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SECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 40-F

[Check one]

|[   ] |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
|----- |  | ------------------------------------------------------------------------------------

|[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, 2002          

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) and        
|Registrant's principal executive offices) | 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 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, 2002, 236,870,685 Common Shares
outstanding

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
Securities 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 89.The exhibit index is
located on page 47.



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# ATI TECHNOLOGIES INC.

RENEWAL ANNUAL
INFORMATION FORM

For the Fiscal Year
Ended August 31, 2002







January 17, 2003

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# TABLE OF CONTENTS

|        |  |                                     |  |  
|------- |  | ----------------------------------- |  | -
|ITEM 1. |  | CORPORATE STRUCTURE                 |  | 4
|ITEM 2. |  | GENERAL DEVELOPMENT OF THE BUSINESS |  | 5

|                            |  |   | 
|--------------------------- |  | - | 
|MARKET TRENDS AND DIRECTION |  | 7

|        |  |                                       |  |  
|------- |  | ------------------------------------- |  | -
|ITEM 3. |  | NARRATIVE DESCRIPTION OF THE BUSINESS |  | 9

|                                         |  |    | 
|---------------------------------------- |  | -- | 
|BUSINESS STRATEGY                        |  | 10
|PRODUCTS                                 |  | 11
|RESEARCH AND DEVELOPMENT                 |  | 11
|SALES                                    |  | 16
|COMPETITION                              |  | 17
|MANUFACTURING                            |  | 18
|CUSTOMER SERVICE AND SUPPORT             |  | 18
|HUMAN RESOURCES                          |  | 19
|FACILITIES                               |  | 19
|RISKS AND
UNCERTAINTIES                  |  | 20
|LEGAL PROCEEDINGS
AND REGULATORY MATTERS |  | 31

|        |  |                                             |  |   
|------- |  | ------------------------------------------- |  | --
|ITEM 4. |  | SELECTED CONSOLIDATED FINANCIAL
INFORMATION |  | 32
|ITEM 5. |  | MANAGEMENT'S DISCUSSION AND
ANALYSIS        |  | 33
|ITEM 6. |  | MARKET FOR SECURITIES                       |  | 33
|ITEM 7. |  | DIRECTORS AND OFFICERS                      |  | 33

|                   |  |    | 
|------------------ |  | -- | 
|DIRECTORS          |  | 33
|
|CORPORATE OFFICERS |  | 34

|        |  |                        |  |   
|------- |  | ---------------------- |  | --
|ITEM 8. |  | ADDITIONAL INFORMATION |  | 36

|                                                  |  |    | 
|------------------------------------------------- |  | -- | 
|ANNUAL REPORT
AND MANAGEMENT INFORMATION CIRCULAR |  | 36
|DESCRIPTION
OF SHARE CAPITAL                      |  | 36
|SHARE OPTION
PLANS                                |  | 37
|EMPLOYEE SHARE
PURCHASE PLAN                      |  | 38

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# GLOSSARY OF TECHNICAL
TERMS AND OTHER INFORMATION

|                                                      |  |                                                          
|----------------------------------------------------- |  | ---------------------------------------------------------
|AGP means accelerated graphics port.                |  | DTV means digital television
(including set-top boxes).
|AIB means add-in board.                             |  | DVD means digital versatile disc.                      
|"ASIC" means application-specific integrated circuit. |  | I/O
means input/output.                                
|"ASP" means average selling price.                    |  | "ITC" means investment tax credit.                       
|"CAD" means computer-aided design.                    |  | "OEM" means original equipment manufacturer.             
|"COT" means customer-owned tooling.                   |  | "PC" means personal computer.                            
|"CPU" means central processing unit.                  |  | "PCB" means printed circuit board.                       
|"DCC" means digital content creation.                 |  | "PDA" means personal digital assistant.                  
|"DDR" means double data rate.                         |  | "VPU" means visual processing unit.                      
|"DFP" means digital flat panel.                       |  |                                                          

ATI and the ATI logo are registered
trademarks of ATI Technologies Inc. Certain ATI Technologies Inc. product names are
trademarksand/or registered trademarks of ATI Technologies Inc. This document also
includes references to trademarks, products and companynames of other corporations. All
dollar amounts referred to in this document are references to U.S. dollars, unless
otherwise stated.

Certain statements in this
Annual Information Form constitute forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995. When used herein,
words such as plans, intends, anticipates,
should, estimates, expects, believes,
indicates, targeting, suggests and similar expressions
are intended to identify forward-looking statements. Forward-looking statements are based
on current expectations and entail various risks and uncertainties that are outlined below
and in the Risks and Uncertainties section. These risks and uncertainties
could cause or contribute to actual results that are materially different from those
projected. ATI disclaims any obligation or intention to update or revise any
forward-looking statement, whether as a result of new information, future events or
otherwise. Additional information concerning factors that could cause actual results to
materially differ from those in such forward-looking statements is contained in the
Companys filings with Canadian and United States securities regulatory authorities.

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|ITEM 1. |  | CORPORATE STRUCTURE
|------- |  | -------------------

ATI Technologies Inc.
(ATI or the Company) was incorporated pursuant to the Business
Corporations Act (Ontario) by articles of incorporation dated August 20, 1985, as
Array Technology Inc. The Companys name was subsequently changed to Array
Technologies Inc. pursuant to articles of amendment dated September 13, 1985, and to ATI
Technologies Inc. pursuant to articles of amendment dated December 18, 1985. In this
document, references to ATI or the Company mean ATI Technologies
Inc. and its subsidiaries unless the context otherwise requires or indicates.

On December 31, 1987, the articles of
the Company were amended to divide the 1,000 common shares then outstanding into 1,000,000
common shares. In conjunction with the Companys initial public offering in November
1993, articles of amendment were filed dated 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, the board of
directors of the Company 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.

The principal and head office of the
Company is located at 1 Commerce Valley Drive East, Markham, Ontario, L3T 7X6. Below is a
summary of ATIs principal subsidiaries as at December 31, 2002, all of which are
directly or indirectly wholly owned:

|Subsidiary                        |  | Incorporation       |  | Activity                                                                                          
|--------------------------------- |  | ------------------- |  | --------------------------------------------------------------------------------------------------
|ATI Technologies (Europe) GmbH    |  | Republic of Germany |  | Sales and marketing support in Europe                                                             
|ATI Technologies (Europe) Limited |  | Ireland             |  | Sales, distribution, logistics, software replication
and technical support for the European market
|ATI Research, Inc                 |  | State of California |  | Research and development                                                                          
|ATI Technologies Systems Corp.    |  | State of California |  | U.S. OEM 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.  |  | State of California |  | Research and development                                                                          
|ATI Technologies (Hungary) KFT    |  | Hungary             |  | Research and development, licensing and
lending                                                   
|ATI Research GmbH                 |  | Republic of Germany |  | Research and development                                                                          
|NxtWave Communications Inc.       |  | State of Delaware   |  | Research and development                                                                          

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|ITEM 2. |  | GENERAL DEVELOPMENT OF THE BUSINESS
|------- |  | -----------------------------------

Founded in 1985, ATI is a world
leader in the supply of graphics, video and multimedia solutions for desktop and notebook
personal computers (PCs), consumer electronic devices, digital televisions
(including set-top boxes) (DTVs) and game consoles. ATIs main product
lines, component and board-level graphic accelerators, increase the speed at which
graphics can be displayed on PC monitors and improve image resolution and colour
definition. Graphics accelerators lessen the burden placed on the computers
microprocessor or central processing unit (CPU) by concurrently performing
tasks that are best suited for a dedicated graphics accelerator while allowing the CPU to
perform more general purpose computing functions.

ATIs strength is built upon its
product and technology leadership in visual processing technologies, customer focus,
top-to-bottom solutions and ability to identify and capitalize on key industry trends or
inflection points where new technologies and markets converge. In the past, these
inflection points have included migration from 2D to 3D graphics, the adoption of the
accelerated graphics port (AGP) bus interface, the incorporation of digital
versatile disc (DVD) functionality into the graphics accelerator, the
markets acceptance of digital flat panel (DFP) monitors, and the more
recent development of new highly complex functional graphics processing engines.

The Companys business strategy
has evolved over the past three years in response to significant changes in the PC
industry. This evolution includes the adoption of a new business model to more effectively
address the important system builder or white box, clone or non-branded PC
market, which represents approximately half of the PCs sold today. Original equipment
manufacturers (OEMs) like Dell, Hewlett-Packard and IBM represent the other
50% of the market. At the end of 2001, the Company began moving away from supplying
graphics boards directly to system builders. ATI now supplies chips to add-in-board
(AIB) manufacturers or original design manufacturers who, in turn, build
board-level products using the Companys graphics chips and sell these boards to
system builders. The Company believes that this strategy has increased and will continue
to increase the penetration of its technology in the system builder market.

Another significant change in the
graphics technology industry is the increasing use of integrated graphics chipsets that
combine core logic functions such as the memory and peripheral controllers with the
graphics processor. It is estimated that today, integrated graphics chipsets are used in
approximately half of the desktop systems sold worldwide. While overall, growth in the PC
market has decelerated, one area of the PC market that has grown over the past three years
is the value PC or the sub-$1,000 PC. For the most part, these value PCs use
integrated graphics chipsets. In response to this industry change, the Company developed
and introduced a full line of integrated graphics products in March 2002 and is continuing
to focus on the development of integrated chipset solutions.

ATI is now endeavouring to leverage
its core graphics technology into related markets that should enable the Company to
broaden its opportunities beyond the PC market. These opportunities derive from the larger
market for consumer electronic devices that include game consoles, DTVs, handheld devices
and colour cell phones. These consumer devices are expected to increasingly utilize rich
visual displays over the next few years, presenting additional growth opportunities for
the Company. In 2002, ATI participated in the game console market through its technology
licensing arrangement with Nintendo. The Company also announced design wins in both the
DTV and handheld device markets.

Management believes that a strong
commitment to the funding of research and development will enable ATI to effectively
respond to changing consumer demand. While there are uncertainties involved in research
and development, the Company is committed to securing the resources and necessary
leading-edge technology to maintain its position in the graphics and multimedia markets.

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In April 2000, the Company acquired
all of the issued and outstanding shares of ArtX, Inc. (ArtX) for a total
investment of approximately $453 million. At the time of the acquisition, ArtX was a
privately held company based in Palo Alto, California, which was engaged in the design and
development of graphics solutions for high performance PCs and consumer electronic
devices. The acquisition has been accounted for by the purchase method, whereby the
results of operations of ArtX are included in the Companys results from the date of
acquisition. The purchase price for the acquisition was satisfied through the issue of
21,494,980 common shares of ATI. In addition, the Company agreed to assume all options
outstanding under ArtXs 1997 Equity Incentive Plan (see Additional Information
 Share Option Plans) requiring ATI to issue up to an additional 7,006,649
common shares upon the exercise thereof. Pursuant to the acquisition agreement between ATI
and ArtX, ATI entered into a performance agreement with the former shareholders of ArtX.
The performance agreement required ATI to issue additional common shares upon achievement
of a specified future contract design win within two years from the closing date of the
acquisition. The performance requirement was not met and, accordingly, no performance
shares were issued and no additional purchase price consideration was recorded. The
acquisition of ArtX has allowed ATI to obtain increased exposure in the integrated
graphics solutions marketplace, as well as entry into the mass consumer electronics and
game console market. The acquired assets of ArtX included a research and development group
of approximately 70 engineers.

In March 2001, the Company acquired
FGL Graphics, the professional graphics division of SONICblue Inc., which develops and
markets the technology-leading FireGL brand of OpenGL-based graphics accelerators, for an
aggregate purchase price of approximately $11.3 million. This acquisition accelerated
ATIs entry into the high performance graphics workstation market. Products
incorporating FireGL technology are sold to major suppliers of high performance
workstation systems including Hewlett-Packard Company and Dell Computer Corporation.

In July 2001, ATI acquired ownership
of HydraVision desktop management software and related technologies from Appian Graphics
Corporation, several multi-monitor related patents and the HydraVision trademark for
approximately $2 million. HydraVision multi-monitor management software provides users
with an interface for simplified management of multiple displays. 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. In
addition, ATI hired a number of Appian Graphics employees to develop future enhancements
to HydraVision software. The Company believes that advanced multi-monitor capabilities
will continue to be important features in graphics technologies. A number of ATI products
now include HydraVision software.

During fiscal 2001, the Company
disposed of its investment in Broadcom Corporation, realizing a gain of approximately
$54.9 million. In addition, the Company earned an additional 250,701 shares of Broadcom
Corporation, valued at $8.5 million, during that fiscal year as a result of the
achievement of certain performance targets which were set at the time of the
Companys initial investment.

In June 2002, the Company acquired
NxtWave Communications Inc. (NxtWave) for cash consideration of $20.2 million.
NxtWaves business is focussed on the development and delivery of broadband
communications silicon using proprietary silicon signal processing technologies adapted
for applications in digital terrestrial and cable receivers. This acquisition broadens
ATIs DTV product portfolio by bringing NxtWaves leading demodulation
technology together with ATIs XILLEON solution, positioning ATI as a provider
of advanced DTV silicon solutions.

ATI currently employs more than 1,900
full-time people worldwide. The Company operates technology centres and sales support
offices in Canada, the United States, Europe and the Asia Pacific region.

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# Market Trends and
Direction

The Companys future success
will be dependent on its ability to address key industry trends, including the following:

Trend
towards integrated solutions

In order for OEMs to meet continually
lower pricing targets while still maintaining reasonable profit margins, management of the
Company believes that OEMs will look to continued integration of discrete chips, including
the graphics accelerator chip, into various levels of integrated chip solutions. As well
as potentially offering significant cost savings to the OEM, management believes that
integrated chip solutions, which combine graphics and core logic functions in one chipset,
will result in shorter design times and more available motherboard space. Management of
the Company also believes that OEM customers will continue to demand different levels and
types of integration to target different consumer preferences and PC configurations.
Management believes that a separate graphics subsystem will continue to offer higher
performance and will be the preferred solution for high-end and workstation PCs, while
integrated chipsets will target value-oriented PC systems.

The Company has entered into a
cross-licensing agreement with Intel Corporation (Intel) that grants each
company rights to utilize certain patented technology owned by the other. ATI has the
right, subject to certain restrictions, to build integrated chipsets that are compatible
with Intels current Pentium® 4 microprocessor platform. The Company believes
that its license with Intel will assist it in its efforts to penetrate the substantial
Intel Pentium® 4 value PC market utilizing integrated graphics chipsets.

In the third quarter of 2002, ATI
launched its full line of integrated graphics core logic products. The new RADEON
IGP family of products includes integrated graphics processors for the desktop and mobile
PC markets, and supports both Intel Pentium® 4 and AMD Athlon and AMD
Duron platforms.

Continuing
expansion of mobile PC market

The notebook or mobile PC market
continues to be one of the fastest growing segments 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. ATI
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. As in the desktop PC market, integration of
discrete notebook PC components may allow for reduced costs, faster design times and more
available space for other features within the mobile PC. Accordingly, mobile graphics
products with integrated memory, such as the Companys MOBILITY RADEON
7500 and MOBILITY RADEON 9000, have gained widespread acceptance in the mobile
PC market over the past year.

As the trend continues towards less
expensive notebook PCs, the market will require graphics chip makers to find less
expensive ways of delivering high quality graphics performance, including the use of
integrated chipsets. ATIs full line of integrated graphics core logic products,
introduced in 2002, includes integrated products for notebook PCs.

Trend
towards the use of rich visual display technologies in handheld devices

The Company believes that the market
for small handheld devices including personal digital assistants (PDAs),
wireless e-mail devices and smart phones will increasingly require that these products
provide rich visual display, 2D and 3D graphics technology. ATI is responding to this
market opportunity by developing products that meet this growing trend. In 2002, the
Company announced and began to ship its first media co-processor for handheld devices
called IMAGEON 100. The enhanced 2D graphics and hardware MPEG-4 decoding design of
this product offers high performance and crisp images while

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saving power for longer
battery life. In November 2002, ATI announced the release of its IMAGEON 3200 which
integrates an advanced 2D graphics engine and an MPEG/JPEG decoder alongside a powerful
and versatile set of peripheral input/output (I/O) functions.

Television
moving from analog to digital

As television broadcasters in North
America and the rest of the world convert their analog television signals to DTV
transmissions over the next decade, management of the Company believes increased consumer
interest in DTV will spur demand for more advanced digital set-top boxes and similar
consumer electronic devices with additional features such as DVD, 3D gaming and Internet
functionality. Digital transmission standards provide significant advantages compared to
analog standards, including greater picture clarity and resolution as well as
opportunities for more channels, enhanced e-commerce, Internet access and enhanced TV
viewing. The Company has developed products specifically designed to address this
expanding market, including its XILLEON 220 chip. With the acquisition of NxtWave in
2002, ATIs DTV product portfolio was broadened by bringing NxtWaves leading
demodulation technology together with ATIs XILLEON solution, positioning ATI
as a provider of advanced DTV solutions. In 2002, the United States Federal Communications
Commission issued a mandate requiring the integration of off-air digital tuners into TV
sets and receiver devices over the next several years, which the Company believes should
create additional demand for DTVs and ATIs DTV products.

Continued
growth of the non-branded PC market

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 builders, otherwise known as system integrators or white
box, clone or non-branded PC manufacturers. Today, system builders are responsible
for approximately half of worldwide PC shipments. Accordingly, it will be important for PC
graphics companies to have their technology incorporated in board-level products which are
available to and accepted by the system builder channel. The Company adopted a strategy in
2001 that it believes has and will continue to effectively address this market segment.

Increased
production efficiencies and reduction of component costs

Management of the Company believes
that further production efficiencies and benefits can be obtained by adopting more
advanced process technologies and by continuing to utilize a diversified supplier base,
including wafer manufacturers. Further production cost efficiencies can be gained through
volume purchasing and production arrangements. For a number of its upcoming products, the
Company will utilize 0.13 micron design technology, which is currently the smallest viable
design geometry.The Company will also continue to utilize volume purchasing and
multiple supplier strategies in order to increase competitiveness.

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|ITEM 3. |  | NARRATIVE DESCRIPTION
OF THE BUSINESS
|------- |  | -------------------------------------

ATIs strength is built upon its
product and technology leadership in visual processing technologies, customer focus,
top-to-bottom solutions and ability to identify and capitalize on key industry trends or
inflection points where new technologies and markets converge. In the past, these
inflection points have included migration from 2D to 3D graphics, the adoption of the AGP
bus interface, the incorporation of DVD functionality into the graphics accelerator, the
markets acceptance of DFP monitors, and the more recent development of new highly
complex functional graphics processing engines.

In 2000, ATI began volume shipments
of its RADEON product family which was introduced as ATIs sixth-generation
product family. Using patented technology with twin rendering pipelines and three texture
units, the RADEON family of products dramatically increased 3D rendering speed and
significantly improved visual reality. The RADEON family also included a
hardware-based transform, clipping and lighting engine, an innovative 3D architecture that
offloads complex graphics calculations from the CPU.

In 2001, ATI continued delivering new
technologies based on its RADEON technology, including RADEON VE,
ALL-IN-WONDER RADEON and MOBILITY RADEON. The ALL-IN-WONDER RADEON
multimedia card, the first graphics solution with new technology that enables the PC to
become a personal video recorder, allows users to record TV programming on a PCs
hard drive, pause and rewind live TV, and access an online interactive TV
programming guide.

Also in 2001, ATI announced new
RADEON products, including RADEON 8500, based upon ATIs
seventh-generation graphics technology, which continued to improve the features of the
graphics processor. The RADEON 8500 was the first graphics chip to support
Microsoft®s Direct X 8.1 pixel shader technology.

In 2001, two new FIRE GL cards
were announced, the mid-range FIRE GL 8800 and the entry-level FIRE GL 8700.
These products, which were designed for high performance graphics workstation PCs,
incorporate ATIs RADEON technology and were introduced by the Company
following the acquisition of FGL Graphics earlier in 2001.

In the first quarter of 2002, ATI
started to receive royalty revenues from its licensing arrangement with Nintendo for
ATIs Flipper chip that is used in Nintendos game console,
GAMECUBE.

Also in the first quarter of 2002,
ATI introduced the XILLEON 220, a highly integrated system-on-chip. The
XILLEON 220 integrates into a single chip all processor, graphics, video, audio, and
I/O capabilities required for DTV applications.

In January 2002, the Company
introduced IMAGEON 100, a media co-processor for handheld electronic devices such as
PDAs and data-enabled colour cell phones, whose capabilities include enhanced 2D graphics
and hardware MPEG-4 decoding design that offers high performance, crisp images, and low
power consumption.

In the third quarter of 2002, ATI
launched its full line of integrated graphics core logic products. The new RADEON
IGP family of products includes integrated graphics processors for the desktop and mobile
PC markets, and supports both Intel Pentium® 4 and AMD Athlon and AMD
Duron platforms.

In June 2002, ATI acquired NxtWave.
This acquisition broadened ATIs DTV product portfolio by bringing NxtWaves
leading demodulation technology together with ATIs XILLEON solution,
positioning ATI as a provider of advanced solutions for DTV.

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In the fourth quarter of 2002, ATI
introduced the RADEON 9700, RADEON 9000, FIRE GL X1 and the
MOBILITY RADEON 9000, all of which are industry-leading products which have
garnered a significant number of design wins from OEMs.

# Business Strategy

Management anticipates that future PC
systems and consumer electronic devices, such as DTVs, will continue to require advanced
graphics technology to support 3D gaming, World Wide Web browsing and digital video
technologies such as DVD functionality and digital video decoding.

The Company intends to expand its
presence in the PC market, expand into new product markets and increase profitability by
closely following and capitalizing on market trends and inflection points in the industry.

The Company intends to execute its
business plan through the following strategies:

Sustained
product and technology leadership

The Company believes that in order to
compete effectively in the highly competitive graphics chip market it must deliver
high-end graphics solutions on a consistent and sustained basis. The Company believes that
through concurrent 3D core development teams, one developing next-generation products and
the other focusing on future-generation products, through business unit-focused
engineering teams and by providing top-to-bottom solutions for all segments of the PC
market that meet customer needs, the Company will be able to solidify its market position.

The Company also intends to focus its
research efforts on key core technologies that will allow ATI to bring new and innovative
products to the OEM, system builder, distributor, retailer, DTV and handheld markets. ATI
intends to continue its focus on key graphics technologies relating to digital
technologies and 2D, 3D and video acceleration for desktop, mobile and workstation PCs as
well as apply its research and development resources to new and growing product areas such
as DTV and consumer electronic devices, including handheld devices and colour cell phones.
Due to the rapidly changing and expanding technologies in the PC market and the
convergence of this market with other media, ATI intends to continue to internally develop
and pursue opportunities to acquire or license complementary leading-edge technologies
when appropriate.

Penetrate
integrated graphic chipset market

The Company is addressing the market
trend towards integrated chipsets, and specifically core logic chipsets with integrated
graphics, through the introduction in 2002 of integrated chipset offerings. The new
RADEON IGP family of products includes integrated graphics processors for the
desktop and mobile PC markets, and supports both Intel Pentium® 4 and AMD Athlon
and AMD Duron platforms. The Company believes that the feature set of the
RADEON IGP family will allow the RADEON IGP family to compete effectively
against other product offerings in the market.

Increase
market share in the non-branded PC market

ATI is seeking to increase its market
share in the system builder market by selling a full range of its graphics technologies to
AIB manufacturers. Management of the Company believes that by supplying AIB manufacturers
with chips rather than supplying directly to system builders, it can leverage AIB
manufacturers own sales and distribution networks rather than compete against these
suppliers, and provide these suppliers with the opportunity to increase sales, revenue and
market share. In 2002, the Company was able to increase the number of AIB customers that
were manufacturing board product based on ATI components, as well as increase its
penetration in the system builder market segment.

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Target
emerging and growing markets

The Company intends to continue to
focus on emerging and growing market segments such as the consumer electronics device
market, including the more established game console market. Management of the Company
believes that ATIs technology portfolio is positioned to target these market
opportunities and believes that its technology leadership and innovation will enable it to
compete in these markets. The Company currently has product offerings for the DTV, PDA and
colour cell phone market.

# Products

ATIs core graphics business is,
divided into two main areas: desktop and mobile PCs. The Company designs and sells
component-level and board-level products into the PC market.

Part of the Companys strategy
however, is to expand beyond the PC market with products that address the consumer market,
including multimedia products, handheld devices (including colour cell phones and PDAs),
DTV solutions, as well as graphics technologies that are found in game consoles, including
Nintendos GAMECUBE.

The market lifecycle of ATIs
products is short, usually between six and 18 months. Over the product lifecycle, the
price of ATIs product typically declines as new technology is developed and
introduced into the market.

Desktop
Solutions

ATI designs and manufactures a wide
variety of graphics and multimedia products for the desktop market, offering the highest
industry standards for quality, features and customer support. ATIs most recent
generation of RADEON products launched in July 2002 includes the performance-leading
and award-winning RADEON 9700 PRO and RADEON 9000 PRO. Both products are
shipping in volume and are widely supported by a range of top-tier game and software
developers.

Built for gaming enthusiasts, the
RADEON 9700 PRO is an advanced graphics board, featuring ATIs RADEON
9700 PRO visual processing unit (VPU). Using eight parallel rendering
pipelines, 256-bit double data rate (DDR) memory interface, Microsoft®
DirectX® 9.0 support and AGP 8X support, the RADEON 9700 PRO provides a
high-level PC entertainment experience, through a combination of highly realistic 3D
rendering performance and image quality, sophisticated real-time visual effects and
leading video features.

As a mid-range product, the
RADEON 9000 PRO features a quad-pipe architecture, four parallel, highly optimized
rendering pipelines and up to 128MB of memory, providing best-of-class performance to
accelerate all popular 3D applications.

Since launching in July 2002, the
RADEON 9700 PRO family has grown to include additional products such as the
RADEON 9500 and RADEON 9500 PRO.

In addition to the new generation of
RADEON products, ATI continues to market its mid range RADEON 7500 and
value-oriented RADEON 7000, and for a limited time its RADEON 8500, desktop
graphics products.

ATIs desktop products provide
users with the ability to run the most advanced PC applications and software games, as
well as view full motion video on their PC. ATIs current products also provide PC
users with a cost-effective way to upgrade the graphics capabilities of their PC without
upgrading the CPU or the entire PC.

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Workstation
Solutions

The FIRE GL family of
workstation graphics boards brings high performance to the digital content creation
(DCC) and computer aided design (CAD) markets. This product family
includes the FIRE GL X1 with revolutionary new architecture and up to 256MB of
memory.

FIRE GL X1 is ATIs most
advanced workstation graphics board, featuring ATIs FIRE GL 9700 VPU. With the
addition of photo-realistic visualization and 3D asset management tools, FIRE GL X1,
enables collaborative workflow and accelerates the production pipeline, providing digital
content creators, engineers and game developers with the power to generate highly
realistic 3D animation, real-life visual effects and design work in real-time.

In addition, the FIRE GL family
also offers the FIRE GL Z1, ATIs mid-range workstation graphics board,
featuring ATIs FIRE GL 9500 VPU. With advanced new architecture and 128MB of
memory, FIRE GL Z1 delivers superior performance to power leading DCC and CAD
software applications.

Finally, ATI offers the value edition
FIRE GL E1 workstation graphics accelerator (powered by the FIRE GL 8800LE)
and the entry-level FIRE GL 8700 featuring 64MB of DDR memory, providing powerful
rendering capabilities to leading applications.

Multimedia
Solutions

Multimedia continues to be an
important segment 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.
ATI continues to focus its efforts on this market by supplying board-level products which
offer PC/TV convergence, combining PC technology with TV, audio and video technology. As
use of media such as the World Wide Web increases and information communication technology
improves, PCs will require complete multimedia products that are able to effectively
deliver these capabilities. Over the past three years, ATI has continually introduced new
multimedia products with additional features and functionality, affording users the
ability to capture and manipulate video on their PC with each new generation.

ATIs ALL-IN-WONDER RADEON
9700 PRO, announced in September 2002, is the latest addition to the Companys
ALL-IN-WONDER line of multimedia products. Based on the RADEON 9700 PRO VPU, the
ALL-IN-WONDER 9700 PRO includes features such as mulTView for dual TV tuner support and
128MB of DDR memory, as well as superior 2D and 3D graphics performance.

ATIs ALL-IN-WONDER RADEON
8500DV, announced in August 2001, is the first in ATIs family of ALL-IN-WONDER video
cards to provide a FireWire standard digital video connection, giving digital video
enthusiasts the ability to connect digital camcorders and other FireWire devices. The
video card also includes a full function remote control for quick and easy access to TV,
video, DVD and gaming features from any room in the house.

In June 2001, ATI announced the DV
WONDER for the digital video market. This FireWire (IEEE 1394) board fits easily into any
free peripheral component interconnect slot on a desktop PC and enables digital video
camcorder users to swiftly transfer and edit high-quality digital video on their desktop
computers.

In November 2000, ATI announced the
TV WONDER USB EDITION, a 125-channel external tuner pod that plugs into a PC or notebook
equipped with a universal serial bus interface, that allows consumers to watch TV and
capture video on their PC with a simple single cable installation. In January 2001, the TV
WONDER USBs sister product for Apple Macintosh computers was announced, the XCLAIM
TV USB EDITION.

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Mobile
Solutions

Launched in August of 2002,
ATIs MOBILITY RADEON 9000 is a powerful mobile visual processor,
supporting Microsoft® DirectX® 8 pixel and vertex shaders, and delivering realism
to the latest 3D games.

Based on ATIs MOBILITY
RADEON 9000 visual processor, the MOBILITY FIRE GL 9000 visual processor
for mobile workstations was launched in September 2002. As the successor to the
MOBILITY FIRE GL 7800, the MOBILITY FIRE GL 9000 is designed for
advanced CAD/CAM and DCC.

ATI entered the mobile workstation
market in August 2001 with the MOBILITY FIRE GL 7800 graphics processor, which
incorporates technology acquired through ATIs purchase of FGL Graphics.

In August 2001, ATI announced the
MOBILITY RADEON 7500, which incorporated ATIs POWERPLAY power
management technology, designed to increase notebook battery life. MOBILITY
RADEON 7500s graphics performance narrowed the performance gap between desktop
and mobile systems.

In February 2001, ATI announced the
first mobile implementation of RADEON technology, the MOBILITY RADEON
graphics processor.

Integrated
Solutions

In March 2002, ATI launched the
RADEON IGP family of products. Built around ATIs RADEON technology, the
RADEON IGP family uses a 64-bit system architecture and 266 MHz DDR memory
interface, and is the first and only integrated graphics solution to support ATIs
industry-leading POWERPLAY power management technology. The RADEON IGP family
is flexible and scalable, and supports both desktop or notebook PCs built on Intel or AMD
platforms.

This family includes:

| | RADEON IGP
340 and 340M (Pentium® 4 processor compatible) for the value and mainstream desktop
and notebook PC market; and
|- | ---------------------------------------------------------------------------------------------------------------------------

| | RADEON IGP 320 and 320M (supporting AMD Athlon and
AMD Duron processors) for the value and mainstream desktop and notebook
PC market.
|- | ----------------------------------------------------------------------------------------------------------------------------------------

DTV
Solutions

ATI designs cost-effective and highly
integrated multimedia chipsets like XILLEON 220 and THEATRE 200 for the DTV
market. The XILLEON 220, introduced in 2001, is an advanced and highly integrated
system-on-chip suitable for a range of digital devices, including DTVs, home media
gateways and TV-enabled web pads.

Through its acquisition of NxtWave,
ATI also offers a number of semiconductor products that offer advanced broadband receiver
technologies for the DTV market.

SET-TOP-WONDER XILLEON,
ATIs fourth-generation reference platform, has been created as a complete reference
design for consumer electronics manufacturers developing low-cost, high performance
digital video consumer devices. SET-TOP-WONDER XILLEON incorporates ATIs
XILLEON 220, which is an advanced and highly integrated system-on-chip for the
consumer market.

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Handheld
Solutions

ATIs IMAGEON 3200 is an
advanced multimedia co-processor for handheld electronic devices. Introduced in November
2002, IMAGEON 3200 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 handheld devices, including PDAs and
colour cell phones, that demand more advanced graphics capabilities.

ATIs first video graphics
product for handheld devices, the IMAGEON 100, includes support for an advanced 2D
graphics engine, MPEG-4 decoding (the standard for wireless streaming video) and an LCD
timing controller among other features. It offers an excellent visual experience for
end-users while reducing the overall system power consumption for a longer battery life.

Game
Consoles

ATI has licensed its proprietary
Flipper chip to Nintendo as the central graphics core of Nintendos game
console, GAMECUBE. 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.

Software
Drivers

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

ATI develops its software drivers in
many different languages and formats to conform to international user requirements.
ATIs 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 the Companys customers to market leading-edge and
cost-effective ATI-based products.

In 2001, the Company introduced
Microsoft® XP-specific drivers and applications, support to Apple OSX and optimized
drivers for ATIs new product families, including RADEON 8500, RADEON
7500, MOBILITY RADEON and MOBILITY RADEON 7500 mobile products and
their related multimedia derivatives. In 2002, the Company introduced CATALYST, a software
suite that includes unified driver architecture and software applications to enable the
RADEON family of graphics products.

# Research and Development

Management believes that a strong
commitment to research and development is fundamental to ATIs success. Due to the
rapid pace of technological change in the graphics industry, it is critical to meet each
market window with the newest generation of products that meet market and customer
requirements. Ongoing research and development efforts enable the Company to participate
in establishing industry standards as well as design and create new products based on
these standards. ATI will continue to strengthen its research and development base through
internal research and development efforts, licensing arrangements with third parties and
acquisitions of technology companies, when appropriate.

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ATIs primary research and
development objective is to develop core technologies that establish a base from which ATI
can quickly design products to meet the ever-changing demands of the PC graphics and
multimedia industry. ATIs dedication to research and development of core
technologies has also allowed the Company to position itself as a participant in emerging
multimedia markets, such as the digital technology, DTV, DFP display and gaming sectors.

The Companys research and
development approach encompasses concurrent 3D core development teams, one developing
next-generation products and the other focusing on future-generation products. At the same
time, 3D core technology is made available concurrently to the other ATI business units,
such as mobile, workstation, DTV and consumer product development teams.

ATIs net investment in research
and development increased from $149.5 million in fiscal 2001 to $164.6 million in fiscal
2002. The Companys engineering resources increased from approximately 1,110 to more
than 1,240 employees during that time. In both 2001 and 2002, the Company entered into a
number of licensing arrangements with third parties engaged in the development of
complementary technologies, which will be used by ATI in the development of its products.

During fiscal 2000, ATI strengthened
its research and development resources through the acquisition of ArtX, which included a
team of approximately 70 engineers. This acquisition provided ATI with additional
integrated product expertise and facilitated ATIs entry into the game console
marketplace.

In fiscal 2001, ATI acquired FGL
Graphics, the professional graphics division of SONICblue Inc., which develops and markets
the technology-leading FireGL brand of OpenGL-based graphics accelerators. The agreement
included the acquisition of 35 highly-skilled employees at FGL Graphics research and
development and marketing facilities in Munich, Germany and San Jose, California. Also in
2001, ATI acquired HydraVision multi-monitor management software from Appian Graphics
Corporation and hired a number of Appian Graphics employees.

In fiscal 2002, the Company acquired
NxtWave, including a team of approximately 55 engineers. This acquisition broadened
ATIs DTV product portfolio by bringing NxtWaves leading demodulation
technology together with ATIs XILLEON solution, positioning ATI as a provider
of advanced DTV silicon solutions.

The following table summarizes the
Companys net investment in research and development over the past three years.
Research and development expenditures include both current expenses, such as salaries and
certain materials, as well as expenditures on capital assets that were acquired for
research and development purposes and prototype and design tools. For research and
development activities carried out in Canada, the Company qualifies for federal investment
tax credits (ITCs) at the rate of 20% of all eligible current and capital
research and development expenditures. The Company also qualifies for tax credits based on
research and development activities carried on in the United States. These ITCs are used
to reduce current expenses, capital expenditures and federal tax otherwise payable.

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Net Investment in
Research and Development (Thousands of U.S. dollars)

| |                                                      |  |          |  | Years ended August 31 |  |         
| | ---------------------------------------------------- |  | -------- |  | --------------------- |  | --------
|
| | Gross current R&D expenses                           |  | $182,349 |  | $164,968              |  | $147,213
| | Less related ITCs                                    |  | 17,740   |  | 15,503                |  | 16,643  
| |                                                      |  |          |  |                       |  |         
| | Net current R&D expenses                             |  | 164,609  |  | 149,465               |  | 130,570 
| | Net current R&D expenses as a percentage of revenues |  | 16.1%    |  | 14.4%                 |  | 10.2%   
| |                                                      |  |          |  |                       |  |         
| | Capital R&D expenditures, net of ITCs                |  | 15,448   |  | 13,672                |  | 22,607  

Sales

ATIs components and board-level
products are sold to PC OEMs, AIB manufacturers, retailers, DTV and handheld customers.

ATIs PC OEM customers include
Acer, Apple, Dell, Founder, Fujitsu, Gateway, Hewlett-Packard, Hitachi, IBM, Legend,
Panasonic, Siemens, Sony, Sun, Toshiba and TriGem. ATIs major distributors include
Althon, D & H, Ingram Micro and Tech Data. The Companys major retailers include
Best Buy, Future Shop, COMP USA, Circuit City and Frys. Its major e-commerce
retailers include buy.com, CDW and Micro Warehouse. ATIs DTV customers include
Scientific Atlanta and Pace Micro. The Companys handheld customers include Toshiba.
The Company supplies the system builder channel by supplying its components to AIB
manufacturers.

Management of the Company believes
that ATI brand awareness provides added value to OEM customers products through
retail and press recognition of ATI product features, quality and performance. Sales to
OEM customers often involve a direct relationship between the customer and the
Companys research and development personnel to ensure that the products being
developed by ATI meet the needs and specifications of the OEM. Management believes that
this is a significant and positive factor in maintaining the Companys ability to
sell components and board-level products to OEMs, where the thrust of the sales effort is
to have the Companys products designed into the OEMs existing or new product
lines. ATI works closely with OEMs on supply chain integration and demand generation. The
Company also supports OEM requirements on a worldwide basis from design, application
support to production. This relationship at the OEM level benefits the Company as the OEM
will generally continue to incorporate ATIs components in its products until the OEM
ceases production of that particular product.

The Company has and seeks to increase
its arrangements with leading AIB manufacturers in an effort to increase market
penetration of ATI chip technologies worldwide. The Company, rather than directly
delivering board-level products into the system builder market, delivers component
products to AIB manufacturers, who in turn manufacture and sell board-level products using
ATI technology to system builders. ATIs AIB customers include First International
Computer, Giga-Byte, Hightech, CP Technology, Sapphire Technology, Tyan, Yuan and Wistron
InfoComm.

In 2002, ATIs top ten customers
accounted for approximately two-thirds of the Companys revenues, with one customer
representing 21% of revenues. In 2001, one customer accounted for 19% of revenues and the
Companys top ten customers accounted for approximately two-thirds of the
Companys revenues. In 2000, one customer accounted for 12% of revenues.

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The following table summarizes the
breakdown of the Companys revenues by territory as a percentage of total revenues:

| |              |  |      |  | Years ended August 31 |  |     
| | ------------ |  | ---- |  | --------------------- |  | ----
|
| | Canada       |  | 1%   |  | 2%                    |  | 2%  
| | USA          |  | 29%  |  | 31%                   |  | 33% 
| | Europe       |  | 15%  |  | 24%                   |  | 31% 
| | Asia Pacific |  | 55%  |  | 43%                   |  | 34% 
| |              |  |      |  |                       |  |     
| |              |  | 100% |  | 100%                  |  | 100%
| |              |  |      |  |                       |  |     

ATI endeavours, where possible, to diversify
its geographic base, however with the Companys adoption of the chip model, and the
continued trend towards OEMs increasing manufacturing operations in the Asia Pacific
region, it is anticipated that sales will continue to shift to that region.

The Company maintains an
international presence for its products through its international sales force and by
localizing its products into all of the major European and Asian languages.

Sales to OEMs and AIBs are generally
made pursuant to the terms and conditions of the OEM or AIBs purchase order.
Generally, such orders do not provide any commitment for minimum purchases by the OEM or
AIB. The Companys supply arrangements with its distributor and retailer customers
are generally terminable by either party on not more than 90 days notice.

The Company recognizes revenue when
evidence of an arrangement exists, goods are shipped 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 shipment. In addition, the Company provides for the estimated cost of product
warranties at the time of revenue recognition.The Company also directly supports
promotion of the Companys products by system builders, distributors and retailers
through cooperative advertising. In addition, ATI offers a three-year limited hardware
warranty to the end-user consumer on all of its branded hardware products. This warranty
is supported directly by ATIs customer service department and serves as a further
selling feature for AIB manufacturers, distributors and retailers. While the Company
maintains a reserve to cover these policies, there can be no assurance that these reserves
will be sufficient or that future price protection claims and returns will not have an
adverse effect on the results of operations of the Company.

Competition

The markets in which ATI competes and
expects to compete in the future are highly competitive and characterized by rapid changes
in technology. The Company expects the level of competition in each market sector to
increase. The Company provides graphics and multimedia solutions in all market segments of
the PC desktop, mobile, workstation and server markets through OEMs, AIB manufacturers,
system builders, distributors and retailers. As a result, ATI competes 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 its product line, the Company continually faces new competitors in converging
markets and may encounter substantial competition from established companies in those
markets.

The Companys sources of
competition in the PC market are those companies that provide graphics and multimedia
subsystems for the desktop and mobile segments. These include: (i) discrete component
suppliers, (ii) AIB manufacturers, (iii) fully-integrated graphics suppliers and (iv)
suppliers of integrated

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graphics and core logic components. These include Intel, nVidia,
Matrox Electronic Systems, Trident, SiS and Via Technologies. In addition, the
Companys competitors also include a number of smaller companies, which may have
greater flexibility to address specific market needs.

The Companys competitors in the
graphics segment of the DTV business include Broadcom, LSI Logic Corporation, Motorola,
STMicroelectronics and Oak Technologies. The Companys main competitor in the
handheld market is MediaQ. In the game console market, the Company competes primarily
against nVidia.

# Manufacturing

Component Manufacturing

The Company relies on third party
full-service foundries located in the Asia Pacific region for the manufacture of its
proprietary graphics components. ATI manages its component manufacturing through a
customer owned tooling (COT) program. Under the COT program, ATI substantially
replaces full-service component vendors with a few specialized vendors, each of whom
undertake different steps in the production cycle. Under the COT program, ATI purchases
raw material, in finished wafer form, from its foundry suppliers and arranges to
sub-contract the testing, assembly and packaging processes to create final
application-specific integrated circuit (ASIC) components. The COT program
increases the Companys control over the manufacturing process, resulting in
shortened delivery times, increased product quality and reduced component costs.

Board
Manufacturing

Once a new product has been designed
and tested, the task of manufacturing is given to the Companys subcontractors. The
process for manufacturing ATIs board-level products begins with the procurement of
materials such as printed circuit boards, memory components, resistors, capacitors and
connectors, as well as ATIs proprietary components. These materials are then
assembled by ATIs contract manufacturers into complete board products.

The Companys manufacturing
facility in Markham, Ontario, Canada is devoted to prototyping and trial runs for new
product introductions.

# Customer Service and
Support

ATI considers customer service and
long-term customer support to be critical to ongoing customer loyalty and continued
success in its business. ATIs products are designed to be easily installed and
include simple menu driven software to ensure ease of use. ATI also works closely with
major hardware and software developers to ensure ongoing compatibility and support for its
products, an important aspect of ATIs customer service and support in an industry of
unique and continually changing systems, products and product specifications.

Because the Company researches and
develops as well as produces and markets its own components and boards, ATI is able to
link customer support to hardware and software engineering, production and sales and
marketing, thereby allowing for efficient customer-to-engineering-to-market solutions.

ATI offers its customers and
strategic business partners various levels of service and support via the ATI CustomerCare
program. ATI currently has approximately 50 individuals working at its Markham, Ontario
location in Canada and at its European operating centre in Dublin, Ireland, to find
solutions to customer problems or concerns and to answer customer questions. CustomerCare
also leverages the power of the Internet to allow for quick and easy access to product
information, software driver updates

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and online customer service and technical support
through the Companys Internet Web site, www.ati.com. Customers may
also access the CustomerCare program via phone and traditional mail.

# Human Resources

The Company had the following number
of individuals on payroll, including non-permanent and short-term employees, at August 31:

| |                               |  | 2002  |  | 2001  |  | 2000 
| | ----------------------------- |  | ----- |  | ----- |  | -----
| | Research and development      |  | 1,249 |  | 1,117 |  | 1,022
| | Operations and administration |  | 473   |  | 542   |  | 580  
| | Sales and marketing           |  | 295   |  | 293   |  | 288  
| | Customer support              |  | 75    |  | 80    |  | 86   
| |                               |  |       |  |       |  |      
| | Total number of ATI personnel |  | 2,092 |  | 2,032 |  | 1,976
| |                               |  |       |  |       |  |      

Management believes that its ability to
attract and retain highly skilled engineering, marketing and management personnel is one
of the key factors in the success of the Company. None of the Companys employees are
governed by collective bargaining agreements. ATI has never experienced a material work
stoppage or strike in its history.

# Facilities

The Companys head office
facilities are located in Markham, Ontario, Canada. The head office is located at 1
Commerce Valley Drive East, in Markham, Ontario. This facility, comprises approximately
240,000 square feet of office space. The Company has a 50% interest in the joint venture
that owns this facility. The Company has two other locations in Markham, Ontario. The
facility (and former head office location) at 33 Commerce Valley Drive East, which is 100%
owned by the Company, comprises approximately 123,000 square feet, including approximately
65,000 square-feet of manufacturing and warehouse space. The Company also leases an
additional 55,000 square-feet of office space at 55 Commerce Valley Drive West.

ATI owns a 35,000 square-foot
facility in Dublin, Ireland. The Company leases engineering facilities in the United
States including: approximately 60,000 square feet in Marlborough, Massachusetts;
approximately 34,000 square-feet in Newtown, Pennsylvania; approximately 13,500 square
feet in Langhorne, Pennsylvania; and approximately 104,000 square feet in Santa Clara,
California. By early 2003, the Company will consolidate the Pennsylvania locations into a
new leased facility of approximately 35,000 square feet. The Company also leases a number
of smaller regional offices in the United States, Europe and Asia Pacific.

ATIs operations are subject to
a variety of federal, provincial and local environmental laws and regulations. Such 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. Management believes that ATI is currently in compliance with all
applicable environmental laws in all material respects.

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# Risks and Uncertainties

The Companys 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 the Companys filings with Canadian and United States securities regulatory
authorities, including Managements Discussion and Analysis of Operating Results and
Financial Position contained in the 2002 Annual Report.

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

Unpredictable
and Fluctuating Operating Results

The Companys results can
fluctuate and are often difficult to predict due to changing market conditions, seasonal
and variable demand for its products and the effects of rapid and frequent technological
changes. As a result, the Companys revenues can fluctuate from quarter to quarter,
and within a quarter, revenues may vary from month to month. In addition, the
Companys operating expenses are largely independent of revenue in any particular
period. Therefore, it is difficult to accurately predict revenues and profits or losses.
Factors that have affected the Companys 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;
| | - |  | -----------------------------------------------

| |  |  | demand
and acceptance of the Company's products, including integrated graphics components and
consumer electronics;
| | - |  | -------------------------------------------------------------------------------------------------------------------

| |  |  | timely
development and production of next-generation products, including products for the
consumer device market;
| | - |  | -----------------------------------------------------------------------------------------------------------------

| |  |  | introduction
of new products by the Company's competitors;
| | - |  | ----------------------------------------------------------

| |  | availability
of licenses for emerging industry technology, including microprocessor platform
architecture and other intellectual property rights necessary for the development of new
products by the Company;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | changes
to the overall Company average selling price resulting from competitive pressures and
low-cost PCs;
| | - |  | -----------------------------------------------------------------------------------------------------------

| |  |  | delays
or early introduction of new microprocessors or their related chipsets;
| | - |  | ------------------------------------------------------------------------------

| |  |  | changes
to the Company's overall product mix;
| | - |  | ---------------------------------------------

| |  |  | increasing
product line complexity and related management of inventory;
| | - |  | -----------------------------------------------------------------------

| |  |  | unexpected
 variances in the  Company's  cost of  materials,  especially  silicon  wafer,  memory
and printed  circuit  boards          ("PCBs"), and packaging costs;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | changes
to the expected yield of the Company's component products;
| | - |  | ------------------------------------------------------------------

| |  |  | excess
or shortage of manufacturing capacity;
| | - |  | ---------------------------------------------

| |  |  | volume
of orders received that can be filled in the quarter;
| | - |  | ------------------------------------------------------------

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| |  |  | seasonal
and variable demand associated with the PC industry;
| | - |  | -------------------------------------------------------------

| |  |  | timing
of the introduction of customer incentive programs during the quarter;
| | - |  | -----------------------------------------------------------------------------

| |  |  | supply
constraints for other components incorporated into the Company's products and those of
its customers; and
| | - |  | ----------------------------------------------------------------------------------------------------------------

| |  |  | inability
to quickly adjust spending sufficiently to compensate for any unexpected revenue
shortfall.
| | - |  | -----------------------------------------------------------------------------------------------------

Furthermore, most of the
Companys operating expenses are relatively fixed in the short term. As indicated
above, the Company may be unable to rapidly adjust its spending to compensate for any
unexpected revenue shortfall, which could harm quarterly operating results. In addition,
as discussed further below, the Companys products have varying gross margins. As a
result of the factors listed above, period-to-period comparisons of the Companys
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, the Companys operating results may be below the
expectations of securities analysts and investors. The Companys failure to meet
these expectations could adversely affect the market price of the Companys common
shares.

Importance
of Design Wins

The Companys future success and
ultimate sales achievements will depend in large part on retaining and/or winning design
contracts (design wins), which entails PC OEMs choosing the Companys
existing and future products as their graphics and multimedia solutions. The
Companys major PC OEM customers typically introduce new system configurations as
often as twice a year for desktop products and at least once a year for mobile products.
Accordingly, the Companys products must have competitive performance ratings,
adequate feature-sets, consistent quality levels and appropriate prices within the limited
time frames of its 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 the Companys business and operating results.

Variable
Gross Margins

The Companys overall gross
margin is dependent on a number of factors, the principal items being the cost of input
materials (mainly silicon, memory and PCBs), the yield of the Companys chips
received from its foundries, the average selling price of the Companys products and
the actual product mix of the Companys revenues. In terms of product mix, the
Companys business model involves the development and marketing of component and
board-level graphics products for desktop and mobile PC, DTV and multimedia applications.
Each of these products or product categories has dissimilar gross margins at any
particular time. Consequently, many of the Companys gross margin components
fluctuate and the overall corporate gross margin is difficult to predict. Should any of
the factors influencing gross margins change substantially, the Companys operating
results could be adversely affected.

Reliance
on the PC Industry

The Company currently derives a
substantial portion of its revenue from the sale of graphics and multimedia products for
use in PCs. Although the PC industry grew significantly during the late 1990s, since 2000
PC sales have not experienced similar levels of growth. Growth in PC sales at levels
experienced in the past may not occur in the future. Reductions in the sales of PCs
reduces the overall demand for the Companys 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

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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 the Companys operating results.

Dependence
on Timely Introduction of New Products

The graphics industry is
characterized by frequent product introductions and short life cycles based on constantly
improving technologies and new industry standards. Increasingly important is the
Companys ability 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 which are the traditional periods in
which PC OEMs introduce new products. This means that the Company must commit resources to
the development and manufacture of its products without having commitments to purchase
from customers. The Company must also take advantage of new technologies to maintain its
competitive edge. If the Company fails to identify new product opportunities or develop or
bring to market these new products or enhancements within the time frame required by
customers, if the Companys new products or enhancements are not selected by PC OEMs
to be included in their products, or if the products or technologies developed by
competitors render the Companys products or technologies non-competitive or
obsolete, the Company may experience reduced demand for its products and loss of market
share and the Companys operating results could be adversely affected.

The Companys business depends
to a significant extent on its ability to continually introduce new and enhanced
generations of graphics products in order to retain or win customer contracts and maintain
average selling prices (ASPs). The life cycles of graphics boards typically
range from six to 12 months and the life cycles of the Companys graphics chips
typically range from six to 18 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 or board, the ASP undergoes regular price
reductions. In the past, the Companys newer products, at their highest ASP, have
offset the reduction in ASP of the Companys older products that are nearing the end
of their product life cycle. The introduction of new products and enhancements to existing
products is therefore necessary to maintain overall corporate ASPs. However, should the
Company not introduce new products or launch new products without sufficient increases in
ASP or increased unit sales volumes capable of offsetting these reductions in ASPs, the
Companys revenues, inventories, gross margins and operating results could be
adversely affected.

Trend
Towards Integrated Graphics Components

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.

The Company believes that integrated
graphics chipsets, which are estimated to account for approximately half of the desktop
systems sold worldwide, will continue to represent an increasing share of the PC graphics
market. During fiscal 2002, the Company introduced the RADEON IGP family of
products, which includes integrated graphics processors for the desktop and mobile PC
markets, and supports both Intel Pentium® 4 and AMD Athlon and AMD Duron
platforms. If these products do not successfully address this market segment and the
low-cost PC segment accounts for a significant percentage of PCs sold in the future, the
Companys business, financial condition and operating results could be adversely
affected.

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Success
of Nintendos Gamecube

The Companys graphics
technology for the game console market is being used by Nintendo in its GAMECUBE
products. Revenues from this technology are only received by the Company in the form of
royalties paid by Nintendo to the Company based upon the number of GAMECUBE consoles
and games sold by Nintendo. Accordingly, ATIs royalty revenues will be directly
related to the sales by Nintendo of its GAMECUBE products. The Company has 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 the Company from this
technology may not be fully realized and the Companys operating results may be
adversely affected.

In fiscal 2002, the Company started
to recognize royalty revenues from its technology licensing arrangement with Nintendo.
Although royalty revenue was less than 5% of the Companys total revenues for the
year, it directly impacted net income as there were no significant operating expenses
associated with the revenue. During fiscal 2002, a significant amount of the
Companys net earnings were derived from Nintendo royalties. Consequently, anything
that negatively affects the royalties paid by Nintendo to the Company may adversely affect
the Companys operating results.

Highly
Competitive Environment

The markets in which the Company
competes and expects to compete in the future are highly competitive and are characterized
by rapid technological changes, frequent product introductions and declining selling
prices. Consolidation of the Companys competitors has increased competitive
pressures in the graphics industry. The Company believes that the consolidation trend in
the PC market has stabilized as the number of companies participating in this market has
declined significantly, with the three main players now being the Company, nVidia and
Intel. ATI believes that the main factors of competition in these markets remain technical
performance, price, product features, time-to-market, technical support, conformity to
industry standard application programming interfaces and the ability to deliver consistent
volume and quality of product. The Company expects competition to intensify in these areas
and there can be no assurances that competitive products will not be less costly, provide
better performance or include additional features that render the Companys products
uncompetitive. Increased competition may require the Company to reduce its prices and/or
invest further in R&D and sales and marketing efforts, thus affecting the
Companys operating results.

The Companys competitors in the
graphics segment of the consumer market, which includes DTVs and PDAs, include Broadcom,
LSI Logic, Motorola, STMicroelectronics, Oak Technologies and MediaQ.

Some of the Companys
competitors, in particular Intel, have greater financial and other resources than the
Company 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 the Companys smaller competitors may have
greater flexibility within niche markets and better name recognition addressed to specific
market needs. As a result, there can be no assurance that the Company will be able to
maintain its competitive position and market share against current or future competitors,
which could adversely affect its business and operating results.

Dependence
on a Small Number of Customers

The Companys revenues are
concentrated with a small number of customers. In 2002, the Companys top ten
customers accounted for approximately 68% of its revenues, with one customer representing
21% of revenues. The Company expects that a small number of PC OEMS will continue to
account for a

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substantial part of the Companys revenues. Continued sales to PC OEMs
are dependent on continuing to achieve design wins with these OEMs. The loss of business
or failure to achieve design wins from such PC OEMs without adding new sources of revenues
could have an adverse effect on the financial results of the Company. Other risks
associated with the Companys dependence on a small number of customers include:
unexpected delays in the introduction of the Companys customers products,
resulting in a change in the timing of their orders; product rates of return in excess of
those forecasted; cancellation of customer orders and the resultant holding of excess
inventory and unexpected write-down of inventories; and the inability to secure alternate
purchasers for its products. Furthermore, if any one the Companys customers
experiences financial difficulty, the risk exists that the Company may be required to
write off bad debts of such a customer. Any of such events could have an adverse effect on
the financial results of the Company.

Greater
Resources of Intel

In 1999, Intel began shipping
integrated graphics component products targeted at the low-cost PC market. Intel is the
largest manufacturer in the world of PC processors and has significantly greater resources
than the Company. Given its significant leadership position and the large cost of the
microprocessor relative to other components within the PC, Intel could cost-effectively
combine graphics components or functionality with its microprocessors. The Companys
products may not be able to successfully compete with Intels products on the basis
of price or performance. The Company expects Intel to invest heavily in research and
development and in marketing and selling campaigns to engender brand loyalty with PC
manufacturers and users. ATI also expects Intel to maintain its dominance of the PC
platform. These and other selling advantages could render the Companys integrated
chipset products uncompetitive on a cost basis.

Due to the widespread adoption of
Intels microprocessor architecture and interface architecture, including the AGP
interface, Intel has the ability to create and influence key industry standards in the PC
industry. The Company relies on its ability to obtain and maintain licenses from Intel in
order to use certain proprietary Intel technology in its 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 the Companys 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 the Companys business,
financial condition and operating results.

During fiscal 2002, the Company
introduced the RADEON IGP family of products, which is intended to compete with and
complement Intels family of integrated products. Current competitive integrated
graphics components interface with Intel processors via an Intel bus. Other competitors
have implied, through information that they have released publicly, that they have
obtained licenses from Intel or are licensed under Intel licensed manufacturers. There can
be no assurance that Intel will not attempt to prevent ATI from manufacturing current or
future Intel bus compatible products. There can also be no assurance that ATIs
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
the Companys products. Intel spokespeople previously stated that it had exited the
discrete graphics business. Intel has also stated that it intends to remain in the
integrated graphics component market. 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 in the discrete graphics component market with the Company.

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Technological
Change and Product Defects

The markets for the Companys
products are characterized by rapidly changing technology, evolving industry standards and
frequent new product introductions. Products in the Companys market typically have a
life cycle of six to 18 months, with regular reductions in the ASP over the life of the
product. In addition, ASPs for new product introductions may not offset the reduction in
ASPs of the Companys products at the end of their product life cycle. Continuing
erosion of ASPs may adversely affect the Companys revenue and operating results
unless increases in unit volume are sufficient to offset these declines. The Company
invests significant resources in the development of both hardware and supporting software
for the PC graphics and multimedia market in order to develop new products that
incorporate additional features and functionality that can be sold at higher ASPs. The
Companys success will depend upon market acceptance of its existing products and its
ability to enhance its existing products and to introduce new products and features to
meet changing customer requirements. There can be no assurance that the Company will be
successful in identifying, developing, manufacturing and marketing new products or
enhancing its existing products and, as a result, the Companys gross margins could
decline in the future.

The Companys business and
operating results could be adversely affected if the Company incurs delays in developing
new products or enhancements, or if such products or technologies developed by others
render the Companys products or technologies non-competitive or obsolete. Products
as complex as those offered by the Company may contain defects or failures when introduced
or when new versions or enhancements to existing products are released. Although the
Company has not experienced materially adverse effects resulting from bugs, defects,
failures or incompatibilities to date, there can be no assurance that, despite testing by
the Company, 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 the Companys products, material recall and replacement costs, delay in
recognition or loss of revenues, the diversion of the attention of the Companys
engineering personnel from product development efforts and damage to the Companys
reputation in its industry. Correcting such errors and failures in the Companys
products could require significant expenditures. Any such circumstances could have an
adverse effect on the Companys business, financial condition or operating results.

Proprietary
Technology

The Companys success is heavily
dependent upon proprietary technology. The Company relies principally upon a combination
of copyright, trademark, patent and trade secret laws, restrictions on disclosures and
contractual provisions to protect its proprietary and intellectual property rights. There
can be no assurance, however, that these laws and procedures will be adequate to prevent
misappropriation of the Companys technology or independent third party development
of the same or similar technology. Unauthorized parties may attempt to copy or otherwise
obtain and use ATIs technology, which could weaken the Companys competitive
position. In addition, there can be no assurance that the protection provided to the
Companys proprietary technology by the laws of foreign jurisdictions will be
substantially similar to the remedies available to the Company under the laws of Canada or
the United States. Any claims or litigation initiated by the Company to protect its
proprietary technology could be time consuming and costly and divert the attention of the
Companys technical and management resources whether or not the claims or litigation
are determined in favour of the Company.

Reliance
on Foundries and Other Third-Party Manufacturers

ATI is a fabless
semiconductor company and therefore relies on independent foundries or fabs,
currently, Taiwan Semiconductor Manufacturing Company and United Microelectronics Corp.,
to manufacture its component products. The Company also uses independent contractors to
perform the assembly, testing and packaging of its products. As is typical in the graphics
industry, the Company obtains manufacturing services on a purchase order basis and its
fabs are under no obligation to provide

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the Company with any specified minimum quantity of
product. The Company depends on these suppliers to allocate to the Company a portion of
their manufacturing capacity sufficient to meet the Companys needs, to produce
products of acceptable quality and at acceptable manufacturing yields, and to deliver
those products to the Company on a timely basis. There can be no assurance that these
manufacturers will be able to meet the Companys near-term or long-term manufacturing
requirements. Indeed, continued market acceptance of the Companys products will
depend on reliable relationships with its wafer manufacturers and subcontractors to ensure
adequate product supply to respond to customer demand. Because the lead time needed to
establish a strategic relationship with a new manufacturing partner could be several
quarters, the Company may be unable to secure an alternative supply for any specific
product in a short time frame. Other risks associated with the Companys 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 the Companys 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 ATIs products are located in Hsin Chiu and Tainan,
Taiwan. Many of the Companys 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 contributed to a temporary shortage of graphics
processors. Additional earthquakes may occur in this region in the future. To the extent
that the Companys supply from its fabs or other suppliers is interrupted for a
prolonged period of time or terminated for any reason, the Company may not have sufficient
time to replace its supply of products manufactured by those fabs.

As well, each wafer manufacturer has
unique design rules and proprietary process technology to which the Company must adapt its
products. To the extent that the Company moves production of its products to new
manufacturers or to current manufacturers with new process technology or design rules and
encounters transition difficulties, the Company could realize lower yields or poorer
performance of its products. Any inability of the Company to secure sufficient or reliable
supplies of wafers may adversely affect its ability to meet customer demand for its
component and board products and, as a result, could have an adverse effect on revenues
and operating results.

Availability
of Insurance Coverage

To the extent available on
commercially reasonable terms and subject to underwriting conditions, exclusions and
deductibles, the Company maintains insurance coverage with recognized, licensed insurers
against loss or damage to the Companys 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 the
Companys inventories are produced and stored in Taiwan, prior to delivery to
ATIs 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, the Companys business, financial condition and operating results could be
adversely affected.

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

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from processing wafer. In addition, more complex
manufacturing processes, such as the 0.13 micron design technology and 12 inch wafer
technology which are in the process of being introduced in the industry, often initially
result in lower and more unstable yields. As a consequence of ATIs move to a COT
manufacturing process, the Company bears the financial risks and benefits associated with
product yields. As such, the Companys profitability is significantly affected by the
manufacturing yield that it achieves in the production of its component products. The
inability of the Company, in cooperation with its wafer manufacturers, to achieve or
maintain planned production yields could have an adverse effect on the Companys
business and operating results.

Semiconductor manufacturing yields
are a function both of product design, which is developed largely by the Company, 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 actual product exists that can be analyzed and
tested to identify process sensitivities relating to the design rules that are used.
Further, some ASIC defects cannot be identified until tested on a customers board
design. The Company faces 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, the Companys net revenues and profitability could be adversely affected. In
addition, yield problems require cooperation by and communication between the Company and
the manufacturer and sometimes the customer as well. The offshore location of the
Companys principal manufacturers compounds these risks, due to the increased effort
and time required to identify, communicate and resolve manufacturing yield problems.
Furthermore, there can be no assurance that the Company or its 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 the Company not having
sufficient product supply to meet demand and accordingly could adversely affect the
Companys operating results.

Transition
to New Manufacturing Process Technologies

Process technology defines the
minimum transistor size used to design semiconductors. The finer the process technology,
the denser or the greater the number of transistors a chip designer is able to build into
a semiconductor. ATIs strategy is to use the most advanced process technology
appropriate for its products and available from its fabs. The Company continually assesses
the benefits of migrating to smaller geometry 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. The Company believes that the transition of its
products to increasingly smaller geometries will be important to maintain its competitive
position and intends to migrate to smaller micron technologies with its future products as
these technologies become viable. Due to the inherent risk of transitioning to new
technologies however, there can be no assurance that the Company will not experience
reduced yields or delays in product delivery dates. Moreover, the Company is dependent on
its third-party fabs to successfully migrate to new manufacturing processes (see
Reliance on Foundries and Other Third Party Manufacturers above). Any such
failure by the Company or its fabs could have an adverse effect on the Companys
business, financial condition and operating results.

Entrance
into New Product Markets

ATI has recently developed graphics
and integrated products for the emerging consumer electronic device market including PDAs,
DTVs and colour cell phones. The Company expects the market for consumer electronic
devices including DTVs to be significant. Although this is a relatively new market,
competitors already exist who supply other components to this market and these and other
manufacturers have stated their intention to supply graphics and multimedia components to
ATIs existing and potential customers. The delay in acceptance of DTV technology
will provide further opportunities for competitors to enter this market. In addition, the
telecommunications, cable and consumer electronics industries and their suppliers are
undergoing a period of instability. ATI therefore expects that competition will increase

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in this market. ATIs ability to succeed in this market is subject to a number of
uncertainties including acceptance of its products, developing 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 ATI will be able to
successfully compete in these new emerging markets. If ATI is unable to successfully
introduce products in these new markets as they expand, the Companys business,
financial condition and operating results could be adversely affected.

Reliance
on 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 the
Company maintain its 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 is currently undergoing a further transition with the adoption of
the new AGP 8X standard. Other improvements in graphics bus standards are expected in the
future. The Companys 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, the Company 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 could adversely affect the
Companys 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 the Company will be able to take advantage of these changes.
In the event that such occurrences fail to materialize, the Companys business and
operating results could be adversely affected.

Legal
Proceedings

The Company is subject to legal
proceedings and claims that arise in the ordinary course of its business. Please see
Narrative Description of the Business  Legal Proceedings and Regulatory
Matters for a description of class action proceedings in the United States and
regulatory proceedings in Ontario against the Company. The industries in which the Company
competes are characterized by frequent claims and related litigation regarding patent and
other intellectual property rights. There is a risk that the Companys 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 the Company 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 the Company or its customers and the Company was not able to procure a license to
permit the continued use of the third partys intellectual property, the
Companys operating results could be adversely affected. The Company may be required
to pay damages or lost profits, modify its products, discontinue products and/or indemnify
its customers.

Should any such claims or proceedings
against the Company be successful, the business, financial condition and operating results
of the Company may be adversely affected.

Reliance
on Key Employees

The Companys success is
dependent on the performance and continued service of its executive officers and certain
key employees. None of the Companys officers or employees is bound by an employment
contract nor does the Company have key person life insurance policies on any
of its employees. Competition for high-level engineering, marketing, sales and executive
personnel is intense, particularly in the technology sector. Declining common share prices
and the limited number of common shares

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available for issuance under the Companys
share option plan, make retention more difficult, particularly where prior share option
grants are less valuable. Key employees may pursue equity opportunities elsewhere.
Start-up companies generally offer larger equity opportunities to attract individuals from
more established companies. There can be no assurance that the Company 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 the Companys ability to develop new
products or enhance existing products in a timely manner, sell products to its customers
and potential customers, or manage its business effectively.

Government
Regulation

Canadian federal, provincial and
local authorities as well as foreign authorities in applicable jurisdictions regulate the
Companys business. The Companys 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. To
date, compliance with the standards applicable to the Companys products have not had
a material impact on the Companys operating results. Although, historically, the
Company has not experienced any significant delays in meeting the standards applicable to
its products, should such delays occur in the future, they could adversely affect the
competitive and financial position of the Company.

Cyclical
Nature of Industry

The PC and semiconductor industry
historically has been characterized by rapid technological change, cyclical market
patterns, significant average selling price 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. The industry,
including the market for graphics components, has experienced significant economic
downturns at various times, characterized by diminished product demand and accelerated
erosion of average selling prices. Any future downturn in the industry may be severe or
may have an adverse effect on the Companys business and operating results. The
Company may experience substantial period-to-period fluctuations in operating costs due to
general industry conditions or other factors.

Adequate
Supply of Components

Certain non-proprietary components
such as memory, printed circuit boards and capacitors used in the manufacture of the
Companys products and by OEMs 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. The Companys inability to obtain these
components from alternative sources, if required, could result in delays or reductions in
product shipments, which could harm the Companys operating results. In addition,
increases in component costs may not be easily or quickly passed on to the Companys
customers. Any inability to manage fluctuations in component prices may adversely affect
the Companys gross margins and operating results.

Customer
Relationships

Substantially all of the
Companys sales are made on the basis of purchase orders rather than long-term
agreements. As a result, the Company may commit resources to the production of products
without having received advance purchase commitments from customers. In particular, sale
of the Companys 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.

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Any inability to sell products to
which the Company has 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 the Companys profitability and
restrict the Companys ability to fund its operations. The Company recognizes revenue
when evidence of an arrangement exists, goods are shipped 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 shipment. Refusal by customers to accept shipped products, returns or delays
or difficulties in collecting accounts receivable could result in significant charges
against income, which could have an adverse effect on the Companys operating
results.

Future
Acquisitions

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

Further, the Company may finance
future acquisitions with additional indebtedness. The Company may be required to generate
cash flow from operations to service that indebtedness and it may not generate sufficient
cash flow to service that indebtedness. The Company may be required to refinance its
indebtedness upon its maturity, and the Company may not be able to refinance its
indebtedness at all or on acceptable terms. In addition, if the Company consummates one or
more significant acquisitions through the issuance of common shares, holders of the
Companys common shares could suffer significant dilution of their ownership
interests.

Foreign
Currency Risks

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

Third
Party Development Tools

In the design and development of new
products and product enhancements, the Company relies on third-party software development
tools. While the Company currently is not 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, the Company has 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 the Companys 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 the Company. If the software development tools the
Company uses become unavailable or fail to produce designs that meet consumer demands, the
Companys business could suffer.

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International
Operations

The Company maintains operations in a
number of other countries including the United States, Ireland, Germany, Japan, Taiwan,
Hong Kong, Malaysia and Barbados. In addition, a substantial portion of the Companys
products are manufactured, assembled and tested by independent third parties in the Asia
Pacific region. The Company sells the majority of its products in the United States,
Europe and the Asia Pacific region. Accordingly, the Company is subject to various
geopolitical risks in connection with its 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 the Companys revenues and
operating results.

# Legal Proceedings and
Regulatory Matters

On December 16, 2002, the Company
disclosed that staff of the Ontario Securities Commission (the OSC) had raised
concerns regarding the timeliness of the Companys announcement on May 24, 2000 of a
shortfall in the Companys revenues and earnings for the third quarter of its 2000
fiscal year. The Company also reported that it was aware that OSC staff had raised
concerns about trading that took place prior to the announcement by certain Company
insiders and others, including certain directors and officers. The board of directors of
ATI designated Paul Russo, a director who joined the board of directors in January 2002,
to conduct an independent review of the concerns raised by the OSC. Mr. Russo retained
independent professional advisors to assist him in this review, including Mr. Peter Dey of
Osler, Hoskin & Harcourt LLP, to act as a special advisor to Mr. Russo. On January 16,
2003, OSC staff filed a notice of hearing and statement of allegations in relation to the
Company and others. The notice alleged that the Company 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 the Company 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 the Company, engaged in
insider trading contrary to the Securities Act (Ontario). ATI cannot measure the
extent to which the negative publicity and uncertainty relating to these proceedings are
impacting ATIs business and/or financial condition. The Company cannot currently
predict with any certainty the extent of the impact that these proceedings will continue
to have on ATIs business due to the uncertainty of the timing and nature of their
resolution or whether any fines or penalties will be imposed on the Company 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. These proceedings may
have a material adverse impact on the market price of the Companys common shares and
the ability of the Company to raise equity financing in the future or complete
acquisitions involving the issuance of common shares of the Company as all or a portion of
the purchase price.

In May and June 2001, certain holders
of the Companys securities commenced four class action lawsuits in the United States
District Court for the Eastern District of Pennsylvania (the Court) alleging
that the Company and certain of its 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 the business operations, prospects and financial
conditions of the Company. These lawsuits were filed on behalf of shareholders who
acquired the Companys common shares between January 13, 2000 and May 24, 2000. The
plaintiffs seek 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

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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 the common shares of the
Company 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 in
principle providing for the full and complete settlement of all claims asserted in the
consolidated lawsuits. Final settlement of the consolidated lawsuit is contingent on the
execution of a stipulation of settlement between the parties and the approval of the Court
after a notice period.

|ITEM 4. |  | SELECTED CONSOLIDATED FINANCIAL INFORMATION
|------- |  | -------------------------------------------

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

Summarized
Financial Statement Data (Thousands of U.S. dollars, except per share amounts)

| |                                   |  |            |  | Years ended August 31 |  |           
| | --------------------------------- |  | ---------- |  | --------------------- |  | ----------
|
| |                                   |  |            |  |                       |  |           
| | Statement of Operations Data      |  |            |  |                       |  |           
| | Revenues                          |  | $1,021,722 |  | $1,037,809            |  | $1,283,065
| | Cost of goods sold                |  | 686,210    |  | 797,096               |  | 1,045,508 
| |                                   |  |            |  |                       |  |           
| | Gross margin                      |  | 335,512    |  | 240,713               |  | 237,557   
| |                                   |  |            |  |                       |  |           
| | Expenses                          |  |            |  |                       |  |           
| | Selling and marketing             |  | 78,069     |  | 75,541                |  | 86,529    
| | Research and development          |  | 164,609    |  | 149,465               |  | 130,570   
| | Administrative                    |  | 35,662     |  | 37,261                |  | 31,918    
| | Amortization of intangible assets |  | 97,501     |  | 114,507               |  | 56,709    
| |                                   |  |            |  |                       |  |           
| |                                   |  | 375,841    |  | 376,774               |  | 305,726   
| |                                   |  |            |  |                       |  |           
| | Loss from operations              |  | (40,329)   |  | (136,061)             |  | (68,169)  
| | Interest and other income         |  | 732        |  | 64,131                |  | 15,225    
| | Interest expense                  |  | (659)      |  | (1,180)               |  | (104)     
| |                                   |  |            |  |                       |  |           
| | Loss before income taxes          |  | (40,256)   |  | (73,110)              |  | (53,048)  
| | Income taxes (recovery)           |  | 7,209      |  | (18,905)              |  | 16,286    
| |                                   |  |            |  |                       |  |           
| | Loss for the year                 |  | $(47,465)  |  | $(54,205)             |  | $(69,334) 
| |                                   |  |            |  |                       |  |           
| | Loss per share                    |  |            |  |                       |  |           
| | Basic                             |  | $(0.20)    |  | $(0.23)               |  | $(0.32)   
| | Fully diluted                     |  | $(0.20)    |  | $(0.23)               |  | $(0.32)   
| | Balance Sheet Data                |  |            |  |                       |  |           
| | Working capital                   |  | $361,653   |  | $323,560              |  | $291,086  
| | Capital assets                    |  | 95,838     |  | 71,487                |  | 61,320    
| | Total assets                      |  | 915,055    |  | 848,890               |  | 1,015,011 
| | Total long-term debt              |  | 15,7981    |  | -                     |  | -         
| | Shareholders' equity              |  | 647,027    |  | 681,635               |  | 765,274   

1Comprised of obligation
under capital lease.

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Dividend
Policy

The Company has neither declared nor
paid any cash dividends to date on its outstanding shares. The Company intends to retain
its future earnings to finance the development of its business and, accordingly, does not
anticipate paying any cash dividends on its common shares in the foreseeable future.

|ITEM 5. |  | MANAGEMENTS
DISCUSSION AND ANALYSIS
|------- |  | ------------------------------------

Managements Discussion and
Analysis of Operating Results and Financial Position included in the Companys 2002
Annual Report on pages 17 to 33 is incorporated herein by reference. Since the date of the
Companys 2002 Annual Report, the Company has indicated that it does not expect to
approach margins in its target range of 32  35% until the fourth quarter of fiscal
2003.

|ITEM 6. |  | MARKET FOR SECURITIES
|------- |  | ---------------------

The Companys common shares are
listed on The Toronto Stock Exchange under the symbol ATY and The NASDAQ Stock
Market under the symbol ATYT.

|ITEM 7. |  | DIRECTORS AND OFFICERS
|------- |  | ----------------------

The following table sets forth the
name and municipality of residence, position held with the Company and principal
occupation of each of the directors and corporate officers of ATI as at January 17, 2003.
Directors of the Company hold office until the next annual meeting of shareholders or
until their successors are duly elected or appointed.

# Directors

|Name and
Municipality of Residence                 | Position Held
in the Company                   | Director
Since | Principal Occupation                                                           
|-------------------------------------------------- | ---------------------------------------------- | -------------- | -------------------------------------------------------------------------------
|JAMES D. FLECK (1) (2)    
Toronto, Ontario        | Director                                       | 1995           | Chairman, Fleck Management Services Inc.                                       
|PAUL D. FOX (1) (2)    
Uxbridge, Ontario          | Director                                       | 1993           | Barrister and Solicitor                                                        
|K.Y. HO     
Toronto, Ontario                      | Chairman, Chief Executive Officer and Director | 1986           | Officer of ATI                                                                 
|ALAN D. HORN (1) (2) (3)    
Toronto, Ontario      | Director                                       | 1993           | Vice President, Finance and Chief Financial Officer, Rogers Communications Inc.
|DR. PAUL RUSSO (1)    
Los Altos Hills, California | Director                                       | 2002           | Chairman, President and Chief Executive Officer, Silicon Optix Inc.            

|(1) | Member of the Audit Committee.
|--- | ------------------------------

|(2) | Member
of the Compensation Committee.
|--- | -------------------------------------

|(3) | Mr. Horn would be considered a financial expert as defined under the
United States Sarbanes-Oxley Act of 2002and the rules of the United
States Securities and Exchange Commission.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ATI does not have an executive
committee. During the past five years, all of the directors of the Company have held their
principal business affiliations as noted opposite their respective names except that prior
to April 2000, Dr. Russo was the Chief Executive Officer of Genesis Microchip Inc.

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# Corporate Officers

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

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

| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  |  | 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

As at December 31, 2002, the
directors and senior officers of ATI as a group beneficially owned, directly or
indirectly, or exercised control or direction over 6,946,483 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.

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|ITEM 8. |  | ADDITIONAL INFORMATION
|------- |  | ----------------------

Annual
Report and Management Information Circular

Additional information with respect
to the Company, including directors and officers remuneration and
indebtedness, principal holders of the Companys securities and options to purchase
securities and interests of insiders in material transactions is contained, where
applicable, in the Companys Management Information Circular dated December 20, 2002
(2002 Circular). Additional financial information is provided in the
Companys Consolidated Financial Statements and Notes to the Consolidated Financial
Statements included in the 2002 Annual Report.

Copies of ATIs 2002 Annual
Report, 2002 Circular and of this Annual Information Form may be obtained upon request
from the Corporate Secretary or the Investor Relations Department of the Company.

At any time while the securities of
the Company are in the course of a distribution, the Corporate Secretary of the Company
will provide any person, upon request, with a copy of (i) this Annual Information Form;
(ii) the Companys most recent annual report containing the audited consolidated
financial statements of the Company for the most recently completed fiscal year together
with the accompanying report of the auditor; (iii) any interim financial statements of the
Company 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.

# Description of Share
Capital

The authorized capital of the Company
consists of an unlimited number of common shares and an unlimited number of preferred
shares, issuable in series. As of December 31, 2002, 237,117,420 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 the holders
thereof to one vote per share at all meetings of shareholders of the Company, except
meetings at which only the holders of another class or series of shares are entitled to
vote and, subject to the prior rights of the holders of the preferred shares, to receive
any dividends declared by the board of directors of the Company and the remaining property
of the Company upon dissolution.

Preferred
Shares

The preferred shares are issuable in
one or more series. Subject to the Companys 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 of the Company 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

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increase the maximum number
of authorized shares of a class ranking in priority to or on a parity with the preferred
shares.

# Share Option Plans

ATI has established a Share Option
Plan (the Option Plan) for the benefit of directors, officers and employees of
ATI. Subject to the requirements of the Option Plan, the board of directors has the
authority to 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 established by ATI, is limited to 38,000,000 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 established
by ATI 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, 2002, options to
purchase an aggregate of 29,052,238 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 2,831,211 common shares have been granted to
fifteen officers of ATI at exercise prices ranging from Cdn.$4.35 to Cdn.$21.25 and having
terms expiring from May 2003 to July 2009. Options to purchase an aggregate of 645,000
common shares have been granted to four directors of ATI who are not also officers at
exercise prices ranging from Cdn.$4.37 to Cdn.$23.37 and having terms expiring from
January 2003 to February 2009. Options to purchase an aggregate of 25,576,027 common
shares have been granted to employees of ATI other than officers and directors at exercise
prices ranging from Cdn.$4.37 to Cdn.$23.37 and having terms expiring from January 2003 to
December 2009.

When ATI acquired ArtX, ATI assumed
all options outstanding under ArtXs 1997 Equity Incentive Plan (the ArtX
Plan). Each option assumed by ATI 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 expired by the tenth
anniversary of the date of grant. No additional options will be issued pursuant to the
ArtX Plan.

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As at December 31, 2002, under the
ArtX Plan, options to purchase an aggregate of 3,336,536 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 281,862 common
shares of ATI are held by persons who are now officers of ATI at an exercise price of
$0.34 and expiring in December 2009. Options to purchase an aggregate of 3,054,674 common
shares of ATI are held by persons who are now employees of ATI at exercise prices ranging
from $0.09 to $0.93 and having terms expiring from April 2008 to March 2010.

# Employee Share Purchase
Plan

The Company has established an
Employee Share Purchase Plan (the Purchase Plan) for the benefit of fulltime
employees of the Company. 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. The Company contributes $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.

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# 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.



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# DISCLOSURE CONTROLS
AND PROCEDURES

Within
the 90-day period prior to the filing of this report, 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 Rule 13a-14(c) under the
Securities Act of 1934). 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 to ensure that material information relating to the Registrant
and its consolidated subsidiaries would be made known to them by others within those
entities. There were no significant changes in the Registrants internal controls or
in other factors that could significantly affect the Registrants disclosure controls
and procedures subsequent to the date of their evaluation, nor were there any significant
deficiencies or material weaknesses in the Registrants internal controls. As a
result, no corrective actions were required or undertaken. However, 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 periods specified in the
SECs rules and forms.



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# 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.                
| | /s/   Dave Orton                     
| |                                      
| | Dave Orton                           
| | President and Chief Operating Officer

Date: January 17, 2003



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# CERTIFICATION PURSUANT
TO EXCHANGE ACT RULE 13a-14

I,
K.Y. Ho, Chairman and Chief Executive Officer of ATI Technologies Inc. (ATI)
certify that:

1.
      I have reviewed this annual report on Form 40-F of ATI
Technologies Inc.;

2.
      Based on my knowledge, this annual 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 annual report;

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

4.
      ATIs other certifying officer and I are responsible for
establishing and                     maintaining disclosure controls and procedures (as
defined in Exchange Act Rules                     13a-14 and 15d-14) for ATI and have:

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

| | b)
      Evaluated the effectiveness of ATIs disclosure controls
and procedures as                     of a date within 90 days prior to the filing date
of this annual report (the                     Evaluation Date); and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
      Presented in this annual report our conclusions about the
effectiveness of the                     disclosure controls and procedures based on our
evaluation as of the Evaluation                     Date;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | b)
      Any fraud, whether or not material, that involves management or
other employees                     who have a significant role in ATIs internal
controls; and
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

44 of 89

6.      ATIs other certifying officer and I have indicated in
this annual report                     whether there were significant changes in internal
controls or in other factors                     that could significantly affect internal
controls subsequent to the date of our                     most recent evaluation,
including any corrective actions with regard to                     significant
deficiencies and material weaknesses.

Date: January 17, 2003

| |                                               
| | ----------------------------------------------
| | By:      /s/   K.Y. Ho                        
| |                                               
| | Name:  K.Y. Ho                                
| | Title:    Chairman and
Chief Executive Officer



---

45 of 89

# CERTIFICATION PURSUANT
TO EXCHANGE ACT RULE 13a-14

I,
Terry Nickerson, Senior Vice President, Finance and Chief Financial Officer of ATI
Technologies Inc. (ATI) certify that:

1.
      I have reviewed this annual report on Form 40-F of ATI
Technologies Inc.;

2.
      Based on my knowledge, this annual 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 annual report;

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

4.
      ATIs other certifying officer and I are responsible for
establishing and                     maintaining disclosure controls and procedures (as
defined in Exchange Act Rules                     13a-14 and 15d-14) for ATI and have:

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

| | b)
      Evaluated the effectiveness of ATIs disclosure controls
and procedures as                     of a date within 90 days prior to the filing date
of this annual report (the                     Evaluation Date); and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
      Presented in this annual report our conclusions about
the effectiveness of the                     disclosure controls and procedures based on
our evaluation as of the Evaluation                     Date;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | b)
      Any fraud, whether or not material, that involves management or
other employees                     who have a significant role in ATIs internal
controls; and
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

46 of 89

6.
      ATIs other certifying officer and I have indicated in
this annual report                     whether there were significant changes in internal
controls or in other factors                     that could significantly affect internal
controls subsequent to the date of our                     most recent evaluation,
including any corrective actions with regard to                     significant
deficiencies and material weaknesses.

Date: January 17, 2003

| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | By:      /s/   Terry Nickerson                                                           
| |                                                                                          
| | Name:  Terry Nickerson                                                                   
| | Title:    Senior
Vice President, Finance and         
            Chief Financial Officer



---

47 of 89

# EXHIBIT INDEX

|   |                                                                                                                              | SequentialPage No.
|-- | ---------------------------------------------------------------------------------------------------------------------------- | ------------------
|   |                                                                                                                              |                   
|1. | Comparative consolidated financial statements
for the year ended August 31, 2002, together with the auditors' report thereon | 48                
|2. | Management's Discussion and Analysis of Operating Results and Financial Position                                             | 72                
|3. | Consent of auditors - KPMG LLP dated January 17, 2003.                                                                       | 89                

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Page 48 of 89

EXHIBIT 1



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)          | David
      E. Orton(signed) | Terry
      Nickerson(signed)      
|------------------------ | ---------------------------- | -----------------------------------
|Chairman
      and CEO   | President
      and COO      | Senior Vice
      President and CFO
|September
      25, 2002 |                              |                                    



---

Page 49 of 89

AUDITORS REPORT TO THE SHAREHOLDERS

We have audited the consolidated
  balance sheets of ATI Technologies Inc. as at August 31, 2002 and 2001 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, 2002. 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, 2002 and 2001 and the results of its
  operations and its cash flows for each of the years in the three-year period
  ended August 31, 2002 in accordance with Canadian generally accepted accounting
  principles.

KPMG LLP(signed)
  Chartered AccountantsToronto, Canada 
  September 25, 2002



---

Page 50 of 89

CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS





---

Page 51 of 89

CONSOLIDATED BALANCE SHEETS



|On behalf of the
        Board: |                         
|------------------------------- | ------------------------
|K.Y. Ho(signed)Director         | Paul Fox(signed)Director



---

Page 52 of 89

CONSOLIDATED STATEMENTS OF CASHFLOWS



---

Page 53 of 89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears ended August 31, 2002,
  2001, and 2000 (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 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 ASIA-PACIFIC.



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 17.

(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 from the
  acquisition date, which are carried at cost, which approximates their fair values;
  and (ii) publicly traded common stock which is held for sale and which is carried
  at the lower of cost or market. The market value of the publicly traded common
  stock was approximately $0.2 million at August 31, 2002 (2001  nil).

(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 as follows:



The Company regularly reviews the carrying value
  of its capital assets. If the carrying value of its capital assets exceeds the
  estimated amount recoverable, the Company measures the amount of the impairment
  based on discounted expected future cash flows and charges such impairment to
  the consolidated statements of operations and retained earnings.

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Page 54 of 89

(f) Intangible assets:

Intangible assets are recorded at cost and
  are amortized on a straight-line basis as follows:



The Company regularly evaluates
  the carrying value of its intangible assets for potential permanent impairment.
  Should there be a permanent impairment in the value of the intangible assets,
  the Company measures the amount of the impairment based on discounted expected
  future cash flows and charges such impairment to the consolidated statements
  of operations and retained earnings.

Goodwill acquired in business
  combinations subsequent to June 30, 2001 has not been amortized but will be
  tested for impairment annually (note 1(p)).

(g) 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 writedown based on the fair
  value of the shares of the investees and charges such writedown to the consolidated
  statements of operations and retained earnings.

(h) Revenue recognition:

Revenue is recognized when
  evidence of an arrangement exists, goods are shipped 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 time of shipment. In addition, the Company provides
  for the estimated cost of product warranties at the time of revenue recognition.

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 title and risk of loss 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.

(i) Deferred revenue:

The Company enters into service
  contracts with customers that can extend beyond a one-year time frame. Project
  revenue is realized on the percentage of completion method, based on specific
  contract milestones when available and when the milestones are met. Where these
  milestones are not available, the Company recognizes revenue using the projected
  overall contract expenditures as a proxy for progress against the contract objectives.

(j) 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.

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Page 55 of 89

(k) Research and development
  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. Research and development costs are reduced by related
  investment tax credits.

(l) 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. Under this method, deferred tax assets
  and liabilities are recognized for the future tax attributable to the temporary
  differences between the carrying amounts and respective tax bases of assets
  and liabilities. Future tax assets and liabilities are measured using substantively
  enacted tax rates expected to apply to taxable income in the year in which those
  temporary differences are expected to be recovered or settled. The effect on
  future tax assets and liabilities of a change in tax rates is recognized in
  income in the year that includes the substantive enactment date. To the extent
  the realization of future income tax assets is not considered to be more likely
  than not, a valuation allowance is provided.

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 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.

As permitted under the new
  standard, financial statements for fiscal 2000 were not restated; however, the
  effect was applied retroactively as an adjustment to 2001 opening retained earnings.

(m) Loss for the year
  per share:

Basic loss per share has
  been calculated by dividing loss for the year by the weighted average number
  of common shares outstanding during the year. Diluted loss per share is computed
  similar to basic 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.

(n) Stock options:

The Company has share option
  plans, which are described in note 10. No compensation expense is recognized
  for these plans when stock or 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.

(o) 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 the 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. Actual results could differ from those estimates.

(p) Change in accounting
  policies:

During the year, the Company
  adopted the new Canadian Institute of Chartered Accountants (CICA)
  Handbook Section 3500, Earnings Per Share, under which the Company
  is required to retroactively use the treasury stock method for calculating diluted
  earnings per share. This change results in an earnings per share calculation
  that is consistent with U.S. GAAP. Previously reported diluted earnings per
  share have been restated to reflect this change.

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Page 56 of 89

In September 2001, the CICA
  issued Handbook Section 1581, Business Combinations, and Section
  3062, Goodwill and Other Intangible Assets. The new standards mandate
  the purchase method of accounting for business combinations and require that
  goodwill no longer be amortized but instead be tested for impairment at least
  annually. The standards also specify criteria that intangible assets must meet
  to be recognized and reported apart from goodwill. The standards require that
  the value of the shares issued in a business combination be measured using the
  average share price for a reasonable period before and after the date the terms
  of the acquisition are agreed to and announced. Previously, the consummation
  date was used to value the shares issued in a business combination. The new
  standards are substantially consistent with U.S. GAAP.

Effective July 1, 2001, goodwill
  acquired in business combinations completed after June 30, 2001 was not amortized.
  In addition, the criteria for recognition of intangible assets apart from goodwill
  and the valuation of the shares issued in a business combination have been applied
  to business combinations completed after June 30, 2001.

Upon full adoption of the
  standards beginning September 1, 2002, the Company will discontinue the amortization
  of all existing goodwill, evaluate existing intangible assets and make any necessary
  reclassifications in order to conform to the new criteria for recognition of
  intangible assets apart from goodwill and test for impairment in accordance
  with the new standards.

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 up to six months to determine the fair value of its reporting units and
  compare that to the units carrying amounts. To the extent a reporting
  units carrying amount exceeds its fair value, the Company must perform
  a second step to measure the amount of impairment in a manner similar to a purchase
  price allocation. This second step is to be completed no later than August 31,
  2003. Any transitional impairment will be recognized as an effect of a change
  in accounting principle and will be charged to opening retained earnings as
  of September 1, 2002.

As of August 31, 2002, the
  Company has unamortized goodwill of $187.8 million and unamortized intangible
  assets of $21.9 million, all of which are subject to the transitional provisions
  of Sections 1581 and 3062. Amortization expense related to goodwill was $83.5
  million for 2002. Because of the extensive effort required to comply with the
  remaining provisions of Sections 1581 and 3062, the Company has not estimated
  the impact of these provisions on its financial statements beyond discontinuing
  goodwill amortization.

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, system builders,
  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 to hedge its exposure
  to the interest rate risk applicable to its expected future mortgage requirement.
  At closing of the expected future mortgage, this hedging instrument will be
  recognized as a yield adjustment to the interest expense, over the life of the
  mortgage.

The carrying amounts of cash
  equivalents, short-term investments, accounts receivable, sundry receivables,
  bank indebtedness, accounts payable and accrued liabilities approximate their
  fair market values because of the short-term nature of these instruments. The
  fair value of obligation under capital lease approximates its carrying value.

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Page 57 of 89

3. INVENTORIES:



At August 31, 2002, the Company
  had non-cancellable inventory purchase commitments totaling $16.6 million.

4. CAPITAL
  ASSETS:



Building-in-progress of $13.5
  million at August 31, 2001 represents the Companys 50% share of cost incurred
  by a joint venture to construct a new building facility (note 15). The building-in-progress
  additions include $0.29 million of capitalized interest cost at August 31, 2001.
  In April 2002, the building was completed and the aggregate amount of building-in-progress
  and land were transferred to building under capital lease (note 15).

Depreciation expense related
  to capital assets amounted to $22.9 million in fiscal 2002 (2001  $21.0
  million; 2000  $17.8 million).

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Page 58 of 89

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:



(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:



Under the terms of the agreement,
  SONICblue Ltd. was eligible to receive additional consideration 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 earned 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.

(c) Acquisition of ArtX,
  Inc.:

On April 4, 2000, the Company
  acquired all of the issued and outstanding shares and options of ArtX, Inc.
  (ArtX), a privately held company based in Palo Alto, California,
  which designs and develops graphics solutions for high-performance personal
  computers and e-appliances. The acquisition has been accounted for by the purchase
  method, whereby the results of operations of ArtX are included in the Companys
  results from the date of acquisition. The acquisition resulted in the issue
  of approximately 21.5 million common shares and 7 million options (note 10).

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Page 59 of 89

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



Purchased in-process research
  and development was charged to operations on a straight-line basis over a one-year
  period. Workforce represents the replacement value of the assembled workforce
  at the time of acquisition, core technology represents the value of proprietary
  know-how as of the acquisition date and goodwill represents the
  excess of the purchase consideration over the fair value of the net identifiable
  assets acquired. Core technology, workforce and goodwill are being amortized
  on a straight-line basis over a period of five years.

As part of the acquisition
  of ArtX, the Company entered into a Performance Agreement with the former shareholders
  of ArtX. The Performance Agreement required ArtX to achieve a specified future
  contract design win within two years from the closing date of the acquisition,
  April 4, 2000. The performance requirement was not met and, accordingly, no
  additional purchase price consideration was recorded.

6. INTANGIBLE
  ASSETS:

The net book values of the
  intangible assets acquired related to NxtWave, FGL Graphics, ArtX (note 5) and
  Chromatic Research Inc. (Chromatic) are as follows:



Amortization expense related
  to intangible assets amounted to $97.5 million in fiscal 2002 (2001  $114.5
  million; 2000  $56.7 million).

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Page 60 of 89

During fiscal 2002, the Company
  conducted a comprehensive review of the carrying values of the 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, the Company
  wrote off the remaining balances of the core technology and goodwill of Chromatic
  totaling $4.8 million, and $4.2 million of core technology and $6.4 million
  goodwill related to ArtX.

Effective September 1, 2000,
  the Company adopted the asset and liability method of accounting for income
  taxes, which resulted in the recognition of a tax asset for loss carryforwards
  of $1.4 million and $4.6 million for ArtX and Chromatic, respectively, with
  corresponding reductions of goodwill originally recorded upon acquisition.

During fiscal 2001, the $4.5
  million balance of the intangible assets related to the workforce of Chromatic
  was fully written off due to a higher than anticipated turnover rate of the
  Chromatic employees.

7. LONG-TERM
  INVESTMENTS:



Share investments consist
  of investments in other companies in which the Company has ownership interests
  ranging from approximately 0.1% to 4.0%.

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.

During fiscal 2002, the Company
  received an additional 107,387 shares of Broadcom Corporation (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.
  The Company then 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 its
  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.

For the year ended August
  31, 2000, the Company realized gains of approximately $10.7 million from the
  sale of long-term investments.

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

As at August 31, 2002, the
  fair value of the long-term investments for which quoted market value is available
  was approximately $5.9 million (2001  $10.6 million). The carrying value
  at August 31, 2002 was $5.9 million.

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8. BANK CREDIT FACILITIES:

At August 31, 2002, the Company
  had available bank credit facilities of $101 million (2001  $98 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, 2002 and 2001, there were no borrowings outstanding under these
  facilities.

Commitment fees in 2002 were
  $15,000.

9. CAPITAL
  LEASE:

During the third quarter
  of fiscal 2002, the Company entered into a lease agreement for the new building
  facility located in Markham, Ontario with the joint venture in which it has
  50% ownership. The lease is recorded as a capital lease. The building under
  capital lease is initially recorded at the present value of minimum lease payments
  at the inception of the lease. Depreciation is provided using the straight-line
  method over a period of 15 years.

The Companys obligation
  under this capital lease owed to the third party venturer is as follows:



Interest of $0.43 million relating to the capital
  lease obligation has been included in interest expense for fiscal 2002.

10. SHAREHOLDERS EQUITY:

(a) Common shares issued
  and outstanding:



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**(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 38,000,000
  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.

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 (NQSO).

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.

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



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As at August 31, 2002, the range of exercise
  prices for options outstanding and exercisable (vested) are as follows:



As at August 31, 2002, 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, 2002, 1,129,930 options relating
  to the ArtX Plan were exercised at a weighted average price of $0.26 and 134,200
  options were cancelled at a weighted average price of $0.39.

Under an incentive plan entered
  into in June 2002, the Company has provided certain employees with a performance
  incentive, consisting of a combination of cash and options, the receipt of which
  is conditional upon the Company entering into a specified business arrangement
  with a third party by April 2003. The cash portion of the incentive consists
  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 granted options to purchase 2.6 million common shares
  at an exercise price of $6.96 per share and which are only exercisable in the
  event the Company is successful in entering into the arrangement. The intrinsic
  value, if any, of the shares and the cash consideration payable will be expensed
  for accounting purposes as the employees earn the amounts.

(d) 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.

11. INCOME TAXES:

Loss before income taxes consists
  of the following:



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



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



Income tax expense 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:



Canadian income taxes were
  not provided for on undistributed earnings for certain non-Canadian subsidiaries.
  The Company intends to reinvest these earnings indefinitely in operations outside
  Canada.

As at August 31, 2002, the
  Company had $130.6 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. A portion of these losses have an indefinite
  carryforward period whereas the remainder will begin to expire commencing in
  2008.

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12. LOSS
  PER SHARE:

As at August 31, 2002, options
  to purchase 32,813,005 (2001  29,109,372; 2000  24,823,960) shares
  of common stock with a weighted average exercise price of $7.18 (2001 
  $5.37; 2000  $5.77) were outstanding but were not included in the calculation
  of diluted earnings per share because the Company had a net loss for that year
  and to do so would have been antidilutive.

The performance shares relating
  to the acquisition of ArtX (note 5), consisting of 4,071,661 common shares with
  a weighted average exercise price of $14.58, were not included in the calculation
  of diluted earnings per share for the years ended August 31, 2001 and 2000 because
  the Company had a net loss for those years and to do so would have been antidilutive.
  These shares expired in 2002 and therefore have no impact on earnings per share.

13.
  SEGMENTED INFORMATION:

The Company operates one
  operating segment, that being the design, manufacture and sale of graphic and
  multimedia products for personal computers and consumer electronic devices.



At August 31, 2002, one customer
  accounted for 13% and another customer accounted for 11% of the Companys
  consolidated accounts receivable balance (2001  17% and 10%). In fiscal
  2002, one customer accounted for 21% of the Companys consolidated revenues
  (2001  one customer accounted for 20%; 2000  one customer accounted
  for 13%).

14.
  COMMITMENTS:

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



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15. 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. The completed cost of this facility amounted to $33.3 million. Subsequent
  to August 31, 2002, the joint venture obtained a mortgage from a lender, on
  the building facility, secured by the underlying asset (note 20).

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



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 is a forward start pay fixed derivative agreement for a notional
  amount of Cdn. $38.0 million. The agreement provides 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. As of the maturity date, the
  Companys proportionate share of the loss of the swap amounted to $1.4
  million, which will be amortized and charged to the consolidated statements
  of operations and retained earnings, over the term of the mortgage.

16. SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:



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

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17. UNITED
STATES ACCOUNTING PRINCIPLES:

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



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

(ii)Under Canadian GAAP, the aggregate purchase price of ArtX was approximately
  $453 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 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.

(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 currently no equivalent requirement.
  The comparative figures for the year ended August 31, 2001 have been restated
  to include the impact of this difference between Canadian and U.S. GAAP.

(iv)The Company accounts for its share options under Canadian GAAP. In the Companys
  circumstances the share options are not materially different from the amounts
  that would be determined under the provisions of the Accounting Principles Board
  Opinion No. 25, Accounting for Stock Issued to Employees (APB
  25) and related interpretations. Accordingly, no compensation expense
  for its share option plans has been recognized or recorded in the consolidated
  statements of operations and retained earnings for the years ended August 31,
  2002, 2001 and 2000. 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 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:

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The weighted average estimated
  fair values at the date of the grant, as defined by SFAS 123, for options granted
  in fiscal 2002, 2001 and 2000 were $9.15, $1.92 and $2.62 per share option,
  respectively.

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:



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

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,
  the income tax benefit is treated as a reduction to the income tax provision
  if compensation costs are not recorded.

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



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(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 earnings or shareholders
  equity, it does increase assets, liabilities, revenue, 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.

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

(1) As at August 31, 2002,
  the consolidated accounts receivable provision for returns and doubtful accounts
  was approximately $7.9 million (2001  $14.0 million).

(2) As
  at August 31, 2002, none of the accruals exceed 5% of total consolidated current
  liabilities (2001  nil).

(3) For
  the year ended August 31, 2002, the net foreign exchange loss was approximately
  $0.4 million (2001  $1.9 million; 2000  $0.2 million).

(iii) Comprehensive
  income:

Financial Accounting Standards
  Board Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
  Income (SFAS 130) requires disclosure of comprehensive income,
  which includes reported net earnings 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 loss and
  its components:



(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 increase 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 15) 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 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 earnings currently.

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18. PENDING
  ACCOUNTING STANDARDS:

(a) Stock-based compensation
  and other stock-based payments:

In December 2001, the CICA
  issued Handbook Section 3870, 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.
  Consideration paid by employees on the exercise of stock options is recorded
  as share capital. The standard is effective for the Companys fiscal year
  beginning September 1, 2002 for awards granted on or after that date.

(b) Foreign currency
  translation and hedging relationships:

CICA Handbook Section 1650
  has been amended to eliminate the deferral and amortization of foreign currency
  translation gains and losses on long-lived monetary items, effective January
  1, 2002, with retroactive restatement of prior periods. The Company is not impacted
  by this change. The CICA issued Accounting Guideline No. 13 (AcG-13),
  which establishes criteria for hedge accounting effective for the Companys
  2004 fiscal year.

19.
  LITIGATION:

In May and June 2001, certain
  holders of the Companys securities commenced four class actions in the
  United States District Court for the Eastern District of Pennsylvania alleging
  that the Company and certain of its 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 the business operations, prospects
  and financial conditions of the Company. These lawsuits were filed on behalf
  of shareholders who acquired the Companys common shares between January
  13, 2000 and May 24, 2000. The plaintiffs seek compensatory and punitive damages
  in each of the class actions. The Court has consolidated all four actions and
  permitted the plaintiffs to file a consolidated amended complaint. The Company
  and named directors believe the complaint is without merit and intend to defend
  vigorously. The ultimate outcome of this litigation is not determined at this
  time.

In addition to the claim
  described above, 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.

20.
  SUBSEQUENT EVENT:

On September 5, 2002, the
  joint venture in which the Company has a 50% ownership interest entered into
  a mortgage agreement with a lender to finance the new building facility in Markham,
  Ontario. The Companys proportionate share of the mortgage amounted to
  $10.8 million (Cdn. $16.9 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. Funding under the mortgage was received
  in October 2002.

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FIVE-YEAR HISTORICAL REVIEW







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EXHIBIT 2

MANAGEMENTS DISCUSSION
  AND ANALYSISof Operating Results and Financial Position

The following discussion
  and analysis should be read in conjunction with the Companys
  2002 Consolidated Financial Statements and accompanying notes beginning on page
  36
  of this Annual Report. All financial amounts are expressed in U.S. dollars.

Certain statements in this
  annual report constitute forward-looking statements within the
  meaning of the U.S. Private
  Securities Litigation Reform Act of 1995. When used in this annual report, words
  such as plans, intends, anticipates,
  should, estimates, expects, believes,
  indicates, targeting, suggests and
  similar expressions are intended to
  identify forward-looking statements. Forward-looking statements are based on
  current expectations and entail various risks
  and uncertainties that are outlined in the Comparison of Operating Results
  for the Years Ended August 31, 2002, 2001 and
  2000 and Risks and Uncertainties sections of this Managements
  Discussion and Analysis and in the Companys filings
  with Canadian and U.S. securities regulatory authorities. These risks and uncertainties
  could cause or contribute to actual results
  that are materially different from those projected. ATI disclaims any obligation
  or intention to update or revise any forwardlooking
  statement, whether as a result of new information, future events or otherwise.

Please note that all references
  to 2002, 2001 and 2000 refer to ATIs fiscal years ended August 31, unless
  otherwise noted.



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COMPANY DESCRIPTION

ATI Technologies Inc. (referred to as ATI
  or the Company) is a world leader in the design and manufacture
  of innovative 3D graphics and digital media silicon solutions. An industry pioneer
  since 1985, ATI is one the worlds foremost graphics processor unit (GPU)
  providers and is dedicated to the delivery of leading-edge performance solutions
  for the full range of PC and Mac desktop and notebook platforms, workstation,
  set-top box and digital television, game console and handheld markets. With
  2002 revenues in excess of $1 billion, ATI has more than 1,900 employees in
  the Americas, Europe and Asia. ATIs common shares trade on NASDAQ (ATYT)
  and the Toronto Stock Exchange (ATY).

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

General

Managements Discussion and Analysis of
  Operating Results and Financial Position is made with reference to the Companys
  Consolidated Financial Statements and notes which have been prepared in accordance
  with generally accepted accounting principles (GAAP). The preparation
  of these financial statements requires management to make estimates and assumptions
  that affect the reported amounts of assets and liabilities and the disclosure
  of contingent assets and liabilities. Management makes significant estimates
  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. These estimates
  are based on managements historical experience and various other assumptions
  that are believed to be reasonable under the circumstances, the results of which
  form the basis for making judgments about the carrying value of assets and liabilities
  that are not readily apparent from other sources. Actual results could differ
  from these estimates.

Management believes the following critical
  accounting policies affect its more significant estimates and assumptions used
  in preparation of its Consolidated Financial Statements.

Revenue Recognition

The Company recognizes revenue when evidence
  of an arrangement exists, goods are shipped to customers, selling price is fixed
  and determinable and collectability is reasonably assured. The Company records
  reductions to revenue for estimated sales returns and allowances, price protection
  and sales rebates. In addition, at the time revenue is recognized the Company
  provides for the estimated cost of product warranties and reduces revenue for
  estimated product returns. Future market conditions and changing product lifecycles
  in the marketplace may require management to increase customer incentive offerings,
  which could necessitate a further reduction of revenue.

Inventory

The Companys raw materials are recorded
  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. The Company will write
  down its inventory for estimated obsolescence and excess inventories based upon
  assumptions about future demand and market conditions. The business environment
  in which the Company operates is subject to rapid change in technology and customer
  demand. If actual market conditions are less favourable than those projected
  by management, additional inventory writedowns may be required.

Income Taxes

The Company records a valuation
  allowance to reduce its future tax assets to the amount that is more likely
  than not to be realized. In arriving at this estimate, management considers
  future taxable income in the various jurisdictions in which it operates, as
  well as ongoing tax planning strategies, in determining the need for this valuation
  allowance. In the event the Company were to determine that it would be able
  to realize its future tax assets in the future in excess of its net recorded
  amount, an adjustment to the future tax assets would increase income in the
  period that such determination was made. In addition, should the Company determine
  it would not be able to realize all or part of its future tax assets in the
  future, an adjustment to the future tax assets would be charged to income in
  the period such determination was made.



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RECENT ACCOUNTING DEVELOPMENTS

Earnings per Share:

Effective September 1, 2001, ATI adopted the
  new accounting standard for earnings per share as required by the revised Canadian
  Institute of Chartered Accountants (CICA) Handbook Section
  3500, Earnings Per Share. Under this new standard, the Company presents
  basic and diluted earnings per share figures for income before discontinued
  operations and extraordinary items and for net income with equal prominence
  on the face of the income statement. In addition, the standard required a change
  in method for computing diluted earnings per share (EPS). This method
  is called the Treasury Stock Method.

Business Combinations and Goodwill:

In September 2001, the CICA issued Handbook
  Section 1581, Business Combinations and Section 3062, Goodwill
  and Other Intangible Assets. The new standards mandate the purchase method
  of accounting for business combinations and require that goodwill no longer
  be amortized but instead be tested for impairment at least annually. The standards
  also specify criteria that intangible assets must meet to be recognized and
  reported apart from goodwill. The standards require that the value of the shares
  issued in a business combination be measured using the average share price for
  a reasonable period before and after the date the terms of the acquisition are
  agreed to and announced. Previously, the consummation date was used to value
  the shares issued in a business combination. The new standards are substantially
  consistent with U.S. GAAP.

Effective July 1, 2001, goodwill acquired in
  business combinations completed after June 30, 2001 was not amortized. In addition,
  the criteria for recognition of intangible assets apart from goodwill and the
  valuation of the shares issued in a business combination has been applied to
  business combinations completed after June 30, 2001.

Upon full adoption of the standards beginning
  September 1, 2002, the Company will discontinue amortization of all existing
  goodwill, evaluate existing intangible assets and make any necessary reclassifications
  in order to conform to the new criteria for recognition of intangible assets
  apart from goodwill and test for impairment in accordance with the new standards.

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 up to six months to determine
  the fair value of its reporting units and compare that to the carrying amounts
  of the reporting units. To the extent a reporting units carrying amount
  exceeds its fair value, the Company must perform a second step to measure the
  amount of impairment in a manner similar to a purchase price allocation. This
  second step is to be completed no later than August 31, 2003. The change to
  assessing fair value by reporting unit could result in an impairment charge.
  Any transitional impairment will be recognized as an effect of a change in accounting
  principle and will be charged to retained earnings as of September 1, 2002.

As of August 31, 2002, the Company had unamortized
  goodwill of $187.8 million and unamortized intangible assets of $21.9 million,
  all of which are subject to the transitional provisions of Sections 1581 and
  3062. Amortization expense related to goodwill was $83.5 million for 2002. Because
  of the extensive effort required to comply with the remaining provisions of
  Sections 1581 and 3062, the Company has not yet determined the impact the adoption
  of Section 1581 and Section 3062 will have on its financial statements beyond
  discontinuing goodwill amortization.

Stock-based Compensation and Other Stock-based
  Payments:

In December 2001, the CICA issued Handbook
  Section 3870, 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.
  Consideration paid by the employees on the exercise of stock options is recorded
  as share capital. The standard is effective for the Companys fiscal year
  beginning September 1, 2002 for awards granted on or after that date.

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Foreign Currency Translation and Hedging
  Relationships:

CICA Handbook Section 1650 has been amended
  to eliminate the deferral and amortization of foreign currency translation gains
  and losses on long-lived monetary items, effective January 1, 2002, with retroactive
  restatement of prior periods. The Company is not impacted by this change. The
  CICA issued Accounting Guideline No. 13 (AcG-13), which establishes
  criteria for hedge accounting effective for the Companys 2004 fiscal year.

OVERVIEW

ATIs main product lines, component and
  board-level graphics accelerators, increase the speed at which graphics can
  be displayed on PC monitors and improve image resolution and color definition.

Graphics accelerators lessen the burden placed
  on the computers microprocessor or central processing unit (CPU)
  by concurrently performing tasks that are best suited for a dedicated graphics
  accelerator while allowing the CPU to perform more general purpose computing
  functions.

ATIs strength is built upon its product
  and technology leadership in visual processing technologies, customer focus,
  top-to-bottom solutions and ability to identify and capitalize on key industry
  trends or inflection points where new technologies and markets converge. In
  the past, these inflection points have included migration from 2D to 3D graphics,
  the adoption of the accelerated graphics port (AGP) bus interface,
  the incorporation of digital versatile disc (DVD) functionality
  into the graphics accelerator, the markets acceptance of digital flat
  panel (DFP) monitors, and the more recent development of new highly
  complex functional graphics processing engines.

One significant industry trend is the increasing
  use of integrated graphics chipsets that combine core logic functions, such
  as the memory and peripheral controllers, with the graphics processor. Today,
  it is estimated that integrated graphics chipsets are used in approximately
  half of the desktop systems sold worldwide. While overall PC market growth has
  decelerated, one area of the PC market that has grown over the past three years
  is the value PC or the sub-$1,000 PC. For the most part, these value
  PCs use integrated graphics chipsets. In response to this trend, the Company
  developed and introduced a full line of integrated graphics products in March
  2002 and is continuing to focus on the development of integrated chipset solutions.
  Although revenue from integrated chipsets did not represent a material contribution
  to revenues in fiscal 2002, the Company is targeting to achieve about 10 per
  cent of its revenues in fiscal 2003 from sales of integrated chipset products.

The Companys business strategy has evolved
  over the past three years in response to significant changes in the PC industry.
  This evolution includes the adoption of a new business model to more effectively
  address the important system builder, or whitebox PC market, which
  represents approximately half of the PCs sold today. Original Equipment Manufacturers
  (OEMs) like Dell, Hewlett-Packard and IBM represent the other 50
  per cent of the market. At the end of 2001, the Company began moving away from
  supplying graphics boards into the system builder market. ATI now supplies chips
  to add-in-board manufacturers (AIBs) and original design manufacturers
  (ODMs) in addition to its traditional OEM customers. Those AIBs
  and ODMs, in turn, build board-level products using the Companys graphics
  chips and sell these boards to system builders. The Company believes that this
  strategy will increase the penetration of its technology in the system builder
  market. This new strategy has the effect of constraining revenues (the average
  selling price of a chip is about 40 per cent of the average selling price of
  a graphics board) while increasing gross margin as a percentage of revenues
  and reducing administrative expense.

ATI is now endeavoring to leverage its core
  graphics technology into related markets that should enable the Company to broaden
  its opportunities beyond the PC market. These opportunities derive from the
  larger market for consumer electronic devices that include game consoles, set-top
  boxes, digital TVs and handheld devices. These consumer devices are expected
  to increasingly utilize rich visual displays over the next few years, presenting
  additional growth opportunities for the Company. ATI obtained significant net
  income contribution in 2002 from its entry into the game console market through
  its technology licensing arrangement with Nintendo. The Company also announced
  design wins in both the set-top box and handheld device market.

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2002 Developments

In the first quarter of 2002, ATI started to
  receive royalty revenues from its licensing arrangement with Nintendo for ATIs
  Flipper chip that is used in Nintendos new game console, GAMECUBE.

Also in the first quarter, ATI introduced the
  XILLEON 220, a highly integrated system-on-chip. The XILLEON 220
  integrates into a single chip all processor, graphics, video, audio, and I/O
  (input and output) capabilities needed in a set-top box or digital TV.

In January 2002, the Company introduced IMAGEON
  100, a media co-processor for handheld electronic devices such as personal digital
  assistants (PDAs) and data-enabled mobile phones, whose capabilities
  include enhanced 2D graphics and hardware MPEG-4 decoding design that offers
  high performance, crisp images, and low power consumption.

In the third quarter of 2002, ATI launched
  its full line of integrated graphics core logic products. The new RADEON
  IGP family of products includes integrated graphics processors for the desktop
  and mobile PC markets, and support for both Intel Pentium 4 and AMD Athlon
  platforms.

In June 2002, ATI acquired
  NxtWave Communications Inc. (NxtWave) for $20.2 million in cash.
  NxtWaves business included the delivery of broadband communications silicon
  using proprietary digital processing technology. This acquisition broadens ATIs
  set-top box product portfolio by bringing NxtWaves leading demodulation
  technology together with ATIs XILLEON solution, positioning
  ATI as a one-stop solution for digital television and set-top boxes.

In the fourth quarter of
  2002, ATI introduced the RADEON 9700, RADEON 9000, FIREGL
  X1 and the MOBILITY RADEON 9000, all of which are industry leading
  products which have garnered a significant number of design wins from OEMs.

Comparison of Operating Results for the
  Years Ended August 31, 2002, 2001 and 2000

The Companys reported operating results
  have been and will continue to be subject to quarterly and other fluctuations
  as a result of several factors including, among other things, changing market
  and economic conditions, technological change in the PC graphics industry, the
  ability of the Company to successfully introduce new products, changes in pricing
  policies by competitors and/or suppliers, the research and development costs
  associated with the development of new products, the availability and cost of
  the Companys products and materials from suppliers, the addition or loss
  of significant customers, seasonal customer demand, new product introductions
  by the Company or its competitors, and changes in the sales mix both of products
  sold and in the geographic regions where the products are sold.

The Companys reported operating results
  may vary from prior periods or may be adversely impacted in periods when it
  is undergoing a product line transition during which sales of new products must
  be ramped up to replace sales of the Companys older products. These older
  products often come under significant pricing and margin pressure as a result
  of competitors actions in the marketplace.

Should the Companys new products, including
  its integrated chipset products, and products for the consumer electronic device
  market, not offer the features and performance required by its customers or
  fail to achieve meaningful marketshare, the Companys operating results
  will be negatively impacted. In addition, the Companys ability to develop
  new products is dependent upon the Company obtaining 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 the issues
  discussed above, the Companys operating results and common share price
  may be subject to a significant level of volatility, particularly on a quarterly
  basis.

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OPERATING RESULTS

The following table compares
  operating results for the Companys three most recent fiscal years. Each
  line item is expressed as a percentage of revenues.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*Adjusted
      net income excludes the after-tax effect of gain (loss) on investments (net),
      amortization of intangible assets related to the Companys acquisitions,
      and the future tax recovery pertaining to intangible assets acquired. The
      adjusted figures for 2000 also exclude special inventory writedowns and
      special selling and marketing charges totaling $88.3 million. Each of these
      items has been excluded from adjusted net income as they are not considered
      to be part of the Companys normalized ongoing operations. While the
      Company recognizes that adjusted net income does not have any standardized
      meaning described by GAAP, and that its adjusted net income calculation
      cannot be used as a comparison to other companies financial performance,
      ATI believes that its adjusted net income more appropriately reflects the
      Companys operating performance.

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REVENUES

Revenues totaled $1.02 billion,
  $1.04 billion and $1.28 billion in 2002, 2001 and 2000, respectively.

Revenues declined 1.6 per
  cent in 2002 versus 2001 primarily as a result of the ongoing transition in
  ATIs business from board sales to component sales. The transition from
  board to component sales had the impact of constraining revenues while increasing
  gross margins as a percentage of revenues and reducing administrative expenses.
  While revenues declined due to this transition, unit sales increased by over
  25 per cent due to increased marketshare in certain segments of the desktop
  and notebook markets.

The Company started to recognize
  royalty revenues in 2002 from its technology licensing arrangement with Nintendo.
  Although the royalty revenue was less than 5 per cent of the Companys
  total revenues for the year, it directly impacts net income as there are no
  significant operating expenses associated with the revenue.

Revenues in 2001 decreased
  by 19.1 per cent from 2000, a result of a worldwide slowdown in PC sales; the
  increasing use of integrated chipsets, which ATI did not offer; and as a result
  of increased competition; and ATIs loss of marketshare in the desktop
  PC market.

In 2002, 53.2 per cent of
  revenues related to components (versus 46.4 per cent in 2001 and 39.0 per cent
  in 2000) and 44.0 per cent related to boards (versus 52.8 per cent in 2001 and
  60.6 per cent in 2000) and 2.8 per cent of revenues related to licensing income,
  including Nintendo. The increase in percentage of component revenues in 2002
  was a result of the Companys transition to a chip model. In 2001, the
  increase in percentage of component revenues compared to 2000 was a result of
  a decline in board sales due to increased competition and the trend towards
  integrated chipsets in desktop PCs, increased revenues in mobile, as well as
  the adoption of the chip model late in 2001.

The revenue mix by major
  geographic territory continued to shift toward Asia-Pacific in 2002, as many
  OEMs increased manufacturing operations in that region, and due to ATIs
  adoption of the chip model. Asia-Pacific revenues comprised 55.1 per cent of
  revenues in 2002 compared to 42.5 per cent in 2001 and 33.6 per cent in 2000.

European revenues fell to
  14.6 per cent in 2002 from 23.9 per cent in 2001 and 30.9 per cent in 2000.
  The decline in European sales in 2002, compared to the previous year, was a
  result of the Companys strategy of selling chip technology to ODMs and
  AIBs to serve the system builder channel rather than selling direct. ATIs
  European revenues traditionally have been driven by the system builder channel.

In 2001, the decline in European
  revenues was largely a result of increased competition and aggressive pricing,
  as well as a general softness in the European economy resulting in a decrease
  in PC demand. The decline in European revenues in 2001 compared to the previous
  year was also a result of the Company adopting its new chip model as noted above,
  as well as a loss of desktop marketshare.

Canadian and U.S. revenues
  declined as a portion of total revenues to 30.3 per cent in 2002 from 33.6 per
  cent in 2001 and 35.5 per cent in 2000. The continuing shift to Asian manufacturing
  contributed to this proportionate decline in North American revenues.

In 2002, one customer accounted
  for 21 per cent of total revenues compared to 20 per cent in 2001 and 13 per
  cent in 2000. The Companys top 10 customers accounted for approximately
  68, 66, and 62 per cent of revenues in 2002, 2001 and 2000, respectively.



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COST OF GOODS SOLD

Cost of goods sold was $686.2
  million, $797.1 million and $1.05 billion in 2002, 2001 and 2000, respectively.
  Cost of goods sold as a percentage of revenues decreased to 67.2 per cent compared
  to 76.8 per cent in 2001 and 81.5 per cent in 2000. The Company is targeting
  to maintain its cost of goods sold as a percentage of revenues in the 6568
  per cent range.

The decrease in cost of goods sold as a per
  cent of revenues in 2002 compared to the prior year was due to a higher percentage
  of component sales primarily resulting from the Companys 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 margins on
  competitive board products in 2002. The decrease was slightly offset by lower
  margins in the fourth quarter of 2002 as a result of weakness in the notebook
  market and a negative mobile product mix.

The proportionate decline in 2001 compared
  to 2000 was due in part to the changing product mix. The Company also benefited
  from an abundant supply of lower cost memory in the second half of its fiscal
  2001 year. In addition, in 2000, cost of goods sold included a special charge
  of $64.0 million for excess inventory and lower of cost versus market adjustments,
  increasing cost of goods sold by 4.7 per cent to 81.5 per cent of sales. This
  increase was directly attributable to increased competition, compounded by component
  shortages and the movement of the RAGE 128 PRO product family down to
  the mainstream market segment.

EXPENSES

Selling and MarketingSelling 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.

Selling and marketing expenses
  totaled $78.1 million, $75.5 million, and $86.5 million in 2002, 2001 and 2000,
  respectively.

Selling and marketing expenses
  increased in 2002 compared to 2001 as a result of marketing activities to promote
  ATIs brand, including various marketing and advertising programs, and
  increased expense for new product launches. In fiscal 2001, expenses declined
  compared to fiscal 2000 due to an increased focus on implementing more cost-effective
  sales and marketing programs as well as a decrease in variable expenses, such
  as channel-related variable selling expense, which are largely a function of
  sales levels.

As a percentage of revenues,
  selling and marketing expenses have increased to 7.6 per cent in 2002 compared
  to 7.3 per cent in 2001 and 6.7 per cent in 2000. The increase for 2002 compared
  to 2001 is largely a result of marketing and advertising programs to promote
  ATIs brand, increased costs associated with new product launches, and
  customer samples. In 2001, the increase in selling and marketing expenses as
  a percentage of revenues, compared to 2000, is due largely to the decline in
  revenues in the period.





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Research and DevelopmentR&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.

R&D expenses totaled
  $164.6 million, $149.5 million and $130.6 million in 2002, 2001 and 2000 respectively.
  The $15.1 million increase in R&D expenses in 2002 is 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. (FGL Graphics) in March
  2001; the staffing of ATIs leap-frog 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.

R&D expenses increased
  in 2001 by $18.9 million, compared to 2000, as a result of a more aggressive
  technology and product development strategy that increased the breadth of the
  Companys product offering, as well as continued investment in the development
  of new product offerings. In addition, in 2001, ATI acquired new technology
  and R&D staff through the purchase of FGL Graphics. The increase was also
  partially attributable to increased component and board prototyping costs resulting
  from the Companys increasingly complex and sophisticated product offerings.

As a percentage of revenues,
  R&D expenses have increased to 16.1 per cent in 2002 from 14.4 per cent
  in 2001 and 10.2 per cent in 2000. R&D expense increased as a percentage
  of revenues in 2002 compared to 2001 as a result of investment in new markets,
  including integrated chipset and consumer products.

Administrative   
  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 totaled
  $35.7 million, $37.3 million and $31.9 million in 2002, 2001 and 2000, respectively.
  As a percentage of revenues, administrative expenses were 3.5 per cent in 2002,
  3.6 per cent in 2001 and 2.5 per cent in 2000.

The decrease in administrative
  expenses in 2002 compared to the prior year was primarily a result of a decrease
  in headcount in board operations and other areas of the Company due to the Companys
  transition to a chip model. In fiscal 2001, administrative expenses increased
  compared to 2000 as a result of increased salary and benefits costs related
  to the increased strength and breadth of the senior management team as well
  as expenses related to reductions in the Companys workforce.



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Amortization of Intangible
  Assets Amortization expense totaled $97.5 million, $114.5 million and $56.7
  million for 2002, 2001 and 2000, respectively. Amortization of intangible assets
  decreased by $17.0 million to $97.5 million in 2002 compared to the prior year.
  The decline from 2001 is 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 decline was slightly offset by the writedown
  of core technology and goodwill associated with the acquisitions of ArtX and
  Chromatic Research Inc. (Chromatic) which aggregated $15.4 million
  during the year.

Amortization of intangible
  assets increased substantially in 2001 compared to 2000 reflecting ATIs
  purchase of ArtX in April 2000 and, to a lesser extent, the accelerated amortization
  in 2001 of the intangibles related to the acquisition of Chromatic which was
  completed in 1999. In 2001, amortization of intangible assets was $114.5 million
  compared to $56.7 million in 2000.

In 2002, ATIs acquisition
  of NxtWave, an investment of $20.2 million, was allocated using purchase accounting,
  of which $5.3 was charged to purchased in-process R&D, $9.2 million to core
  technology, and $4.7 million to goodwill. Purchased in-process R&D is being
  amortized over one year and core technology is being amortized over two to five
  years.

In 2001, the Companys
  acquisition of FGL Graphics for an initial investment of $9.2 million was allocated
  using purchase accounting, of which $5.4 million was charged to core technology,
  which is being amortized over two years. Under the terms of the agreement, SONICblue
  Ltd. was eligible to receive additional consideration contingent upon FGL Graphics
  achieving specified performance targets prior to December 31, 2001. These targets
  were met and in fiscal 2002 the Company recorded additional consideration of
  $2.1 million. This amount was allocated to core technology. Due to the timing
  of the acquisition as well as the small purchase price relative to acquisitions
  made by the Company in the previous two years, the acquisition of FGL Graphics
  was not material to amortization expense. (See notes 5 and 6 to the Consolidated
  Financial Statements.)

ArtX which was acquired by
  ATI in April 2000 for a total investment of $453.0 million was allocated using
  purchase accounting to net assets of $5.6 million, purchased in-process R&D
  of $51.0 million, workforce of $4.4 million, core technology of $14.5 million
  and goodwill of $377.5 million.

Purchased in-process R&D
  associated with the ArtX acquisition was charged on a straight-line basis to
  operations over a one-year period. Workforce represents the replacement value
  of the assembled workforce at the time of acquisition. Core technology represents
  the value of proprietary know-how as of the acquisition date and
  goodwill represents the excess of the purchase consideration over the fair value
  of the net identifiable assets acquired. Workforce, acquired core technology
  and goodwill are being amortized on a straight-line basis over a period of five
  years. Amortization of intangible assets of $87.5 million related to the acquisition
  of ArtX is reflected in the Companys operating results for 2002, versus
  $108.1 million in 2001 and $53.2 million in 2000. (See notes 5 and 6 to the
  Consolidated Financial Statements.)

During fiscal 2002, the Company
  conducted a comprehensive review of the carrying values of the 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, the Company wrote off the



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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.

During 2001, the balance
  of the intangible assets related to Chromatics workforce ($4.5 million)
  was written off due to a higher than anticipated turnover rate of Chromatic
  employees. (See note 6 to the Consolidated Financial Statements.)

Interest and Other Income

Interest and other income
  includes interest earned on the Companys cash and cash equivalents and
  short-term investments, gain (loss) on investments and foreign exchange gains
  and losses. Cash and cash equivalents include highly liquid instruments with
  an original maturity of less than 90 days. Short-term investments include highly
  liquid instruments with an original maturity of 90 days or more and publicly
  traded common stock which is held for sale and which is carried at the lower
  of cost and market.

During fiscal 2002, the Company
  disposed of a portion of a long-term investment realizing a loss of $0.3 million.
  The Company 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 the Company intends to sell
  the remaining portion of this investment.

In 2002, the Company also
  received an additional 107,387 shares of Broadcom Corporation (Broadcom),
  valued at $2.1 million, as a result of the release of escrowed shares pursuant
  to the terms of the agreement to purchase the Companys share investment
  in SiByte Inc., by Broadcom in the preceding fiscal year. The Company wrote
  down its total investment in Broadcom by $4.7 million to reflect the other than
  temporary decline in its value.

In 2001, ATI realized a gain
  of $54.9 million on the sale of its shares in Broadcom, as well as an $8.5 million
  gain on investments resulting from additional shares earned from Broadcom. This
  was offset by a $2.1 million loss on other investments, which was a result of
  the writedown of the value of certain long-term investments to reflect the other
  than temporary decline in their value. In 2000, a $10.7 million gain was realized
  on the sale of long-term investments.

Interest Expense

In 2002, interest expense
  totaled $0.7 million and was primarily related to the Companys capital
  lease obligation for the new building facility located in Markham, Ontario,
  a joint venture in which it has 50 per cent ownership. Interest expense also
  includes the Companys proportionate share of the interest expense related
  to the interim construction financing of the joint venture. In 2001, interest
  expense of $1.2 million was primarily a result of the Companys drawing
  on its credit facility in the first quarter. There was minimal interest expense
  in 2000.

Income Taxes

Income tax expense totaled
  $7.2 million in fiscal 2002 compared to an income tax recovery of $18.9 million
  in 2001 and an income tax expense of $16.3 million in 2000. The income tax expense
  in 2002 includes a $10.9 million expense related to the Companys operating
  income, a $3.5 million recovery of the future tax liability associated with
  intangible assets (other than goodwill) from the acquisitions of ArtX and Chromatic,
  and a $0.2 million income tax recovery related to the sale of investments.

ATIs operating tax
  rate, which excludes the impact of the amortization of intangible assets related
  to the acquisitions of ArtX and Chromatic, and the effect of the gain (loss)
  on investments and other special charges, was 18.0 per cent in 2002, 18.0 per
  cent in 2001 and 20.1 per cent in 2000. The tax rate of the Company is affected
  by the amount of net income earned in its various operating jurisdictions. (See
  note 11 to the Consolidated Financial Statements.)

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Net Income and Net Income per Share

The loss in 2002 was $47.5
  million compared to a loss of $54.2 million in 2001 and a loss of $69.3 million
  in 2000. The loss per share decreased to $0.20 in 2002 versus a loss of $0.23
  in 2001 and $0.32 in 2000.

The decrease in loss in 2002
  compared to the prior year is largely due to improved gross margins. The decrease
  in loss for the year 2001 compared to 2000 is due to a significant increase
  in investment income resulting from the gain on the Companys investment
  in Broadcom and an income tax recovery resulting from a change in accounting
  policy. In 2001, ATI incurred a net operating loss of $136.1 million compared
  to a net loss of $68.2 million in 2000. This was generally due to an increase
  in operating and amortization expense as a result of the acquisition of ArtX,
  Inc. In 2001, investment income increased by $50.6 million largely due to a
  $63.4 million gain related to ATIs investment in Broadcom. The change
  in the method of accounting for income taxes resulted in a recovery of $18.9
  million in 2001 compared to tax expense of $16.3 million in 2000.

Adjusted Net Income and Adjusted Net Income
  per Share

Adjusted net income in 2002
  was $49.7 million compared to an adjusted net loss of $16.3 million in 2001
  and adjusted net income of $64.6 million in 2000. Adjusted net income per share
  increased to $0.20 in 2002 versus a net loss of $0.07 in 2001 and net income
  of $0.29 per share in 2000.

The increase in adjusted
  net income for the year in 2002 compared to the prior year is largely due to
  improved gross margin, offset by higher overall operating expenses. Both the
  decrease in adjusted net income and adjusted net income per share in 2001 compared
  to 2000 are primarily due to the decline in revenues, but also a result of lower
  than normal gross margins due to higher cost memory in inventory during the
  first half of the fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Cash Position

Cash position (cash and cash
  equivalents and short-term investments) increased to $236.9 million at August
  31, 2002, from $216.5 million a year earlier and $79.2 million at August 31,
  2000. The increase is attributable to cash generated from operations and, in
  2001, a one-time gain on the sale of the Companys investment in Broadcom
  Corporation.

The Company has access to
  $101.0 million under its credit facilities at August 31, 2002 compared to $98.0
  million at August 31, 2001 and $86.0 million at August 31, 2000. ATI believes
  the $337.9 million in cash position and available borrowings at August 31, 2002
  together with expected cash flow from operations in 2003 will provide it with
  sufficient funds to meet its operating and capital expenditure requirements
  for the upcoming year.

ATI generated operating cash
  flow of $56.9 million in 2002 compared to $101.9 million in 2001. In 2000 the
  Company consumed cash in operations of $17.9 million. The decrease in 2002 compared
  to 2001 is a result of the one time gain on investments from the Companys
  sale of its shares in Broadcom Corporation in 2001 and an increase in inventory
  in 2002.

The Company increased its
  accounts receivable by $29.4 million in 2002 compared to the prior year-end.
  Inventories increased by $76.4 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



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product introductions. In 2001,
  the Company decreased its accounts receivable by $45.5 million and reduced its
  inventories by $143.7 million compared to the prior year-end. In 2000, inventories
  increased by $48.3 million as the Company built up inventory of the new RADEONTMproduct family in expectation of continued growth in PC sales.

Capital expenditures in 2002
  were $30.1 million, compared to $31.1 million in fiscal 2001, and $25.7 million
  in 2000. Expenditures in 2002 included construction of a new building, engineering
  equipment and leasehold improvements. Capital expenditures in 2003 are expected
  to be in the same range as prior years.

In 2002, the Company acquired
  NxtWave for $20.2 million. In 2001, the Company acquired equity interests in
  other companies totaling $1.5 million net. In addition, the Company invested
  $11.3 million toward the acquisition of FGL Graphics.

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, and $12.7 million in 2000.

As at August 31, 2002, the
  Company is committed to the following minimum payments related to office premises,
  license and royalty agreements and building under capital lease payments:



Accounts Receivable

Accounts receivable increased by 21.8 per cent
  to $164.3 million at August 31, 2002 compared to the prior year-end, due to
  slightly longer payment terms in the industry as well as a greater than usual
  amount of product sold in the last few weeks of the year as the RADEON
  9700 PRO and RADEON 9000 products began to ship.

Accounts receivable declined 25.2 per cent
  to $134.9 million at August 31, 2001 compared to the end of 2000, largely as
  a result of the successful implementation of a more vigorous collections policy,
  but also due to lower revenues.

At August 31, 2002, 93.4 per cent of accounts
  receivable were less than 60 days outstanding, compared with 95.8 per cent at
  August 31, 2001 and 96.8 per cent a year earlier. The Export Development Corporation
  guaranteed approximately 97.0 per cent of total accounts receivable at August
  31, 2002, 91.0 per cent at August 31, 2001 and 86.9 per cent a year earlier.
  Days sales in accounts receivable increased to 50 days in 2002 compared to 38
  days in 2001. In 2000, days sales in accounts receivable were 45. At August
  31, 2002, one customer accounted for 13 per cent and another customer for 11
  per cent of the accounts receivable balance.





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Inventories

Inventories on hand increased significantly
  in the last two quarters of fiscal 2002 as the Company ramped up production
  of new products and had somewhat lower than expected revenues of current products.
  At August 31, 2002, inventories totaled $175.3 million compared to $99.0 million
  at the end of 2001. Inventory levels were $140.2 million lower at August 31,
  2001 compared to 2000. While lower revenues were a factor in this reduction,
  in 2001 ATI successfully implemented a demand management program to reduce inventories
  of raw materials, work in progress and finished goods.

Capital Assets

Capital asset additions totaled
  $30.1 million in 2002, $31.1 million in 2001 and $25.7 million in 2000.

In 2002 capital asset additions
  included additions to building-in-progress that were subsequently transferred
  into a building under capital lease.

In 2001, this total included
  building-in-progress additions of $11.5 million, representing ATIs 50
  per cent share of the cost incurred to construct the new building adjacent to
  its head office in Markham, Ontario. Laboratory, computer equipment and software
  purchases accounted for another $15.5 million in 2001.

Approximately $18.2 million
  of the 2000 additions related to computer equipment and software tools.

In February 1999, the Company
  entered into a joint venture agreement to construct the new building in Markham.
  The facility was completed in April 2002. The cost of this facility amounted
  to $33.3 million in which the Company has a 50 per cent interest.

Long-Term Investments

From time to time, the Company
  makes minor equity investments in other companies, generally in conjunction
  with a technology relationship. In 2002, ATI did not make any investments of
  this nature.

During fiscal 2002, the Company
  disposed of a portion of a certain long-term investment realizing a loss of
  $0.3 million. The Company 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 the Company intends
  to sell the remaining portion of this investment.



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In 2002, the Company also
  received an additional 107,387 shares of Broadcom Corporation, valued at $2.1
  million, as a result of the release of escrowed shares pursuant to the terms
  of the agreement to purchase the Companys share investment in SiByte Inc.
  by Broadcom in the preceding fiscal year. The Company then wrote down its total
  investment in Broadcom by $4.7 million to reflect the other than temporary decline
  in its value.

In 2001, ATI invested $2.5
  million. During the same period, the Company wrote down the value of its acquired
  equity interests in other companies by a total of $2.1 million to reflect an
  other than temporary decline in value of those investments. This compares with
  $4.4 million invested in 2000.

In 2001, the Company sold
  some of its equity investments, which resulted in gains of approximately $54.9
  million from proceeds of $65.1 million. In 2000, gains were $10.7 million from
  proceeds of $15.3 million. (See note 7 to the Consolidated Financial Statements.)

Accounts Payable

Accounts payable increased
  to $172.1 million in 2002 from $79.7 million in the prior year as a result of
  the timing of payments to suppliers and increased inventory purchases for the
  new product lines.

Subsequent Event

On September 5, 2002, the
  joint venture in which the Company has a 50 per cent ownership interest entered
  into a mortgage agreement with a lender to finance the new building facility
  in Markham, Ontario. The Companys proportionate share of the mortgage
  amounted to $10.8 million (Cdn. $16.9 million), and the mortgage has a repayment
  term of 12 years bearing interest at a rate of 6.96 per cent per annum. The
  underlying mortgage is denominated in Canadian dollars. Funding under the mortgage
  was received in October 2002.

OUTLOOK FOR 2003

The Company expects that
  its financial performance will improve in 2003 on the basis of an anticipated
  strengthening in the PC market in general, as well as a stronger and broader
  product offering from the Company. Over the 2003 fiscal year, the use of integrated
  graphics chipsets by PC OEMs is expected to continue to increase. ATIs
  success in penetrating this market and achieving significant sales for its new
  integrated product, RADEON IGP, will also be a significant factor in generating
  better financial performance in 2003. The consumer electronic market represents
  a growth opportunity for ATI and in 2003 revenues from this market segment are
  also expected to contribute to revenue growth. On an overall basis, ATI is endeavoring
  to achieve gross margins in the range of 32 to 35 per cent over the 2003 fiscal
  year. Despite the continued transition from board to component sales, increasingly
  competitive markets will be a crucial factor in the Companys ability to
  maintain these margins levels. Accordingly, while the Company is optimistic
  about the prospects for improved financial performance, those factors referred
  to above will present challenges for the Company over the course of fiscal 2003.

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RISK AND UNCERTAINTIES

ATIs operating results
  can fluctuate and are often difficult to predict due to changing market conditions,
  seasonal and variable demand for its products and the effects of rapid and frequent
  technological changes. As a result, the Companys revenues can fluctuate
  from quarter to quarter, and within a quarter, revenues may vary from month
  to month. In addition, ATIs operating expenses are largely independent
  of revenue in any particular period. Therefore, it is difficult to accurately
  predict revenues and profits or losses. Factors that have affected ATIs
  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;
- Demand and acceptance of
    the Companys products, including integrated graphics components and
    consumer electronics;
- Timely development and
    production of next-generation products, including products for the consumer
    device market;
- Introduction of new products
    by ATIs competitors;
- Availability of licenses
    for emerging industry technology or other intellectual property rights necessary
    for the development of new products by ATI;
- Changes to overall Company
    average selling price resulting from competitive pressures and low-cost PCs;
- Delays or early introduction
    of new microprocessors or their related chipsets;
- Changes to the Companys
    overall product mix;
- Increasing product line
    complexity and the related management of inventory;
- Unexpected variances in
    ATIs cost of materials, especially silicon wafer, memory and printed
    circuit boards;
- Changes to the expected
    yield of the Companys 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;
- Supply constraints for
    other components incorporated into ATIs products; and
- Inability to quickly adjust
    spending sufficiently to compensate for any unexpected sales shortfall.

For a more complete discussion
  of general risks and uncertainties which apply to ATIs business and its
  financial results, please see the Companys Annual Information Form and
  other filings with Canadian and U.S. securities regulatory authorities.

For a description of certain
  legal proceedings affecting the Company, please see note 19 to the Consolidated
  Financial Statements.



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QUARTERLY INFORMATION(Unaudited) (In thousands of U.S. dollars, except per share amounts)







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EXHIBIT 3





Auditors Consent

The Board of Directors 
ATI Technologies Inc.

We consent to the use of our report
dated September 25, 2002, included in this annual report on Form 40-F.

(Signed)    
          KPMG LLP

Toronto, Canada
January 17, 2003