabilities by adding NxtWave’s leading demodulation technology to our XILLEON products, which positioned ATI as a provider of complete solutions for DTV.

o We started to receive royalty revenues from our licensing arrangement with Nintendo for ATI’s ‘Flipper’ chip that is used in Nintendo’s GAMECUBE game console.

2001

o We introduced new RADEON products, including RADEON 8500. This was the first graphics chip to support Microsoft’s DirectX 8.1 pixel shader technology.

o We announced two new FireGL graphics boards, the mid-range FireGL 8800 and the entry-level FireGL 8700, for the high performance workstation PC market.

o We delivered new technologies based on our RADEON technology, including RADEON VE for desktop computers and ALL-IN-WONDER RADEON and MOBILITY RADEON for notebook computers. The ALL-IN-WONDER RADEON multimedia card was the first graphics solution to include technology that enables a PC to function as a personal video recorder and access an online interactive TV programming guide.

Page 9 of 134

2.1 Acquisitions

We continually seek to expand our technology base and further our strategic goals. Acquisitions, including those described below, are one of the ways we do this.

We acquired ArtX, Inc. (“ArtX”) in April 2000 in pursuit of our strategy to expand into the high-volume IGP market. ArtX, a privately held company, was highly regarded for graphics technology. With this acquisition we gained integrated visual processing technology, associated research and development (“R&D”) and expertise in the form of 70 engineers. This acquisition facilitated our entry into the consumer electronics and video game console markets and provided additional technology for the launch of our IGP products in fiscal 2002.

To achieve our goal of top-to-bottom market leadership, it was essential for us to address the high-end workstation segment of the PC market. In 2001, we accelerated our entry into this market with the acquisition of FGL Graphics, the professional graphics division of SONICblue Inc. FGL Graphics developed and marketed the technology-leading FireGL brand of OpenGL-based graphics accelerators. This acquisition contributed to our growth in the workstation market as well as our overall product and technology development in our other product categories.

In 2001, we identified multi-monitor display capability as a means to broaden our product offerings and target new customers. In July 2001, we acquired HYDRAVISION desktop management software and related technologies from Appian Graphics Corporation as well as several related patents and the HYDRAVISION trademark. HYDRAVISION software features include window and dialog box control, hot-key shortcuts, independent resolutions and refresh rates, independent application control and up to nine virtual desktops. A number of our products now include HYDRAVISION’s multi-monitor capability.

In 2002, our strategy to leverage our core technology into markets for consumer electronic devices began to gain momentum, particularly in the DTV market, as the U.S. Federal Communications Commission announced the mandated conversion from analog to digital television by 2007. Prior to June 2002, our XILLEON visual processor products, although highly regarded, required an interconnect with a signal processing and communications chip demodulator in order to operate in DTV products. In June 2002, we acquired NxtWave in order to combine NxtWave’s leading demodulation technology with our XILLEON products, positioning ATI as a provider of complete DTV solutions.

In September 2003, we acquired certain assets of AMI Technologies Corp. (“AMI”), our exclusive sales organization for Taiwan and China since 1992. This acquisition strengthened our presence in these important markets. The majority of AMI’s sales, marketing and field application engineering staff were transferred to ATI as part of the acquisition. After the acquisition, AMI continues to act as our sales agent in the region for smaller add-in board (“AIB”) customers that we do not service directly.

As a result of these acquisitions we have gained technology and R&D, engineering and sales expertise, expanded the markets for our products and created new market opportunities for our business.

Page 10 of 134

ITEM 3. NARRATIVE DESCRIPTION OF THE BUSINESS

3.1 Overview

Founded in 1985, ATI is a world leader in the supply of graphics processing products and technology for desktop and notebook PCs, consumer electronic devices, DTVs and video game consoles. We apply our proprietary technologies, design capabilities and software to provide graphics solutions for customers in all our target markets.

Our business is organized around two main markets for semiconductor graphics products: PC products and consumer electronic devices. Our RADEON product line is a recognized leader in the PC graphics market. Although representing less than 5% of our revenues in fiscal 2003, we believe that the markets for consumer electronic devices represent a key area for the future growth of our business. Our IMAGEON products for next generation mobile phones and handheld devices, and our XILLEON and NXTWAVE products for DTV markets have achieved significant recent design wins with customers in their respective segments. In the video game console market, our ‘Flipper’ chip technology has been the sole graphics engine used by Nintendo in their GAMECUBE console. We have also signed multi-year technology development agreements with Nintendo and Microsoft for future products and services.

During the fiscal year ended August 31, 2003, our business generated revenues of nearly $1.4 billion. We have more than 2,200 employees worldwide. Our ten largest customers accounted for approximately 70% of our revenues in fiscal 2003. Since a significant portion of PCs and consumer electronic devices are currently built in the Asia-Pacific region regardless of where the products are sold, the majority (72%) of our sales during fiscal 2003 were in the Asia-Pacific region.

We believe that our continued commitment to innovation and technology leadership will position ATI to capitalize upon growth opportunities in the markets for our products in the future.

3.2 Our Markets

The semiconductor graphics market addresses the need for image processing for various computing and entertainment platforms such as desktop and notebook PCs, workstations, DTVs, handheld devices and video game consoles. The primary product of a semiconductor graphics supplier is the graphics processing unit (“GPU”) or visual processing unit (“VPU”), a semiconductor chip that increases the speed and complexity of images that can be displayed on a graphical interface as well as improving image resolution and colour definition. The GPU or VPU off-loads the burden of graphics processing from the PC or electronic devices’ microprocessor or central processing unit (“CPU”). In this way the dedicated graphics or visual processor and CPU work in tandem to increase overall speed and performance.

Though both VPU and GPU refer to the same general category, we use VPU to distinguish our more recent generations of processors beginning with the introduction of ATI’s RADEON 9700 – the first graphics processor to enable cinematic rendering in real time.

During the past few years, the PC industry has been marked by consolidation among the large PC OEMs and the growing importance of PC system integrators (“SIs”) or “white box, clone or non-branded” PC manufacturers. Today, SIs are responsible for approximately one-half of worldwide PC shipments. Therefore, it is important for PC graphics suppliers to have their technology incorporated into board-level products which are available to and accepted by the SI channel. As a result of these developments, in fiscal 2001, we undertook a transition of our business which has resulted in us becoming a component-level supplier to the PC graphics industry. This strategy included refocusing our distribution channels and supplying AIB manufacturers with our component products who, in turn, supply SI manufacturers with their board-level products. We now also supply our OEM customers with component-level products as well as, to a lesser extent, graphics boards. As a result, more than 90% of our unit sales were shipped

Page 11 of 134

as components in fiscal 2003. We are continuing to focus on securing our relationships with AIB manufacturers in order to increase penetration of our products in new markets and geographic regions.

PC Market

The strength of the semiconductor graphics market is heavily dependent upon the PC market. Customers in the PC segment include: OEMs and SIs, who build GPUs or VPUs into their PC products; ODMs, who build GPUs or VPUs into their PC motherboard and graphics board products; and AIB manufacturers who incorporate GPUs or VPUs into their graphics board products.

Desktop and notebook products represent the two major segments of the PC market. According to International Data Corporation (“IDC”), a market research firm, the worldwide desktop PC market and notebook market was estimated to be 108.2 million units and 39.7 million units, respectively, in 2003 and is forecast to be 114.6 million and 50.1 million units, respectively, in 2004. While the desktop segment has traditionally been the largest sector within the PC market by volume, the notebook market continues to expand at a more rapid pace driven by the availability of lower power and high performance notebook PCs at affordable prices. According to the most recent IDC data, the desktop and notebook PC markets are estimated to grow to 132.0 million units and 78.4 million units, respectively, by 2007.

The graphics solution for both the desktop and notebook segments is addressed by either an IGP, a graphics processor with one or more other logic functions such as memory, I/O and communications controllers on one chip, or a discrete graphics processor, a stand-alone graphics chip. Discrete graphics chips tend to provide higher levels of performance and speed while IGP products cater towards the value segment of the market. The demand for integrated graphics solutions has grown in recent years as the PC market has developed and performance of IGP products advances. OEMs and SIs, who have been continually pressured to meet lower price targets while still maintaining reasonable profit margins, are increasingly using integrated chipsets over discrete chipsets in their products given the “value” or low-cost characteristics of integrated graphics solutions. Based on industry data, it is estimated that integrated graphics chipsets currently account for approximately one-half of the desktop systems sold worldwide.

Consumer Electronics Market

The semiconductor graphics market has grown beyond its PC roots as technology in other electronic devices has developed. New avenues of growth for the semiconductors graphics market include DTVs, handheld devices, such as colour mobile phones and personal digital assistants (“PDAs”), and video game consoles. Similar to the development of the PC graphics market, users are demanding enhanced imagery for improved utility and a richer visual experience for their digital electronic devices.

The growth in the DTV market will be driven by the gradual conversion of analog television signals to digital transmissions by television broadcasters. This conversion will be supported by a United States Federal Communications Commission mandate that requires the integration of digital tuners into TV sets and receiver devices by 2007. As this transition takes place, semiconductor graphics suppliers will have the opportunity to leverage their technology in the PC graphics market into new products for DTVs. According to Strategy Analytics, a market research firm, the DTV and set-top box market was estimated to be 36.0 million units in 2003, is forecast to be 50.3 million units in 2004 and is currently estimated to grow to 105.2 million units by 2007.

The market for colour, feature rich (including camera) and smart phones will increasingly require that mobile phones provide rich colourful visual displays as well as 2D and 3D graphics technology. The gradual move to next generation ‘2.5G and 3G’ mobile phone technologies will drive this trend as users demand an enhanced experience with their mobile phones. As this market develops, semiconductor graphics suppliers will have opportunities to work with mobile phone manufacturers and supply advanced graphics processors for their mobile phone products. According to Display Search, a market research firm, the size of the mobile phone market was estimated to be 452 million units in 2003, is forecast to be

Page 12 of 134

486 million units in 2004, over one-half of which are estimated to include colour displays, and is currently estimated to grow to 513 million units by 2007, with 75% having colour display.

Video game consoles are also an important segment of the consumer electronics market. In this market, semiconductor graphics suppliers work alongside game console manufacturers to enhance the visual experience for the user of sophisticated video games. Semiconductor graphics suppliers have the opportunity to leverage their core visual and graphics processing technologies by providing solutions to this market. According to Strategy Analytics, a market research firm, the game console market was estimated to be 36.2 million units in 2003, is forecast to be 29.3 million units in 2004 and is currently estimated to grow to 35.8 million units by 2007.

3.3 Business Strategy

We anticipate that future PC systems and certain consumer electronic devices will continue to require advanced visual processing technology to support 3D gaming and digital video technologies such as digital versatile disc (“DVD”) functionality and digital video decoding.

We intend to expand our presence in the PC market and expand into new markets by closely following and capitalizing on market trends and inflection points in the industry.

We intend to execute our business plan through the following strategies:

Sustained product and technology leadership

Enabling the most compelling visual experience irrespective of platform is central to our business strategies. Our goal is to consistently raise the technology and performance standard in all segments of the PC market. We are focused on capturing performance and technology leadership at the high-end enthusiast level of the PC market and then propagating this technology through the performance, mainstream and value PC markets.

With the introduction of the RADEON 9800, we have demonstrated our continued commitment to introduce industry-leading technology at the high-end of the desktop PC market. We leveraged high-end performance VPUs into the important mainstream and value market segments by introducing the RADEON 9600 and the RADEON 9200.

We will continue to focus our research efforts on core technologies that allow us to bring new and innovative products and technologies to the market. We continue to focus on key graphics technologies relating to 2D, 3D and video acceleration for desktop, mobile and workstation PCs. Due to the rapidly changing and expanding technologies in the PC market and the convergence of this market with other media, we continue to internally develop and pursue opportunities to acquire or license complementary leading-edge technologies when appropriate.

Build a strong and sustainable franchise in the integrated graphics processor market

The market for IGPs has grown rapidly and today represents approximately one-half of the PC graphics market. Bringing our core visual processing technology and integration expertise to the IGP market segment is a natural extension of our PC market strategy. We have invested in R&D, cultivated distribution channels and anticipated certain inflection points to stage our entry in this market to maximize our opportunities.

The combination of performance, features and low cost of our IGP products represent a competitive value proposition in the IGP market. In 2003, we started shipping our RADEON IGP 340 and 320 products for the notebook market. Over 10% of our revenue in fiscal 2003 came from these two products. We also introduced a series of new IGP products culminating in the release of the RADEON 9100 IGP and MOBILITY RADEON 9100 IGP. Strong customer acceptance of our value/performance proposition has

Page 13 of 134

contributed to our successful launch in the IGP market. We have partnered with key motherboard manufacturers including Asus, Giga-Byte, Micro-Star International and PC Partner, which we expect will help us penetrate the desktop IGP market in fiscal 2004.

Expand in select consumer electronics market segments

We endeavour to leverage our core graphics technology from our PC products into related markets that reach beyond the PC and address the markets for consumer electronic devices that include handheld devices, such as colour mobile phones, DTVs and video game consoles. We continue to refine our approach to these markets and are currently focusing on colour mobile phones in the handheld segment and North American digital television in our DTV business.

In the colour mobile phone market, we began volume shipments of our IMAGEON products in fiscal 2003 and secured design wins with Motorola, a leading mobile phone manufacturer.

In fiscal 2003, we achieved broad-based acceptance of our solutions in the DTV market. During the year, design wins from Sony, Epson and Scientific-Atlanta, respective leaders in television, projector, and set-top box manufacturing, significantly strengthened our position and represented important milestones in our DTV business.

In the video game console market, our ‘Flipper’ chip technology has been the sole graphics engine used by Nintendo in their GAMECUBE console. We have also signed multi-year technology development agreements with Nintendo and Microsoft for future products and services.

Innovate cost-effectively and improve operating and financial performance

We seek to innovate efficiently. This means targeting new channels and new customers by leveraging our core technologies. It also means introducing our products into new markets at key inflection points and capitalizing on the momentum of changes in the market. We strive to make continuous improvements in development processes and technologies, manufacturing efficiencies and inventory management. In fiscal 2003, we improved our inventory management controls and increased our inventory turns to 5.2 times from 4.5 times in fiscal 2002.

We continually review our business to ensure that expenses correspond with their opportunity and return profile. During fiscal 2003, we made steady improvements in financial and operating performance. As a result of our technology leadership in the high-end desktop as well as our entry into the notebook integrated market, we increased revenue by 36% on a year-over-year basis.

3.4 Products and Technology

3.4.1 PC Products

Desktop Products

In order for OEMs to meet continually lower pricing targets while still maintaining reasonable profit margins, there is a growing trend for OEMs to use integrated chipsets rather than discrete graphics solutions in their “value” or low-cost PCs. The value PCs represent a significant portion of PCs that are sold today. Currently, we estimate that integrated graphics chipsets are used in approximately one-half of the desktop systems sold worldwide.

Our desktop IGP products address this value segment of the PC market. We bring advanced features, low cost and an excellent visual experience to the sub-$1,000 PC market. We offer a full line of IGPs for Intel-based computer platforms and also offer IGPs for AMD-based computers. In fiscal 2003, we launched our first desktop IGP product, RADEON 9100 IGP and commenced volume shipments in fiscal 2004.

Page 14 of 134

In order to sell IGPs, we must secure license agreements with manufacturers of CPUs on which the motherboard is based. We have entered into licensing arrangements with Intel Corporation (“Intel”) which permit ATI, subject to certain requirements, restrictions and limitations, to build, develop and sell integrated chipsets that are compatible with Intel’s current Pentium 4 desktop and notebook microprocessor platforms. Advanced Micro Devices, Inc. (“AMD”) has open specifications for the bus interfaces of its CPUs. We have also entered into the necessary licensing arrangements that are required for our IGP products to be compatible with AMD’s Athlon and Duron CPUs.

While the percentage of PCs that are considered value PCs has risen significantly over the years, we still believe that a separate graphics subsystem will continue to offer higher performance and will be the preferred solution for high-end and workstation PCs.

Our discrete desktop VPUs address desktop PC markets where customers expect high levels of performance, speed and a compelling visual experience. We offer a complete line of discrete VPU products for mainstream, performance and enthusiast PC markets. Our most recent generation of desktop VPUs includes the performance-leading and award-winning RADEON 9800XT.

In 2004, we expect that the majority of PC manufacturers will make the transition to PCI Express. PCI Express is a new bus interface standard that is not backward compatible to the existing accelerated graphics port (“AGP”) bus interface. We expect that this transition will open up many of the OEM and channel slots and result in design win opportunities in 2004 as OEMs and SIs transition their products to the PCI Express standard. As the first graphics manufacturer to develop and demonstrate PCI Express compatible graphics products, we believe that we are well positioned for this market transition.

Notebook Products

The notebook or mobile PC market continues to be a growing segment in the PC industry, as notebook computers now incorporate richer features such as improved 3D performance, DVD support, and power management technology to reduce battery drain from the graphics subsystem. We developed the MOBILITY RADEON family of mobile graphics accelerators to target this growing market and to provide a performance and feature set with the flexibility to work in a variety of notebook classes. In this category, speed, low power consumption and visual performance are the uppermost considerations of our customers. We focus on designing notebook VPUs that meet and exceed these expectations in mainstream, value and enthusiast categories.

As in the desktop PC market, the integration of discrete notebook PC semiconductor components may allow for reduced costs, faster design times and more available space for other features within the mobile PC. Accordingly, our mobile graphics products with integrated memory, including our MOBILITY RADEON 9600 and MOBILITY RADEON 9200 have gained widespread acceptance in the mobile PC market over the past year.

As the trend continues towards less expensive notebook PCs, we believe the market will require graphics chip makers to find less expensive ways of delivering high quality graphics performance, including the use of integrated chipsets. Our notebook IGPs target the value category of the portable or laptop computer segment. Our products for this category combine excellent visual performance, powerful features and low power consumption. The most recent generation of our IGP notebook products is the MOBILITY RADEON 9100 IGP.

Home Media PCs

Home media PCs or multimedia continues to be a significant part of the PC market. Generally, multimedia refers to the combination of two or more mediums, such as television and the PC, into one combined information platform. We continue to focus our efforts on this market by supplying products which offer PC/TV convergence, combining PC technology with TV, audio and video technology.

Page 15 of 134

In 2003, we unveiled the latest in our award-winning ALL-IN-WONDER product line, the ALL-IN-WONDER 9800PRO. We offer both notebook and desktop home media PC products. We also offer MPEG encoding software solutions.

Workstation Products

Our FireGL family of workstation graphics boards brings high performance to the digital content creation and computer-aided design workstation PC markets. We offer both desktop and notebook workstation solutions. Our most recent product introductions in this segment include our FireGL X1-256 and FireGL T2-128. Both of these products offer a competitive price/performance combination in their respective segments.

3.4.2 Consumer Electronics Products

Many consumer electronic devices today rely on some form of digital processor to increase functionality, improve reliability, decrease size and lower costs. An easy-to-use display is typically the next consumer priority.

We continue to leverage our core technology, visual processing expertise and power management know-how to create growth opportunities in certain consumer electronics markets. We have initially targeted three markets: (i) DTVs, including set-top boxes; (ii) handheld devices, including colour mobile phones and (iii) video game consoles.

Digital television including set-top boxes

As television broadcasters in North America and the rest of the world convert their analog television signals to DTV transmissions over the next decade, we believe increased consumer interest in DTV will spur demand for more advanced DTVs, projectors and set-top boxes. The United States Federal Communications Commission issued a mandate in 2002 requiring the integration of digital tuners into TV sets and receiver devices by 2007. Digital transmission standards provide significant advantages compared to analog standards, including greater picture clarity and resolution as well as opportunities for more channels, e-commerce and enhanced TV viewing.

We are leveraging our core technology in visual processors by offering visual and signal processing technologies for the DTV market. Our XILLEON 225, THEATRE 310 and SET-TOP-WONDER XILLEON product lines are cost-effective and highly-integrated solutions for this market. We also provide software and support infrastructure to our customers in this segment.

Many of the leading television, projector and set-top box manufacturers, including Sony, Samsung, Epson and Scientific Atlanta have chosen our XILLEON 225 for their new DTV products.

Colour mobile phones and handheld devices

The latest generation of colour mobile phones, PDAs and other handheld devices are driving demand for more advanced visual processors. Higher resolution panels, higher performing embedded processors and increased internal and removable storage are all contributing to rapid changes in handheld and mobile communication devices.

Our IMAGEON product line contributes market leading visual processing and power saving technology as well as a high level of integration. Our IMAGEON 3200 is an advanced multimedia co-processor for handheld electronic devices. It integrates an advanced 2D graphics engine and an MPEG/JPEG decoder alongside a versatile set of peripheral I/O functions. These features make the IMAGEON 3200 suitable for the new generation of colour and feature phones.

Page 16 of 134

Video Game Consoles

We also leverage our core visual processing technology in the video game console market. We provide visual processing technology to Nintendo for its GAMECUBE game console. We believe enthusiasm for computer gaming continues to grow with increasing consumer demand for more realistic, immersive and cinematic experiences.

We have licensed our proprietary ‘Flipper’ chip to Nintendo as the central graphics core of Nintendo’s GAMECUBE video game console. The ‘Flipper’ chip’s highly integrated processor includes both a 2D and 3D graphics engine, a digital signal processor for audio processing, all system I/O functions, including CPU system memory, controllers, optical disk, flash card, modem and video interfaces and an on-chip high bandwidth frame buffer.

3.5 Research and Development

A strong commitment to R&D is fundamental to our success. Due to the rapid pace of technological change in the graphics industry, it is critical that we meet each market window with the newest generation of products that meet market and customer requirements. Ongoing R&D efforts enable us to participate in establishing industry standards as well as design and create new products based on these standards. We continue to strengthen our R&D base through internal R&D efforts, licensing arrangements with third parties and acquisitions of technology companies, when appropriate.

Our primary R&D objective is to develop core technologies that establish a base from which we can quickly design products to meet the ever-changing demands of the PC graphics and multimedia industry. Our dedication to R&D of core technologies has also allowed us to expand our addressable market beyond the PC discrete graphics market to the IGP market and to consumer electronics markets including DTVs, colour mobile phones and video game consoles.

Our net investment in R&D increased from $164.6 million in fiscal 2002 to $213.0 million in fiscal 2003. Our engineering resources increased from approximately 1,250 to more than 1,500 employees during that time.

The following table summarizes our net investment in R&D over the past three years. R&D expenditures include current expenses, such as salaries and certain materials, as well as depreciation of capital assets that were acquired for R&D purposes and prototype and design tools. For R&D activities carried out in Canada, we qualify for Canadian federal investment tax credits (“ITCs”) at the rate of 20% of all eligible current and capital R&D expenditures. We also qualify for tax credits based on R&D activities carried on in the United States. These ITCs are used to reduce current expenses, capital expenditures and federal tax otherwise payable.

Page 17 of 134

Net Investment in Research and Development
(Thousands of U.S. dollars)	Years ended August 31
	2003		2002		2001
			(restated)		(restated)
Gross current R&D expenses	234,719		$182,349		$164,968
Less related ITCs	21,743		17,740		15,503
Net current R&D expenses	212,976		164,609		149,465
Net current R&D expenses as a
percentage of revenues	15.4	%	16.2	%	14.4	%
Capital R&D expenditures, net of ITCs	9,237		15,448		13,672

3.6 Sales

We sell our products through five major sales channels: OEMs, SIs, AIB manufacturers, retail stores and consumer electronics manufacturers.

Our PC OEM customers include Acer, Apple, Dell, Founder, Fujitsu, Fujitsu-Siemens, Gateway, Hewlett-Packard, Hitachi, IBM, Legend, NEC, Packard Bell, Panasonic, Sony, Sun, Toshiba and Trigem.

In the OEM market, it is critical to time the introduction of our graphics products to reflect industry transitions or inflection points and meet the schedules associated with qualifying and shipping products for seasonal buy cycles, typically in the spring and fall. Sales to OEM customers often involve a direct relationship between the customer and our R&D personnel to ensure that the products we are developing meet the needs and specifications of the OEM. A significant portion of the manufacturing of products for OEMs are handled by ODMs, particularly in the notebook market. Our current notebook ODM customers include Arima, Asustek, Compal, First International Computer, Inventec, Quanta, Uniwill and Wistron.

Over the past three years we have worked to establish and broaden our relationships with major AIB manufacturers. We deliver component-level products to these manufacturers who in turn build and sell board-level products using our technology to SIs. Our AIB customers include Asustek, Connect 3D, C.P. Technology, First International Computer, Giga-Byte, Hightech Information Systems, Sapphire, Tyan, Wistron and Yuan.

We also work directly with our SI customers including Actebis, Alienware, Evesham Technology, Falcon Northwest, Kraftway, MaxData Systeme, Medion, Mesh, Unika and Voodoo. SIs typically sell from positions of regional or product-based strength in the market. They usually operate on short design cycles and can respond quickly with new technologies. The SI channel often uses discrete graphics solutions as a means to differentiate their products and add value to their customers.

ODMs also build motherboard products which include integrated chipsets or IGPs. In 2003, we announced strategic alliances with the world’s leading motherboard, notebook and PC design manufacturers to develop products that feature our RADEON 9100 IGP and MOBILITY RADEON 9100 IGP family of products including Asus, Compal, C.P. Technology, First International Computer, Giga-Byte, Lite-On, Micro-Star International, Quanta, Sapphire and Shuttle.

We also sell our PC products through major retailers including Best Buy, CompUSA, Circuit City, Dixons, Future Shop, MediaMarkt, Saturn and Fry’s. Our major e-commerce retailers include buy.com,

Page 18 of 134

CDW.com and Micro Warehouse. The retail market is characterized by significant price sensitivity requiring clear feature and performance differentiation at approximately four different price points.

In our consumer electronics business, we are focused on selling to the top-tier consumer electronics manufacturers. We continue to strengthen our sales organization in the Americas, Japan and the Asia-Pacific region.

In our handheld business, our major customers include Motorola, Sharp and Toshiba. In our DTV business our customers include Changhong Electric (Apex brand), Epson, Funai Electric (Sylvania brand), Pace Micro Technology, Sony, Samsung, and Scientific Atlanta.

In our view, ATI brand awareness increases the efficiency of our reach into each of our sales channels. We have increased our brand awareness programs over the last few years through high profile product launches, targeted event sponsorship and point-of-sale promotion kits. We have also initiated a broad-based sticker program that has resulted in more than 10 million computers bearing the ATI brand.

Our ten largest customers accounted for approximately 70% of our revenues in fiscal 2003, with one customer representing 16%. In fiscal 2002, one customer accounted for 21% of our revenues and our top ten customers accounted for approximately two-thirds of our revenues.

The following table summarizes the breakdown of our revenues by territory as a percentage of total revenues. Our geographical segmentation reflects the locations where we delivered its products to its customers, not where the end customer purchased the PC or consumer electronic device. A significant portion of PCs and consumer electronics devices are currently built in Asia-Pacific, regardless of where the products are sold. Accordingly, the majority of our sales in fiscal 2003 were in the Asia-Pacific region.

	Years ended August 31
	2003		2002		2001
			(restated1)		(restated1)
Canada	1	%	1	%	2	%
USA	19	%	29	%	31	%
Europe	8	%	15	%	24	%
Asia-Pacific	72	%	55	%	43	%
	100	%	100	%	100	%

¹ See note 1(g) to our Consolidated Financial Statements for the year ended August 31, 2003 included in our 2003 Annual Report for an explanation of the restatement.

We maintain a regional sales presence in each of the key industrialized areas of the world. As noted above, however, OEMs, AIB manufacturers and consumer electronics companies are locating their manufacturing operations in the Asia-Pacific region. Our sales organization reflects this geographic weighting. We offer products in all of the major European and Asian languages.

Our sales arrangements with OEMs, AIBs, distributors and key retail customers generally operate on the basis of product forecasts provide by the particular customer, but do not include any commitment or requirement for minimum product purchases. Purchase orders are also typically cancellable by the customer without consequence on 60 days notice to us.

We recognize revenue when evidence of an arrangement exists, risks and rewards of ownership have been transferred to the customer, the selling price is fixed and determinable and collectibility is reasonably assured. Estimated returns and allowances, price protection and sales rebates are recorded as a reduction

Page 19 of 134

of revenue at the time revenue is recognized. In addition, we provide for the estimated cost of product warranties at the time of revenue recognition.

We directly support promotion of our products by system builders, distributors and retailers through cooperative advertising. In addition, we offer a limited hardware warranty to the end-user consumer on all of our branded hardware products. This warranty is supported directly by our customer service department and serves as a further selling feature for AIB manufacturers, distributors and retailers. While we maintain a reserve to cover these policies, there can be no assurance that these reserves will be sufficient or that future price protection claims and product returns will not have an adverse effect on the results of our operations.

Page 20 of 134

3.7 Competition

Our markets are highly competitive and characterized by rapid changes in technology. We provide graphics and multimedia products in all market segments of the PC desktop, mobile, workstation and server markets through OEMs, SIs, AIB manufacturers, distributors and retailers. As a result, we compete with every PC graphics and multimedia company that serves one or all of these distinct market segments. In addition, by integrating new functionality into the graphics accelerator chip and expanding our product line, we continually face new competitors in converging markets, some of whom may be substantial and well-established in those markets. Key competitive factors in the PC, mobile phone and DTV markets are outlined below.

Key Competitive Factors by Market

PC		Mobile Phones		DTV
o	Visual performance, features	o	Power consumption	o	Visual performance
o	and speed	o	Cost	o	Scalability across platforms
o	Cost	o	Size	o	Cost
o	Brand awareness	o	Graphics performance	o	Customer differentiation
o	Comprehensive product line	o	Visual performance		and support
o	Timely product introductions		and speed	o	Timely product introductions
o	Product quality, including
	image quality and software
	stability

In the PC market our competitors include: (i) discrete component suppliers; (ii) AIB manufacturers; (iii) fully-integrated graphics suppliers; and (iv) suppliers of IGPs. These include Intel, Matrox Electronic Systems, nVidia, Trident, Via Technologies and XGI Technology. Other competitors also include a number of smaller companies, which may have greater flexibility to address specific market needs. The growing complexity of visual processors and the associated R&D costs, however, represent an increasingly higher barrier to entry in this market.

In the consumer electronics markets we have different competitors in each of our market segments.

In handheld markets, we have three categories of competitors. Baseband processor vendors have traditionally provided the voice processing functionality in mobile phones. Many of these vendors are expanding their product offerings to encompass the graphics processing required by colour and feature mobile phones. These competitors include Motorola, Philips, Qualcomm and Texas Instruments. Another category of competitor, application processor vendors, has emerged to serve the high-end feature and smart phones that require large amounts of general purpose processing capability. These competitors include Intel, nVidia, Qualcomm, Samsung, STMicroelectronics and Texas Instruments. The third category of competitor, media co-processor vendors, is most closely aligned with our strategy in the colour and mobile phone market. Media co-processor competitors include Epson and nVidia.

In the DTV business our competitors include Broadcom, Conexant Systems, LSI Logic, Philips, STMicroelectronics and Zoran, as well as in-house semiconductor development divisions at companies such as Matsushita Electric (Panasonic brand) and Toshiba.

In the video game console market, we compete primarily against nVidia or “in-house” solutions at companies such as Sony.

Page 21 of 134

3.8 Manufacturing

Component Manufacturing

We have strategic relationships with the two leading semiconductor foundries, Taiwan Semiconductor Manufacturing Company and United Microelectronics Corp., to manufacture our visual processor components. From the foundry, we deliver wafers to our test, assembly and packaging partners including Advanced Semiconductor Engineering Group, King Yuan Electronics, Omert Semiconductor Electronics, Siliconwave Precision Industries and ST Assembly Test Services who package and test the final application-specific integrated circuit (“ASIC”). It is a flexible production line that enables us to balance capacity based upon technology and expertise. In this way we maintain control over the manufacturing process, reduce delivery times and component costs and increase product quality.

Board Manufacturing

Board-level product manufacturing is outsourced to third party manufacturers. They include Celestica, Fairway, Foxconn, HonHai and PC Partner with locations in China and other countries in South East Asia. Our manufacturing facility in Markham, Ontario, Canada is primarily devoted to prototyping and trial runs for new product introductions.

3.9 Customer Service and Support

As service and support is critical to the success of our customers, it is critical to our success. We work closely with our customers by committing R&D resources to achieving optimal compatibility and integration with their products.

We provide regular and ongoing software updates to our customers to continually optimize their product offerings. We also work closely with our customers on demand generation programs aimed at their key markets. We deliver fast and accurate responses to hardware and software developers to ensure that their products, games and applications maximize the potential of our visual processor technology.

With each of our graphics and video accelerator products, we provide drivers and supporting software packages that enable the effective use of our products under a variety of operating systems and applications. In addition to the Microsoft family of operating systems, we support Apple OS9 and OSX, as well as Linux-based applications. Our software provides optimized performance for a variety of CPU platforms (including Intel and AMD based systems), motherboards and chipsets.

We develop our software drivers in many different languages and formats to conform to international user requirements. Our software engineers, scientists and test professionals engage in large scale development of drivers and related software applications in support of OEM, retail and AIB customers. On-time delivery of optimized, unified and reliable software that supports the latest technology enables our customers to market leading-edge and cost-effective ATI-based products.

In 2002, we introduced CATALYST, a software suite that includes unified driver architecture and software applications to enable the RADEON family of graphics products. In 2003, we increased the level of support we provide to our existing customers with monthly postings of our CATALYST software suite. Each CATALYST release features performance improvements, stability and quality improvements and new capabilities, thus permitting us to continuously enhance the value our customers receive from our products.

Unified Drivers

We enable all our PC-based products (discrete and integrated, desktop and mobile, graphics and multimedia) with a unified driver – a single driver product currently supporting all of our RADEON products and executing under all of Microsoft’s supported PC operating systems. The unified driver

Page 22 of 134

concept is useful for customers who do not wish to manage separate software builds for separate ATI parts, and who seek a stable, efficient and backwards-compatible software environment for their PCs. In addition to unified driver support for Microsoft Windows variants, we also provide drivers for the MacOS and Linux environments.

3.10 Human Resources

We had the following number of individuals on payroll, including non-permanent and short-term employees, at August 31 in each of the years noted below:

	2003	2002	2001
Research and development	1,422	1,249	1,117
Operations and administration	461	473	542
Sales and marketing	410	370	373
Total number of ATI personnel	2,293	2,092	2,032

We believe that our ability to attract and retain highly skilled engineering, marketing and management personnel is one of the key factors in our success. None of our employees are governed by collective bargaining agreements. We have never experienced a material work stoppage or strike.

3.11 Facilities

Our head office facilities are located in Markham, Ontario, Canada at 1 Commerce Valley Drive East. This facility comprises approximately 240,000 square feet of office space. We have a 50% interest in the joint venture that owns this facility. We have two other locations in Markham, Ontario. At 33 Commerce Valley Drive East, we own 100% of a facility that comprises approximately 123,000 square feet, including approximately 65,000 square-feet of manufacturing and warehouse space. We lease another facility at 55 Commerce Valley Drive West that comprises an additional 55,000 square feet of office space.

We lease engineering facilities in the United States including approximately 60,000 square feet in Marlborough, Massachusetts and approximately 104,000 square feet in Santa Clara, California. We also lease a number of smaller regional offices in the United States, Europe and the Asia-Pacific region. As a result of the change in our business model over the past three years where we have transitioned to primarily supplying component-level products rather than board products to our customers, we closed our European board manufacturing facility located in Dublin, Ireland in fiscal 2003.

Our operations are subject to a variety of federal, provincial and local environmental laws and regulations. These laws and regulations relate to, among other things, the discharge of contaminants into water and air and onto land, the disposal of waste, and the handling, storage and transportation of hazardous materials. We believe that we are currently in compliance with all applicable environmental laws in all material respects.

Page 23 of 134

3.12 Risks and Uncertainties

Our operations and financial results are subject to various risks and uncertainties which are outlined below. These risks are in addition to those outlined elsewhere in this Annual Information Form and in our filings with Canadian and United States securities regulatory authorities, including Management’s Discussion and Analysis of Operating Results and Financial Position contained in the 2003 Annual Report.

As a result of any or any combination of these risks and uncertainties, our operating results and common share price may be subject to a significant level of volatility, particularly on a quarterly basis.

Our operating results can fluctuate and are unpredictable

Our operating results have been and will continue to be subject to quarterly and other fluctuations due to changing market and economic conditions and various other factors set out below. As a result, our revenues can fluctuate from quarter to quarter, and within a quarter, revenues may vary from month to month. In addition, because our operating expenses are largely independent of revenues in any particular period, we may be unable to rapidly adjust our spending to compensate for an unexpected revenue shortfall, which could harm quarterly operating results. As a result, it is difficult to accurately predict revenues and profits or losses.

Our reported operating results may vary from prior periods or may be adversely impacted in periods when we are undergoing a product line transition during which sales of new products may be ramped up to replace sales of our older products. These older products often come under significant pricing and margin pressure as a result of our competitors’ actions in the marketplace.

As a result of any combination of these or other issues referred to below, our operating results and common share price may be subject to a significant level of volatility, particularly on a quarterly basis. Factors that have affected our operating results in the past and could affect them in the future include, among other things:

o levels of growth or decline in the PC industry;

o rapid and frequent technological change in the PC graphics industry;

o demand and acceptance of our products and those of our customers, including integrated graphics components and consumer electronic devices;

o successful and timely development and production of next-generation products, including products for the consumer electronics market;

o introduction of new products by our competitors;

o availability of licenses for emerging industry technology or other intellectual property rights necessary for the development of new products;

o changes to our overall average selling price ("ASP") resulting from competitive pressures;

o delays or early introduction of new microprocessors or their related chipsets;

o changes to our overall product mix or the geographic regions where our products are sold;

o R&D costs associated with the development of new products;

o increasing product line complexity and the related management of inventory;

o unexpected variances in the cost or availability of materials, especially silicon wafer, memory, printed circuit boards ("PCBs") and packaging costs;

o changes to the expected yield of our component products;

Page 24 of 134

o excess or shortage of manufacturing capacity;

o volume of orders received that can be filled in the quarter;

o seasonal and variable demand associated with the PC industry;

o addition or loss of significant customers; and

o supply constraints and disruptions for other components incorporated into our products and those of our customers.

As a result of the factors listed above, period-to-period comparisons of our operating results should not be relied upon as an indication of future performance. The results of any quarterly period are not indicative of results to be expected for a full fiscal year.

Design wins are critical to our future success

Our future success and ultimate sales achievements will depend in large part on our retaining and/or winning design contracts (“design wins”), which occurs when PC OEMs, ODMs AIB manufacturers or manufacturers of consumer electronics devices choose to use our existing and future products in their various product offerings. Our major customers typically introduce new product offerings as often as twice a year. Accordingly, our products must have competitive performance ratings, adequate feature-sets, consistent quality levels and appropriate prices within the limited time frames of our customers to be included in new system configurations. The failure to win new or retain existing design wins of sufficient volume, sales and profitability could have an adverse effect on our business and operating results.

Our gross margins fluctuate and are difficult to predict

Our overall gross margin is dependent on a number of factors, the principal items being the cost of input materials (mainly silicon, memory, device packaging and PCBs), the manufacturing yield of wafers received from foundries, the ASP of our products and the actual product mix of our revenues. The continuous change in these factors, most of which are beyond our control, cause our overall gross margins to fluctuate from quarter to quarter and make it difficult for us to predict our overall gross margins. In terms of product mix, our business model involves the development and marketing of component and board-level graphics products and technology for desktop and mobile PC, DTV, mobile phone, video game console and multimedia applications. Each of these products or product categories has dissimilar gross margins at any particular time. Consequently, many of our gross margin components fluctuate and the overall corporate gross margin is difficult to predict. Should any of the factors influencing gross margins change substantially, our gross margins could be adversely affected.

We do not have minimum purchase requirements under our sales arrangements with customers

Our sales arrangements with our customers do not include any requirement or commitment for minimum purchases of our products. As a result, we often commit resources to develop products without having received advance purchase commitments from customers. In particular, sales of our component products to customers other than OEMs are subject to volatility on a regular basis as demand is often unpredictable and is susceptible to price competition on a short-term basis. Any inability to sell products to which we have devoted significant resources or the cancellation or deferral of product orders could result in excess inventory. This could result in future inventory write-downs, which could have an adverse effect on our profit margins and financial results and restrict our ability to fund our operations. We may build memory and component inventories during periods of anticipated growth and in connection with selling workstation boards directly to major OEMs. We could be subject to excess or obsolete inventories and be required to take corresponding write-downs if growth slows or if we incorrectly forecast product demand. A reduction in demand could negatively impact our gross margins and financial results.

Page 25 of 134

The success of our business is dependent on the timely introduction of new products that do not contain errors
or defects

The graphics industry is characterized by frequent product introductions and short product life cycles based on constantly improving technologies and new industry standards. In the PC market, it is increasingly important to be among the first to market with new or enhanced products to replace existing products in order to coincide with the introduction of new products by PC OEMs, particularly during the late summer and fall that are the traditional periods in which PC OEMs introduce new products. The consumer electronics markets also have similar design cycles in which new product offerings are traditionally introduced in the fall. This means that we must commit resources to the development and manufacturing of our products without having commitments to purchase from customers. We must also take advantage of new technologies to maintain our competitive edge. If we fail to identify new product opportunities or develop or bring to market these new products or enhancements within the time frame required by customers, if our new products or enhancements are not selected by our customers to be included in their products, or if the products or technologies developed by competitors render our products or technologies non-competitive or obsolete, we may experience reduced demand for our products and loss of market share and our operating results could be adversely affected.

Our business depends to a significant extent on our ability to continually introduce new and enhanced generations of graphics products in order to retain or win customer contracts and maintain ASPs. The life cycles of our products typically range from six to eighteen months. Market demand requires graphics products to incorporate new features and performance standards on an industry-wide basis. Over the life of a specific graphics component, the ASP undergoes regular price reductions. The introduction of new products and enhancements to existing products is necessary to maintain overall corporate ASPs. If we are unable to introduce new products or launch new products without sufficient increases in ASP or increased unit sales volumes capable of offsetting these reductions in ASPs, our revenues, inventories, gross margins and operating results could be adversely affected.

Our business and operating results could be adversely affected if we incur delays in developing new products or enhancements, or if such products or technologies developed by others render our products or technologies non-competitive or obsolete. Products as complex as those offered by ATI may contain defects or failures when introduced or when new versions or enhancements to existing products are released. There can be no assurance that, despite our testing procedures, errors will not be found in new products or releases after commencement of commercial shipments in the future, which could result in loss of or delay in market acceptance of our products, material recall and replacement costs, delay in recognition or loss of revenues, the diversion of the attention of our engineering personnel from product development efforts and damage to our reputation in the industry. Correcting such errors and failures in our products could require significant expenditures. Any such circumstances could have an adverse effect on our business, financial condition or operating results.

The success of our business is dependent upon our ability to introduce products with required features and
performance levels that support and coincide with significant industry transitions

The PC industry is characterized by frequent new product introductions typically centred around hardware and software changes made by Intel and Microsoft. For instance, new PCs are commonly introduced to coincide with new processor, chipset or memory products launched by Intel or new operating systems launched by Microsoft. It is therefore increasingly important that we maintain our ability to introduce new products that take advantage of these industry transitions. In the past, these industry transitions have included the shift to the AGP standard, which underwent a further transition in 2003 with the adoption of the new AGP 8X standard. A new bus standard, PCI Express, will affect the entire PC industry and is expected to be introduced in 2004. Our products must be able to support the new features and performance levels being required by PC manufacturers at the beginning of these transitions and be priced competitively, otherwise, we may lose business as well as the opportunity to retain and obtain design wins until the next product transition. Failing to develop products with required features and performance levels or a delay as short as a few months in bringing a new product to market

Page 26 of 134

could adversely affect our revenues. As well, there can be no assurance that the industry will continue to innovate or improve standards or that the industry will introduce these changes when expected or that we will be able to take advantage of these changes. In the event that such occurrences fail to materialize, our business and operating results could be adversely affected.

A substantial portion of our revenues and our financial performance are dependent upon the PC industry which
is cyclical in nature

We currently derive a substantial portion of our revenue from the sale of graphics and multimedia products for use in PCs. Although the PC industry grew significantly during the late 1990s, since 2001 PC sales have not experienced similar levels of growth. Historically, the PC and semiconductor industries have been characterized by rapid technological change, cyclical market patterns, significant ASP erosion, fluctuating inventory levels, periods of overcapacity and capacity constraints, variations in manufacturing costs and yields and significant expenditures for capital equipment and product development. Growth in PC sales at levels experienced in the past may not occur in the future. Reductions in the sales of PCs reduce the overall demand for our products. Moreover, such changes in demand could be large and sudden, as experienced in fiscal 2001 and in previous years when PC manufacturers built-up inventories in anticipation of a period of significant growth that did not materialize. In such cases, PC manufacturers may abruptly suspend all purchases of additional inventory from their suppliers. In addition, declines in spending by corporations and/or consumers, for example, due to an economic downturn, may negatively affect the PC industry. Any sustained reduction in the demand for PCs could adversely affect our operating results.

The success of our business will be dependent upon the success of our integrated graphics component products

Low-cost PCs account for a significant percentage of PCs sold in the market and are driving the demand for integrated graphics and core logic functions in one chipset. In order for PC OEMs to offer these computers at low prices, overall system costs must be reduced. The costs of integrated graphics components are significantly less than the costs of traditional discrete graphics components, in part due to their reduced functionality and because they do not require separate graphics memory devices.

Integrated graphics chipsets, which are estimated to account for approximately one-half of the desktop systems sold worldwide, represent a significant share of the PC graphics market. Although we currently have a full product line of IGPs to address the integrated market for the Intel-based IGP market, as well as products that address the AMD-based IGP market, if our products do not successfully address this market segment or we cannot produce products on a cost-effective basis, or if we are unable to obtain required licences for future Intel-based products, our business, financial condition and operating results could be adversely affected.

Our royalty revenues, which can compromise a significant part of our earnings, are dependent upon the success
of Nintendo’s GAMECUBE

Our graphics technology for the video game console market is being used by Nintendo in its GAMECUBE products. The only revenues that we receive from this technology are in the form of royalties paid by Nintendo to us based upon the number of GAMECUBE consoles and games sold by Nintendo. Accordingly, our royalty revenues will be directly related to the sales by Nintendo of its GAMECUBE products. We have no control over Nintendo’s marketing efforts. There can be no assurance that sales of Nintendo’s GAMECUBE products will achieve expected levels in the current or future fiscal years. Consequently, the revenues expected by us from this technology may not be fully realized and our operating results may be adversely affected. During the past two fiscal years, a significant amount of our net earnings were derived from Nintendo royalties. Anything that negatively affects the royalties paid by Nintendo to us may adversely affect our operating results.

Page 27 of 134

Our entry into new emerging product markets is subject to a number of uncertainties

We have recently developed graphics and integrated products for the emerging consumer electronics market including DTVs and colour mobile phones. Although this is a relatively new market, there are already a significant number of competitors targeting it. The delay in acceptance of DTV technology has also provided further opportunities for competitors to enter this market. In addition, as the telecommunications, cable and consumer electronics industries and their suppliers undergo a period of convergence, we expect that competition will increase in these markets. Our ability to succeed in these new consumer markets is subject to a number of uncertainties, including acceptance of our products, the development of new technologies sufficient to meet market demand, the need to develop customer relationships, different sales strategies and channels, new and different industry standards from those in the PC market and changing strategic alliances. There can be no assurance that we will be able to successfully compete in these new emerging markets. If we are unable to successfully introduce products in these new markets as they expand, our business, financial condition and operating results could be adversely affected.

The markets in which we carry on business are highly competitive

The markets in which our products are sold are very competitive and are expected to remain as such due to rapid technological changes, frequent product introductions and declining selling prices. Furthermore, the consolidation of our competitors has increased the level of competition in the graphics industry. We believe that the consolidation of our competitors in the PC graphics market segment of the PC market has stabilized and that there are now three main players in the PC market. We believe that the main factors that will determine our competitiveness in the PC market are technical product performance, price, product features, time-to-market, conformity to industry standard application programming interfaces, the ability to deliver consistent volume and quality of products, quality and stability of software drivers as well as technical support. We expect that competition will intensify in these areas and there can be no assurances that our competitors’ products will not be less costly, provide better performance or include additional features that render our products uncompetitive. Increased competition may require us to reduce our prices and/or invest further in R&D and sales and marketing efforts, which may negatively affect our operating results.

Some of our competitors, in particular Intel, have greater financial and other resources than we do and may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. Further, some competitors have greater access or rights to companion technologies, including interface, processor and memory technical information. They may also be able to undertake more extensive marketing efforts and adopt more aggressive pricing policies. Several of our smaller competitors may have greater flexibility within niche markets and better name recognition in connection with specific market needs. As a result, there can be no assurance that we will be able to maintain our competitive position and market share against current or future competitors. If we do not remain competitive, our business and operating results could be adversely affected.

Intel has a dominant position in the PC industry and has greater resources than we do. Our success is dependent upon our ability to continue to develop products that are both compatible and competitive with Intel’s technology

In 1999, Intel began shipping integrated graphics component products that were targeted at the low-cost PC market. Intel is the world’s largest manufacturer of PC processors and has significantly greater resources than we do. Given its significant leadership position and the large cost of the microprocessor relative to other components within the PC, it is possible that Intel could combine graphics components or functionality with its microprocessors on a cost-effective basis. Our integrated chipset products may not be able to successfully compete with Intel’s products on the basis of price or performance. We expect Intel to invest heavily in R&D and in marketing and selling campaigns to engender brand loyalty with PC manufacturers and users. We also expect Intel to maintain its dominance of the PC platform. These and other selling advantages could render our integrated chipset products uncompetitive on a cost basis.

Page 28 of 134

Due to the widespread adoption of Intel’s microprocessor architecture and interface architecture, including the current AGP interface and the upcoming PCI Express interface expected to be adopted by the industry in 2004, Intel has the ability to create and influence key industry standards in the PC industry. We rely on our ability to obtain and maintain licenses from Intel in order to use certain proprietary Intel technology in our products. Any significant modifications by Intel to the AGP standard, the microprocessor, core logic components or other aspects of the PC microprocessor architecture or any delay in the public release of such modifications could result in incompatibility with our technology. Any such incompatibility or the inability to obtain or the termination of any required license to use such technology could have an adverse effect on our business, financial condition and operating results.

We currently have a full line of IGP products for the Intel-based platform intended to compete with and complement Intel’s family of integrated products. Currently, integrated graphics components interface with Intel microprocessors through an Intel bus. There can be no assurance that Intel will not attempt to prevent us from manufacturing current or future Intel bus compatible products. There can also be no assurance that our products will compete effectively against Intel’s current or future integrated products, that Intel will not aggressively use its industry position to undercut prices, or that Intel will not introduce additional products that are directly competitive with our products.

Intel spokespeople have previously stated that Intel has exited the discrete graphics business. There can be no assurance, however, that Intel will not re-enter the discrete graphics market, that Intel will not license a graphics core from competitors or that Intel will not acquire a graphics accelerator company and again compete with us in the discrete graphics component market.

Our revenues are dependent upon a small number of customers

A significant portion of our revenues are derived from sales made to a small number of customers. In 2003, our top ten customers accounted for approximately 70% of our revenues, with one customer representing 16% of our revenues. We expect that a small number of customers will continue to account for a substantial part of our revenues in the future. Continued sales to these customers, however, are dependent on us continuing to achieve design wins with these customers. The loss of business or failure to achieve design wins from one or more of such customers without adding new sources of revenues would have an adverse effect on our financial results.

Other risks associated with our dependence on a small number of customers include: unexpected delays in the introduction of our customers’ products, resulting in a change in the timing of their orders, extended accounts receivable, cancellation of customer orders resulting in excess inventory and unexpected inventory write-downs and the inability to secure alternative purchasers for our products. Furthermore, if any one of our customers experiences financial difficulty, the risk exists that we may be required to write-off the bad debts of such customer. Any of these events could have an adverse effect on our financial results.

We rely on third party foundries and other contractors to manufacture our products

We are a “fabless” semiconductor company and therefore relies on independent foundries or “fabs” (currently Taiwan Semiconductor Manufacturing Company and United Microelectronics Corp.) to manufacture our component products. We also use independent contractors to perform the assembly, testing and packaging of our products. As is typical in the graphics industry, we obtain manufacturing services on a purchase order basis and our fabs are under no obligation to provide us with any specified minimum quantity of product. We depend on these suppliers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis. There can be no assurance that these manufacturers will be able to meet our near-term or long-term manufacturing requirements. Indeed, continued market acceptance of our products will depend on reliable relationships with our wafer manufacturers and subcontractors to ensure adequate product supply to respond to customer demand. Because it could take several quarters to establish a strategic relationship with a new

Page 29 of 134

manufacturing partner, we may be unable to secure an alternative supply for any specific product in a short time frame. Other risks associated with our dependence on third-party manufacturers include: reduced control over delivery schedules, quality assurance, manufacturing yields and cost, lack of capacity in periods of excess demand, misappropriation of our intellectual property, dependence on several small undercapitalized subcontractors, reduced ability to manage inventory and parts, and exposure to foreign countries and operations, including exposure to political instability and natural disasters.

Currently, the third party wafer plants used to manufacture our products are located in Hsin Chiu and Tainan, Taiwan. Many of our assembly, testing and packaging suppliers are also located in southern Taiwan. On September 22, 1999, Taiwan suffered a major earthquake that measured 7.6 on the Richter scale and disrupted the operations of our manufacturing suppliers and contributed to a temporary shortage of graphics processors. Additional earthquakes or other occurrences that disrupt our manufacturing suppliers may occur in this region in the future. To the extent that the supply from our fabs or other suppliers is interrupted for a prolonged period of time or terminated for any reason, we may not have sufficient time to replace our supply of products manufactured by those fabs.

As well, each wafer manufacturer has unique design rules and proprietary process technology to which we must adapt our products. If we move production of our products to new manufacturers or if current manufacturers implement new process technology or design rules, any transition difficulties may result in lower yields or poorer performance of our products. Any inability of ATI to secure sufficient or reliable supplies of wafers may adversely affect our ability to meet customer demand for our component and board products and, as a result, could have an adverse effect on revenues and operating results.

Our business is dependent upon an adequate supply of component parts from a limited number of suppliers

Certain non-proprietary components (such as memory, PCBs and capacitors) used in the manufacture of our products and by OEMs in the manufacture of desktop and notebook PCs are currently available from only a limited number of sources and are often subject to rapid changes in price and availability. If these suppliers fail to deliver these components or increase prices, we may not be able to find alternative sources of supply. This would result in increased costs, delays or reductions in product shipments, and adversely impact our operating results. We may not be able to pass through to our customers increases in component costs. Any inability to manage fluctuations in component prices may adversely affect our gross margins and operating results.

Our business and operating results are dependent upon achieving planned semiconductor manufacturing yields

The fabrication of semiconductors is a complex process. Contaminants, defects in masks used to print circuits on wafers, difficulties in the fabrication process and other factors can cause a substantial percentage of wafers to be rejected or a significant number of die on each wafer to be non-functional. These problems are difficult to diagnose and time-consuming and expensive to remedy. As a result, semiconductor companies frequently encounter difficulties in achieving acceptable production yields from processing wafer. In addition, more complex manufacturing processes, such as the 0.13 micron design technology and 12 inch wafer technology which were introduced last year in the industry, often initially result in lower and more unstable yields. As a consequence of our move to a customer-owned tooling manufacturing process where we have the responsibility for the design and performance of the tooling required for manufacturing, we bear the financial risks and benefits associated with product yields. As such, our profitability is significantly affected by the manufacturing yield that we achieve in the production of our component products. Our inability, in cooperation with our wafer manufacturers, to achieve or maintain planned production yields could have an adverse effect on our business and operating results.

Page 30 of 134

Semiconductor manufacturing yields are a function both of product design, which is developed largely by us, and process technology, which is typically proprietary to the manufacturer. Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until the actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used. Furthermore, some defects cannot be identified until tested on a customer’s board design. We face the risk of product recalls resulting from design or manufacturing defects that are not discovered during the manufacturing and testing process. In the event of a significant number of product returns due to a defect or recall, our net revenues and profitability could be adversely affected. In addition, yield problems require cooperation by and communication between us and the manufacturer and sometimes the customer as well. The offshore location of our principal manufacturers compounds these risks, due to the increased effort and time required to identify, communicate and resolve manufacturing yield problems. There can be no assurance that we or our fabs will identify in a timely manner, fix and/or achieve acceptable manufacturing yields in the future. Failure to reach planned production yields over time could result in us not having sufficient product supply to meet demand, and/or higher production costs and lower gross margins. This would adversely affect our operating results.

To remain competitive, we must transition to new manufacturing process technologies, however, this transition
may result in reduced manufacturing yields and delay the introduction of new products

Process technology defines the minimum transistor size used to design semiconductors. The finer the process technology, the greater the number of transistors a chip designer is able to build into a semiconductor. Our strategy is to use the most advanced process technology appropriate for our products and available from our fabs. We continually assess the benefits of migrating to smaller process technologies in order to improve performance and lower costs. However, the use of more advanced processes may have a greater risk of initial yield problems. We believe that the transition of our products to increasingly smaller process technologies will be important to maintain our competitive position and we intend to migrate to smaller process technologies with our future products as these technologies become viable. Due to the inherent risk of transitioning to new technologies, however, there can be no assurance that we will not experience reduced yields or delays in product delivery dates. Moreover, we are dependent on our third-party fabs to successfully migrate to new manufacturing processes. Any such failure by us or our fabs could have an adverse effect on our business, financial condition and operating results.

Our ability to design and introduce new products in a timely manner is dependent upon third party development tools

In the design and development of new products and product enhancements, we rely on third-party software development tools. While we are not currently dependent on any one vendor for the supply of these tools, some or all of these tools may not be readily available in the future. For example, we have experienced delays in the introduction of products in the past as a result of the inability of then available software development tools to fully simulate the complex features and functionalities of our products. The design requirements necessary to meet consumer demands for more features and greater functionality from graphics products in the future may exceed the capabilities of the software development tools available to us. If the software development tools that we use become unavailable or fail to produce designs that meet consumer demands, our business could suffer.

Our success is dependent on proprietary technology, however, there can be no assurances that applicable laws will be adequate to prevent misappropriation of our technology

Our success is heavily dependent upon proprietary technology. We rely principally upon a combination of copyright, trademark, patent and trade secret laws, restrictions on disclosures and contractual provisions to protect our proprietary and intellectual property rights. There can be no assurance, however, that these laws and procedures will be adequate to prevent misappropriation of our technology or independent third party development of the same or similar technology. Unauthorized parties may attempt

Page 31 of 134

to copy or otherwise obtain and use our technology, which could weaken our competitive position. In addition, there can be no assurance that the protection provided to our proprietary technology by the laws of foreign jurisdictions will be substantially similar to the remedies available to us under the laws of Canada or the United States. Any claims or litigation that we initiate to protect our proprietary technology could be time consuming and costly and divert the attention of our technical and management resources whether or not the claims or litigation are determined in our favour.

Our operating earnings will be negatively affected when we are required to expense stock options beginning in fiscal 2005

Since our inception, we have used stock options and other long-term equity incentives as a fundamental component of our employee compensation packages. We believe that stock options and other long-term equity incentives directly motivate our employees to maximize long-term stockholder value and, through the use of vesting, encourage employees to remain with us. The Canadian Institute of Chartered Accountants (“CICA”), has recently approved changes to Canadian generally accepted accounting principles (“GAAP”) that will require us to record a charge against earnings for employee stock option grants beginning in the fiscal year commencing September 1, 2004. This change will have a negative impact on our earnings determined in accordance with GAAP. The amount of the charge against earnings will be dependent upon the number of stock options granted in any fiscal year and will be calculated utilizing the fair-value method of accounting. The new standard requires us to choose from alternative methods of application when adopting the fair-value basis of accounting. We have not yet determined which of the alternatives that we will choose. To the extent that new regulations adopted in Canada or the U.S. make it more difficult or expensive to grant options to employees, we may incur increased cash compensation costs and we may find it difficult to attract, retain and motivate employees; either could materially adversely affect our business and operating results.

Our sales and earnings are subject to foreign currency risks

A substantial amount of our operating expenses are denominated in Canadian dollars. However, our results our reported in U.S. dollars. As a result, an appreciation in the value of the Canadian dollar relative to the U.S. dollar will have a negative impact our earnings. In fiscal 2003, the rise of the Canadian dollar relative to the U.S. dollar from 64 cents to 73 cents had an approximate $5.0 million negative impact on our operating earnings. Should the Canadian dollar remain at current levels of 76 cents relative to the U.S. dollar, we expect an approximate $17 million increase in expenses in fiscal 2004 relative to fiscal 2003 solely due to the rise in value of the Canadian dollar.

The majority of our product sales are denominated in U.S. dollars. To the extent that our products are purchased by customers using currencies other than the U.S. dollar, fluctuations in the exchange rate between the U.S. dollar and the local currency can cause increases or decreases in the cost of our products in the local currency of such customers. An appreciation of the U.S. dollar relative to the local currency could reduce sales of our products.

Our business is subject to operational and financial risks associated with our international operations

We maintain operations in a number of other countries including the United States, Germany, Japan, Taiwan, Hong Kong, Malaysia, China and Barbados. In addition, a substantial portion of our products are manufactured, assembled and tested by independent third parties in the Asia-Pacific region. We sell the majority of our products in the United States, Europe and the Asia-Pacific region. Accordingly, we are subject to various geopolitical risks in connection with our international sales and operations. These risks include political and economic instability, changes in diplomatic and trade relationships, natural disasters and unexpected changes in legislative or regulatory requirements. These risks could result in an increase in the cost of components, delays from difficulties in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, potentially longer payment cycles, potentially adverse taxes, restrictions on the repatriation of funds and the burdens of complying with a variety of foreign laws, any of which could ultimately have an adverse effect on our revenues and operating results.

Page 32 of 134

Any legal or regulatory proceedings brought against us may be time-consuming and costly to defend and, if we are unsuccessful in defending against them, may be detrimental to our business and financial condition

We are subject to legal proceedings and claims that arise in the ordinary course of business. On January 16, 2003, the Ontario Securities Commission (the “OSC”) filed a notice of hearing and statement of allegations against us and certain of our present and former directors and officers, including our Chief Executive Officer. We have incurred substantial costs associated with the regulatory proceedings and cannot predict the level of additional costs that will be incurred in the future. If, as has been requested by OSC staff, our Chief Executive Officer is prohibited from being an officer or director of ATI, it could have a material adverse effect on our business and results of operations and could have an adverse impact on the market price of our common shares.

Please see “Narrative Description of the Business – Legal Proceedings and Regulatory Matters” for a description of class action proceedings in the United States and the regulatory proceedings in Ontario.

In addition, the industries in which we compete are characterized by frequent claims and related litigation regarding patent and other intellectual property rights. There is a risk that our current or future products may infringe third-party intellectual property rights. Any claim, whether or not with merit, could be time-consuming to evaluate, result in costly litigation, cause product shipment delays or stoppages or require us to enter into licensing agreements that may require the payment of a license fee and/or royalties to the owner of the intellectual property. In the event that a third party were to sustain a valid claim against us or our customers and we are not able to procure a license to permit the continued use of the third party’s intellectual property, our operating results could be adversely affected. We may also be required to pay damages or lost profits, modify our products, discontinue products and/or indemnify our customers. Should any such claims or proceedings against us be successful, our business, financial condition and operating results may be adversely affected.

Our inability to maintain adequate levels of insurance, particularly in Taiwan, could adversely affect our operating results in the event of a significant loss

To the extent available on commercially reasonable terms and subject to underwriting conditions, exclusions and deductibles, we maintain insurance coverage with recognized, licensed insurers against loss or damage to our assets, including losses as a result of unforeseen business interruptions. Property and business interruption insurance coverage is only available on a limited basis with respect to assets and property located in certain geographical areas, particularly Taiwan. A significant amount of our inventories are produced and stored in Taiwan, prior to delivery to customers. Damage to the inventories held in Taiwan, as a result of a natural disaster or other cause, could result in a significant loss for which no insurance coverage would be available. In the event insurance coverage is not available or is subject to limits or significant deductibles or is denied in respect of any losses or claims, our business, financial condition and operating results could be adversely affected.

Our business is dependant on our head office remaining free from a major shut down

Our international operations depend on the availability of administrative support in areas such as finance, human resources and sales in order to operate efficiently in their local markets and complete transactions with our customers. Our international offices, particularly those in the Asia-Pacific region, where a majority of our sales take place, do not have local administrative support in a number of these areas. In August 2003, our head office in Markham, Ontario experienced a temporary shut down due to a widespread power blackout in Ontario and the northeastern United States. In the spring of 2003, the outbreak of the SARS virus in the Toronto area also impacted employees at our head office. Any unexpected and prolonged shut down of our head office in the future for any reason whatsoever could hinder our ability to effectively and efficiently manage our international business operations and could adversely affect our revenues and operating results.

Page 33 of 134

Future acquisitions may have a significant impact on our business and financial condition and could result in dilution of the current common shareholders

We may pursue product or business acquisitions in order to complement or expand our business. However, we may not be able to identify appropriate acquisition candidates in the future. If an acquisition candidate is identified, we may not be able to successfully negotiate the terms of any such acquisition, finance such acquisition or integrate such acquired product or business into our existing products and business. The negotiation of potential acquisitions could divert management’s time and resources and require significant funds to consummate. The process of combining with another company or integrating an acquired product may be disruptive to our business and may result in unforeseen operating difficulties requiring significant financial resources that would otherwise be available for the ongoing development or expansion of our existing operations. Possible future acquisitions could result in us incurring contingent liabilities and amortization expenses related to intangible assets, all of which could have an adverse effect on our financial condition and operating results.

Further, we may finance future acquisitions through borrowings or otherwise incur indebtedness in connection with acquisitions. We may be required to generate cash flow from operations to service that indebtedness and may not be able to do so. We may also be required to refinance this indebtedness upon its maturity and we may not be able to do so on acceptable terms. In addition, if we consummate one or more significant acquisitions through the issuance of common shares, holders of common shares could suffer significant dilution of their ownership interests.

The success of our business is dependent upon our ability to recruit and retain key employees

Our success is dependent on the performance and continued service of our executive officers and certain key employees. None of our officers or employees are bound by an employment contract nor do we have “key person” life insurance policies on any of our employees. Competition for high-level engineering, marketing, sales and executive personnel is intense. Key employees may pursue equity opportunities elsewhere. Start-up companies generally offer greater equity opportunities to attract individuals from more established companies. There can be no assurance that we will be able to retain existing personnel or attract, hire and retain additional qualified personnel. The loss of service of certain key managers and executives or the failure to attract, hire and retain additional key employees could restrict our ability to develop new products or enhance existing products in a timely manner, sell products to our customers and potential customers, or manage our business effectively.

Our business and products are subject to government regulation

Canadian federal, provincial and local authorities as well as foreign authorities in applicable jurisdictions regulate our business. Our board-level graphics accelerator products are required to meet the standards set by Industry Canada, the Federal Communications Commission in the United States and the European Economic Community in order to ensure that they do not interfere with the operation of other consumer electronics products. Any significant delays in meeting the standards applicable to our products in the future could adversely affect our competitive and financial position.

Our business is subject to potential tax liabilities

We are subject to income taxes in both Canada and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, there is no assurance that the final determination of any tax audits and litigation will not be materially different from that which is reflected in historical income tax provisions and accruals. Should additional taxes be assessed as a result of an audit or litigation, there could be a material effect on our income tax provision and net income in the period or periods for which that determination is made.

Page 34 of 134

3.13 Legal Proceedings and Regulatory Matters

On December 16, 2002, we disclosed that staff of the OSC had raised concerns regarding the timeliness of our announcement on May 24, 2000 of a shortfall in our revenues and earnings for the third quarter of our 2000 fiscal year. We also reported that we were aware that OSC staff had raised concerns about trading that took place prior to the announcement by certain of our insiders and others, including certain directors and officers. On January 16, 2003, OSC staff filed a notice of hearing and statement of allegations in relation to us and others. The notice alleged that we failed to disclose information concerning the shortfall in revenues and earnings that occurred in the third quarter of fiscal 2000, as required by the listing rules of the Toronto Stock Exchange. The notice also alleged that we made a misleading statement to OSC staff in August 2000 regarding the events leading up to the disclosure on May 24, 2000 of the shortfall. Seven individuals were named in the notice. The notice alleged that six of these individuals, including K.Y. Ho, the Chairman and Chief Executive Officer of ATI, engaged in insider trading contrary to the Securities Act (Ontario). We cannot measure the extent to which the negative publicity and uncertainty relating to these proceedings are impacting our business and/or financial condition. We cannot currently predict with any certainty the extent of the impact that these proceedings will continue to have on our business due to the uncertainty of the timing and nature of their resolution or whether any fines or penalties will be imposed on us by the OSC that might have a material adverse effect on its business or financial condition. One of the remedies sought by OSC staff against the named individuals, including Mr. Ho, is a prohibition on acting as a director or officer of a public company. If Mr. Ho is prohibited from being an officer or director of ATI, it could have an adverse effect on our business and results of operations and could have an adverse impact on the market price of our common shares. We have incurred substantial costs to date in connection with the OSC notice of hearing and expect to incur additional costs in the future which could materially and adversely affect our operating results and financial condition. These proceedings and any resulting penalties or fines may have a material adverse impact on the market price of our common shares and our ability to raise equity financing in the future or complete acquisitions involving the issuance of our common shares as all or a portion of the purchase price.

In May and June 2001, certain holders of our securities commenced four class action lawsuits in the United States District Court for the Eastern District of Pennsylvania (the “Court”) alleging that we and certain of our directors and officers violated the Securities Exchange Act of 1934 and common law by making material misstatements of, or omitting to state, material facts related to our business operations, prospects and financial conditions. These lawsuits were filed on behalf of shareholders who acquired our common shares between January 13, 2000 and May 24, 2000. The plaintiffs were seeking compensatory and punitive damages in each of the class actions. The Court consolidated all four actions and permitted the plaintiffs to file a consolidated amended complaint. On July 23, 2002, the Court granted in part and denied in part the defendants’ motion to dismiss the consolidated amended complaint, and the parties thereafter engaged in fact discovery concerning the claims remaining in the lawsuit. On November 1, 2002, the Court granted the plaintiffs’ motion for class certification and certified a class of all persons or entities who purchased our common shares on the NASDAQ National Market during the period of January 13, 2000 through May 24, 2000. Following a Court ordered mediation, the parties reached an agreement providing for the full and complete settlement of all claims asserted in the consolidated lawsuits for a cash payment by ATI of $8.0 million. The terms of the Stipulation and Agreement of Settlement, which received court approval on April 28, 2003, included no admission of liability or wrongdoing by ATI or other defendants. During the fourth quarter of fiscal 2003, we received $3.3 million from our insurers as its contribution toward the settlement payment.

In May 2003, Cirrus Logic (“Cirrus”) brought suit against us in the United States District Court for the Western District of Texas, Austin Division, for infringement of a Cirrus patent relating to graphics processor technology. In addition, a separate patent infringement suit relating to a different Cirrus patent had been pending in the United States District Court for the Northern District of California, San Francisco Division, since July 1998. In September 2003, ATI and Cirrus announced that we had entered into a cross-license agreement and had settled all outstanding litigation. Under the settlement agreement, all

Page 35 of 134

outstanding claims and counterclaims in both lawsuits between Cirrus and ATI were dismissed. In connection with the settlement, Cirrus transferred to us a portion of its patent portfolio relating to the former graphics products group of its PC products division, a business that Cirrus exited several years ago, and we paid Cirrus $9.0 million.

Page 36 of 134

ITEM 4. SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following tables summarize selected financial information for ATI on a consolidated basis during the last three fiscal years.

	(Thousands of U.S. dollars, except per share amounts)
Statement of Operations Data
	2003		2002		2001
			(Restated1)		(Restated1)
Revenues	$ 1,385,293		$ 1,015,779		$ 1,040,365
Cost of goods sold	952,001		682,385		799,038
Gross margin	433,292		333,394		241,327
Expenses
Selling and marketing	96,925		77,920		75,594
Research and development	212,976		164,609		149,465
Administrative	39,413		35,662		37,261
Amortization and write-down of goodwill
and intangible assets	10,767		97,501		114,507
Other charges	28,724		--		--
	388,805		375,692		376,827
Income (loss) from operations	44,487		(42,298	)	(135,500	)
Interest and other income, net	4,382		732		64,131
Interest expense	(1,899	)	(659	)	(1,180	)
Income (loss) before income taxes	46,970		(42,225	)	(72,549	)
Income taxes (recovery)	11,741		6,854		(18,760	)
Net income (loss)	$      35,229		$   (49,079	)	$   (53,789	)
Net income (loss) per share
Basic	$0.15		$(0.21	)	$(0.23	)
Diluted	$0.14		$(0.21	)	$(0.23	)
Balance Sheet Data
Working capital	$   430,288		$357,804		$321,325
Capital assets	86,890		95,838		71,487
Total assets	1,116,058		909,370		844,958
Total long-term debt	28,073	2	15,798	3	--
Shareholders' equity	699,609		643,178		679,400

¹ See Note 1(q) to our Consolidated Financial Statements for the year ended August 31, 2003 included in our 2003 Annual Report for an explanation of the restatement.

2 Comprised of a capital lease obligation.

3 Comprised of a capital lease obligation and mortgage payable.

Page 37 of 134

Dividend Policy

We have neither declared nor paid any cash dividends to date on its outstanding shares. We intend to retain our future earnings to finance the development of our business and, accordingly, do not anticipate paying any cash dividends on our common shares in the foreseeable future.

ITEM 5. MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s Discussion and Analysis of Operating Results and Financial Position, as set out on pages 10 to 28 of our 2003 Annual Report is incorporated herein by reference.

ITEM 6. MARKET FOR SECURITIES

Our common shares are listed on the Toronto Stock Exchange under the symbol “ATY” and the NASDAQ National Market under the symbol “ATYT”.

ITEM 7. DIRECTORS AND OFFICERS

The following table sets forth the name and municipality of residence, position held with ATI and principal occupation of each of the directors and corporate officers of ATI as of December 31, 2003. Directors of ATI hold office until the next annual meeting of shareholders or until their successors are duly elected or appointed.

7.1 Directors

Name and Municipality of Residence	Position Held in the Company	Director Since	Principal Occupation
K.Y. HO	Chairman, Chief Executive	1986	Officer of ATI
Toronto, Ontario	Officer and Director
ALAN D. HORN (1)(4)	Director	1993	Vice President, Finance and
Toronto, Ontario			Chief Financial Officer, Rogers
			Communications Inc., a cable,
			internet access, wireless data,
			broadcasting and publishing
			company.
JAMES D. FLECK (1)(2)(3)(5)	Director	1995	Chairman, Fleck Management
Toronto, Ontario			Services Ltd., a management
			services company.
PAUL RUSSO (2)	Director	2002	Chairman, President and
Los Altos Hills, California			Chief Executive Officer,
			Silicon Optix Inc., a fabless
			semiconductor company.
RONALD CHWANG (3)	Director	2003	Chairman and President, Acer
Los Altos Hills, California			Technology Ventures, America
			LLP, a high-tech venture capital
			company.
JOHN E. CALDWELL (1)(2)(3)(4)	Director	2003	Independent consultant and
Toronto, Ontario			corporate director.

Page 38 of 134

Name and Municipality of Residence	Position Held in the Company	Director Since	Principal Occupation
ROBERT A. YOUNG (1)	Director	2003	Chairman and Chief Executive
New Canaan,			Officer, IRT, Inc., a personal
Connecticut			investment company.

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

(3) Member of the Governance and Nominations Committee.

(4) Mr. Horn and Mr. Caldwell would each be considered a “financial expert” as defined under the United States Sarbanes-Oxley Act of 2002 and the rules of the United States Securities and Exchange Commission.

(5) Lead director of the Board.

We do not have an executive committee. During the past five years, all of our directors have held their principal business affiliations as noted opposite their respective names except that:

(a) prior to April 2000, Dr. Russo was the Chief Executive Officer of Genesis Microchip Inc.;

(b) prior to October 2002, Mr. Caldwell was a consultant to GEAC Computer Corporation Limited (“GEAC”) and prior to December 2001, Mr. Caldwell was the President and CEO of GEAC; prior to October 1999, Mr. Caldwell was the President and CEO of CAE Inc.; and

(c) prior to February 2002, Dr. Young was the Chairman and CEO of Curl Corporation; prior to December 1997, Dr. Young was Managing Director with Dillon, Read & Co. and prior to December 1986, Dr. Young was the President of IBM Instruments.

Mr. Caldwell was also a director of Mosaic Group Inc. (“Mosaic”) in December 2002 when it obtained a court order under the Companies Creditors Arrangement Act (Canada) to initiate the restructuring of its debt obligations and capital structure.

Page 39 of 134

7.2 Corporate Officers

Name and Municipality of Residence	Position Held in the Company	Principal Occupation
K.Y. HO	Chairman and Chief Executive Officer	Officer of ATI
Toronto, Ontario
DAVID ORTON	President and Chief Operating Officer	Officer of ATI
Los Altos, California
TERRY NICKERSON	Senior Vice President, Finance and Chief	Officer of ATI
Mississauga, Ontario	Financial Officer
MICHEL CADIEUX	Senior Vice President, Corporate Services	Officer of ATI
Aurora, Ontario
ADRIAN HARTOG	Senior Vice President and General Manager,	Officer of ATI
Toronto, Ontario	Consumer Business Unit
RICK BERGMAN	Senior Vice President, Marketing and General	Officer of ATI
San Jose, California	Manager, Desktop Business Unit
RICK HEGBERG	Senior Vice President, Worldwide Sales	Officer of ATI
Mendham, New Jersey
PHIL EISLER	Vice President and General Manager, Integrated	Officer of ATI
Toronto, Ontario	and Notebook Business Unit
HENRY QUAN	Vice President, Corporate Development	Officer of ATI
Woodbridge, Ontario
GIL CHRISTIE	Vice President, Board Operations	Officer of ATI
Thornhill, Ontario
JIM SETO	Vice President, ASIC Engineering Operations	Officer of ATI
Richmond Hill, Ontario
LOUISE CRAGG	Vice President, Information Technology	Officer of ATI
Toronto, Ontario
RAYMOND LI	Vice President, Hardware Engineering	Office of ATI
Toronto, Ontario
BENJAMIN BAR-HAIM	Vice President, Software Engineering	Officer of ATI
Richmond Hill, Ontario
BRYAN ROBB	Vice President and General Counsel	Officer of ATI
Toronto, Ontario
JASON PETERSON	Vice President, Finance	Officer of ATI
Toronto, Ontario
DEAN BLAIN	Corporate Secretary	Solicitor
Toronto, Ontario

During the past five years, all of the corporate officers of ATI have held the positions noted opposite their respective names or other senior positions with ATI, except:

o David Orton who, prior to April 2000, was President and Chief Executive Officer, ArtX, Inc. and, prior to May 1999, was Senior Vice President and General Manager, Visual Computing and Scalable Systems, Silicon Graphics Inc.

o Terry Nickerson who, prior to November 2000, was Vice President, AGD Division, Stackpole Limited; prior to December 1998, was Vice President Finance and Chief Financial Officer, Stackpole Limited; and prior to April 1998, was Executive Vice President, Rathon Inc., a subsidiary of Molson, Inc.

Page 40 of 134

o Michel Cadieux who, prior to September 2000, was Vice President, Human Resources, at Telemedia Communications Inc. and, prior to January 1998, was Vice President, Human Resources, at ING Bank of Canada.

o Gil Christie who, prior to April 1999, was Director of Operations, Digital Equipment of Canada.

o Louise Cragg who, prior to September 2000, was Vice President, Information Technology, Cara Restaurant Operations and, prior to July 1998, was Vice President, Information Systems and Technology, Tibett & Britten.

o Rick Bergman who, prior to January 2001, was Chief Operating Officer of S3 Graphics, a division of SONICblue Inc.

o Rick Hegberg who, prior to January 2003, was the Chief Executive Officer of Net Octave; prior to January 2001, was the Vice President, North American Sales of Agere Systems Inc. (formerly Lucent Microelectronics); and prior to October 1997, was Vice-President, Worldwide Sales and Marketing of Trident Microsystems, Inc.

o Bryan Robb who, prior to March 2001, was Vice President, Corporate Affairs and General Counsel of Cedara Software Corp.

o Benjamin Bar-Haim who, prior to January 2001, was President of Array Systems Computing.

o Jason Peterson who, prior to October 2003, was Director of Strategic Planning at ATI; prior to January 2001, was the Controller for ATI Research Silicon Valley Inc.; prior to April 2000, was the Corporate Controller for ArtX; and prior to October 1999, was a Controller for various business units at Phillips Semiconductor.

As at December 15, 2003, the directors and senior officers of ATI as a group beneficially owned, directly or indirectly, or exercised control or direction over 7,076,391 common shares, representing approximately 2.9% of the outstanding common shares of the Company. The information as to shares owned indirectly or over which control or direction are exercised by the directors and officers, but which are not registered in their names and not being within the knowledge of the Company, has been furnished by such directors and officers.

The success of the Company is dependent on the services of a number of members of senior management. The experience of these individuals will be a factor contributing to the Company’s continued success and growth. The loss of one or more of these individuals could have a material adverse effect on the Company’s operations and business prospects.

Page 41 of 134

ITEM 8. ADDITIONAL INFORMATION

8.1 Annual Report and Management Information Circular

Additional information with respect to ATI, including directors’ and officers’ remuneration and indebtedness, principal holders of our securities and options to purchase securities and interests of insiders in material transactions is contained, where applicable, in our Management Information Circular dated December 19, 2003 (“2003 Circular”). Additional financial information is provided in the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in the 2003 Annual Report.

Copies of our 2003 Annual Report, 2003 Circular and of this Annual Information Form may be obtained upon request from the Corporate Secretary or our Investor Relations Department.

At any time while our securities are in the course of a distribution, the Corporate Secretary will provide any person, upon request, with a copy of: (i) this Annual Information Form; (ii) our most recent annual report containing the audited consolidated financial statements of ATI for the most recently completed fiscal year together with the accompanying report of the auditor; (iii) any interim financial statements of ATI subsequent to the financial statements for the most recently completed fiscal year; (iv) the management information circular for the most recent annual meeting of shareholders involving the election of directors; and (v) any other document incorporated by reference into the preliminary short form prospectus or the final short form prospectus filed in connection with such distribution of securities.

8.2 Description of Share Capital

Our authorized capital consists of an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. As of December 31, 2003, 244,624,109 common shares and no preferred shares were issued and outstanding. The material provisions of the common shares and the preferred shares are summarized below.

Common Shares

The common shares entitle holders to one vote per share at all shareholder meetings except meetings at which only the holders of another class or series of shares are entitled to vote. Subject to the prior rights of the holders of the preferred shares, the common shares also entitle holders to receive any dividends declared by the board of directors and our remaining property after ATI is dissolved.

Preferred Shares

The preferred shares are issuable in one or more series. Subject to our articles, the board of directors is authorized to fix, before issuance, the designation, rights, privileges, restrictions and conditions attaching to the preferred shares of each series. The preferred shares rank prior to the common shares with respect to the payment of dividends and the return of capital on dissolution. Except with respect to matters as to which the holders of preferred shares are entitled by law to vote as a class, the holders of preferred shares will not be entitled to vote at meetings of shareholders unless, with respect to any series of preferred shares, the payment of dividends is in arrears. The holders of the preferred shares are not entitled to vote separately as a class or series or to dissent with respect to any proposal to amend the articles to create a new class of shares ranking in priority to or on a parity with the preferred shares, to effect an exchange or a reclassification or cancellation of the preferred shares or to increase the maximum number of authorized shares of a class ranking in priority to or on a parity with the preferred shares.

8.3 Share Option Plans

We have established a Share Option Plan (the “Option Plan”) for the benefit of our directors, officers and employees. Subject to the requirements of the Option Plan, the board of directors has the authority to

Page 42 of 134

select those individuals to whom options will be granted and the number of options to be granted to each individual. The exercise price for purchasing common shares upon exercise of options granted under the Option Plan is determined as the weighted average of the trading prices for common shares on the Toronto Stock Exchange or the NASDAQ National Market for the five trading days preceding the date on which the board of directors determines that the grant of the option is to be effective. The options are not transferable. Each option, unless sooner terminated pursuant to the provisions of the Option Plan, expires on the date determined by the board of directors, which date cannot be later than ten years from the date the option was granted.

The aggregate number of common shares that are available for issuance under the Option Plan, or pursuant to other share compensation arrangements that we have established, is limited to 47,000,000 common shares. The aggregate number of common shares which may be reserved for issuance to any one person cannot exceed 5% of the common shares issued and outstanding. In addition, the number of common shares which may be reserved for issuance and which may be issued within a one year period pursuant to options granted to insiders (as defined in the Securities Act (Ontario)) pursuant to the Option Plan and all other compensation arrangements that we have established is limited to 10% of the number of common shares issued and outstanding, excluding any common shares issued pursuant to share compensation arrangements during the immediately preceding one year period. Furthermore, the number of common shares which may be issued within a one year period to any one insider and such insider’s associates (as defined in the Securities Act (Ontario)) pursuant to the Option Plan and all other share compensation arrangements is limited to 5% of the number of common shares issued and outstanding, excluding any common shares issued pursuant to share compensation arrangements during the immediately preceding one year period.

As at December 31, 2003, options to purchase an aggregate of 24,081,511 common shares were outstanding, which have been granted by ATI to directors, officers and employees under the Option Plan. Of such options, options to purchase an aggregate of 3,707,932 common shares have been granted to twenty-eight officers of ATI at exercise prices ranging from Cdn.$6.84 to Cdn.$23.37 and having terms expiring from May 2004 to August 2010. Options to purchase an aggregate of 355,000 common shares have been granted to three directors of ATI who are not also officers at exercise prices ranging from Cdn.$9.59 to Cdn.$23.37 and having terms expiring from January 2004 to January 2008. Options to purchase an aggregate of 20,018,579 common shares have been granted to employees of ATI other than officers and directors at exercise prices ranging from Cdn.$5.97 to Cdn.$23.37 and having terms expiring from January 2004 to November 2010.

When we acquired ArtX, we assumed all options outstanding under ArtX’s 1997 Equity Incentive Plan (the “ArtX Plan”). Each option that we assumed is exercisable upon the same terms and conditions (including vesting provisions) as under the ArtX Plan and the applicable option agreement issued thereunder, except that each option is exercisable for common shares of ATI and the number of shares and the exercise price have been adjusted to reflect the exchange ratio for the acquisition. At the time of the acquisition, an aggregate of 7,006,649 common shares of ATI were issuable pursuant to these previously issued ArtX options. In general, options granted under the ArtX Plan vested immediately or within specified time periods or pursuant to specified events as determined by the board of directors of ArtX. Most options granted under the ArtX Plan vested over a 50-month period and expire by the tenth anniversary of the date of grant. No additional options will be issued pursuant to the ArtX Plan.

Under the ArtX Plan, as at December 31, 2003, options to purchase an aggregate of 2,126,628 common shares of ATI were outstanding, which had been granted by ArtX to directors, officers, employees and consultants of ArtX. Of such options, options to purchase an aggregate of 316,216 common shares of ATI are held by persons who are now officers of ATI at exercise prices ranging from $0.09 to $0.93 and expiring from October 2007 to November 2009. Options to purchase an aggregate of 1,810,412 common shares of ATI are held by persons who are now our employees at exercise prices ranging from $0.09 to $0.93 and having terms expiring from April 2008 to March 2010.

Page 43 of 134

8.4 Employee Share Purchase Plan

We have established an Employee Share Purchase Plan (the “Purchase Plan”) for the benefit of our full time employees. Under the Purchase Plan, employees are entitled to purchase common shares through payroll deductions by contributing up to 10% of his or her annual compensation to the Purchase Plan each year. Under the Purchase Plan, common shares are purchased on the open market by the plan administrator. We contribute $1.50 to the Purchase Plan for every $9.00 contributed by employees and pays brokerage and administration charges in connection with the purchase of the common shares under the Purchase Plan.

8.5 Restricted Share Unit Plans

In October 2003, we announced the adoption of plans to grant restricted share units (“RSUs”) as a part of our overall stock-based compensation program. The restricted share unit plans (the “RSU Plans”) include: a plan for Canadian employees and directors (the “Canadian Plan”), a plan for U.S. employees and directors (the “U.S. Plan”), and a plan for all other employees and directors (the “Global Plan”). The RSU Plans allow employees to earn actual common shares (or cash in lieu of shares under the Global Plan) of ATI over time, rather than options that give employees the right to purchase stock at a set price. RSUs will be accounted for as a compensation expense under the fair value method of accounting. For the RSUs awarded to employees in respect of fiscal 2003, we incurred an approximate total cash outlay of $22 million to purchase the common shares required to satisfy these RSU obligations and estimate that an expense (to record this cash outlay) of approximately $2 million will be incurred for every quarter until the end of the vesting period in October 2006.

In all of the RSU Plans, the board of directors determines which employees and directors are entitled to participate in the plan (the “participants”) and the number of RSUs to be awarded to each participant. RSUs awarded to participants will be credited to an account that is established on their behalf and maintained in accordance with the plan. Each RSU awarded conditionally entitles the participant to the delivery of one common share (or cash in lieu of such shares under the Global Plan) upon attainment of the RSU vesting period. RSUs awarded to participants vest in accordance with terms determined by the board.

Under the Canadian Plan, after RSUs are awarded to participants and prior to vesting, we will provide funds to a trust established for the purpose of purchasing on the market, and holding in trust, common shares to be delivered to Canadian participants in exchange for RSUs once the applicable vesting period has been met. Similarly, under the U.S. Plan, we will provide funds to a U.S. broker, who purchases common shares for delivery to a custodian to be held on behalf of U.S. participants pending satisfaction of the applicable RSU vesting period.

Under the Global Plan, participants are not entitled to receive common shares upon the vesting of their RSUs. Rather, once an RSU vests, the participant under the Global Plan is only entitled to receive a cash payment from us equal to the number of RSUs awarded to such participant multiplied by the weighted average trading price of the common shares on the NASDAQ National Market over the five trading days immediately preceding the relevant vesting date. Grants of RSUs under the Global Plan are accounted for using variable plan accounting whereby the value of the RSUs and their related amortization are adjusted based on the underlying value of ATI’s common shares at the end of each quarter.

We have awarded a total of 1,556,239 RSUs. 953,931 RSUs have been awarded under the Canadian Plan, 513,962 RSUs have been awarded under the U.S. Plan and 88,346 RSUs have been awarded under the Global Plan. Of the RSUs awarded, 1,297,039 RSUs have been awarded to employees (excluding officers and directors), and 259,200 RSUs have been awarded to officers. No RSUs have been awarded to directors. All RSUs that have been awarded vest over a period of three years.

Page 44 of 134

Pursuant to Rule 4350(i)(1)(A) of the NASDAQ rules (the “Nasdaq Rule”), the Company is required to seek shareholder approval of any equity compensation plans it intends to adopt. In connection with the RSU Plans, however, an exemption from the Nasdaq Rules was obtained in September 2003 since the rules and regulations of the Toronto Stock Exchange do not require shareholder approval for compensation plans which do not involve an issuance of shares from treasury and on the basis that obtaining shareholder approval would therefore have been contrary to generally accepted practices in Canada.

Page 45 of 134

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A. Undertaking

ATI Technologies Inc. (the "Registrant") hereby undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities in relation to which the obligation to file an annual report on Form 40-F arises, or to transactions in said securities.

B. Consent to Service of Process

The Registrant previously has filed with the SEC a Form F-X in connection with the Common Shares.

Page 46 of 134

DISCLOSURE CONTROLS AND PROCEDURES

As of the Registrant's fiscal year end, an evaluation was carried out under the supervision of and with the participation of the Registrant's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the U.S. Exchange Act of 1934 (the "Exchange Act")). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of August 31, 2003, the end of the period covered by the annual report to ensure that material information relating to the Registrant and its consolidated subsidiaries would be made known to them by others within those entities.

As recommended by the Securities and Exchange Commission (the "SEC") in its adopting release, we will continue to periodically evaluate our disclosure controls and procedures and we will be making modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized and reported within the time period's specified in the SEC's rules and forms.

Page 47 of 134

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ATI TECHNOLOGIES INC.

//David Orton//

David Orton

President and Chief Operating Officer

Date: January 16, 2004

Page 48 of 134

EXHIBIT INDEX

		Sequential Page No.
1.	Comparative consolidated financial statements for the year ended August 31, 2003, together with the auditors' report thereon	49
2.	Management's Discussion and Analysis of Operating Results and Financial Position.	77
3.	Consent of auditors - KPMG LLP dated September 29, 2003.	97
4.	Officers' certifications required by Rule 13a-14(a) or Rule 15d-14(a).	98
5.	Officers' certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.	103
6.	Code of Ethics.	106

EX-1

Page 49 of 134

EXHIBIT 1

Page 50 of 134

MANAGEMENT’S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS Management of ATI Technologies Inc. is responsible for the integrity of the accompanying Consolidated Financial Statements and all other information in this Annual Report. The Consolidated Financial Statements have been prepared by Management in accordance with accounting principles generally accepted in Canada. The preparation of the Consolidated Financial Statements necessarily involves the use of estimates and careful judgment, particularly in those circumstances where transactions affecting a current period are dependent upon future events. All financial information presented in this Annual Report is consistent with the Consolidated Financial Statements. To discharge its responsibilities for financial reporting and safeguarding of assets, Management believes that it has established appropriate systems of internal accounting controls that provide reasonable assurance that the financial records are reliable and form a proper basis for the timely and accurate preparation of financial statements. Consistent with the concept of reasonable assurance, Management recognizes that the relative cost of maintaining these controls should not exceed their expected benefits. Management further ensures the quality of the financial records through careful selection and training of personnel and the adoption and communication of financial and other relevant policies. The Board of Directors discharges its responsibilities with respect to the Consolidated Financial Statements primarily through the activities of its Audit Committee, which is composed entirely of directors who are not employees of the Company. This committee meets quarterly with Management and at least twice annually with the Company’s independent auditors to review the Company’s reported financial performance and to discuss audit, internal control, accounting policy and financial reporting matters. The Consolidated Financial Statements were reviewed by the Audit Committee and approved by the Board of Directors. The financial statements have been audited by KPMG LLP, who were appointed by the shareholders at the last Annual General Meeting of Shareholders. Their report is presented herein.

K.Y. Ho (signed)
Chairman and CEO
September 29, 2003 David E. Orton (signed)
President and COO Terry Nickerson (signed)
Senior Vice President and CFO

  AUDITORS’ REPORT TO THE SHAREHOLDERS We have audited the consolidated balance sheets of ATI Technologies Inc. as at August 31, 2003 and 2002 and the consolidated statements of operations and retained earnings and cash flows for each of the years in the three-year period ended August 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company as at August 31, 2003 and 2002 and the results of its operations and its cash flows for each of the years in the three-year period ended August 31, 2003 in accordance with Canadian generally accepted accounting principles.  
KPMG LLP
Chartered Accountants (signed)
Toronto, Canada
September 29, 2003

Page 51 of 134

  CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

	Years ended August 31 (In thousands of U.S. dollars, except per share amounts)		2003						2002			2001
									(Restated)			(Restated)
	REVENUES	$	1,385,293					$	1,015,779		$	1,040,365
	Cost of goods sold		952,001						682,385			799,038
	Gross margin		433,292						333,394			241,327
	EXPENSES
	Selling and marketing		96,925						77,920			75,594
	Research and development		212,976						164,609			149,465
	Administrative		39,413						35,662			37,261
	Amortization and write-down of
	goodwill and intangible assets (note 6)		10,767						97,501			114,507
	Other charges (note 15)		28,724						–			–
			388,805						375,692			376,827
	Income (loss) from operations		44,487						(42,298	)		(135,500	)
	Interest and other income, net (note 7)		4,382						732			64,131
	Interest expense (note 10)		(1,899	)					(659	)		(1,180	)
	Income (loss) before income taxes		46,970						(42,225	)		(72,549	)
	Income taxes (recovery) (note 12)		11,741						6,854			(18,760	)
	NET INCOME (LOSS)		35,229						(49,079	)		(53,789	)
	RETAINED EARNINGS, beginning of year		68,797						117,876			199,956
	Adjustment to opening retained earnings:
	Accounting change (note 1(q)(i))		–						–			(2,651	)
	Change in accounting policy for income taxes (note 1(q)(iv))		–						–			(25,640	)
			–						–			(28,291	)
	Retained earnings, end of year	$	104,026					$	68,797		$	117,876
	NET INCOME (LOSS) PER SHARE (note 13):
	Basic	$	0.15					$	(0.21	)	$	(0.23	)
	Diluted		0.14						(0.21	)		(0.23	)
	WEIGHTED AVERAGE NUMBER OF SHARES (000’s)
	Basic		238,251						234,895			230,880
	Diluted		244,353						234,895			230,880
	See accompanying notes to Consolidated Financial Statements.

Page 52 of 134

  CONSOLIDATED BALANCE SHEETS

	August 31 (In thousands of U.S. dollars)		2003									2002
												(Restated)
	ASSETS
	Current assets:
	Cash and cash equivalents	$	300,905								$	187,126
	Short-term investments		49,784									49,801
	Accounts receivable		234,548									141,126
	Inventories (note 3)		176,494									192,121
	Prepayments and sundry receivables		31,753									21,806
	Future income taxes (note 12)		3,772									3,630
	Total current assets		797,256									595,610
	Capital assets (note 4)		86,890									95,838
	Intangible assets (note 6)		8,811									21,858
	Goodwill (note 6)		190,095									187,815
	Long-term investments (note 7)		3,960									7,405
	Tax credits recoverable		21,181									–
	Future income taxes (note 12)		7,865									844
	Total assets	$	1,116,058								$	909,370
	LIABILITIES AND SHAREHOLDERS’ EQUITY
	Current liabilities:
	Bank indebtedness (note 8)	$	–								$	12,015
	Accounts payable		191,196									172,093
	Accrued liabilities		136,709									49,421
	Deferred revenue (note 9)		37,669									250
	Current portion of long-term debt (note 10)		1,394									568
	Future income taxes (note 12)		–									3,459
	Total current liabilities		366,968									237,806
	Long-term debt (note 10)		28,073									15,798
	Future income taxes (note 12)		21,408									12,588
	Total liabilities		416,449									266,192
	Shareholders’ equity (note 11):
	Share capital:
	Authorized:
	Unlimited preferred shares
	Unlimited common shares
	Issued and outstanding:
	241,742,113 common shares (2002 – 236,870,685)		582,454									561,477
	Contributed surplus		4,855									4,630
	Retained earnings		104,026									68,797
	Currency translation adjustments		8,274									8,274
	Total shareholders’ equity		699,609									643,178
	Total liabilities and shareholders’ equity	$	1,116,058								$	909,370
	Commitments and contingencies (notes 3, 15, 17 and 21) Subsequent event (note 22) See accompanying notes to Consolidated Financial Statements. On behalf of the Board:

K.Y. Ho (signed)
Director James D. Fleck (signed)
Director

Page 53 of 134

  CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years ended August 31 (In thousands of U.S. dollars)		2003						2002			2001
									(Restated)			(Restated)
	CASH PROVIDED BY (USED IN):
	Operating activities:
	Net income (loss)	$	35,229					$	(49,079	)	$	(53,789	)
	Items which do not involve cash:
	Tax credit recoverable		(21,181	)					–			–
	Future income taxes		(1,802	)					1,223			(18,430	)
	Depreciation and amortization		34,705						120,422			135,462
	Other charges		1,400						–			–
	Loss (gain) on investments		(3,876	)					3,355			(61,216	)
	Unrealized foreign exchange loss		3,637						620			431
	Change in non-cash operating working capital:
	Accounts receivable		(93,422	)					(23,109	)		42,854
	Inventories		15,627						(80,203	)		145,670
	Prepayments and sundry receivables		(8,678	)					(678	)		12,487
	Accounts payable		19,103						91,916			(104,189	)
	Accrued liabilities		87,288						1,662			686
	Deferred revenue		37,419						(104	)		(3,304	)
	Income taxes payable		–						(9,083	)		5,281
			105,449						56,942			101,943
	Financing activities:
	Increase (decrease) in bank indebtedness		(12,015	)					3,266			8,749
	Addition to long-term debt		10,709						–			–
	Principal payments on long-term debt		(1,064	)					(312	)		–
	Settlement of swap contract		(1,365	)					–			–
	Issue of common shares		20,977						12,495			4,687
	Repayment of share purchase loans		225						362			–
			17,467						15,811			13,436
	Investing activities:
	Purchase of short-term investments		(49,784	)					(54,233	)		(45,000	)
	Maturity of short-term investments		49,649						49,584			4,403
	Additions to capital assets		(16,390	)					(30,111	)		(31,091	)
	Purchase of long-term investments		(2,460	)					–			(2,500	)
	Proceeds from sale of long-term investments		10,029						–			65,061
	Acquisitions, net of cash acquired (note 5)		–						(22,118	)		(9,201	)
			(8,956	)					(56,878	)		(18,328	)
	Foreign exchange loss on cash held in foreign currency		(181	)					(204	)		(431	)
	INCREASE IN CASH AND CASH EQUIVALENTS		113,779						15,671			96,620
	CASH AND CASH EQUIVALENTS, beginning of year		187,126						171,455			74,835
	CASH AND CASH EQUIVALENTS, end of year		300,905						187,126			171,455
	Short-term investments		49,784						49,801			45,000
	CASH POSITION, end of year	$	350,689					$	236,927		$	216,455
	Supplemental cash flow information (note 19) See accompanying notes to Consolidated Financial Statements.

Page 54 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)   The principal business activities of ATI Technologies Inc. (the “Company“) are the design, manufacture and sale of innovative 3D graphics and digital media silicon solutions. The Company markets its products to original equipment manufacturers, system builders, distributors and retailers primarily in North America, Europe and the Asia-Pacific region.
  NOTE 1. Significant accounting policies

(a) Basis of presentation
These Consolidated Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and are presented in U.S. dollars. No material differences would result if these Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission, except as disclosed in note 20. (b) Principles of consolidation
These Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, as well as the Company’s 50% ownership in a joint venture to own an office building in Markham, Ontario. All significant intercompany transactions and balances have been eliminated upon consolidation.

(c) Cash and cash equivalents and short-term investments
Cash and cash equivalents include highly liquid instruments with a maturity of less than 90 days from the acquisition date. The carrying amounts of cash and cash equivalents are stated at cost, which approximates their fair values. The Company’s short-term investments include: (i) highly liquid instruments with a maturity date of 90 days or more but less than one year from the acquisition date that are carried at cost, which approximates their fair values; and (ii) publicly traded common stock that is held for sale and which is carried at the lower of cost and market.

(d) Inventories
Raw materials are stated at the lower of cost and replacement cost. Finished goods and work in process are stated at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis.

(e) Capital assets
Capital assets are recorded at cost, net of related investment tax credits, and are depreciated over their estimated useful lives. Estimated useful lives for principal asset categories are as follows:

	Asset		Method		Rate
	Building		Diminishing balance		5%
	Building under capital lease		Straight line		15 years
	Laboratory and computer equipment		Diminishing balance/straight line		331/3%/over one to five years
	Computer software		Diminishing balance/straight line		50%/over two to three years
	Production equipment		Diminishing balance/straight line		20%/over one year
	Office equipment		Diminishing balance/straight line		20%/over three years
	Leasehold improvements		Straight line		Over term of lease

(f) Goodwill from business combinations
For business combinations prior to July 1, 2001, goodwill was amortized on a straight-line basis over five to seven years. Prior to September 1, 2002, the Company assessed the recoverability of goodwill based on undiscounted expected future cash flows. Goodwill acquired in business combinations subsequent to June 30, 2001 has not been amortized.

Effective September 1, 2002, the Company fully adopted The Canadian Institute of Chartered Accountants’ (“CICA”) Handbook Sections 1581, “Business Combinations,” and 3062, “Goodwill and Other Intangible Assets.” From that date, the Company discontinued amortization of all existing goodwill. The Company reviewed existing intangible assets, including estimates of remaining lives, and has reclassified $2.3 million from workforce to goodwill as of September 1, 2002 to conform with the new criteria.

Page 55 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)   In connection with Section 3062’s transitional goodwill impairment evaluation, the Company is required to assess whether goodwill is impaired as of September 1, 2002. The Company has completed the transitional goodwill impairment assessment during the second quarter of 2003 and has determined that no impairment existed as of September 1, 2002.

Upon adopting these standards on September 1, 2002, the Company is required to evaluate goodwill annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is tested at the reporting unit level by comparing the reporting unit’s carrying value to its fair value. The fair values of the reporting units are estimated using a discounted cash flow approach. To the extent a reporting unit’s carrying amount exceeds its fair value, an impairment of goodwill exists. Impairment is measured by comparing the fair value of goodwill, determined in a manner similar to a purchase price allocation, to its carrying amount. During the fourth quarter of fiscal 2003, the Company performed its annual goodwill impairment test in accordance with the new goodwill standards of Section 3062 and determined that there was no goodwill impairment in fiscal 2003.

Effective September 1, 2002, the Company had unamortized goodwill of $190.1 million, which is no longer being amortized. This change in accounting policy is not applied retroactively and the amounts presented for prior periods have not been restated for this change. The impact of this change is as follows:

			2003						2002			2001
									(Restated)			(Restated)
	Net income (loss)	$	35,229					$	(49,079	)	$	(53,789	)
	Add back goodwill amortization		–						74,014			76,284
	Income before goodwill amortization	$	35,229					$	24,935		$	22,495
	Basic net income (loss) per share:
	As reported	$	0.15					$	(0.21	)	$	(0.23	)
	Before goodwill amortization		0.15						0.11			0.10
	Diluted net income (loss) per share:
	As reported	$	0.14					$	(0.21	)	$	(0.23	)
	Before goodwill amortization		0.14						0.10			0.09

(g) Intangible assets
Intangible assets are recorded at cost and are amortized on a straight-line basis over their estimated useful lives as follows:

Purchased in-process research and development

1 year

Core technology

2 – 7 years

(h) Impairment of long-lived assets
The Company reviews capital and intangible assets for impairment on a regular basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability is assessed by comparing the carrying amount to the projected future net cash flows the long-lived assets are expected to generate.

(i) Long-term investments
Investees over which the Company does not have control or significant influence are accounted for by the cost method. The Company regularly reviews the carrying values of its long-term investments. Should there be a decline in value of the Company’s long-term investments that is other than a temporary decline, the Company measures the amount of the write-down based on the fair value of the shares of the investee and charges such write-down to the consolidated statements of operations and retained earnings.

(j) Revenue recognition
Revenue is recognized when evidence of an arrangement exists, risks and rewards of ownership have been transferred to customers, selling price is fixed and determinable, and collectibility is reasonably assured. Estimated returns and allowances, price protection and sales rebates are recorded as a reduction of revenue at the time of revenue recognition. In addition, the Company provides for the estimated cost of product warranties at the time of revenue recognition.

Page 56 of 134

For all sales, the Company uses a binding purchase order and, in certain cases, uses a contractual agreement as evidence of an arrangement. The Company considers delivery to occur upon shipment, provided risk and rewards of ownership have passed to the customer. At the point of sale, the Company assesses whether the selling price is fixed and determinable and whether collection is reasonably assured. If the Company determines that collection is not reasonably assured, the Company defers recognition of the revenue until collection becomes reasonably assured, which is generally upon receipt of cash.

The Company follows the percentage of completion method of accounting for contracts requiring the Company to develop customized technology to meet a customer’s specifications. Under such contracts, revenue is recognized based on the ratio of total costs incurred to date to overall estimated costs. Provisions for estimated losses on contracts are recognized when identified.

(k) Foreign currency translation
The Company’s subsidiaries are accounted for as integrated foreign operations. Transactions of the Company and its subsidiaries originating in foreign currencies are translated into U.S. dollars at the prevailing rates approximating those at the dates of the transactions. Monetary assets and liabilities are translated at the year-end rates of exchange and non-monetary items are translated at historical exchange rates. The resulting net gain or loss is included in the consolidated statements of operations and retained earnings.

(l) Research and development (“R&D”) expenditures
Research costs, other than capital expenditures, are expensed as incurred. Development costs are expensed as incurred unless they meet the criteria under generally accepted accounting principles for deferral and amortization. The Company has not deferred any such development costs to date. R&D costs are reduced by related investment tax credits.

(m) Income taxes
The Company uses the asset and liability method of accounting for income taxes. Future income tax assets and liabilities are recognized for future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating loss carryforwards and undeducted R&D pools. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized in the year that includes the enactment or substantive enactment date. A valuation allowance is recorded against any future income tax asset if it is more likely than not that the asset will not be realized. Income tax expense or recovery is the sum of the Company’s provision for current income taxes and the difference between opening and ending balances of future income tax assets and liabilities.

(n) Income (loss) per share
Basic income (loss) per share has been calculated by dividing the net income or loss for the year by the weighted average number of common shares outstanding during the year. The Company uses the treasury stock method for calculating diluted income (loss) per share. Diluted income (loss) per share is computed similar to basic income (loss) per share except that the weighted average number of common shares outstanding is increased to include additional shares from the assumed exercise of stock options, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire shares of common stock at the average market price during the reporting year.

(o) Stock options
The Company has share option plans, which are described in note 11. No compensation expense is recognized for these plans when stock options are issued to employees. Any consideration paid by employees on exercise of stock options or purchase of stock is credited to share capital.

Effective September 1, 2002, the Company adopted the CICA Handbook Section 3870, “Stock-based Compensation and Other Stock-based Payments,” which establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services provided by employees and non-employees. The standard requires that a fair value-based method of accounting be applied to all stock-based payments to non-employees and to employee awards that are direct awards of stock, that call for settlement in cash or other assets or are stock appreciation rights that call for settlement by the issuance of equity instruments. However, the new standard permits the Company to continue its existing policy of recording no compensation cost on the grant of stock options to employees. The

Page 57 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)   Company has applied the pro forma disclosure provisions of the new standard to awards granted on or after September 1, 2002. No restatement of prior periods was required as a result of the adoption of the new standard. Consideration paid by employees on the exercise of stock options is recorded as share capital. See note 11 for the pro forma disclosure, as required by this standard.

(p) Use of estimates
The preparation of Consolidated Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting years presented. Significant estimates are used in determining the allowance for doubtful accounts, provision for inventory obsolescence, useful lives of intangible assets, valuation of long-term investments, realization of future tax assets and estimates for sales returns and allowances, price protection and sales rebates. Actual results could differ from those estimates.

(q) Accounting changes
(i) During fiscal 2003, the Company reviewed its revenue recognition accounting policy as it is applied to the shipment of products to its customers. Following this review, the Company corrected the application of its revenue recognition accounting policy by revising the timing of when revenue is recognized to more clearly identify the point in the shipping process when the risks and rewards of ownership have been transferred to the customer. This change and the related income tax effect have been applied retroactively. The financial statements of all prior periods presented for comparative purposes have been restated to give effect to this change. The impact of this change on prior years is as follows:

									2002			2001
	Revenues:
	As previously reported							$	1,021,722		$	1,037,809
	Restated								1,015,779			1,040,365
	Net loss for the year:
	As previously reported								(47,465	)		(54,205	)
	Restated								(49,079	)		(53,789	)
	Net loss per share:
	Basic:
	As previously reported								(0.20	)		(0.23	)
	Restated								(0.21	)		(0.23	)
	Diluted:
	As previously reported								(0.20	)		(0.23	)
	Restated								(0.21	)		(0.23	)

For the year ended August 31, 2003, as a result of this change, revenues, net income, basic net income per share and diluted net income per share have been increased by $22.0 million, $3.8 million, $0.02 basic and $0.01 diluted per share, respectively. Opening retained earnings for the Company’s 2001 financial year has been decreased by $2.7 million to give effect to this change.

(ii) Disposal of long-lived assets and discontinued operations:
In December 2002, the CICA issued Handbook Section 3063, “Impairment or Disposal of Long-lived Assets,” and revised Section 3475, “Disposal of Long-lived Assets and Discontinued Operations.” These sections supersede the write-down and disposal provisions of Section 3061, “Property, Plant and Equipment,” and Section 3475, “Discontinued Operations.” The new standards are consistent with U.S. GAAP. Section 3063 establishes standards for recognizing, measuring and disclosing impairment of long-lived assets held-for-use. An impairment is recognized when the carrying amount of an asset to be held and used exceeds the projected future net cash flows expected from its use and disposal, and is measured as the amount by which the carrying amount of the asset exceeds its fair value. Section 3475 provides specific criteria for and requires separate classification for assets held-for-sale and for these assets to be measured at the lower of their carrying amounts or fair value, less costs to sell. Section 3475 also broadens the definition of discontinued operations to include all distinguishable components of an entity that will be eliminated from operations.

The Company applied the revised Section 3475 to disposal activities initiated on or after May 1, 2003. Section 3063 is effective for the Company’s 2004 fiscal year. The Company expects that the adoption of this standard will have no material impact on its financial position, results of operations or cash flows.

Page 58 of 134

(iii) Guarantees:
In December 2002, the CICA approved Accounting Guideline AcG-14, which requires certain disclosures of obligations under guarantees. The guideline is generally consistent with the disclosure requirements for guarantees under U.S. GAAP. The guideline does not apply to product warranties or the measurement requirements under U.S. GAAP.

The Company has fully adopted this guideline as of March 1, 2003. See note 14 for the disclosures required by this standard.

(iv) Income taxes:
Effective September 1, 2000, the Company changed its method of accounting for income taxes from the deferral method to the asset and liability method. The cumulative effect of adopting the new standard, as of September 1, 2000, resulted in a decrease in intangible assets of $6.0 million, an increase in net future tax liability of $19.6 million and a decrease in opening retained earnings for fiscal 2001 of $25.6 million.

As a result of adopting the new accounting rules in fiscal 2001, an income tax recovery of $16.3 million was recorded. This recovery resulted from the realization of the future tax liability associated with intangible assets, other than goodwill, related to the Company’s acquisitions.

(r) Recently issued accounting pronouncements
(i) Generally accepted accounting principles:
In July 2003, the CICA issued Handbook Section 1100, “Generally Accepted Accounting Principles.” This section establishes standards for financial reporting in accordance with Canadian GAAP. It describes what constitutes Canadian GAAP and its sources. This section also provides guidance on sources to consult when selecting accounting policies and determining appropriate disclosures, when a matter is not dealt with explicitly in the primary sources of Canadian GAAP. This guideline is effective for the Company’s 2005 fiscal year, with early adoption encouraged. The Company is currently evaluating the impact of adoption on the Consolidated Financial Statements.

(ii) Asset retirement obligations:
In March 2003, the CICA issued Handbook Section 3110, “Asset Retirement Obligations.” This section establishes standards for the recognition, measurement and disclosure of liabilities for asset retirement obligations and the associated retirement costs. This section applies to legal obligations associated with the retirement of a tangible long-lived asset that result from its acquisition, construction, development or normal operation. This guideline is effective for the Company’s 2005 fiscal year, with early adoption encouraged. The Company is currently evaluating the impact of adoption on the Consolidated Financial Statements.

(iii) Consolidation of variable interest entities:
In June 2003, the CICA approved Accounting Guideline AcG-15, which provides guidance for determining when an enterprise includes the assets, liabilities and results of activities of entities that are subject to control on a basis other than ownership of voting interests (a “variable interest entity”). This guideline is effective for the Company’s 2005 second quarter, except for certain disclosure requirements which would be required for the Company’s 2004 third quarter. Early adoption is encouraged. The Company expects that the adoption of this standard will have no material impact on its financial position, results of operations or cash flows.
 
NOTE 2. Financial instruments

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, short-term investments, accounts receivable and sundry receivables. The Company invests only in high-quality cash and cash equivalents and short-term investments. A majority of the Company’s accounts receivable is derived from sales to original equipment manufacturers, add-in-board manufacturers, original design manufacturers, distributors and retailers in the personal computer industry. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. In addition, a significant portion of the total accounts receivable is insured against possible losses. The Company maintains adequate reserves for potential credit losses as estimated by management.

The joint venture, Commerce Valley Realty Holdings Inc. (“CVRH”), in which the company has a 50% ownership, entered into an interest rate swap contract in fiscal 2001 to hedge its exposure to the interest rate risk applicable to its mortgage for the building facility in Markham, Ontario. This interest rate swap contract closed on September 10, 2002, resulting in a proportionate loss of $1.4 million to the Company. The loss is treated as a deferred expense item in the balance sheet and is charged to the consolidated statements of operations and retained earnings as a yield adjustment to the interest expense, over the term of the mortgage (note 18).

Page 59 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)   The carrying amounts of cash equivalents, short-term investments, accounts receivable, sundry receivables, bank indebtedness and accounts payable and accrued liabilities approximate their fair market values because of the short-term nature of these instruments.

The fair values of the obligation under capital lease and mortgage payable approximate their carrying values.

The financial conditions, operating results and cash flows of the Company may be materially and adversely impacted by a substantial weakening of the U.S. dollar against local currencies as the Company’s long-term debt and a significant amount of its operating expenses are paid in local currencies other than the U.S. dollar. The Company does not enter into foreign currency forward contracts to hedge its exposure to currency fluctuations. However, the Company assesses the need to use derivative instruments to manage its foreign exchange risk on an ongoing basis.


NOTE 3. Inventories

			2003						2002
									(Restated)
	Raw materials	$	153,240					$	127,683
	Work in process		7,110						25,603
	Finished goods		16,144						38,835
		$	176,494					$	192,121

At August 31, 2003, the Company had non-cancellable inventory purchase commitments totaling $23.3 million.

NOTE 4. Capital assets

	2003		Cost						Accumulated depreciation			Net book value
	Land	$	1,909					$	–		$	1,909
	Building		13,572						4,020			9,552
	Building under capital lease		33,268						3,140			30,128
	Laboratory and computer equipment		66,350						40,334			26,016
	Computer software		23,736						18,645			5,091
	Production equipment		2,745						1,551			1,194
	Office equipment		8,835						3,593			5,242
	Leasehold improvements		10,759						3,001			7,758
		$	161,174					$	74,284		$	86,890

	2002		Cost						Accumulated depreciation			Net book value
	Land	$	1,909					$	–		$	1,909
	Building		8,353						2,320			6,033
	Building under capital lease		33,268						924			32,344
	Laboratory and computer equipment		77,711						47,758			29,953
	Computer software		34,645						25,603			9,042
	Production equipment		6,355						3,977			2,378
	Office equipment		8,983						3,235			5,748
	Leasehold improvements		9,591						1,160			8,431
		$	180,815					$	84,977		$	95,838

Depreciation expense related to capital assets amounted to $23.9 million in fiscal 2003 (2002 – $22.9 million; 2001 – $21.0 million)

Page 60 of 134

NOTE 5. Acquisitions

(a) Acquisition of NxtWave Communications Inc.
On June 28, 2002, the Company acquired NxtWave Communications Inc. (“NxtWave”) for cash consideration of $20.2 million. NxtWave is in the business of delivering broadband communications silicon using proprietary digital signal processing technologies adapted for applications in digital terrestrial and cable receivers. The acquisition was accounted for using the purchase method, whereby the results of operations of NxtWave have been included in the consolidated statements of operations and retained earnings and cash flows from the date of acquisition.

The fair values of the net assets acquired were as follows:

	Net assets:
	Current assets, including cash of $165										$	538
	Capital assets											899
	Non-current assets											59
	Purchased in-process R&D											5,300
	Core technology											9,200
	Goodwill											4,678
	Liabilities assumed											(459	)
	Cash consideration										$	20,215

Purchased in-process R&D and core technology are being amortized as follows:

Purchased in-process R&D

1 year

Core technology

2 – 5 years

(b) Acquisition of FGL Graphics
On March 30, 2001, the Company acquired FGL Graphics, the professional graphics division of SONICblue Ltd. FGL Graphics, which develops and markets the FireGL™ brand of OpenGL-based graphics accelerators, is a provider of solutions of NT and Linux workstation markets. The acquisition was accounted for using the purchase method, whereby the results of operations of FGL Graphics have been included in the consolidated statements of operations and retained earnings and cash flows from the date of acquisition.

The fair values of the assets acquired were as follows:

	Inventories										$	3,528
	Capital assets											200
	Prepayments											68
	Core technology											7,473
	Cash consideration										$	11,269

Under the terms of the agreement, SONICblue Ltd. was eligible to receive additional consideration of up to $7.3 million in cash, contingent upon FGL Graphics achieving certain future performance targets from the closing date to December 31, 2001. The entire amount of this $7.3 million was subsequently paid and allocated to core technology (2002 – $2.1 million; 2001 – $5.2 million).

The core technology is being amortized on a straight-line basis over a two-year period.

Page 61 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)   NOTE 6. Intangible assets and goodwill

The net book values of intangible assets and goodwill acquired are as follows:

	2003		Cost						Accumulated amortization			Net book value
	Purchased in-process R&D	$	56,250					$	56,250		$	–
	Core technology		31,144						22,333			8,811
	Total intangible assets	$	87,394					$	78,583		$	8,811
	Goodwill	$	376,788					$	186,693		$	190,095

	2002		Cost						Accumulated amortization			Net book value
	Purchased in-process R&D	$	56,250					$	51,833		$	4,417
	Workforce		4,400						2,120			2,280
	Core technology		31,144						15,983			15,161
	Total intangible assets	$	91,794					$	69,936		$	21,858
	Goodwill	$	372,388					$	184,573		$	187,815

Amortization expense and write-downs of goodwill and intangible assets are as follows:

			2003						2002			2001
	Goodwill:
	Amortization expense	$	–					$	73,134		$	75,404
	Write-down		–						10,319			–
			–						83,453			75,404
	Intangible assets:
	Amortization expense		10,767						8,963			34,592
	Write-down		–						5,085			4,511
			10,767						14,048			39,103
		$	10,767					$	97,501		$	114,507

NOTE 7.Long-term investments

						2003					2002
	Share investments				$	3,960				$	7,405

Share investments consist of investments in other companies in which the Company has ownership interests ranging from approximately 1.2% to 13.2%.

During fiscal 2003, the Company acquired a 13.2% interest in a private technology-based company.

During fiscal 2003, the Company disposed of all its remaining shares in Broadcom Corp. (“Broadcom”), realizing a gain in the aggregate amount of $3.8 million.

During fiscal 2002, the Company disposed of a certain long-term investment and realized a loss of $0.3 million. In addition, the Company wrote down the remaining balance of this investment by the amount of $0.5 million to reflect the other than temporary decline in its value. The entire balance of the above-mentioned investment, which had a net book value of $0.2 million, was then reclassified as short-term investments as the Company no longer intended to hold the investment for long-term purposes. The Company sold the investment in 2003.

Page 62 of 134

During fiscal 2002, the Company received an additional 107,387 shares of Broadcom, valued at $2.1 million, as a result of the release of escrow shares pursuant to the terms of the agreement to purchase the Company’s share investment in SiByte Inc. (“SiByte”) by Broadcom in the preceding fiscal year. On August 31, 2002, the Company wrote down its total investment in Broadcom by $4.7 million to reflect the other than temporary decline in its value.

During fiscal 2001, the Company wrote down the value of certain of its long-term investments by an aggregate of $2.1 million to reflect the other than temporary decline in their value.

During fiscal 2001, the Company exchanged all of its share investment in SiByte for 494,295 shares of Broadcom as a result of the purchase of SiByte by Broadcom. The Company later sold these shares of Broadcom, realizing a gain of approximately $54.9 million. In addition, the Company earned an additional 250,701 shares of Broadcom, valued at $8.5 million, during fiscal 2001 as a result of the achievement of certain performance targets by SiByte pursuant to the terms of the purchase agreement.

Gains and losses from long-term investments are included in interest and other income in the consolidated statements of operations and retained earnings.

NOTE 8. Bank indebtedness

At August 31, 2003, the Company had available bank credit facilities of $25.4 million (2002 – $101.0 million). The credit facilities are secured by way of general security agreements and personal property, covering the cash, credit balances and deposit instruments of the Company. Interest rates on the credit facilities vary and are based on the bank’s U.S. base rate, Canadian bank prime rate or the LIBOR rate. At August 31, 2003 and 2002, there were no borrowings outstanding under these facilities. The bank indebtedness of $12.0 million at August 31, 2002 pertains to the CVRH joint venture.

Aggregate commitment fees and standby fees of $30,000 (2002 – $15,000; 2001 – $17,000) were paid in 2003. Standby fees are calculated at the rate of 0.125% per annum on the unused portion of the facilities.

NOTE 9. Deferred revenue

Deferred revenue, at August 31, 2003, includes $37.5 million, which represents milestone payments made by or owing from certain customers in connection with custom development arrangements entered into by the Company during fiscal 2003. NOTE 10. Long-term debt

			Interest rate				2003					2002
	Obligation under capital lease (a)		6.31	%		$	17,785				$	16,366
	Mortgage payable (b)		6.96	%			11,682					–
							29,467					16,366
	Less current portion						1,394					568
						$	28,073				$	15,798

(a) Obligation under capital lease
The Company’s obligation under capital lease represents the lease on the building facility occupied by the Company in Markham, Ontario.

(b) Mortgage payable
On September 10, 2002, CVRH, the joint venture in which the Company has a 50% ownership interest, entered into a mortgage agreement with a lender to finance the building facility occupied by the Company in Markham, Ontario. The Company’s proportionate share of the mortgage as at August 31, 2003 amounted to $11.7 million (Cdn. $16.2 million), and the mortgage has a repayment term of 12 years, bearing interest at a rate of 6.96% per annum. The underlying mortgage is denominated in Canadian dollars.

Page 63 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)   (c) The Company’s obligations under the mortgage and capital lease are as follows:

	Year ended August 31:
	2004								$	3,277
	2005									3,277
	2006									3,277
	2007									3,351
	2008									3,455
	Thereafter through 2017									27,155
	Total minimum lease payments									43,792
	Less amount representing interest									14,325
	Present value of net minimum payments on long-term debt									29,467
	Less current portion of long-term debt									1,394
									$	28,073

Interest of $1.1 million and $0.7 million relating to capital lease obligation and mortgage payable, respectively, is included in interest expense for fiscal 2003 (2002 – $0.4 million and nil; 2001 – nil).

NOTE 11. Shareholders’ equity

(a) Common shares issued and outstanding

							Number					Amount
	Outstanding, August 31, 2000						229,436,267				$	557,044
	Issued for cash						2,767,962					4,687
	Cancellation of shares						(85,555			)		(10,514	)
	Outstanding, August 31, 2001						232,118,674					551,217
	Issued for cash						4,828,136					12,495
	Cancellation of shares						(76,125			)		(2,235	)
	Outstanding, August 31, 2002						236,870,685					561,477
	Issued for cash						4,871,428					20,977
	Outstanding, August 31, 2003						241,742,113				$	582,454

(b) Preferred shares
An unlimited number of preferred shares, ranking in priority upon distribution of assets over common shares, may be issued in series with additional provisions as fixed by the Board of Directors.

No preferred shares have been issued to date.

(c) Common share option plans
The Company maintains a share option plan (the “ATI Plan”) for the benefit of directors, officers and employees. The ATI Plan, as amended, provides that the aggregate number of common shares available for issuance pursuant to options granted under the ATI Plan and all other share compensation arrangements are limited to 47,000,000 common shares. In general, the maximum number of common shares reserved for issuance in respect of any one individual may not exceed 5%, and in respect of insiders of the Company, may not exceed 10% of the number of common shares issued and outstanding.

Options are granted under the ATI Plan at the discretion of the Board of Directors at exercise prices determined as the weighted average of the trading prices of the Company’s common shares on The Toronto Stock Exchange or NASDAQ for the five trading days preceding the effective date of the grant. In general, options granted under the ATI Plan vest over a period of up to four years from the grant date and expire by no later than the seventh anniversary of the date of grant.

Page 64 of 134

When the Company acquired ArtX, it assumed the ArtX common shares options plan (the “ArtX Plan”). The Company maintains the ArtX Plan for the benefit of directors, officers, employees and consultants. The ArtX Plan provides that the aggregate number of common shares available for issuance pursuant to options granted under the ArtX Plan and all other share compensation arrangements are limited to 8,007,599 common shares for both incentive stock options (“ISO”) and non-qualified stock options.

In general, options granted under the ArtX Plan vest immediately or within specified times or events as determined by the Board of Directors, which is normally over a five-year period, and expire by the tenth anniversary of the date of grant. If the person obtaining the options owns more than 10% of the total combined voting power of all classes of stock (10% shareholder), then the options will be exercisable after the expiration of five years from the date of grant.

Options were granted under the ArtX Plan at the discretion of the Board of Directors at exercise prices determined as no less than 85% of the fair market value of the shares on the date of grant provided that the exercise price of an ISO will not be less than 100% of the fair market value of the shares on the date of grant and the exercise price of any option granted to a 10% shareholder is no less than 110% of the fair market value of the shares on the date of grant.

Under an incentive plan entered into in June 2002, the Company provided certain employees with a performance incentive, consisting of a combination of cash and options, the receipt of which was conditional upon the Company entering into a specified business arrangement with a third party by April 2003, later extended to July 28, 2003. The cash portion of the incentive consisted of three equal payments of $2.7 million, with each payment to be made upon achievement of specified milestones under the arrangement with the third party. Under the plan, the employees were also granted options to purchase 2.6 million common shares at an exercise price of $6.96 per share. The options vest at 25% on the first anniversary of the grant date and thereafter at 6.25% per quarter and are only exercisable in the event the Company is successful in entering into the arrangement. In February 2003, the Company successfully entered into the business arrangement with the third party and all the conditions under the plan were determined to have been met in July 2003. As a result, the first payment of the cash portion of the incentive, in the amount of $2.7 million, was made during the fourth quarter of fiscal 2003. The remaining cash consideration of $5.4 million was accrued as at August 31, 2003 and will be expensed for accounting purposes as the employees earn the amounts. No compensation expense was recorded in fiscal 2002 and 2003 in connection with these options.

The following is a summary of the maximum number of common shares issuable pursuant to outstanding stock options:

			2003									2002						2001
			Number of options outstanding		Weighted average price							Number of options outstanding		Weighted average price				Number of options outstanding		Weighted average price
	Options outstanding,
	beginning of year		32,813,005		$	7.18						29,109,372		$	5.37			24,823,960		$	5.77
	Grant of additional options		907,550		4.89							9,881,474		10.40				11,148,703		5.32
	Cancellation of options		(1,117,276	)	9.03							(1,349,705	)	7.76				(4,095,329	)	8.31
	Exercise of options		(4,871,428	)	4.10							(4,828,136	)	2.60				(2,767,962	)	1.68
	Options outstanding, end of year		27,731,851		8.31							32,813,005		7.18				29,109,372		5.37
	Exercisable, end of year		15,727,485		$	8.35						12,608,053		$	6.54			9,960,010		$	4.77

As at August 31, 2003, the range of exercise prices for options outstanding and exercisable (vested) are as follows:

	Price range		Number of options outstanding			Weighted average life (years)			Weighted average price			Number of options exercisable		Weighted average price
	$ 0.09 – $ 0.93		2,697,554			6.15		$	0.32			2,275,191		$	0.32
	$ 3.94 – $ 5.87		7,691,866			4.72			4.99			3,477,156			5.04
	$ 6.14 – $ 9.21		7,634,869			4.23			7.91			4,359,216			8.52
	$ 9.56 – $13.89		4,723,508			4.06			11.79			2,588,895			11.45
	$14.75 – $16.88		4,984,054			3.90			15.11			3,057,027			15.25
			27,731,851			4.47		$	8.31			15,727,485		$	8.35

Page 65 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)  
As at August 31, 2003, the price range of $0.09 to $0.93, as noted above, represents all of the options relating to the ArtX Plan. All other options outstanding or exercisable relate to the ATI Plan. During the year ended August 31, 2003, 777,423 options relating to the ArtX Plan were exercised at a weighted average price of $0.30 and 11,272 options were cancelled at a weighted average price of $0.31.

For stock options granted to employees after September 1, 2002, had the Company determined compensation costs based on the fair value of the stock options at grant dates consistent with the method prescribed under CICA Handbook Section 3870, the Company’s income per share would have been reported as the pro forma amounts indicated below:

	Net income, as reported								$	35,299
	Pro forma adjustment for stock-based compensation									(525	)
	Pro forma net income								$	34,704
	Pro forma net income per share:
	Basic								$	0.15
	Diluted									0.14

The weighted average estimated fair values at the date of grant for the options granted for fiscal 2003 was $2.65 per share. The fair value of each option granted was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	Risk-free interest rate									3.1	%
	Dividend yield									0.0	%
	Volatility factor of the expected market price of the Company’s common shares									71.1	%
	Weighted average expected life of the options									4.2 years

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period.

(d) Contributed surplus
During 2003, an employee reimbursed $0.2 million (2002 – $0.4 million) to the Company for a loan receivable the Company assumed when it acquired ArtX. This transaction was recorded as contributed surplus.

During 2002, the Company cancelled for no consideration 134,200 options and 76,125 common shares with a total carrying value of $2.2 million. This transaction was recorded as contributed surplus.

NOTE 12.Income taxes

Income (loss) before income taxes consist of the following:

			2003						2002			2001
									(Restated)			(Restated)
	Income (loss) before income taxes:
	Canadian	$	2,081					$	978		$	(14,393	)
	Foreign		44,889						(43,203	)		(58,156	)
	Income (loss) before income taxes	$	46,970					$	(42,225	)	$	(72,549	)

Page 66 of 134

The income tax expense (recovery) consists of the following:

			2003						2002			2001
									(Restated)			(Restated)
	Current:
	Canadian	$	9,572					$	(875	)	$	–
	Foreign		3,971						6,506			(330	)
	Future:
	Canadian		2,234						4,747			(4,202	)
	Foreign		(4,036	)					(3,524	)		(14,228	)
	Income tax expense (recovery)	$	11,741					$	6,854		$	(18,760	)

The following is a summary of the components of the future tax assets and liabilities:

						2003					2002
	FUTURE INCOME TAXES
	Assets:
	Accounting depreciation in excess of tax depreciation				$	981				$	913
	Accounting provisions not deductible for tax purposes					5,111					6,639
	Tax benefit of loss carryforwards and undeducted R&D pools					40,490					37,007
	Other					4,650					201
	Total gross future tax assets					51,232					44,760
	Valuation allowance					(39,595	)				(40,286	)
	Net future tax assets					11,637					4,474
	Liabilities:
	Tax depreciation in excess of accounting depreciation					9,323					7,370
	Investment tax credits taxable in future years					11,241					6,154
	Intangible assets					844					2,523
	Total gross future tax liabilities					21,408					16,047
					$	(9,771	)			$	(11,573	)

Income tax expense (recovery) in the consolidated statements of operations and retained earnings varies from the amount that would be computed by applying the basic Canadian federal and provincial income tax rates to income before income taxes, as shown in the following table:

			2003						2002			2001
									(Restated)			(Restated)
	Income (loss) before income taxes	$	46,970					$	(42,225	)	$	(72,549	)
	Income taxes (recovery) at Canadian rates	$	17,379					$	(16,641	)	$	(30,920	)
	Reduction of Canadian taxes applicable to
	manufacturing and processing activities		(83	)					(54	)		1,067
	Tax effect of:
	Non-deductible amortization of intangible assets		–						31,696			32,248
	Utilization of provincial research and development tax incentives		(2,076	)					(1,733	)		(1,696	)
	Non-taxable portion of capital (gains) losses		–						1,022			(26,487	)
	Foreign jurisdictions		(7,238	)					(4,421	)		100
	Change in beginning of the year balance of the
	valuation allowance for future tax assets		(691	)					(4,501	)		13,942
	Other		4,450						1,486			(7,014	)
		$	11,741					$	6,854		$	(18,760	)

Page 67 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)  
Canadian income taxes were not provided for on undistributed income for certain non-Canadian subsidiaries. The Company intends to reinvest this income indefinitely in operations outside Canada.

As at August 31, 2003, the Company had $95.3 million of net operating losses for income tax purposes. Income tax benefits have not been recognized in these financial statements for a significant portion of these losses. These losses will begin to expire commencing in 2008.

NOTE 13. Net income (loss) per share

The following table presents a reconciliation of the numerators and denominators used in the calculations of the basic and diluted income (loss) per share:

			2003						2002			2001
									(Restated)			(Restated)
	Net income (loss)	$	35,299					$	(49,079	)	$	(53,789	)
	Weighted average number of common shares outstanding (000’s):
	Basic		238,251						234,895			230,880
	Effect of stock options		6,102						–			–
	Diluted		244,353						234,895			230,880
	Net income (loss) per share:
	Basic	$	0.15					$	(0.21	)	$	(0.23	)
	Diluted		0.14						(0.21	)		(0.23	)

As at August 31, 2003, certain options that are anti-dilutive were excluded from the calculation.

As at August 31, 2002, options to purchase 32,813,005 (2001 – 29,109,372) shares of common stock with a weighted average exercise price of $7.18 (2001 – $5.37) were outstanding but were not included in the calculation of diluted loss per share because the Company had a loss for that year and to do so would have been anti-dilutive.

NOTE 14. Guarantee

The Company and other owners of CVRH have jointly and severally provided a guarantee for the mortgage payment on the building facility occupied by the Company in Markham, Ontario. In the event that CVRH is unable to meet the underlying mortgage payment to the lender, the Company and other owners of CVRH will be jointly and severally responsible under this guarantee. The monthly mortgage interest and principal payment amounts to approximately $0.2 million. The mortgage has a repayment term of 12 years with a maturity date on November 1, 2014. As of August 31, 2003, the outstanding amount of the mortgage stood at $23.4 million (Cdn. $32.4 million).

In addition, the Company posted a letter of credit in the amount of $2.2 million (Cdn. $3.0 million) in favor of CVRH. CVRH has assigned this letter of credit to the exclusive benefit of the lender as additional security of the mortgage. The letter of credit has a term of five years and will expire on November 5, 2007. In the event of a lease default by the Company, the proceeds of the letter of credit will be paid to the lender.

Page 68 of 134

NOTE 15. Other charges

Other charges incurred in fiscal 2003 are comprised of the following items:

	Settlement of class action lawsuits (a)								$	4,670
	Regulatory matters (b)									5,828
	Restructuring charge – European operations (c)									6,542
	Lease exit charge (d)									2,684
	Settlement of patent litigation with Cirrus Logic, Inc. (e)									9,000
									$	28,724

(a) Settlement of class action lawsuits
On February 7, 2003, the Company announced that it had reached an agreement for the full and complete settlement of all remaining claims alleged in the shareholder class action lawsuits filed in May 2001 in the United States District Court for the Eastern District of Pennsylvania for a cash payment of $8.0 million. This litigation relates to alleged misrepresentations and omissions made by the Company and certain directors and officers during a period preceding its May 2000 earnings warning. The terms of the Stipulation and Agreement of Settlement, which received final Court order on April 28, 2003, included no admission of liability or wrongdoing by the Company or other defendants. No party timely appealed the Court’s order. During the fourth quarter of fiscal 2003, the Company received $3.3 million from its insurer as its contribution towards the settlement.

(b) Regulatory matters
In January 2003, the Company announced that staff of the Ontario Securities Commission (“OSC”) had filed a Notice to Hearing and Statement of Allegations (“Notice”) in relation to the Company and others. The Notice alleged that the Company failed to disclose information concerning the shortfall in revenue and income that occurred in the third quarter of fiscal 2000, as required by the listing rules of The Toronto Stock Exchange. The Notice also alleged that the Company made a misleading statement to staff of the OSC in August 2000 regarding the events leading up to the disclosure on May 24, 2000 of the shortfall. Seven individuals are also named in the Notice. The Notice alleged that six of these individuals, including K.Y. Ho, the Chairman and Chief Executive Officer of the Company, engaged in insider trading contrary to the Securities Act. A hearing has been scheduled for February – March 2004. The Company has incurred external charges in connection with the matter totaling $5.8 million during the year ended August 31, 2003.

(c) Restructuring charge – European operations
The following table details the activity through the restructuring liabilities accrual for the year ended August 31, 2003:

	Provision								$	5,142
	Cash payments									(896	)
	Balance, August 31, 2003								$	4,246

(i) During the second quarter of fiscal 2003, the Company announced the closure of ATI Technologies (Europe) Limited (“ATEL”), its subsidiary in Dublin, Ireland. The Company has shifted its European business model from direct selling to marketing its graphic chip technology to original design manufacturers and add-in-board partners serving European original equipment manufacturers. The transition has resulted in the redundancy of the operations in Dublin.

Page 69 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)  
In accordance with the former Handbook Section 3475, the Company recorded a pre-tax charge of $2.8 million related to the closure of ATEL in the second quarter of the year. The following table details the components of the charge:

	Exit and other costs								$	1,365
	Asset impairment (non-cash)									1,400
									$	2,765

The asset impairment is due to the write-down of the building facility in Dublin, Ireland to fair value less cost to sell. The building facility, which has a fair value of $1.9 million, is included in the capital assets for financial statement presentation purposes.

The Company completed the major components of its exit plan for ATEL in July 2003 and expects to pay out the cash portion of the restructuring charge by September 2003.

(ii) During the fourth quarter of fiscal 2003, the Company decided to discontinue the operations of ATI Research GmbH, its FireGL™ product division located in Starnberg, Germany, in order to consolidate its R&D activities. As a result, the Company recorded a pre-tax charge of $3.8 million for the quarter pertaining to the closure of ATI Research GmbH based on the revised Handbook Section 3475.

The Company expects to complete the major components of its exit plan for ATI Research GmbH by December 2003.

(d) Lease exit charge
During fiscal 2003, the Company determined that it would exit certain leased properties located in Markham, Ontario. As a result, the Company recognized the fair value of the future net costs related to the leases in the amount of $2.4 million as a charge.

In addition, the Company recorded a further charge of $0.3 million during fiscal 2003 related to the exit costs of the above-mentioned lease properties due to a change in estimate of the fair value of the future net costs.

(e) Settlement of patent litigation with Cirrus Logic, Inc.
In May 2003, Cirrus Logic (“Cirrus”) brought suit against the Company in the United States District Court for the Western District of Texas, Austin Division, for infringement of a Cirrus patent relating to graphics processor technology. In addition, a separate patent infringement suit relating to a different Cirrus Logic patent has been pending in the United States District Court for the Northern District of California, San Francisco Division, since July 1998.

Subsequent to the year-end the Company and Cirrus announced they have entered into a cross-license agreement and have settled all outstanding litigation between the companies.

Under the settlement agreement, all outstanding claims and counterclaims in both lawsuits between Cirrus and the Company were dismissed. In connection with the settlement, Cirrus will transfer to the Company a portion of its patent portfolio relating to the former graphics products group of its PC products division, a business that Cirrus exited several years ago, and the Company will pay Cirrus $9.0 million.

NOTE 16. Segmented information

The Company operates in one primary operating segment, that being the design, manufacture and sale of 3D graphics and digital media silicon solutions

			2003						2002			2001
									(Restated)			(Restated)
	Revenues:
	Canada	$	20,065					$	15,441		$	23,380
	United States		258,545						290,575			325,742
	Europe		113,193						154,712			253,974
	Asia-Pacific		993,490						555,051			437,269
	Consolidated revenues	$	1,385,293					$	1,015,779		$	1,040,365

Page 70 of 134

			2003						2002			2001
									(Restated)			(Restated)
	Revenues:
	Components	$	962,735					$	537,756		$	477,164
	Boards		397,533						450,008			554,528
	Other		25,025						28,015			8,673
	Consolidated revenues	$	1,385,293					$	1,015,779		$	1,040,365
	Capital and intangible assets and goodwill:
	Canada	$	74,332					$	78,842		$	54,162
	United States		208,764						220,811			297,417
	Europe		2,277						4,644			5,071
	Asia-Pacific		423						1,214			706
	Consolidated capital and intangible assets and goodwill	$	285,796					$	305,511		$	357,356

At August 31, 2003, one customer accounted for 18% of the Company’s consolidated accounts receivable balance (2002 – one customer accounted for 12%). In fiscal 2003, three customers aggregated 40% of consolidated revenues, being 16%, 13% and 11%, respectively (2002 – one customer 21%; 2001 – one customer 19%).

NOTE 17. Commitments

The Company is committed to the following minimum payments related to office premises and license and royalty agreements:

	Year ending August 31:		Office premises			License and royalty agreements				Total
	2004	$	6,128		$	16,366			$	22,494
	2005		6,766			13,725				20,491
	2006		6,847			2,819				9,666
	2007		6,207			–				6,207
	2008		6,252			–				6,252
	2009 and thereafter		14,341			–				14,341

NOTE 18. Joint venture

In February 1999, the Company entered into a 50% ownership joint venture agreement for the purpose of constructing a new building facility in Markham, Ontario. The facility was completed in April 2002 and is fully occupied by the Company. The completed cost of this facility amounted to $33.3 million.

The following amounts represent the Company’s proportionate interest in the joint venture:

			2003						2002
	Condensed balance sheet information:
	Current assets	$	1,548					$	391
	Bank indebtedness		–						(12,015	)
	Other current liabilities		(941	)					(474	)
	Long-term debt		(10,969	)					–
	Condensed cash flows:
	Financing activities	$	(989	)				$	3,266
	Investing activities		–						(2,806	)
	Operating activities		1,127						93

Page 71 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)  
On May 23, 2001, the joint venture entered into an interest rate swap contract to hedge its exposure to the interest rate risk applicable to its expected future mortgage requirement. This contract was a forward start pay fixed derivative agreement for a notional amount of Cdn. $38.0 million. The agreement provided for the joint venture to pay a fixed rate of 6.42% in exchange for a floating rate equivalent to one-month Canadian bankers’ acceptances. The Company and the other joint venture partners are guarantors of the credit facility. This interest rate swap contract closed on September 10, 2002, resulting in a proportionate loss of $1.4 million to the Company. The loss is treated as a deferred expense item in the balance sheet and is charged to the consolidated statements of operations and retained earnings as a yield adjustment to the interest expense, over the term of the mortgage.

NOTE 19. Supplemental cash flow information

			2003						2002			2001
	Supplemental cash flow information:
	Interest paid	$	1,739					$	573		$	1,180
	Interest received		2,902						4,889			3,507
	Income taxes paid		2,127						893			1,500

During fiscal 2002, the Company acquired $16.3 million of capital assets by means of capital lease.

NOTE 20. Canadian and United States accounting policies differences

(a) The following table reconciles the net income (loss) for the year as reported on the consolidated statements of operations and retained earnings prepared in accordance with Canadian GAAP to the consolidated income (loss) for the year that would have been reported had the financial statements been prepared in accordance with U.S. GAAP:

			2003						2002			2001
									(Restated)			(Restated)
	Net income (loss) in accordance with Canadian GAAP	$	35,229					$	(49,079	)	$	(53,789	)
	Write-off of purchased in-process R&D (a)(i)		–						(5,300	)		–
	Amortization of purchased in-process R&D (a)(i)		4,417						883			30,151
	Goodwill amortization difference (a)(ii)		–						7,941			7,326
	Stock compensation expenses (a)(iii), (a)(iv)		(25,486	)					997			(1,694	)
	Tax effect of stock options exercised (a)(vi)		(2,083	)					(1,868	)		(346	)
	Loss on hedging transaction (a)(v)		94						(1,365	)		–
	Net income (loss) in accordance with U.S. GAAP	$	12,171					$	(47,791	)	$	(18,352	)
	Net Income (loss) per share in accordance with U.S. GAAP:
	Basic	$	0.05					$	(0.20	)	$	(0.08	)
	Diluted		0.05						(0.20	)		(0.08	)
	Weighted average number of shares (000’s)
	Basic		238,251						234,895			230,880
	Diluted		244,353						234,895			230,880

Page 72 of 134

(i) Under Canadian GAAP, purchased in-process R&D is capitalized and amortized over its estimated useful life. Asset recoverability is reviewed on an ongoing basis. Under U.S. GAAP, purchased in-process R&D is written off at the time of acquisition.

(ii) Under Canadian GAAP, the aggregate purchase price of ArtX was approximately $453.0 million, which was based on the average closing market price of the Company’s common shares around April 4, 2000 (the closing date of the transaction) and merger-related costs. Under U.S. GAAP, the aggregate purchase price of ArtX was approximately $414.0 million, which was based on the average closing market price of the Company’s common shares around February 16, 2000 (the date of the announcement of the transaction) and merger-related costs. As a result, the recorded amount of goodwill and related amount of amortization expense differ. Pursuant to the adoption of new accounting standards, effective September 1, 2002, the Company discontinued amortization of all existing goodwill under both Canadian and U.S. GAAP.

(iii) Under U.S. GAAP, options granted after January 18, 2001, with an exercise price denominated in a currency other than the currency of the primary economic environment of either the employer or the employee, should be accounted for under the variable accounting method. Under Canadian GAAP, there is no equivalent requirement. There were no such options granted after February 28, 2002.

(iv) Under U.S. GAAP, the intrinsic value of the stock options issued under the incentive plan entered into in July 2002 (note 11) is calculated as the increase in the Company’s stock price between the grant date and the date on which all the conditions of the specified business arrangement were determined to have been met. The compensation expense is recognized over the vesting period of the options. Under Canadian GAAP, there is no equivalent requirement.

(v) Under Canadian GAAP, loss on a hedging transaction is allowed to be amortized over the term of the mortgage. Under U.S. GAAP, loss on a hedging transaction is written off when the hedge is determined to be ineffective.

(vi) The Company accounts for its share options under the provisions of the Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related interpretations. Accordingly, compensation expense for its share option plans, based on the intrinsic value, has been recorded in the consolidated statements of operations and retained earnings for the years ended August 31, 2003, 2002 and 2001. Had compensation expense for the Company’s share option plans been determined based on the fair value at the grant dates for awards under the plans consistent with the method prescribed under Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 123, “Accounting for Stock-based Compensation” (“SFAS 123”), the Company’s loss and loss per share would have been reported as the pro forma amounts indicated in the table below:

			2003						2002			2001
									(Restated)			(Restated)
	Net income (loss) in accordance with U.S. GAAP,
	as reported above	$	12,171					$	(47,791	)	$	(18,352	)
	Stock compensation (a)(iii)		25,486						(997	)		1,694
	Pro forma adjustment for SFAS 123		(16,700	)					(17,000	)		(14,100	)
	Pro forma net income (loss)	$	20,957					$	(65,788	)	$	(30,758	)
	Pro forma net income (loss) per share:
	Basic	$	0.09					$	(0.28	)	$	(0.13	)
	Diluted		0.09						(0.28	)		(0.13	)

The weighted average estimated fair values at the date of the grant, as defined by SFAS 123, for options granted in fiscal 2003, 2002 and 2001 were $2.65, $9.15 and $1.92 per share option, respectively.

Page 73 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)  
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes fair value option pricing model with the following assumptions:

			2003						2002			2001
	Risk-free interest rate		3.1	%					3.5	%		4.0	%
	Volatility factor		71.1	%					73.0	%		50.0	%
	Weighted average expected life		4.2 years						4.0 years			2.5 years

For the purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. For the purposes of reporting under U.S. GAAP, the tax benefit associated with deductible stock option compensation is treated as an increase in share capital. For reporting under Canadian GAAP, if compensation costs are not recorded, the income tax benefit is treated as a reduction to the income tax provision.

(b) The following table indicates the differences between the amounts of certain balance sheet items determined in accordance with Canadian and U.S. GAAP:

			2003										2002
			U.S. GAAP			Canadian GAAP			Difference				U.S. GAAP			Canadian GAAP		Difference
													(Restated)			(Restated)
	Assets:
	Prepayments and sundry
	receivables (a)(v)	$	30,482		$	31,753		$	(1,271	)		$	21,806		$	21,806	$	–
	Intangible assets (a)(i)		8,811			8,811			–				17,441			21,858		(4,417	)
	Goodwill (a)(ii)		170,367			190,095			(19,728	)			168,087			187,815		(19,728	)
	Liabilities and
	shareholders’ equity:
	Accrued liabilities (a)(v)		136,709			136,709			–				50,786			49,421		1,365
	Share capital		563,461			582,454			(18,993	)			540,401			561,477		(21,076	)
	Contributed surplus		31,038			4,855			26,183				5,327			4,630		697
	Retained earnings		103,320			104,026			(706	)			91,149			68,797		22,352
	Currency translation
	adjustments		(19,209	)		8,274			(27,483	)			(19,209	)		8,274		(27,483	)

(i) Canadian GAAP requires the proportionate consolidation of interests in joint ventures. Proportionate consolidation is not permitted under U.S. GAAP and interests in joint ventures are accounted for on the equity basis. Although the adoption of proportionate consolidation has no impact on net income or shareholders’ equity, it does increase assets, liabilities, revenues, expenses and cash flow from operations from those amounts otherwise reported under U.S. GAAP. This is not reflected in the table of certain balance sheet items disclosed above.

Page 74 of 134

(ii) Additional disclosures as required in accordance with U.S. GAAP:

	(1)	As at August 31, 2003, the consolidated accounts receivable provision for returns and doubtful accounts was approximately $12.3 million (2002 – $7.9 million).
	(2)	As at August 31, 2003, sales rebate payable represents 17% of total consolidated current liabilities (2002 – 7%).
	(3)	For the year ended August 31, 2003, the net foreign exchange gain was approximately $0.8 million (2002 – loss of $0.4 million; 2001 – loss of $1.9 million).

(iii) Comprehensive income: FASB Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (“SFAS 130”), requires disclosure of comprehensive income, which includes reported net income adjusted for other comprehensive income. Other comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The following table presents comprehensive income (loss) and its components:

			2003						2002			2001
									(Restated)			(Restated)
	Net income (loss) in accordance with U.S. GAAP	$	12,171					$	(47,791	)	$	(18,352	)
	Other comprehensive income (loss), net of tax:
	Unrealized loss on available for sale securities (1)		–						–			(4,159	)
	Unrealized loss on interest rate swap contract (2)		–						510			(510	)
	Reclassification adjustment		–						439			–
	Comprehensive income (loss)	$	12,171					$	(46,842	)	$	(23,021	)

	(1)	U.S. GAAP requires investments in marketable securities available for sale to be recorded at market value and all unrealized holding gains and losses reflected in shareholders’ equity. Under Canadian GAAP, long-term investments are carried at historical cost with losses in value being recognized in income only when the loss in value is other than temporary and increases in value being recognized only when realized.
	(2)	During fiscal 2001, CVRH, the joint venture in which the Company has 50% ownership, entered into an interest rate swap contract (note 18), which was designated as a cash flow hedge for the interest rate risk applicable to its expected future mortgage requirement. Under Canadian GAAP, the hedging instrument is treated as an off-balance sheet item until it closes. Under U.S. GAAP, hedging instruments must be measured at fair value. The unrealized gain or loss arising from changes in fair value of the interest rate swap contract is recognized in other comprehensive income to the extent it is effective; the ineffective portion, if any, is reported in income currently. In the third quarter of fiscal 2002, the interest rate swap was deemed ineffective and reported in income since the actual closing date of the financing differed from the period covered by the interest rate swap.

(c) New United States accounting pronouncements
(i) In November 2002, the Emerging Issues Task Force (“EITF”) reached a consensus regarding EITF Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” The consensus addresses not only when and how an arrangement involving multiple deliverables should be divided into separate units of accounting but also how the arrangement’s consideration should be allocated among separate units. The pronouncement is effective for the Company commencing with its 2004 fiscal year. The Company expects the adoption of this standard will have no material impact on its financial position, results of operations or cash flows.

Page 76 of 134

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
 
Years ended August 31, 2003, 2002 and 2001 (Tabular amounts in thousands of U.S. dollars, except per share amounts)  
(ii) In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). Its consolidation provisions are applicable for all newly created entities created after January 31, 2003, and are applicable to existing variable interest entities as of the beginning of the Company’s fiscal year beginning September 1, 2003. With respect to entities that do not qualify to be assessed for consolidation based on voting interests, FIN 46 generally requires a company that has a variable interest(s) that will absorb a majority of the variable interest entity’s expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur, or both, to consolidate that variable interest entity. For periods prior to FIN 46’s effective date, certain disclosures will be required if it is reasonably possible that the Company will have a significant variable interest in or be the primary beneficiary of a variable interest entity when FIN 46 guidance is effective. The Company expects the adoption of this standard will have no material impact on its financial position, results of operations or cash flows.

NOTE 21. Litigation

In addition to the claims and proceedings, as described in note 15, the Company is subject to legal proceedings and claims that arise in the ordinary course of its business. While management currently believes the amount of ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations, or liquidity of the Company, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur, the impact could be material to the Company.

NOTE 22. Subsequent event

On September 2, 2003, the Company announced the acquisition of certain assets of AMI Technologies Corp., its exclusive sales organization for Taiwan and China since 1992, for cash consideration of $3.0 million.

EX-2

Page 77 of 134

EXHIBIT 2

Page 78 of 134

Management’s
Discussion and Analysis

ABOUT FORWARD-LOOKING STATEMENTS
Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as “plans,” “intends,” “anticipates,” “should,” “estimates,” “expects,” “believes,” “indicates,” “targeting,” “suggests” and similar expressions.

This Annual Report and Management’s Discussion and Analysis (“MD&A”), and in particular the outlook sections of this MD&A, contain forward-looking statements about ATI’s objectives, strategies, financial condition and results. These “forward-looking” statements are based on current expectations and entail various risks and uncertainties.

It must be noted that:

• Forward-looking statements describe our expectations on the day they are made. For the MD&A, it is November 14, 2003.
• Our actual results may materially differ from our expectations if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. Therefore we cannot provide any assurance that forward-looking statements will materialize.
• We assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason.

Risks that could cause our actual results to materially differ from our current expectations are outlined in the Risks and Uncertainties section of this MD&A.

Page 79 of 134

This MD&A comments on ATI’s operations, performance and financial condition for the three years ended August 31, 2003. The MD&A should be read in conjunction with ATI’s 2003 Consolidated Financial Statements and accompanying notes beginning on page 28 of this Annual Report. All current and historical amounts quoted in this MD&A, in the Consolidated Financial Statements and elsewhere in this Annual Report reflect the accounting change described in note 1 to the Consolidated Financial Statements. All tabular amounts are expressed in thousands of U.S. dollars except per share amounts. In this MD&A, ATI, we, us and our mean ATI Technologies Inc. and its subsidiaries. The MD&A is presented in four sections: About Our Business describes our business, strategy and outlook. Financial Results Analysis provides a detailed review of our financial performance for the past three years. It focuses on operating results as well as liquidity and capital resources. Risks and Uncertainties examines uncertainties and challenges that could affect our business. Our Accounting Policies describe our critical accounting policies and the key estimates and assumptions that management has made in the preparation of our financial statements. It also provides a description of changes in accounting standards used to prepare our financial statements. About Our Business ATI is a world leader in the design and manufacture of component-level graphic silicon solutions. An industry pioneer since 1985, ATI is one of the world’s foremost providers of visual processors. Our products allow users to interact with the digital world, and harness the power of technology to create rich cinematic visual experiences. We are dedicated to the delivery of leading-edge performance solutions for the full range of desktop and notebook personal computer (PC), workstation, digital television (DTV), set-top box, game console, color mobile phone and handheld markets. We had revenues of about $1.4 billion in fiscal 2003. In addition, more than 2,200 employees work at ATI in offices in the Americas, Europe and Asia. ATI TERMS EXPLAINED We use certain acronyms to identify some of the main product categories in our business. VPUs and GPUs Visual processing units (VPUs) or graphics processing units (GPUs) are semiconductor chips that increase the speed and complexity of the images that can be displayed on a computer monitor. They also enhance screen resolution and color definition. VPUs or GPUs off-load the burden of visual processing from the computer’s microprocessor or central processing unit (CPU). In this way the dedicated VPU and CPU work in tandem to increase overall speed and performance of the PC. Though both VPU and GPU refer to the same general category, we use VPU to distinguish our more recent generations of processors beginning with the introduction of the RADEON™ 9700—the first graphic processor to enable full rendering in real time. IGPs Integrated graphics processors (IGPs) are semiconductor chips that combine the graphics processor with one or more other core logic functions such as memory, input/output and communications controllers on one chip. Visual Processing Units for PCs ATI designs, engineers, manufactures and markets VPU, GPU and IGP products to original equipment manufacturers (OEMs) and system integrators (SIs) who build them into their personal computers (PCs); original design manufacturers (ODMs) and add-in-board manufacturers (AIBs) who add them to their PC motherboard products or who use them in their graphic board products, as well as retailers.

Page 80 of 134

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.) Desktop Our discrete desktop VPUs and GPUs address desktop PC markets where customers expect high levels of performance, speed and a compelling visual experience. We deliver an array of performance/value propositions for mainstream, performance and enthusiast PC markets. We also design and build VPU and GPU solutions for the advanced workstation and home media markets. Our integrated desktop IGP addresses the value segment of the PC market. We bring speed and an excellent visual experience to the sub-$1,000 PC market. Notebook Our notebook GPUs address the portable or laptop computer segment. In this category, speed, low power consumption and visual performance are the uppermost considerations of our customers. We focus on designing notebook GPUs that meet and exceed these expectations in value, mainstream and enthusiast categories. We also build notebook VPU and GPU solutions for the workstation and home media markets. Our integrated notebook IGPs target the value category of the portable or laptop computer segment. Our products combine excellent graphic performance and low power consumption at a value price-point. Visual Processing Products for Consumer Electronics Many consumer electronics today rely on some form of digital processor to increase functionality, improve reliability, decrease size and lower costs. An easy-to-use display is typically the next consumer priority. ATI has been working for several years to leverage our core technology, visual processing expertise and power management know-how in certain consumer markets. Initially we have targeted three end user markets: handheld devices, including color mobile phones; digital television, including set-top boxes; and game consoles. Color mobile phones, PDAs and handheld devices The latest generation of color mobile phones, PDAs and other handheld devices is driving demand for more advanced visual processors. Higher resolution panels, higher performing embedded processors as well as increased internal and removable storage are contributing to the revolution in handheld and mobile communication devices. Our IMAGEON™ product line brings leading visual processing along with power saving technology and a high level of integration. Digital television including set-top boxes Digital television is another key consumer electronics market for ATI. The U.S. Federal Communications Commission has mandated that all televisions sold in the U.S. be equipped with a digital tuner by 2007. Worldwide, the transition to digital delivery of television signals is well underway. We are leveraging our core technology in visual processors and multimedia by designing and manufacturing component-level visual and signal processing technologies for the digital TV and set-top box markets. Our XILLEON™ and THEATER™ product lines are cost-effective and highly integrated solutions for this market. Game consoles We leverage our core visual processing technology in the game console market where we currently provide visual processing technology to Nintendo for its GAMECUBE game consoles. We have entered into technology development agreements with game console manufacturers Nintendo Co., Ltd. for future products and Microsoft Corp. for future Xbox® products and services. BUSINESS STRATEGY AND 2003 PROGRESS AND ACHIEVEMENTS Our past and future success is driven by consistent execution of four critical strategies—securing and maintaining product and technology leadership, entering and establishing a franchise in the IGP market, building momentum and scale in the consumer electronics markets and improving our operational and financial performance.

Page 81 of 134

	BUSINESS STRATEGY AND OBJECTIVES		2003 ACCOMPLISHMENTS
	Product and Technology Leadership Consistently raise the technology innovation and performance bar in all segments of the PC market.		We Raised the Bar Again in 2003 Continued to introduce industry-leading technology at the high-end of the desktop PC market with the introduction of the RADEON™ 9800. Leveraged high-end performance VPUs into the important mainstream and value market segments with the introduction of the RADEON™ 9600 and the RADEON™ 9200.
	Establish a Franchise in the IGP Market Bring ATI’s core visual processing expertise to the IGP market that represents about 50% of graphics processor shipments today.		Captured a Leading Share of the IGP Notebook Market In 2003, we started shipping our RADEON™ IGP 340 and 320 products for the notebook market. Over 10% of our revenues for 2003 came from these two products. We introduced a series of new IGP products culminating in the release of the RADEON™ 9100 IGP and MOBILITY™ RADEON™ 9100 IGP. Strong customer acceptance of our value/performance proposition has contributed to our successful launch in the IGP market. We partnered with key motherboard manufacturers including ASUS, Gigabyte, MSI, and PC Partner that will help us penetrate the desktop integrated market in fiscal 2004.
	Expand in Consumer Electronics Market Segments Leverage our core technology base and expertise in the PC market with products that reach beyond the PC and address the DTV, handheld and game console markets.		Volume Shipments of IMAGEON™ into the Color Cell Phone Market We secured design wins and started shipping to Motorola, a leading cell phone manufacturer. Achieved Broad-Based Acceptance of ATI’s DTV Solutions Design wins from Sony, Epson and Scientific-Atlanta, the respective leaders in television, projector and set-top box manufacturing represent important milestones in our DTV business. We expect continued momentum in this segment in 2004. Agreements with Game Console Manufacturers We signed new multi-year technology development agreements for future products with Nintendo Co., Ltd. and Microsoft Corp. for their Xbox® products and services.
	Improve Operating and Financial Performance Continuously improve all areas of ATI’s operations to achieve and exceed our financial objectives.		Steady Improvement in Financial and Operating Performance We increased revenue by 36% in fiscal 2003 on a year-over-year basis as a result of technology leadership in the high-end desktop as well as entry into notebook integrated. Our adjusted net income increased to $67.0 million in fiscal 2003 from $48.1 million last year. In 2003, we improved our inventory management controls and increased our inventory turns to 5.2 from 4.5 in 2002.

BUSINESS OUTLOOK FOR FISCAL 2004 We expect that the overall PC market will experience growth in units shipped in fiscal 2004. Both desktop and notebook segments will likely grow, but notebook is expected to produce much higher growth than desktop. We also expect to see some fairly robust growth in both the DTV market and the color cell phone market, each representing new market opportunities for ATI. Although we expect growth from our existing franchises in desktop discrete, notebook discrete and notebook IGP products, we expect much of our fiscal 2004 revenue growth to come from products sold into the handheld, DTV and desktop IGP markets. Based on this outlook for the markets for our products, we expect ATI’s financial performance will improve in 2004 relative to 2003.

Page 82 of 134

  MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)
Financial Results Analysis
This section discusses the financial results of ATI Technologies Inc. During fiscal 2003, ATI reviewed its revenue recognition accounting policy as it is applied to the shipment of products to our customers. Following this review, we corrected our revenue recognition accounting policy by revising the timing of when revenue is recognized to more clearly identify the point in the shipping process when the risk and rewards of ownership have been transferred to the customer. This change and the related income tax effect have been applied retroactively. The financial statements of all prior periods presented for comparative purposes have been restated to give effect to this change. Details are provided in note 1 in the accompanying financial statements. Our financial results have been and will continue to be subject to quarterly and other fluctuations. For a discussion of factors affecting our operating results, please refer to “Risks and Uncertainties” on page 22. OPERATING RESULTS
The following table compares operating results for our three most recent fiscal years. Each line item is expressed as a percentage of revenues.

	Comparison of Operating Results unaudited		2003								2002					2001
											(Restated)					(Restated)
	REVENUES	$	1,385,293		100.0%					$	1,015,779		100.0%		$	1,040,365		100.0	%
	Cost of goods sold		952,001		68.7%						682,385		67.2%			799,038		76.8	%
	Gross margin		433,292		31.3%						333,394		32.8%			241,327		23.2	%
	EXPENSES
	Selling and marketing		96,925		7.0%						77,920		7.7%			75,594		7.2	%
	Research and development		212,976		15.4%						164,609		16.2%			149,465		14.4	%
	Administrative		39,413		2.8%						35,662		3.5%			37,261		3.6	%
	Amortization and write-down of
	goodwill and intangible assets		10,767		0.8%						97,501		9.6%			114,507		11.0	%
	Other charges		28,724		2.1%						–		0.0%			–		0.0	%
			388,805		28.1%						375,692		37.0%			376,827		36.2	%
	NET INCOME (LOSS) FROM OPERATIONS		44,487		3.2%						(42,298	)	(4.2%	)		(135,500	)	(13.0	%)
	Interest and other income, net		4,382		0.3%						732		0.1%			64,131		6.1	%
	Interest expense		(1,899	)	(0.1%	)					(659	)	(0.1%	)		(1,180	)	(0.1	%)
	Income (loss) before income taxes		46,970		3.4%						(42,225	)	(4.2%	)		(72,549	)	(7.0	%)
	Income taxes (recovery)		11,741		0.9%						6,854		0.6%			(18,760	)	(1.8	%)
	NET INCOME (LOSS)	$	35,229		2.5%					$	(49,079	)	(4.8%	)	$	(53,789	)	(5.2	%)
	NET INCOME (LOSS) PER SHARE
	Basic	$	0.15							$	(0.21	)			$	(0.23	)
	Diluted	$	0.14							$	(0.21	)			$	(0.23	)
	ADJUSTED NET INCOME (LOSS)*
	Adjusted net income (loss)	$	67,015							$	48,078				$	(15,836	)
	Adjusted net income (loss) per share
	Basic	$	0.28							$	0.20				$	(0.07	)
	Diluted	$	0.27							$	0.19				$	(0.07	)
	*Please see table titled “Reconciliation of Adjusted Net Income (Loss)” included on page 18.

Page 83 of 134

  Adjusted net income is a “non-GAAP financial measure” that does not have an established meaning under generally accepted accounting principles (“GAAP”), but is referred to in this Annual Report because management of ATI believes that it is indicative of our operating performance and is generally used by investors to evaluate companies in the graphics industry. Such term may not be comparable to similarly titled measures presented by other publicly traded companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

	REVENUES In fiscal 2003, ATI’s revenues grew by 36%. Revenues increased by $370 million to approximately $1.4 billion in 2003. This increase was primarily a result of our strong entry into the notebook IGP market and a growing demand for our high performance desktop products. Overall growth in the notebook market also contributed to growth in discrete and integrated notebook products. Over 55% of our revenues in 2003 were generated by our desktop discrete products which was a relative decrease compared to 2002 where desktop products represented over 60% of revenues. Over 40% of revenues in 2003 were generated by our notebook products, with over 10% of our overall sales coming from our notebook IGP products—a new market segment for us. In 2002, notebook product sales represented about a third of our revenues. Notebook market growth as well as our entry into the notebook integrated market contributed to this shift in 2003. Royalties and licensing income from our Nintendo business continued to represent less than 5% of revenues in 2003, and in absolute dollars were slightly lower in 2003 relative to 2002.
				Revenues
				$ billions
				1.0		1.0		1.4
				01*		02*		03
				*Restated

Our transition from primarily a board-level manufacturer to a component-level manufacturer was substantially completed in 2003, with over 90% of our units shipped as chips, representing about 70% of our consolidated revenues this year. As we ended 2003, about 95% of our units shipped in our PC business were components. Our transition to a component supplier has opened up new channels and markets for us, specifically in the Asia-Pacific region, further contributing to our revenue growth. In 2003, three customers accounted for 40% (16%, 13% and 11% respectively) of total revenues. In 2002, only one customer represented over 10% of our sales, at 21%. Our top ten customers accounted for approximately 70% of revenues in 2003 compared with 71% last year. Our revenues declined 2.4% in 2002 versus 2001 primarily as a result of the ongoing transition in ATI’s business from board sales to component sales. Unit sales volume increased in 2002, but with an increased mix of lower dollar components versus boards.

	Gross Margin In 2003, gross margin was 31.3%, down 1.5 percentage points from gross margin of 32.8% generated in the previous year. Two factors in the first quarter contributed to lower margin early in the fiscal year. First, we wrote-down the inventory value of certain products and, second, we experienced a slower than expected implementation of planned cost reductions. In the remaining three quarters, however, our gross margin climbed steadily and exceeded 35% in the fourth quarter. We achieved higher margins on our board-level products, reflecting the strength of our high-end products. We also saw improvement in desktop chip margins largely due to higher margins from new products, as well as improved contribution of our consumer business. The increase in gross margin percentage was somewhat moderated by lower margins on our “embedded memory” products sold into the notebook PC market. Certain of our notebook products include third party memory. The memory is generally passed through with a limited markup. This results in reduced gross margin percentage.
				Gross Margin
				$ millions
				241.3		333.4		433.3
				01*		02*		03
				*Restated

	Our consumer electronics products began to contribute positively to gross margin in the last quarter of 2003.

Page 84 of 134

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Gross margin in 2002 of 32.8% increased significantly from 23.2% in the prior year due to a higher percentage of component sales primarily resulting from our transition to a chip model, Nintendo royalty income, a full year of relatively high margin workstation revenues, lower cost memory than in 2001, and better margin on competitive board products. The increase was slightly offset by lower margin in the fourth quarter of 2002 as a result of weakness in the notebook market.

	EXPENSES Operating Expenses ATI’s headquarters are in Markham, Ontario, Canada. Our overhead and staffing costs were approximately $160 – $170 million CDN in fiscal 2003. The rise in the value of Canadian dollar relative to the U.S. dollar from 64 cents to 73 cents had an approximate US $5.6 million negative impact on our operating expenses in 2003. Should the Canadian dollar remain at current levels of 76 cents relative to the U.S. dollar, we expect an approximate US $17 million increase in expenses in fiscal 2004 relative to 2003 solely due to the increase in the value of the Canadian dollar. Selling and Marketing Expenses Our selling and marketing expenses climbed 24.4% in 2003 to $96.9 million. As a percentage of revenues, our selling and marketing expenses declined to 7.0% in 2003 from 7.7% last year. Selling and marketing expenses include salaries, commissions and bonuses earned by sales and marketing personnel, direct sales costs, promotional and advertising costs, and travel and entertainment expenses.
				Operating Expenses†
				$ millions
				262.3		278.2		349.3
				01*		02*		03
				*Restated †Total expenses before amortization and other charges

Brand marketing and product awareness are critical to the success of our business. Product launches, game developer programs and co-marketing programs with our OEM, AIB and retailing partners help to create demand for our products. In 2003, we increased investment in brand marketing and product awareness significantly compared to the prior year. The white box, or system integrator channel, is an increasingly important distribution channel for ATI and one that already contributes positively to revenue and profitability. Approximately $11.5 million of our sales and marketing expenses in the form of variable selling expenses were used in support of our pursuit of business in this channel, particularly in the Asia-Pacific region. AMI Technologies Corp. (“AMI”), our third-party sales and distribution partner in Asia-Pacific, generated increased sales and corresponding commissions in 2003. Subsequent to year-end, ATI purchased certain assets of AMI. With this acquisition, we expect to reduce our expenses associated with sales into this region in fiscal 2004. Selling and marketing expenses increased in 2002 compared to 2001 as a result of marketing
activities to promote the ATI brand, including advertising programs and increased expenses for new product launches.

Page 85 of 134

	Research and Development Expenses Our R&D expenses increased 29.4% to $213.0 million in 2003. As a percentage of revenues, R&D expenses declined to 15.4% in 2003 from 16.2% last year. R&D expenses include engineering salaries, costs of development tools and software, component and board prototype costs, consulting fees, licensed technology fees and patent filing fees. Investment in R&D is a key part of our strategy to maintain product and technology leadership. It has enabled us to expand into the IGP segment and open new markets in consumer electronics. We will continue to invest in R&D in support of our strategic objectives. In 2003, our R&D expenses rose as a result of both an increase in staffing, as well as the cost of technology required to support the increasing complexity of our products, and a broader product line. Key activities contributing to our higher R&D spending in 2003 included increased investment in the following:
				Research and Development Expenses
				$ millions
				149.5		164.6		213.0
				01		02		03

	Consumer products business to support our growing cell phone and DTV product lines, as well as one full year of expenses related to the NxtWave Communications Inc. (“NxtWave”) acquisition Desktop products business, including an additional $5.1 million in prototyping expenses Integrated products business primarily relating to expanding hardware engineering capability The expansion of our software engineering competencies Foreign exchange impact R&D expenses increased by $15.1 million to $164.6 million from 2001 to 2002. This increase was attributable to the development and support of new products for the integrated chipset and consumer markets; the reflection of a full year of costs from the acquisition of the FGL Graphics division of SONICblue Ltd. in March 2001; the staffing of our 3D design teams in Marlborough, MA and Santa Clara, CA; a $1.5 million expense associated with the acquisition of NxtWave in June 2002; as well as higher product development costs, including increased prototyping costs. Administrative Expenses Our administrative expenses increased 10.5% to $39.4 million in 2003. As a percentage of revenue, administrative expenses declined to 2.8% in 2003 from 3.5% in 2002. Administrative expenses consist of salaries and expenses of the corporate infrastructure groups, including the operations, human resources, finance, legal and information technology departments. Administrative expenses in 2003 increased $3.8 million relative to 2002 as a result of additional personnel needed to support investments in R&D and marketing, as well as the foreign exchange impact. Most of our administrative expenditures are denominated in Canadian dollars. The decrease in administrative expenses in 2002 compared to the prior year was primarily due to lower staffing levels in our board business and other areas resulting from our transition to a chip model.

Page 86 of 134

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

	Amortization of Intangible Assets		2003						2002			2001
	Goodwill:
	Amortization expense	$	–					$	73,134		$	75,404
	Write-down		–						10,319			–
			–						83,453			75,404
	Intangible assets:
	Amortization expense		10,767						8,963			34,592
	Write-down		–						5,085			4,511
			10,767						14,048			39,103
		$	10,767					$	97,501		$	114,507

Our total amortization expense fell by $86.7 million or 89.0% to $10.8 million in 2003. This decrease is the result of discontinuing amortization of goodwill in response to new accounting standards. Please see “Our Accounting Policies” in this MD&A for more information. Amortization expense totaled $97.5 million in 2002 compared to $114.5 million in 2001. The decline was the result of the completion in April 2001 of the amortization of the purchased-in-process R&D associated with the acquisition of ArtX Inc. (ArtX). This was slightly offset by the write-down of core technology and goodwill associated with the acquisitions of ArtX and Chromatic Research Inc. (Chromatic) that totaled $15.4 million during 2002. During fiscal 2002, we conducted a comprehensive review of the carrying values of core technology and goodwill arising from the acquisitions of Chromatic and ArtX and concluded that there was a permanent impairment in these values. As a result, during the year we wrote off the remaining balances of core technology and goodwill arising from the acquisition of Chromatic totaling $4.8 million, and at year-end wrote off $4.2 million of core technology and $6.4 million in goodwill related to the ArtX acquisition. Other Charges We recorded other charges totaling $28.7 million in 2003 to settle litigation, to address issues related to an investigation by the Ontario Securities Commission (OSC), to reorganize our business in Europe, and to reflect lease exit charges. These charges are unusual in nature. Other charges are fully described in note 15 to the Consolidated Financial Statements. Other charges included: $4.7 million net charge related to the settlement of U.S. class action lawsuits filed in May 2001. $5.8 million charge for costs incurred in connection with the OSC investigation and Notice of Hearing. $6.5 million charge to close our Dublin manufacturing operation and restructure our organization in Germany. $2.7 million charge to exit certain leased properties in Canada. $9.0 million settlement on a patent litigation suit with Cirrus Logic, Inc.

Page 87 of 134

Interest and Other Income
Our interest and other income was $4.4 million in 2003.

			2003						2002			2001
	Interest income on cash and short-term investments		2,802						4,916			4,005
	Gains/(losses) on investments		3,876						(3,355	)		61,216
	Gains/(losses) on foreign exchange		819						(444	)		(1,876	)
	Loss on disposal of fixed assets		(3,932	)					(1,104	)		(69	)
	Other income		817						719			855
	Interest and other income, net		4,382						732			64,131

We disposed of certain long-term investments in 2003 enabling us to realize a gain of $3.9 million. During fiscal 2002, we disposed of a portion of a long-term investment realizing a loss of $0.3 million. We then wrote down the remaining balance of this investment by $0.5 million to reflect the other-than-temporary decline in its value. The balance was then reclassified as a short-term investment as it was our intention to sell the remaining portion of this investment. In 2002, we also received an additional 107,387 shares of Broadcom Corporation, valued at $2.1 million, resulting from the release of escrowed shares pursuant to the terms of the agreement to purchase our share investment in SiByte Inc. by Broadcom in the preceding fiscal year. On August 31, 2002, the Company wrote down its total investment in Broadcom by $4.7 million to reflect the other than temporary decline in its value. Interest Expense
Our interest expense increased to $1.9 million in 2003 from $0.7 million last year. Our interest expense relates primarily to our capital lease obligation and mortgage for the building facility located in Markham, Ontario, a joint venture in which we hold a 50% ownership. In 2002, interest expense also included our proportionate share of the interest expense related to the interim construction financing of the joint venture. Income Taxes
Income tax expense increased to $11.7 million in 2003 from $6.9 million last year.

			2003						2002			2001
									(Restated)			(Restated)
	Operating income tax expense (recovery)		15,570						10,553			(3,422	)
	Recovery of future tax liability related to intangible assets
	(other than goodwill)		(1,679	)					(3,547	)		(16,329	)
	Income tax expense (recovery) related to sale of investments		6						(152	)		991
	Income tax recovery related to other charges		(2,156	)					_			_
			11,741						6,854			(18,760	)

ATI’s operating tax rate, which excludes the impact of the amortization of intangible assets related to acquisitions, and the effect of the gain (loss) on investments and other special charges, was 18.9% in 2003, 18.0% in 2002 and 17.8% in 2001. ATI’s tax rate is affected by the amount of net income earned in its various operating jurisdictions. See note 12 to the Consolidated Financial Statements.

Page 88 of 134

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Net Income (Loss)
Net income rose $84.3 million in 2003 to $35.2 million from a net loss of $49.1 million in 2002. Net income rose in 2003 relative to 2002 as a result of several factors. Revenues and gross margin increased in 2003 while amortization expenses decreased significantly due to new accounting policies. Increases in operating expenses across all other functional areas in 2003 partially offset these improvements. Our net loss in 2002 was $49.1 million compared to a net loss of $53.8 million in 2001. The decrease in net loss in 2002 compared to the prior year was largely due to improved gross margins. Adjusted Net Income (Loss)
Adjusted net income (loss) excludes the after-tax effect of gain on investments, after-tax effect of other charges described in note 15 to the Consolidated Financial Statements, amortization of goodwill and intangible assets related to our acquisitions, and deferred tax recovery of future tax liability pertaining to intangible assets acquired, related to our acquisitions. Each of these items has been excluded from adjusted net income (loss) as they are not considered to be part of our normalized operations. While we recognize that adjusted net income (loss) does not have any standardized meaning described by GAAP, and that our adjusted net income (loss) calculation cannot be used as a comparison to other companies’ financial performance, we believe that our adjusted net income (loss) more appropriately reflects our operating performance. Reconciliation of Adjusted Net Income (Loss)

	unaudited		2003						2002			2001
									(Restated)			(Restated)
	Net income (loss) – GAAP basis	$	35,229					$	(49,079	)	$	(53,789	)
	Amortization of intangible assets		10,767						97,501			114,507
	Other charges		28,724						–			–
	Loss (gain) on investments		(3,876	)					3,355			(61,216	)
	Tax recovery of other charges		(2,156	)					–			–
	Net tax on sale of investments		6						(152	)		991
	Deferred tax recovery of future tax liability		(1,679	)					(3,547	)		(16,329	)
	Adjusted net income (loss)	$	67,015					$	48,078		$	(15,836	)
	Adjusted net income (loss) per share
	Basic	$	0.28					$	0.20		$	(0.07	)
	Diluted	$	0.27					$	0.19		$	(0.07	)

Our adjusted net income rose in 2003 as a result of increased revenues and gross margin, offset by increased operating expenses, excluding amortization of intangible assets and other charges. The increase in adjusted net income for 2002 compared to the prior year was largely due to improved gross margin, offset by higher overall operating expenses, excluding amortization of intangible assets. LIQUIDITY AND CAPITAL RESOURCES This section explains how we manage our cash and capital resources to carry out our strategy and deliver financial results. 2003 Highlights and Outlook for 2004 In 2003, our primary objectives in managing liquidity and cash flows were: Ensuring financial flexibility to support growth and entry into new markets Improving inventory management and targeting inventory at about 60 days usage We generated positive cash flows from operations from our net income and improvements in working capital in the period. We are targeting continuing improvement in cash flows and modestly lower inventory levels relative to sales in fiscal 2004.

Page 89 of 134

Cash Position
The table below is a summary of our cash inflows and outflows for each of the past three years:

	unaudited		2003						2002			2001
									(Restated)			(Restated)
	Net income (loss)	$	35,229					$	(49,079	)	$	(53,789	)
	Non-cash add backs		12,883						125,620			56,247
	Working capital changes		57,337						(19,599	)		99,485
	Issue of common shares		20,977						12,495			4,687
	Bank indebtedness		(12,015	)					3,266			8,749
	Net movement in long-term debt		9,645						(312	)		–
	Net purchases to capital assets		(16,390	)					(30,111	)		(31,091	)
	Net proceeds from sale of long-term
	investments, net of purchases		7,569						–			62,561
	Net purchases of short-term investments		(135	)					(4,649	)		(40,597	)
	Acquisitions		–						(22,118	)		(9,201	)
	Other		(1,140	)					362			–
			113,960						15,875			97,051
	Foreign exchange loss		(181	)					(204	)		(431	)
	Net increase in cash and cash equivalents	$	113,779					$	15,671		$	96,620
	Cash, cash equivalents and
	short-term investments	$	350,689					$	236,927		$	216,455

	Our cash position (cash, cash equivalents and short-term investments) increased 48.0% to $350.7 million in fiscal 2003 as a result of improved revenues and operational performance in 2003, as well as $37.5 million of deferred revenue that was recorded for development agreements with Microsoft Corp. and Nintendo Co. Ltd. We have access to $25.4 million in credit facilities at August 31, 2003 compared to $101.0 million at August 31, 2002. We had access to $101.0 million in credit facilities at the end of fiscal 2002 compared to $98.0 million at August 31, 2001. As at August 31, 2003, we are committed to the following minimum payments related to office premises, license and royalty agreements, building under capital lease payments and mortgage payments:			Cash Position
				$ millions
				216.5		236.9		350.7
				01		02		03

				Total			2004			2005			2006			2007			2008		Thereafter
	Commitment related to
	office premises, license
	and royalty agreements		$	79,451		$	22,494		$	20,491		$	9,666		$	6,207		$	6,252		$	14,341
	Commitment related to
	capital lease			26,995			1,784			1,784			1,784			1,858			1,962			17,823
	Commitment related to
	mortgage			16,797			1,493			1,493			1,493			1,493			1,493			9,332
	Total commitments		$	123,243		$	25,771		$	23,768		$	12,943		$	9,558		$	9,707		$	41,496

We believe that cash flows from operating activities, together with our cash position and borrowings
available under our credit facilities, will be sufficient to fund currently anticipated working capital, planned
operating and capital expenditures and debt service requirements for the next 12 months.

Page 90 of 134

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

	Operating Activities – Working Capital Accounts Receivable Our accounts receivable increased by 66.2% at August 31, 2003 compared to the prior year-end, due largely to increased product sales in the fourth quarter. At August 31, 2003, 93.3% of accounts receivable were less than 60 days outstanding, compared with 92.3% at August 31, 2002. We have Export Development Corporation insurance covering approximately 89.8% of our total accounts receivable at August 31, 2003 compared to 81.2% last year. Days sales in accounts receivable increased to 53 days in 2003 compared to 50 days in 2002. At August 31, 2003, one customer accounted for 18% of our accounts receivable balance. Accounts receivable increased by 19.6% to $141.1 million at August 31, 2002 compared to the prior year-end, due to slightly longer payment terms in our industry as well as greater than usual amount of product sold in the last few weeks of the fiscal year as our new product lines began to ship.
				Accounts Receivable
				$ millions
				118.0		141.1		234.5
				01*		02*		03
				*Restated

At August 31, 2002, 92.3% of our accounts receivable were less than 60 days outstanding, compared with 95.2% at August 31, 2001. We had Export Development Corporation insurance covering approximately 81.2% of our total accounts receivable at August 31, 2002 and 81.3% at our prior year-end. Days sales in accounts receivable increased to 50 days in 2002 compared to 38 days in 2001. At August 31, 2002, one customer accounted for 12% of our accounts receivables.

	Inventories Inventories on hand decreased at August 31, 2003 to $176.5 million. Inventories declined by 8.1% to $176.5 million at the end of 2003 compared to inventories at the end of fiscal 2002. Inventory levels in 2003 were in line with our target of 60 days. In 2003, we continued to implement an inventory management program to reduce inventories of raw materials, work in progress and finished goods. Inventories on hand increased significantly in the last two quarters of fiscal 2002 as we ramped up production of our new products. We also encountered a slower turn of our existing product line during this time frame. Inventories increased by $80.2 million at the end of 2002 compared to August 31, 2001 as a result of lower than expected sales in the last two quarters of the year and increased purchases to support new product introductions.
				Inventories
				$ millions
				111.9		192.1		176.5
				01*		02*		03
				*Restated

Accounts Payable and Accrued Liabilities
Accounts payable increased to $191.2 million in 2003 from $172.1 million in the prior year as a result of increased inventory purchases for our new product lines and the timing of payments to our suppliers. In 2002 accounts payable increased to $172.1 million from $79.7 million at the prior year-end as a result of the timing of payments to suppliers and increased inventory purchases for the new product lines. Accrued liabilities increased to $136.7 million in 2003 compared to $49.4 million in 2002. The increase is largely a result of the timing of payments related to sales rebates and price protection which are also a function of sales, as well as accruals related to other charges noted above, some of which were accrued in the last quarter of the year. There was no significant change in accrued liabilities in 2002 compared to 2001. Deferred Revenue
Deferred revenue increased to $37.7 million in 2003 from $0.3 million in 2002. This deferred revenue is associated with two development contracts, where we have recorded amounts relating to these contracts, but have not yet recognized the revenue. The revenue will be recognized as services are provided under each of the respective contracts.

Page 91 of 134

Financing Activities
We generated cash from common shares issued from the exercise of stock options totaling $21.0 million in 2003, compared to $12.5 million in 2002. Cash generated from common shares issued from the exercise of stock options was $12.5 million in 2002 compared to $4.7 million in 2001. Our bank indebtedness, which arose from the short-term financing provided to the joint venture to construct our new building, declined to nil from $12.0 million in the prior year. Upon completion of the new building a long-term mortgage was obtained in 2003 by the joint venture resulting in an increase of our long-term debt obligations. Investing Activities
Our capital expenditures net of disposals declined to $16.4 million in 2003 from $30.1 million in 2002. This reduction in capital expenditures reflects the completion of our new head office facility in Markham, Ontario in 2002. Engineering equipment and leasehold improvements comprised the majority of capital expenditures in 2003. Capital expenditures in 2004 are expected to be in the same range as 2003. Capital expenditures in 2002 were $30.1 million, compared to $31.1 million in fiscal 2001. The majority of these expenditures related to the construction of our new building which was completed in fiscal 2002. In 2002 capital additions included $22.4 million of additions to building-in-progress. In 2001, capital additions included building-in-progress additions of $11.5 million, representing our 50% share of the costs incurred to construct our new building that were subsequently transferred into building under capital lease. Laboratory, computer equipment and software purchases accounted for another $16.2 million in capital additions in 2001. Long-Term Investments
From time to time, we make equity investments in other companies, generally in conjunction with a technology relationship. In 2003, we invested $2.5 million in these types of investments. During fiscal 2003, we disposed of all of our remaining shares in Broadcom Corp., realizing a gain of $3.8 million. In 2002 we did not make any long-term investments. SUBSEQUENT EVENT
On September 2, 2003, we announced the acquisition of certain assets of AMI, our exclusive sales organization for Taiwan and China since 1992, for cash consideration of $3.0 million. This acquisition strengthens our direct presence in these critical and rapidly growing markets. The majority of AMI’s sales, marketing and field applications personnel will join ATI. The remaining personnel will stay with AMI as it continues to act as our sales agent in the region. CLAIMS AND PROCEEDINGS
In January 2003, we announced that staff of the OSC had filed a Notice of Hearing and Statement of Allegations in relation to ATI and others. The Notice alleged that ATI failed to disclose information concerning the shortfall in revenues and earnings that occurred in the third quarter of fiscal 2000, as required by the listing rules of the Toronto Stock Exchange. The Notice also alleged that ATI made a misleading statement to staff of the OSC in August 2000 regarding the events leading up to the disclosure on May 24, 2000 of the shortfall. Seven individuals are also named in the Notice. The Notice alleged that six of these individuals including K.Y. Ho, the Chief Executive Officer of the Company, engaged in insider trading contrary to the Securities Act. A hearing has been scheduled for February – March 2004. See notes 15 and 21 of the Consolidated Financial Statements regarding other claims and proceedings affecting ATI.

Page 92 of 134

  MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Risks and Uncertainties Our financial results have been and will continue to be subject to quarterly and other fluctuations due to changing market and economic conditions and various other factors set out below. As a result, our revenues can fluctuate from quarter to quarter, and within a quarter, revenues may vary from month to month. In addition, our operating expenses are largely independent of revenues in any particular period. Therefore, it is difficult to accurately predict revenues and profits or losses. Our reported operating results may vary from prior periods or may be adversely impacted in periods when we are undergoing a product line transition during which sales of new products must be ramped up to replace sales of our older products. These older products often come under significant pricing and margin pressure as a result of competitors’ actions in the marketplace. Should our new products, including integrated chipset products, and products for the consumer electronic device market, not offer the features and performance required by our customers or fail to achieve meaningful marketshare, our operating results will be negatively impacted. Our ability to develop new products is dependent upon our ability to obtain licenses to emerging industry technology or other intellectual property rights, which may not be readily available or available on commercially reasonable terms. As a result of any combination of these or other issues referred to below, our operating results and common share price may be subject to a significant level of volatility, particularly on a quarterly basis. Factors that have affected our operating results in the past and could affect them in the future include, among other things: Levels of growth or decline in the PC industry; Rapid and frequent technological change in the PC graphics industry; Demand and acceptance of our products and those of our customers, including integrated graphics components and consumer electronics; Successful and timely development and production of next-generation products, including products for the consumer device market; Introduction of new products by our competitors; Availability of licenses for emerging industry technology or other intellectual property rights necessary for the development of new products by ATI; Changes to our overall average selling price resulting from competitive pressures; Delays or early introduction of new microprocessors or their related chipsets; Changes to our overall product mix or the geographic regions where our products are sold; Research and development costs associated with the development of new products; Increasing product line complexity and our related management of inventory; Unexpected variances in the cost or availability of materials, especially silicon wafer, memory, printed circuit boards and packaging costs; Changes to the expected yield of our component products; Excess or shortage of manufacturing capacity; Volume of orders received that can be filled in the quarter; Seasonal and variable demand associated with the PC industry; Addition or loss of significant customers; and Supply constraints and disruptions for other components incorporated into our products and those of our customers. As indicated above, most of our operating expenses are relatively fixed in the short term. As a result, we may be unable to rapidly adjust our spending to compensate for any unexpected revenue shortfall, which could harm quarterly operating results. Also, our products have varying gross margins. As a result of the factors listed above, period-to-period comparisons of our operating results should not be relied upon as an indication of future performance. The results of any quarterly period are not indicative of results to be expected for a full fiscal year. Accordingly, our operating results may be below the expectations of securities analysts and investors. Our failure to meet these expectations could adversely affect the market price of our common shares.

Page 93 of 134

For a more complete discussion of general risks and uncertainties which apply to our business and our financial results, please see ATI’s Annual Information Form and other filings with Canadian and U.S. securities regulatory authorities. For a description of certain legal proceedings affecting ATI, please see notes 15 and 21 to the Consolidated Financial Statements. Our Accounting Policies
We prepare our Consolidated Financial Statements using Canadian GAAP and have provided a reconciliation of our financial statements to U.S. GAAP in note 20 to the Consolidated Financial Statements. Significant accounting policies and methods used in preparation of our Consolidated Financial Statements are described in note 1 to the Consolidated Financial Statements. Under GAAP, we are required to make estimates and assumptions when we account for and report assets, liabilities, revenue and expenses and disclose contingent assets and liabilities in our financial statements. We are also required to constantly evaluate the estimates and assumptions we use. We base our estimates and assumptions on historical experience and other factors that we believe are reasonable in the circumstances. Because our estimates and assumptions involve judgment and varying degrees of uncertainty, actual results could materially differ from our estimates and assumptions. We make significant estimates when determining provisions for sales returns and allowances, our allowance for doubtful accounts, our provision for inventory obsolescence, the fair value of reporting units for goodwill impairment testing, the useful lives and valuation of intangible assets, the valuation of long-term investments, restructuring charges, our worldwide income tax provision and the realization of future tax assets. We believe the following are the most critical accounting policies we follow as they rely heavily on our judgment and estimates: Revenue Recognition
We recognize revenue when evidence of an arrangement exists, risks and rewards of ownership have been transferred to customers, selling price is fixed and determinable, and collectibility is reasonably assured. During fiscal 2003, we reviewed our revenue recognition accounting policy as it is applied to the shipment of products to customers. Following our review, we corrected the application of our revenue recognition accounting policy by revising the timing of when revenue is recognized to more clearly identify the point in the shipping process when the risks and rewards of ownership have been transferred to the customer. We applied this change, and the related income tax effect, retroactively to our prior period financial statements presented for comparative purposes. We record estimated sales returns and allowances, price protection, sales rebates, and other volume-based incentives at the time we recognize revenue. If our estimates of future market conditions and changing product lifecycles in the marketplace are inaccurate we may be required to materially increase customer incentive offerings, which could necessitate a further reduction of revenue. We also provide for the estimated cost of product warranties at the time of revenue recognition. If actual product warranty costs vary from our estimates we may have to record material adjustments to our warranty expense. Inventory Valuation
We record raw materials at the lower of cost and replacement cost. Finished goods and work in process are stated at the lower of cost and net realizable value. We write-down our inventory for estimated obsolescence, and excess inventories based upon assumptions about future demand and market conditions. The business environment in which we operate is subject to rapid change in technology and customer demand. If actual market conditions are less favorable than those estimated, additional material inventory write-downs may be required. Goodwill
We perform our annual goodwill impairment test in the fourth quarter of each year, and more frequently if events or changes in circumstances indicate that an impairment loss may have been incurred. We test for impairment at the reporting unit level by comparing the reporting unit’s carrying value with its fair value. The fair values of the reporting units are estimated using a discounted cash flow approach. The process we follow when determining a reporting unit’s fair value is subjective and requires judgment in making assumptions about future results, including revenue and cash flow projections at the reporting unit level, and discount rates. Future goodwill impairment tests may result in material impairment charges.

Page 94 of 134

  MANAGEMENT'S DISCUSSION AND ANALYSIS (CONT.)

Income Taxes
Our worldwide income tax provision is impacted by the amount of net income earned in each taxing jurisdiction and the rate of tax payable in respect of that income. In the ordinary course of our global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. The final tax outcome of these matters may be different than the estimates we have made in determining our income tax provisions and accruals. If our estimates and assumptions are determined to be inaccurate there could be a material effect on our income tax provision and net income in the period in which the determination is made. We record a valuation allowance to reduce our future tax assets to the amount of future tax benefit that is more likely than not to be realized. We consider future taxable income in our operating jurisdictions and ongoing prudent and feasible tax planning strategies in determining the need for the valuation allowance. If we were to determine that we could realize our future tax assets in excess of their recorded amounts we would record an adjustment to the future tax asset and increase income in the period the determination is made. Alternatively, if we were to determine that we could not realize all or parts of our future tax assets, we may record a material charge to income in the period the determination is made. During 2003 we have applied changes as a result of newly issued accounting standards as follows: Goodwill and Other Intangible Assets
The CICA issued Handbook Section 3062, “Goodwill and Other Intangible Assets,” which became effective for us on September 1, 2002. This section requires that goodwill and intangible assets with an indefinite life no longer be amortized and assessed for impairment at least annually according to the new standards. This included a transitional test that required any impairment to be charged to opening retained earnings in the year of adoption. The new standards are consistent with U.S. GAAP. We applied the new standards and as a result reclassified $2.3 million from workforce to goodwill as of September 1, 2002 to conform to the new guidance. In addition, we allocated our existing goodwill to our reporting units and completed the transitional impairment test in the second quarter of 2003. We determined no transitional impairment existed as of September 1, 2002. Further, we completed our annual impairment test in the fourth quarter of 2003 and determined no impairment had occurred. Stock-based Compensation and Other Stock-based Payments
We adopted CICA Handbook Section 3870, “Stock-based Compensation and Other Stock-based Payments,” that establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services provided by employees and non-employees as of September 1, 2002. The standard requires that a fair value-based method of accounting be applied to all stock-based payments to non-employees and to employee awards that are direct awards of stock, that call for settlement in cash or other assets or are stock appreciation rights, by the issuance of equity instruments. The standard permits us to continue our policy of recording no compensation cost on the grant of stock options to employees. Consideration paid by employees on the exercise of stock options is recorded as share capital. We have applied the pro forma disclosure provisions of the new standard to awards granted on or after September 1, 2002 that are provided in note 11 to the Consolidated Financial Statements. No restatement of prior periods was required as a result of the adoption of the new standard. Disposal of Long-lived Assets and Discontinued Operations
The CICA issued Handbook Section 3063, “Impairment or Disposal of Long-lived Assets,” and revised Section 3475, “Disposal of Long-lived Assets and Discontinued Operations.” These sections supersede the write-down and disposal provisions of Section 3061, “Property, Plant and Equipment,” and Section 3475, “Discontinued Operations.” The new standards are consistent with U.S. GAAP. We have fully adopted the revised Section 3475 to disposal activities initiated on or after May 1, 2003; we were not impacted by this change. Section 3063 is effective for our 2004 fiscal year. We expect that the adoption of this standard will have no material impact on our financial position, results of operations or cash flows.

Page 95 of 134

Guarantees
The CICA issued Accounting Guideline 14 “Disclosure of Guarantees,” which requires certain disclosures of obligations under guarantees regardless of whether payments will have to be made under the guarantees. The guideline is generally consistent with the disclosure requirements for guarantees under U.S. GAAP. The guideline does not apply to product warranties or the measurement requirements under U.S. GAAP. We have fully adopted this guideline as of March 1, 2003. The disclosures required by this standard are included in note 14 to the Consolidated Financial Statements. In addition to the standards we have applied in the year there are additional new standards that will be applied in future years as follows: Generally Accepted Accounting Principles
In July 2003, the CICA issued Handbook Section 1100, “Generally Accepted Accounting Principles.” This section establishes standards for financial reporting in accordance with Canadian GAAP. It describes what constitutes Canadian GAAP and its sources. This section also provides guidance on sources to consult when selecting accounting policies and determining appropriate disclosures, when a matter is not dealt with explicitly in the primary sources of Canadian GAAP. This guideline is effective for our 2005 fiscal year, with early adoption encouraged. We are currently evaluating the impact of adoption that the standard will have on the Consolidated Financial Statements. Asset Retirement Obligations
In March 2003, the CICA issued Handbook Section 3110, “Asset Retirement Obligations.” This section establishes standards for the recognition, measurement and disclosure of liabilities for asset retirement obligations and the associated retirement costs. This section applies to legal obligations associated with the retirement of a tangible long-lived asset that result from its acquisition, construction, development or normal operation. This guideline is effective for our 2005 fiscal year, with early adoption encouraged. We are currently evaluating the impact that the adoption of this standard will have on our Consolidated Financial Statements. Consolidation of Variable Interest Entities
In June 2003, the CICA approved Accounting Guideline AcG-15, which provides guidance for determining when an enterprise includes the assets, liabilities and results of activities of entities that are subject to control on a basis other than ownership of voting interests (a “variable interest entity”). This guideline is effective in the Company’s second quarter of its 2005 fiscal year, with early adoption encouraged. We expect that the adoption of this standard will have no material impact on our financial position, results of operations or cash flows.

Page 96 of 134

  QUARTERLY INFORMATION

unaudited			November 30										February 28									May 31								August 31
		2002				2001				2003				2002				2003				2002				2003				2002
		(Restated)				(Restated)				(Restated)				(Restated)				(Restated)				(Restated)								(Restated)
REVENUES	$	335,436			$	261,309			$	313,492			$	262,559			$	355,691			$	269,046			$	380,674			$	222,865
Cost of goods sold		244,251				179,568				222,969				173,759				239,590				174,970				245,191				154,088
Gross margin		91,185				81,741				90,523				88,800				116,101				94,076				135,483				68,777
EXPENSES
Selling and marketing		22,247				20,546				21,354				19,648				25,696				19,493				27,628				18,233
Research and
development		48,450				40,070				49,528				41,754				53,713				39,935				61,285				42,850
Administrative		9,212				8,781				9,318				8,357				10,326				9,852				10,557				8,672
Amortization and
write-down of
goodwill and
intangible assets		3,165				21,190				3,162				21,164				3,169				21,679				1,271				33,468
Other charges		–				–				15,996				–				2,288				–				10,440				–
		83,074				90,587				99,358				90,923				95,192				90,959				111,181				103,223
INCOME (LOSS) FROM
OPERATIONS		8,111				(8,846	)			(8,835	)			(2,123	)			20,909				3,117				24,302				(34,446	)
Interest and other
income (expense)		572				1,729				602				1,343				(1,350	)			(306	)			4,558				(2,034	)
Interest expense		(426	)			(2	)			(469	)			(1	)			(488	)			(248	)			(516	)			(408	)
Income (loss) before
income taxes		8,257				(7,119	)			(8,702	)			(781	)			19,071				2,563				28,344				(36,888	)
Income taxes (recovery)		913				2,047				715				3,187				4,063				3,874				6,050				(2,254	)
NET INCOME (LOSS)		7,344				(9,166	)			(9,417	)			(3,968	)			15,008				(1,311	)			22,294				(34,634	)
RETAINED EARNINGS,
beginning of period		68,797				117,876				76,141				108,710				66,724				104,742				81,732				103,431
RETAINED EARNINGS,
end of period	$	76,141			$	108,710			$	66,724			$	104,742			$	81,732			$	103,431			$	104,026			$	68,797
Net income (loss)
per share:
Basic	$	0.03			$	(0.04	)		$	(0.04	)		$	(0.02	)		$	0.06			$	(0.01	)		$	0.09			$	(0.15	)
Diluted		0.03				(0.04	)			(0.04	)			(0.02	)			0.06				(0.01	)			0.09				(0.15	)
WEIGHTED AVERAGE
NUMBER OF SHARES
(000’s):
Basic		236,947				232,496				237,227				234,154				238,183				236,082				240,647				236,848
Diluted		243,298				232,496				237,227				234,154				242,539				236,082				249,525				236,848
OUTSTANDING NUMBER
OF SHARES, END OF
QUARTER (000’s)		236,989				232,787				237,297				234,787				239,267				236,620				241,742				236,871

EX-3

Page 97 of 134

EXHIBIT 3

Auditor’s Consent

The Board of Directors
ATI Technologies Inc.

We consent to the use of our report dated September 29, 2003, included in this annual report on Form 40-F.

//KPMG LLP//                                        
Toronto, Canada
September 29, 2003

EX-4

                                                                 Page 98 of 134

                                                                       EXHIBIT 4




                                                                Page 99 of 134

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                           PURSUANT TO SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

I, K.Y. Ho, principal executive officer of ATI Technologies Inc. (the "issuer"),
certify that:

1.       I have reviewed this annual report on Form 40-F of the issuer;

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

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

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

                  (a) Designed such disclosure controls and procedures, or
                  caused such disclosure controls and procedures to be designed
                  under our supervision, to ensure that material information
                  relating to the issuer, including its consolidated
                  subsidiaries, is made known to us by others within those
                  entities, particularly during the period in which this report
                  is being prepared;

                  (b) Evaluated the effectiveness of the issuer's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

                  (c) Disclosed in this report any change in the issuer's
                  internal control over financial reporting that occurred during
                  the period covered by the annual report that has materially
                  affected, or is reasonably likely to materially affect, the
                  issuer's internal control over financial reporting; and

5.       The issuer's other certifying officer and I have disclosed, based on
         our most recent evaluation of internal control over financial
         reporting, to the issuer's auditors and the audit committee of the
         issuer's board of directors (or persons performing the equivalent
         functions):

                  (a) All significant deficiencies and material weaknesses in
                  the design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  issuer's ability to record, process, summarize and report
                  financial information; and


                                                                Page 100 of 134


                  (b) Any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the issuer's internal control over financial reporting.

Date: January 16, 2004   By:     //K.Y. Ho//
                             --------------------------------------------------
                                 K.Y. Ho
                                 Chairman and Chief Executive Officer








                                                                Page 101 of 134


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                         PURSUANT TO SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002

I, Terry Nickerson, principal financial officer of ATI Technologies Inc. (the
"issuer"), certify that:

1.       I have reviewed this annual report on Form 40-F of the issuer;

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

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

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

                  (a) Designed such disclosure controls and procedures, or
                  caused such disclosure controls and procedures to be designed
                  under our supervision, to ensure that material information
                  relating to the issuer, including its consolidated
                  subsidiaries, is made known to us by others within those
                  entities, particularly during the period in which this report
                  is being prepared;

                  (b) Evaluated the effectiveness of the issuer's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

                  (c) Disclosed in this report any change in the issuer's
                  internal control over financial reporting that occurred during
                  the period covered by the annual report that has materially
                  affected, or is reasonably likely to materially affect, the
                  issuer's internal control over financial reporting; and

5.       The issuer's other certifying officer and I have disclosed, based on
         our most recent evaluation of internal control over financial
         reporting, to the issuer's auditors and the audit committee of the
         issuer's board of directors (or persons performing the equivalent
         functions):

                  (a) All significant deficiencies and material weaknesses in
                  the design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  issuer's ability to record, process, summarize and report
                  financial information; and


                                                                Page 102 of 134


                  (b) Any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the issuer's internal control over financial reporting.

Date: January 16, 2004   By:       //Terry Nickerson//
                             --------------------------------------------------
                                   Terry Nickerson
                                   Senior Vice President, Finance and
                                   Chief Financial Officer

EX-5

                                                                Page 103 of 134


                                                                       EXHIBIT 5




                                                                Page 104 of 134


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ENACTED PURSUANT TO
               SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002


                  ATI Technologies Inc. (the "Company") is filing its annual
report on Form 40-F for the fiscal year ended August 31, 2003 (the "Report")
with the U.S. Securities and Exchange Commission.

                  I, K.Y. Ho, Chairman and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to
section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my
knowledge:

                  (i)  the Report fully complies with the requirements of
                       section 13(a) or 15(d) of the U.S. Securities Exchange
                       Act of 1934; and

                  (ii) the information contained in the Report fairly presents,
                       in all material respects, the financial condition and
                       results of operations of the Company.





//K.Y. Ho//
- ------------------------------------
K.Y. Ho
Chairman and Chief Executive Officer
January 16, 2004







                                                                Page 105 of 134


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ENACTED PURSUANT TO
               SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002


                  ATI Technologies Inc. (the "Company") is filing its annual
report on Form 40-F for the fiscal year ended August 31, 2003 (the "Report")
with the U.S. Securities and Exchange Commission.

                  I, Terry Nickerson, Senior Vice President, Finance and Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350,
as enacted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:

                  (i)  the Report fully complies with the requirements of
                       section 13(a) or 15(d) of the U.S. Securities Exchange
                       Act of 1934; and

                  (ii) the information contained in the Report fairly presents,
                       in all material respects, the financial condition and
                       results of operations of the Company.





//Terry Nickerson//
- ----------------------------------
Terry Nickerson
Senior Vice President, Finance and
Chief Financial Officer
January 16, 2004

EX-6

                                                                Page 106 of 134

                                                                       EXHIBIT 6



                                                                Page 107 of 134

LEADING THE WAY                                               ATI CODE OF ETHICS



                                                                Page 108 of 134

ATI's Code of Ethics


LEADING THE WAY


At ATI, we are committed to conducting our business with the highest level of
integrity. These standards guide our daily activities.


This Code of Ethics outlines the key principles and policies that define our
business practices. It has been developed to provide you with a clear and
in-depth guide to our common values and how they can be applied daily. While the
Code of Ethics is fairly detailed, no code is exhaustive. As always, we continue
to trust that you will use your good judgment when faced with difficult business
decisions. Sometimes in our complex business, the right course of action isn't
always clear. We hope this Code will provide you with the direction you need to
have to make the best decisions - decisions that will uphold your and our
company's reputation for honesty and integrity.


Please keep your copy of the Code of Ethics close at hand and refer to it
whenever you are faced with complicated or difficult situations. Being familiar
with the principles of the Code and agreeing to abide by them is not only good
business, it is a requirement for all ATI directors, officers, and employees.


Working together in an open, respectful and honest environment, we will continue
to build on our past accomplishments while striving to attain even greater
success in the future.


If you have any questions about ATI's Code of Ethics or concerns about ethical
issues, please contact your business unit Vice President or Michel Cadieux, Vice
President, Human Resources.



                                                                Page 109 of 134


ATI TECHNOLOGIES INC.
CODE OF ETHICS

TABLE OF CONTENTS




                                                                        
1.       Code Of Ethics                                                      2

2.       Employee Standard Of Conduct                                        3

3.       Conflicts Of Interest                                               9

4.       Protection Of Proprietary Information                              13

5.       Computer/Communications Systems                                    15

6.       Monitoring Compliance                                              17

7.       Officers' Responsibilities                                         18

8.       Reporting Of Financial Information                                 18

9.       Reporting Violations And Sanctions                                 19

10.      Other Requirements                                                 21

11.      Requests For Information                                           21

12.      Effective Date                                                     21

13.      Appendix A                                                         22

14.      Appendix B                                                         24





                                                                 Page 110 of 134

1. CODE OF ETHICS

1.1 PURPOSE OF THE CODE

As a global company with a diverse group of employees, ATI aims for all of its
employees to carry on business based upon a common set of principles. ATI's Code
of Ethics (the "Code") has been implemented to maintain the reputation earned by
ATI and its employees for honesty, integrity, discretion with respect to
confidential information and the avoidance of conflicts of interest. This Code
also forms part of the terms and conditions of employment for all ATI employees.

ATI encourages you to read this Code from time-to-time. As a company, our
philosophy is that each of you, through self-regulation and individual
responsibility, will make the appropriate decisions and take the appropriate
actions. As a guiding principle, we expect employees to ask themselves whether
their actions are reasonably likely to give rise to a situation that could
negatively affect or cause embarrassment to your reputation or that of ATI. The
rules set out in the Code serve as a complement to the corporate by-laws,
policies and other corporate requirements and directives governing the conduct
of ATI and its employees. They do not restrict the rights of ATI to manage and
direct its employees. ATI may occasionally modify the Code to reflect ongoing
business and legal requirements and will notify you of any changes as they are
implemented.


1.2 DECLARATION AND COMMITMENT

Each ATI employee will be provided with a copy of the Code on its effective
date. At the time of hiring, new employees will also be provided with a copy of
the Code. All employees will be asked to sign a declaration form attached as
Appendix A when they receive the Code. Once a year, employees will also be asked
to reconfirm their commitment to having received, read and understood the Code
and any amendments and to confirm their commitment to comply with the Code.




                                                                Page 111 of 134

1.3 APPLICATION

This Code applies to all ATI directors, officers and employees, whether
full-time or part-time, and to all other service providers including,
contractors and consultants. For ease of reference, the Code often refers only
to "employees", however, it should be understood that the Code is applicable to
all the aforementioned persons. The Code applies wherever business is carried
out on ATI's behalf including ATI offices, business travel and any other
work-related functions such as meetings with third parties, seminars,
conferences and training programs.

2. EMPLOYEE STANDARD OF CONDUCT

ATI's philosophy is to provide a positive work environment in which all
employees can work in a pleasant atmosphere with an emphasis on teamwork. To
maintain this environment, each of us is expected to demonstrate honesty and
integrity, ensure individual rights to equality and non-discrimination and to
safeguard the privacy and reputation of others. ATI expects compliance with the
spirit and letter of all applicable laws and encourages you to interact with
your colleagues in a respectful and courteous manner. As an employee, concern
for what is right should form the basis of all of your business decisions.


2.1 COMPLIANCE WITH LAWS

ATI's reputation is based upon its integrity that is itself based on your
conduct. Each employee must behave ethically and conduct business relations with
honesty, fairness, courtesy and respect at all times. To maintain ATI's
reputation and foster positive business relations with customers and suppliers,
each employee is required to conduct ATI business in compliance with applicable
laws in Canada, the United States and other countries. If any provision of this
Code conflicts with a law or regulation, employees are expected to comply with
the higher standard unless doing so would cause non-compliance with the local
law or regulation. In the event of the latter, you should report the conflict to
your immediate manager.




                                                                Page 112 of 134

In carrying out your duties, you are required to observe the corporate bylaws,
policies and other corporate requirements and directives of ATI. Employees with
a professional designation are also to observe the code of conduct or ethics for
that profession.

Whenever an employee is in doubt about the application or interpretation of any
legal requirement, the employee should refer the matter to his or her manager
who, if necessary, should seek the advice of the Vice President, Human Resources
or Vice-President, Legal Affairs and General Counsel.


2.2 EXTERNAL RELATIONS

Relations with ATI's customers, vendors, suppliers and partners are based on
honesty, credibility and mutual trust. Employees therefore must demonstrate
integrity, diligence and competence in accordance with these principles, and
treat customers, vendors, suppliers and partners with courtesy and respect.
Dealings with suppliers should be made objectively and in the best interests of
ATI and contracts or other arrangements must only be entered into with the
appropriate business, finance and legal approvals. You must appropriately
safeguard customer information and comply with applicable privacy laws.

In your dealings with ATI's customers, vendors, suppliers and partners who have
their own policies or requirements similar to this Code, you are expected to
comply with the terms of such third party's policy provided any such compliance
does not result in a breach of this Code.


2.3 MONETARY COMPENSATION, GRATUITIES
    AND OTHER ADVANTAGES

Employees will not directly or indirectly solicit, accept or offer compensation,
including money, goods, secret commissions, bribes or any other form of benefit
from any supplier, customer or any other third party with whom ATI conducts
business or with whom you have contact with in the course of business. You also
may not accept or give anything that will compromise, or be seen to compromise
your judgement or inappropriately influence others. Apart from marks of
hospitality, gifts and other low-value items that may be offered or received, it
is sometimes necessary in the




                                                                Page 113 of 134

course of conducting our business to offer or receive gifts or invitations of a
social nature that are of more significant value (for example, golf trips). In
these instances, employees must obtain their immediate manager's approval before
accepting such a gift or invitation. Directors and officers of ATI shall obtain
the approval of the person designated by the audit committee of the Board of
Directors before accepting such a gift or invitation.

Employees who wish to offer any gift or invitation must ensure that the offer is
not contrary to the policies of the recipient's employer and that such recipient
is authorized to accept such gift or invitation.

Employees who have permission from their manager may give or receive modest
gifts, favors and entertainment to persons, other than public officials. Factors
to be considered in granting approval include the following:

o the gift or other benefit is not cash, a gift certificate or other negotiable
  instrument;

o the gift or other benefit cannot reasonably be interpreted as an improper
  payment or inducement and is of nominal value;

o the gift or other benefit does not contravene any law and in addition is made
  in accordance with generally accepted local ethical practices;

o the entertainment occurs infrequently and arises out of the ordinary course of
  business;

o the entertainment involves reasonable, not lavish expenditures. The amounts
  involved should be amounts employees are accustomed to spending for their own
  business or personal entertainment; and

o the employee does not feel obligated to give the individual or company
  providing the entertainment any special consideration.

Where an employee is given a gift that contravenes this Code, The employee or
ATI will politely return the gift with an explanation that our Code does not
permit us to accept such gifts. When returning a perishable




                                                                Page 114 of 134

item that does not qualify under this Code is not possible, it should be
anonymously donated to charity. If this is not feasible, the gift should be
accepted on behalf of ATI, not the individual it was presented to, and shared
among all employees in the office.

Some examples of acceptable gifts and entertainment are as follows:

o a gift that is moderate in value

o a gift that is promotional in nature and adorned with a company logo (for
  example, pens, hats, t-shirts)

o a gift that is distributed widely, for example, to other employees,
  customers or suppliers

o meals

o local sporting events

o holiday gatherings and other celebrations

Any questions regarding the interpretation of this section and its requirements
should be directed to the Vice President, Human Resources.


2.4 DEALINGS WITH PUBLIC OFFICIALS

All dealings between employees and public officials are to be conducted in a
manner that will not compromise the integrity or the reputation of any public
official, the employee or ATI. In situations where ATI employees engage in
regular contact or contact in particular circumstances with public officials,
the following guidelines will apply to the employee's conduct:

o employees will not give any gift or make any form of payment, direct or
  indirect, to any public official, or any third party whom the employee
  reasonably knows may pass the gift or payments on to a public official, as
  inducement to having a law or regulation introduced, enacted, defeated or
  violated;

o on special, ceremonial occasions, senior officers of ATI may publicly give



                                                                Page 115 of 134

  gifts of more than nominal value to public institutions and public bodies.
  These may be transmitted through public officials, but the gifts are given to
  the public institutions and public groups the officials represent, not the
  officials personally;

o employees may periodically entertain public officials so long as the
  entertainment is consistent with the standards of behaviour set out in this
  Code and the entertainment is consistent with all applicable laws and
  regulations;

o where employees have dealings with a public official who is a political
  candidate, the standards in this Code as set out in section 3.7 are
  applicable; and

o non-routine and high profile contacts with public officials in Canada, the
  United States and any other country in which ATI conducts business should be
  handled by a Vice-President of ATI.


2.5 RESPONSIBILITY FOR ATI FUNDS

Employees are responsible and accountable for all funds over which they have
control. This means employees are responsible for safeguarding ATI's assets,
including cash, cheques, corporate credit cards and calling cards.


2.6 GATHERING COMPETITIVE INFORMATION

In the normal course of business, it is not unusual for ATI or its employees to
acquire information about many other organizations, including our competitors.
Doing so is a normal business activity and is not unethical. In fact, ATI quite
properly gathers this kind of information from a variety of legitimate sources
to evaluate the relative merits of its own products, marketing methods and even
for such routine reasons as extending credit and evaluating suppliers. This
activity is proper and necessary to help us run our business.

ATI employees must not, however, use illegal means to acquire a competitor's
trade secrets or other confidential information. ATI will not condone illegal
information gathering. If information is obtained by mistake that may constitute
a trade secret or confidential information of another




                                                                Page 116 of 134

person or business, or if you have questions about the legality of information
gathering, you should consult the ATI Legal Department.




2.7 WORK ENVIRONMENT

You have a shared responsibility with ATI to create a work environment where
everyone is treated with dignity and respect. You also share responsibility for
creating and maintaining a healthy and safe workplace for all.

(a) Harassment and Discrimination

ATI strives to provide a workplace free of harassment, discrimination and
intimidation. The responsibility for maintaining such a workplace lies with all
employees. Behaviour that will strain work relationships and contribute to a
negative work environment will not be tolerated. Harassment of any type is
prohibited and ATI prohibits discrimination on the grounds of race, ancestry,
place of origin, colour, ethnic origin, citizenship, creed, sex, sexual
orientation, age, record of offences, marital status, same-sex partnership
status, family status or handicap. Please review ATI's Harassment and
Discrimination Policy on the ATI Intranet for further details.

(b) Health and Safety

ATI has an exceptional health and safety record. To ensure we maintain a healthy
and safe working environment, all employees must observe established health and
safety practices that are reflective of corporate policies and local legislative
requirements. Managers and employees are accountable for ensuring that they
understand their responsibilities and are able to act on them to protect the
health and safety of our employees, customers, vendors and suppliers while at
ATI.

(c) Dress Code

ATI strives to provide an informal, productive work atmosphere for its
employees. In keeping with this philosophy, our corporate office dress code can
be described as "business casual". You are expected to present



                                                                Page 117 of 134

an appearance and manner that is consistent with your duties and
responsibilities.

3. CONFLICTS OF INTEREST

3.1 SOURCES OF CONFLICT OF INTEREST

Your primary professional obligation is to ATI. Employees must therefore avoid
any interests or relations that could conflict with or go against the interests
of ATI. Although relationships likely to create a conflict of interest are
sometimes unavoidable, employees must inform their immediate manager of such
situations and refrain from any action or decision that is not in the best
interests of ATI. In addition to the potential conflicts associated with outside
employment/business activities or insider trading for example, conflicts of
interest can also occur whenever you can influence a decision on ATI's behalf
that may result in a personal benefit, whether direct or indirect, for you or
any other person. Here are some general requirements employees must follow
relating to the avoidance of conflicts of interest. Employees must not:

o disclose or authorize the disclosure, to anyone, other than authorized
  employees, contractors or officers of ATI, or use for non-ATI purposes or
  other non-permitted purposes confidential or personal information acquired in
  the performance of their duties, for their personal benefit, or for the
  benefit of any other person. This obligation extends beyond the termination of
  employment (as specified in your Business Protection Agreement with ATI);

o take advantage of a situation, internal information or the authority of your
  position for your personal benefit or for the benefit of any other person;

o influence or seek to influence negotiations or dealings with ATI for your
  personal benefit or for the benefit of any other person;

o favor certain customers or suppliers for personal reasons; and



                                                                Page 118 of 134

o have an ownership interest in a company supplying products or services to ATI
  or offering products or services to, or in competition with, ATI or be a party
  to a contract or transaction with ATI , unless: (i) the employee has received
  prior approval by the Committee; or (ii) the interest is less than 1/10 of 1%
  of a public company's publicly traded securities. Directors and officers are
  also subject to prescribed disclosure and approval procedures where they have
  a conflict of interest in respect of material contracts or transactions or
  proposed material contracts or transactions with ATI.

Any employee who has a direct or indirect interest in any organization which may
have dealings with ATI must reveal that interest to the Vice-President, Human
Resources in accordance with this Code.


3.2 OUTSIDE EMPLOYMENT AND OTHER ACTIVITIES (DOES NOT APPLY TO OUTSIDE
    DIRECTORS)

You are free to take on employment or carry out any activity you wish outside
your working hours at ATI. However, employees must ensure that such employment
or activity does not enter into a real or apparent conflict with ATI's business
or with your ability to perform your duties at ATI. Consequently, employees may
not:

o work as an employee or consultant or perform any other similar function for a
  company that:

o offers products or services in competition with ATI, or

o supplies products or services to ATI.

o make use of ATI's tools, materials, information or facilities to perform paid
  or unpaid work for another organization, unless expressly authorized by your
  immediate manager (for example, to support a charity);

o perform work for yourself or a third party during working hours;



                                                                Page 119 of 134

o accept any employment or undertake any activity that would prevent you from
  fulfilling your duties at ATI with competence, diligence and punctuality.

You must obtain approval from your immediate manager before engaging in
employment outside of ATI.


3.3 RELATIONSHIPS IN THE WORKPLACE

Employees have an obligation to disclose the existence of any personal or family
relations if they hinder their ability to act in ATI's best interests, or have
the potential to do so or to be perceived as doing so. Employees must also
understand that mixing work life with personal life could lead competitors,
suppliers or co-workers to believe that you are in a conflict of interest.

To avoid conflicts of interest or prevent a situation from developing into a
conflict of interest, you must notify your immediate manager if any of the
following situations occur:

o you recommend the hiring of a friend or relative;

o your function gives you direct authority over a friend or relative;

o one of your family members works for a supplier, customer or competitor;

o one of your relatives or close relations is an executive or major shareholder
  in a supplier, customer or competitor.


3.4 DECLARATION OF CONFLICT OF INTEREST

An employee who is aware of an actual or potential conflict of interest as
described above must promptly inform the Vice-President, Human Resources. You
should do this by completing the Declaration in Appendix B or by completing the
online form on the ATI Intranet. Employees must then comply with any written
recommendations or directives received from the Vice-President, Human Resources
in this matter. In addition, directors and officers must strictly follow the
approval procedures prescribed under corporate legislation in respect of
material contracts or transactions in



                                                                Page 120 of 134

which they are a party or have a material interest. The Vice-President, Legal
Affairs and General Counsel must be contacted in advance to coordinate such
approval.

3.5 Board Appointments (does not apply to outside directors)

An ATI employee may not sit on the board of a company or other entity without
the permission of his/her immediate Vice President, or in the case of Vice
President level employees, the President and Chief Operating Officer. In the
case of a public company, permission must be obtained from the Chief Executive
Officer or Chief Operating Officer. Membership on charitable or community boards
does not require pre-approval but such activity must not interfere with your
duties and obligations to ATI and must not reflect negatively on ATI.

An employee who sits on the board of a company (other than ATI) or other entity
must abstain from voting on any matter directly or indirectly concerning ATI or
likely to go against the interests of ATI.


3.6 TRADING IN ATI STOCK

ATI encourages all of its employees to become shareholders of ATI on a long-term
investment basis. Purchases and sales of ATI securities (including stock
options) are, however, regulated by rules under Canadian securities legislation
and the United States Securities and Exchange Commission and policies of the
Toronto Stock Exchange and the NASDAQ Stock Market. The purchase and sale of ATI
securities may only be done in accordance with ATI's Stock Trading Guidelines.
Please review ATI's Stock Trading Guidelines on the ATI Intranet for further
details.

As a general guideline, it is illegal for anyone to purchase or sell securities
of any public company with knowledge of material information affecting that
company that has not been publicly disclosed. It is also illegal for anyone to
inform another person of material non-public information except in the necessary
course of business. To determine what information is "material" or what
circumstances will be in the "necessary course of business", you should consult
the Vice President, Legal Affairs and General Counsel.




                                                                Page 121 of 134


3.7 POLITICAL CONTRIBUTIONS

The use of ATI funds, goods or services as contributions to political parties,
candidates or campaigns must be approved in advance by the Vice-President, Human
Resources.


3.8 CHARITABLE DONATIONS

Charitable donations may only be made in ATI's name with prior authorization
from the ATI Donations Committee. Such requests should be made to the Donations
Committee by e-mail. You are encouraged to participate in charitable and
community activities in your own name so long as it is not perceived as acting
on ATI's behalf.

4. PROTECTION OF PROPRIETARY INFORMATION

4.1 CONFIDENTIAL INFORMATION

Protecting confidential information is vital to ATI's success. All ATI employees
must hold confidential information concerning ATI's business and affairs in
strict confidence. Confidential information includes, but is not limited to:

o financial data

o employee data

o marketing plans, business projections

o competitive information

o design specifications, technical data/prototypes, research data, software code

o trade secrets, proprietary information

o customer, partner and supplier information




                                                                Page 122 of 134

If in doubt about whether information is confidential, you should assume all
information is confidential unless otherwise advised by your immediate manager.
If there is a need to disclose confidential information, approval must first be
obtained from appropriate management and, in most circumstances, the information
may only be disclosed under the terms of a Non-Disclosure Agreement. The
Business Protection Agreement you signed upon commencing employment with ATI
details your obligation to maintain information confidential throughout and
beyond your tenure with ATI. Please review ATI's Corporate Policy for the
Protection of Proprietary Information on the ATI Intranet for further details.


4.2 PROTECTION OF INTELLECTUAL PROPERTY AND COMPANY ASSETS

All ideas, methods, techniques, technical or business innovations, patents, and
written or computer coded materials manifested in ATI products are considered
works made for hire and all rights are owned by ATI. Please review ATI's
Corporate Policy for the Protection of Proprietary Information on the ATI
Intranet for further details.

ATI's facilities and property, including furniture and equipment may only be
used for ATI business. Except with prior authorization of an employee's
immediate manager (which may include a general authorization in certain
circumstances), no furniture, files, supplies or other equipment may be removed
from ATI's premises. Intellectual property and other proprietary information
must be similarly safeguarded. Please review ATI's Corporate Policy for the
Protection of Proprietary Information on the ATI Intranet for further details.


4.3 RECORDS RETENTION

All employees are expected to become familiar with ATI's Records Retention
Policy and to adhere to the procedures set out in that Policy. ATI records must
be maintained, stored and destroyed only in accordance with this Policy. Please
review ATI's Records Retention Policy on the ATI Intranet for further details.


4.4 CORPORATE COMMUNICATIONS




                                                                Page 123 of 134

ATI has assigned specific persons in its Public Relations and Investor Relations
departments the task of communicating information to the media and investors.
All other employees should not answer questions or provide comments to the media
or the investment community except in accordance with ATI's Corporate Disclosure
Policy. For further details about how information about ATI is communicated
outside the company, please review ATI's Corporate Disclosure Policy on the ATI
Intranet for further details.

In addition, specific procedures exist for sharing information on the Internet
and publishing papers including co-op student reports. Again, if in doubt,
assume all information is confidential until otherwise specified. Please review
ATI's Corporate Policy for the Protection of Proprietary Information on the ATI
Intranet for further details.


4.5 EMPLOYEE PRIVACY

ATI employees must also respect the privacy of their colleagues. Business and
personal information about fellow employees must be held in confidence. As an
employer, ATI is permitted to collect, store, use and, where necessary, disclose
employee personal information in order to administer the employment
relationship. If you have access to employee personal information, you must
maintain strict control and confidentiality of that information at all times.

5. COMPUTER/COMMUNICATIONS SYSTEMS

Employees with access to ATI computing and communication devices must use them
in a responsible manner for the benefit of ATI. Most of these resources are
shared by a large population at ATI. Users, management and Information
Technology departmental employees should ensure that they are used appropriately
and with care. While incidental personal use may occasionally occur and is
acceptable, these resources are intended for ATI's benefit and use.




                                                                Page 124 of 134

Computer system passwords and/or user identifications must not be disclosed to
anyone except in accordance with ATI policy. Employees must not use personal
software on ATI systems and must adhere to all applicable software licensing
agreements when using ATI systems.

Information transmitted through ATI resources implies affiliation with ATI and
should therefore reflect positively upon ATI. This is especially true of the
World Wide Web and ATI's internal networking system. Normal standards of
professionalism should govern when deciding whether to make information
available on ATI computing and communication devices. Please review ATI's
Computing and Communication Devices Policy on the ATI Intranet for further
details.


5.1 E-MAIL

Employees should have no expectation of privacy when using ATI's computing
resources whether accessing ATI's computing resources on site or from a remote
location (e.g. by employees from home). ATI reserves the right to monitor and
review any material created, stored, sent, or received on its network. Please
review ATI's Computing and Communication Devices Policy on the ATI Intranet for
further details.


5.2 INTERNET

ATI employees are encouraged to use the Internet when it is appropriate for
business purposes. However, the infrastructure required to provide this access
represents a sizeable commitment of resources by ATI. Unnecessary Internet usage
causes network and server congestion, additional cost and should be avoided.
Employees should not use the Internet for personal activities including the
viewing and/or distributing of illegal, offensive or pornographic material.
Please review ATI's Internet Use and Security Policy on the ATI Intranet for
further details.




                                                                Page 125 of 134

6. MONITORING COMPLIANCE

The ultimate responsibility for monitoring compliance with the Code lies with
ATI's Board of Directors. The Board of Directors has delegated this
responsibility to the Audit Committee or such other committee which is
established by the Board to oversee governance matters from time to time (the
"Committee"). The Committee will be responsible for:

o filing the Code with securities regulators on an annual basis, as required by
  law;

o reviewing the Code on an annual basis and approving amendments to the Code, if
  necessary or desirable;

o granting waivers to employees from the Code, if any;

o disclosing all waivers from the Code that have been granted in accordance with
  all Canadian, U.S. or other legal requirements;

o overseeing the preparation of and approving public disclosure relating to the
  Code; and

o overseeing implementation and monitoring of the Code by the Vice-President,
  Human Resources.

ATI reserves the right to audit compliance with this Code. Accordingly,
employees will assist any internal or external auditors and will provide access
to all ATI operations, records, facilities or personnel. Employees are also
responsible for taking appropriate measures to safeguard information obtained
through the audit process.




                                                                Page 126 of 134

7. OFFICERS' RESPONSIBILITIES

The officers and managers of ATI play a key role in maintaining ATI's reputation
for integrity and honesty and in upholding the Code. These individuals are
required to:

o set an example by complying with the Code under all circumstances;

o ensure that all employees have a copy of the Code and that they understand its
  principles and act accordingly;

o create and maintain a work atmosphere conducive to observance of the Code;

o promote a workplace based on openness, where problems can be raised and
  discussed without fear of reprisal;

o immediately notify the Vice-President, Human Resources of any actual or
  apparent breach of the Code or an ATI directive;

o rapidly take the necessary disciplinary measures in the event of a proven
  breach of the Code (as instructed by the Vice-President, Human Resources);

o comply with the Code by otherwise maintaining the confidentiality of
  information exchanged between you and your immediate manager.

8. REPORTING OF FINANCIAL INFORMATION

Employees with responsibilities for reporting financial information shall
provide information that is accurate, complete, objective, timely and
understandable and complies with all applicable securities laws relating to
disclosure of financial information to the public. Employees will assist all
internal and external auditors in this regard.




                                                                Page 127 of 134

9. REPORTING VIOLATIONS AND SANCTIONS

9.1 YOUR RESPONSIBILITIES

Employees have a responsibility to ATI report immediately irregular business
practices or inappropriate conduct on the part of other employees that come to
the employees attention. Employees who do not report the event will be viewed as
condoning the activities of those who do not comply with the Code. ATI employees
must follow all corporate by-laws, policies and other corporate requirements and
directives of ATI and the Code. The policies and directives of the various
corporate groups and business units must also be regarded as complementary to
the general policies and directives of ATI.


9.2 COMPLYING WITH THE CODE

It is each employee's responsibility to be aware of and understand the Code and
to remain in compliance with the Code at all times. Failure to comply with the
letter and spirit of the Code may lead to disciplinary action being taken,
including, termination of your employment. Officers and managers may also be
subject to disciplinary action if they condone misconduct related to this Code,
do not report misconduct, do not take reasonable measures to detect misconduct,
or do not demonstrate the appropriate leadership to ensure compliance with the
Code. Where a concern arises over an officer or manager's conduct in relation to
this Code, the Committee will serve as an independent authority for overseeing
the disciplinary process of the involved officer or manager. Each employees
responsibilities in terms of complying with the Code involves the following:

o compliance with the corporate by-laws, policies or other corporate
  requirements or directives of ATI or the Code;

o not asking or requiring other ATI employees to violate a corporate by-law,
  policy or other corporate requirement or directive of ATI or the Code;

o immediately reporting any violation of the corporate by-laws, policies or
  other corporate requirements or directives of ATI or the Code;




                                                                Page 128 of 134

o cooperating with any inquiry into a proven or suspected violation of the
  corporate by-laws, policies or other corporate requirements or directives of
  ATI or the Code;

o taking all necessary steps to ensure that no retaliatory action is taken
  against an employee who has reported a violation of the corporate by-laws,
  policies or other corporate requirements or directives of ATI or the Code.

Employees who are aware of an irregular incident or situation that may
constitute either a violation of the law, this Code or other ATI policies or
directives, are required to promptly report the matter to ATI's Alertline
System. For US & Canada call 1-800-839-0261, all other international locations
call collect to 770-582-5259. The AlertLine system is available 24 hours a day
on a worldwide basis to all employees. Your report may be done anonymously if
you so choose and the system ensures that your concern or issue will be taken
seriously.

All submissions made through this system will be logged, reviewed and maintained
as confidential by the Vice President, Human Resources and Vice President, Legal
Affairs and General Counsel. Depending on the severity and scope of the matter,
such matter may be immediately reported to the Committee of the Board of
Directors on a confidential basis. The Vice President, Human Resources and Vice
President, Legal Affairs and \ or General Counsel will be responsible for
responding to all submissions on behalf of the Committee.

Retaliation against any employee who honestly reports a concern about illegal or
unethical conduct will not be tolerated. Neither ATI, nor any officer, employee,
contractor, subcontractor, or agent of ATI may discharge, demote, suspend,
threaten, harass, or in any other manner discriminate against an employee in the
terms and conditions of employment because of any lawful act done by the
employee to provide information or otherwise assist in an investigation
regarding any conduct which the employee reasonably believes constitutes a
violation of the law, this Code or another ATI directive or because an employee
files, testifies, participates in, or otherwise assists in a proceeding relating
to an alleged violation of the law. It is unacceptable to make a report knowing
it to be false.




                                                                Page 129 of 134

10. OTHER REQUIREMENTS

This Code is a statement of goals and expectations and represents ATI's
commitment to the maintenance of high standards of ethical conduct and behaviour
expected from its employees in all circumstances. The Code does not attempt to
deal specifically with all aspects of the conduct required of ATI employees.
Consequently, situations may arise where it is difficult for you to determine
with certainty the correct action to follow. In such an event, the first place
to turn is your immediate supervisor or manager. If you are uncomfortable
discussing the issue with your supervisor, please consult with the
Vice-President, Human Resources or another senior ATI officer in order for both
ATI's and your interests to be properly addressed.

11. REQUESTS FOR INFORMATION

Any request for information concerning the application or interpretation of this
document must be addressed to the Vice-President, Human Resources.

12. EFFECTIVE DATE

This Code is effective as of July 1, 2003.




                                                                Page 130 of 134

APPENDIX A

EMPLOYEE DECLARATION AND COMMITMENT

Last Name ____________________________________________________________________

First Name____________________________________________________________________

Employee Number ______________________________________________________________

DECLARATION

 I, the undersigned, declare that I have read and understood ATI's Code of
Ethics. I agree to comply with the Code of Ethics and with any amendments
thereto, provided such amendments have been brought to my attention. I declare
that I have informed the Vice-President, Human Resources of any known or
potential conflicts of interest involving me by preparing and submitting the
applicable Declaration form. I agree to report any new conflict of interest as
soon as it arises. I declare that I have no actual or potential conflict of
interest apart from those stated in the form "Declaration of Actual or Potential
Conflicts of Interest".

Signature ____________________________________________________________________

Title Date ___________________________________________________________________

Signature of ATI Representative ______________________________________________

Title Date ___________________________________________________________________



                                                                Page 131 of 134

Notes

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________


______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Note to Immediate Manager:

This form must be filled out and signed at the time of hiring and be kept in the
employee's Human Resources file.




                                                                Page 132 of 134

APPENDIX B

DECLARATION OF ACTUAL OR POTENTIAL CONFLICT OF INTEREST

Last Name ____________________________________________________________________

First Name ___________________________________________________________________

Employee Number ______________________________________________________________

A. I am directly or indirectly involved in another enterprise or occupation that
is or could be in conflict with the interests of ATI:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

B. I have direct or indirect investments or business relations that are or could
be in conflict with the interests of ATI:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

C. I have direct or indirect personal or family relations that are or could be
in conflict with the interests of ATI:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________




                                                                Page 133 of 134

D. Other items:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________


______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________


Signature ____________________________________________________________________

Title Date ___________________________________________________________________

Signature of Manager _________________________________________________________

Title Date ___________________________________________________________________

Note to Immediate Manager:

A copy of this form will be kept in the employees file.



                                                                Page 134 of 134

[LOGO]