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EXHIBIT 99.1 (WESTAIM LOGO)    The Westaim Corporation   Annual Information Form    MARCH 28, 2005




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The Westaim CorporationAnnual Information Form MARCH 28, 2005 TABLE OF CONTENTS PAGECORPORATE STRUCTURE
    
    
    1GENERAL DEVELOPMENT OF THE BUSINESS
    
    
    2DESCRIPTION OF THE BUSINESS
    
    
    2EMERGING TECHNOLOGIES
    
    
    3iFire Technology Corp.
    
    
    3Nucryst Pharmaceuticals Corp.
    
    
    6DISCONTINUED OPERATIONS
    
    
    9INVESTMENTS
    
    
    10REVENUE BY SEGMENT
    
    
    10SELECTED CONSOLIDATED FINANCIAL DATA
    
    
    11CONTRACTUAL COMMITMENTS
    
    
    11SUPPLIES AND RAW MATERIALS
    
    
    11ENVIRONMENTAL
    
    
    12EMPLOYEES
    
    
    12RISK FACTORS
    
    
    12FORWARD-LOOKING STATEMENTS
    
    
    13MANAGEMENTS DISCUSSION AND ANALYSIS
    
    
    13CAPITAL STRUCTURE
    
    
    13DIVIDENDS
    
    
    14MARKET FOR SECURITIES
    
    
    14ESCROWED SECURITIES
    
    
    14TRANSFER AGENT AND REGISTRAR
    
    
    14EXPERTS
    
    
    14DIRECTORS AND OFFICERS
    
    
    15AUDIT COMMITTEE
    
    
    17CODES OF CONDUCT
    
    
    18AUDIT FEES
    
    
    18PRE-APPROVAL OF AUDIT AND NON AUDIT SERVICES BY INDEPENDENT AUDITORS
    
    
    18ADDITIONAL INFORMATION
    
    
    19AUDIT COMMITTEE CHARTER
    Appendix A




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CORPORATE STRUCTURE The Westaim Corporation (Westaim or the Company) was incorporated under the Business
Corporations Act(Alberta) by Articles of Incorporation dated May 7, 1996, as a wholly owned
subsidiary of Viridian (Viridian means Viridian Inc. and its predecessors). The Companys
Articles were amended effective June 26, 1996 to remove private company restrictions on the
transfer of securities, to create preferred share classes designated as Class A Preferred Shares
and Class B Preferred Shares and to increase the maximum number of directors to 15. The
shareholders of Westaim approved a further amendment to the Articles on May 24, 2000 to permit
meetings of shareholders to be held in certain specified cities outside of Alberta, or in any other
city in Canada or the United States. On June 26, 1996, the Company, through a reorganization, issued 75,000,000 common shares to
Viridian in exchange for cash and the assets of its specialty materials businesses and related
research and development activities. The transaction was effective June 1, 1996 and was accounted
for as a reorganization, with the carrying value of the assets and liabilities transferred to the
Company reflected in the Companys balance sheet as at June 1, 1996 at Viridians carrying value. On July 8, 1996 and September 16, 1996, Viridian distributed to holders of its common shares, as
dividends-in-kind, an aggregate total of 70,923,248 common shares of Westaim. Viridian
subsequently disposed of the remainder of its Westaim shares through market sales. Westaims
principal and registered head office is located at 1010, 144-4thAvenue S.W., Calgary, Alberta, T2P 3N4. The following are the material subsidiaries of the Company, including jurisdiction of incorporation
or continuance, and percentage share ownership by the Company: (FLOWCHART) 1




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GENERAL DEVELOPMENT OF THE BUSINESS The following summarizes significant events that have influenced the general development of
the business in the past three years. As noted in the chart above, the Company holds its interest
in its two emerging technologies through wholly owned subsidiaries. In May 2001, the Companys subsidiary, Nucryst Pharmaceuticals Corp. (Nucryst), sold its North
American burn dressing business and entered into an exclusive global licensing agreement with Smith
& Nephew plc for the sale and marketing of Acticoat Burn and Wound Care Dressings. On May 29, 2002, the Company announced its intention to sell non-core assets and to increase the
focus of management and financial resources on its two high-potential emerging businesses, iFire
Technology Corp. (iFire) and Nucryst. In July 2002, the Companys Coinage business was
discontinued, and in February 2003 the ethylene coatings business, Surface Engineered Products
Corporation (SEP), was discontinued. See Discontinued Operations. In January 2003, the Companys Board of Directors (the Board) retained investment bankers to
undertake a review of the operations of the Company and to advise on strategic alternatives. A
special committee of the Board of Directors was established and led the review process. This
comprehensive review reaffirmed the Boards commitment to iFire and Nucryst and sharpened the
Companys strategies to realize the potential value of these businesses. On January 29, 2004, the Company sold its Ambeon business segment (Ambeon) for $33.4 million.
The completion of the sale to a strategic buyer represented an opportunity to enhance the Companys
value and focus resources on iFire and Nucryst. See Discontinued Operations. In August 2004, the Company completed a public offering of equity securities for net proceeds of
$47.8 million. A total of 14,705,883 common shares of the Company were issued. The proceeds are
being used to finance the flat panel display pilot production facility at iFires Toronto facility. In September 2004, Nucryst announced the results from its initial Phase 2a efficacy and safety
study of NPI 32101 in a cream formulation in adult patients with mild to moderate atopic
dermatitis. NPI 32101 is a topical form of Nucrysts proprietary silver Rx nanocrystals. The
purpose of the study was to evaluate the safety and effectiveness of topical NPI 32101 in improving
the signs and symptoms of atopic dermatitis. Based on the findings of this exploratory Phase 2a
study, the Company is undertaking further clinical studies in preparation for its next Phase 2
human clinical trials of NPI 32101 expected to commence in 2005. DESCRIPTION OF THE BUSINESS Westaim is developing and commercializing technologies in the flat panel display, wound care
products and pharmaceutical sectors of the economy. These proprietary technologies were developed
out of the Companys significant research resources and advanced materials expertise. Westaims strategy is to develop the independent technical, operating and marketing and sales
capabilities of each technology investment through the early years of product introduction and
commercialization with the objective of taking these technologies public through initial public
offerings. Management recognizes that, in circumstances where it lacks technical or marketing
expertise or the necessary capital to complete development of a product, it may 2




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be in Westaims best interests to pursue commercialization through joint venture arrangements,
strategic acquisitions, alliances, licensing or selling its technology. EMERGING TECHNOLOGIES iFire Technology Corp. iFire Technology Corp. (iFire) has developed a proprietary flat panel display with solid state,
thick-film dielectric electroluminescent (TDEL) technology. iFire is commercializing its
proprietary technology primarily for the large-screen consumer television market. iSuppli/
Stanford Resources, an independent research firm that follows the flat panel display industry,
predicts that the worldwide market opportunity for 30 to 39-inch TVs
will exceed US $26 billion by 2006. For mid-30-inch screens, the Company believes that in high-volume production, iFire displays will
have a 30% to 50% cost advantage over other flat panel technologies due to TDELs simpler
structure, less complex manufacturing methods and fewer processing steps compared with liquid
crystal displays (LCD) and plasma display panels (PDP). Unlike other flat panel technologies,
the iFire displays do not contain gases (as with PDP), liquids (as with LCD) or a vacuum (as with
the cathode ray tube), making it inherently rugged and less susceptible to shock, vibration and
breakage. TDEL technologys solid state structure and thick-film manufacturing process also make
an iFire display less sensitive to cleanroom contamination that is associated with PDP and LCD,
resulting in lower capital investment, higher manufacturing yield and reduced production cost. In
addition, iFire displays feature full colour, rapid video response, unrestricted viewing angles
and a wide operating temperature range. The technology is scalable from 5-inches to 50-inches. iFires primary strategy is to become a significant supplier of high definition modules for
large-screen flat panel televisions. The Company intends to initially target the mid-30-inch screen
size market due to lower competitor presence. PDP technology is better suited for TVs greater than
40-inches; LCD technology is better suited for TVs less than 30-inches; and organic light emitting
diode technology (OLED) is best suited for small graphics applications with screen sizes less
than 10-inches. iFire intends to establish partnerships with commercial manufacturing companies to
jointly manufacture iFire flat panel modules for consumer television sets. iFire believes that its
technology can achieve significant market penetration in the flat panel television market segment
and achieve a retail price advantage compared with PDP and LCD. In 2003, iFire commissioned an independent study by Industrial Design and Construction (IDC), the
industrial design group of CH2M Hill Companies Ltd., to compare its planned manufacturing processes
against both LCD and PDP. IDC is a leading industrial design firm for the design of electronics
and flat panel display manufacturing facilities. The study compared all three technologies in a
Generation 6 manufacturing facility  one of the most advanced types of flat panel production
facilities in operation today. IDCs detailed report confirmed that in a mature Generation 6
manufacturing environment, iFire should have an estimated 30% to 50% advantage in both capital and
module costs over both LCD and PDP. The report also determined that this advantage is primarily
due to the iFire displays simpler structure and manufacturing process and will therefore be
sustainable as cost-reducing advancements are made in many of the processes common to all flat
panel technologies. Partnership Agreements iFire has entered into a number of strategic relationships to further
progress its TDEL technology. In 2002, iFire entered into a non-exclusive technology collaboration agreement with Sanyo Electric
Company, Ltd. (Sanyo) of Japan. The agreement focuses on the advancement of iFires TDEL
technology for large-screen flat panel televisions through a series of joint development projects.
iFire retains exclusive use of any new joint developments in the inorganic electroluminescent
display sector while Sanyo has exclusive rights to use any joint 3




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developments in the OLED field. Multiple projects have been identified and initiated in the
categories of video electronics, manufacturing technologies for defect reduction and phosphor
process development. In March 2003, iFire entered into a non-exclusive joint development agreement with Dai Nippon
Printing Co., Ltd. (DNP) of Japan for commercial production of mid-30-inch screen size flat panel
television modules. To support the partnership with DNP, iFire and Sanyo have expanded their
technology collaboration agreement to transfer technological and electronics advancements on
17-inch prototypes to the larger, mid-30-inch displays. Under the terms of the agreement, DNP is
utilizing its flat panel production line in Kashiwa, Japan for developing front-end manufacturing
processes for iFires TDEL technology, including the substrate preparation and the fabrication of
the row electrodes and thick-film dielectric layer. Back-end processes such as the deposition of
phosphors, column electrodes and colour correction layers, as well as electronics assembly, are
being performed by iFire at its facility in Toronto, Canada. In January 2004, iFire entered into a Yen 1.08 billion (approximately $13 million) loan agreement
with DNP to partially fund the construction of a pilot production facility in Toronto. It is the
expectation of iFire that the financing relationship will be rolled into an expanded commercial
agreement as the technology moves through pilot phase and into commercial production. As at
December 31, 2004, Yen 408.2 million (approximately $4.8 million) has been drawn on this loan
facility. In 2001, iFire entered into an agreement with Technology Partnerships Canada (TPC), a technology
investment fund established by the Government of Canada under which TPC contributed $30 million
over three years towards eligible research and development costs and related capital expenditures
incurred by iFire. The final contribution claims were recorded in the third quarter of 2003 and
the final payment received in the fourth quarter of 2003. As consideration for this funding, TPC
will receive a royalty of 1.065% on future sales of iFire products and received warrants to
purchase common shares of iFire, representing approximately 0.5% of the current outstanding common
shares of iFire, for future consideration of $6.3 million. The warrants had an original expiry
date of December 31, 2007 and under certain circumstances TPC had the right to put the warrants to
iFire for their fair market value. In February 2005, the expiry date was extended to December 31,
2009 and the put was cancelled. For small graphic applications, iFire has pursued a licensing strategy. In February 2000, iFire
entered into a non-exclusive licensing agreement with Japan-based TDK Corporation (TDK) for
technology collaboration and production of iFire displays less than 12-inches. The agreement
included a 2.5% equity investment in iFire, an up-front licensing fee and ongoing royalties on all
sales made by TDK using technology licensed from iFire. In 2004, TDK made a strategic decision to
discontinue investment in the commercialization of small graphic displays using iFire technology
and in December 2004, the license agreement was terminated. iFire repurchased the shares owned by
TDK and Westaim purchased substantially all of the TDK-developed intellectual property related to
the technology for $3.0 million. Technology Development Progress iFire has made significant progress in enhancing its flat panel
technology. In 2004, iFire continued development of volume manufacturing processes and to increase the optical
performance of the displays using laboratory deposition processes. Luminance as high as 400
cd/m2has been produced on 17-inch graphic panels which is above the luminance required
for use in a commercial product. Lifetime of the phosphor material developed on laboratory
equipment has been demonstrated at more than 20,000 hours which is considered to be the product
requirement. iFire is now in the process of transferring these laboratory results into larger
scale tools similar to those that will be used in pilot production. 4




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STRUCTURE OF IFIRES DISPLAY PANEL  (STRUCTURE OF IFIRE'S DISPLAY PANEL LOGO)
 TOP GLASS AND ELECTRONICS ATTACHMENT  COLOUR CORRECTION LAYER
The colour correction layer tunes colour to match TV
colour requirements and increase the overall display
contrast. It is a simple coating of materials patterned
into red, green and blue stripes. The red and green
stripes are made of the newly developed Colour-By-Blue
colour conversion materials, which absorb blue light
emitted from the blue phosphor and re-emit red or green
light. PATTERNED ITO COLUMN ELECTRODES
The ITO (Indium Tin Oxide) electrodes are used to
transmit the red, green and blue control voltages to the
individual pixels of the display. They are aligned with
the colour correction layer stripes above, and form
display pixels at each intersection with the lower
electrodes. BLUE PHOSPHOR
The phosphor material is the part of the iFire
Display that actually creates light. When electrical
energy is applied to the phosphor, electrons inside the
phosphor material become energized, and that energy is
transformed into visible light. iFire has created a new
phosphor system called Colour-By-Blue, which allows a
single high performance blue material to provide the
light energy for all the RGB colours of a full-colour
display. This Colour-By-Blue process requires no
alignment or patterning of the phosphor, making
manufacturing very simple. PRINTED THICK FILM DIELECTRIC
Created by screen printing, the thick dielectric is
a simple sheet of material that electrically insulates
the top electrodes from the bottom electrodes. The
unique electrical properties of this layer give the
iFire device higher efficiency at lower operating
voltages than traditional Thin Film inorganic EL
devices. This layer makes the iFire device very
resistant to particle defects which is typical of other
flat panel display technologies. Usually, particles
less than 1 micron in size will create defects in other
technologies, but iFires thick dielectric layer, at
about 10-20 microns in thickness, is immune to the
effects of such tiny particles. This means that the
display can be manufactured with much higher yield and,
in turn, lower cost. PRINTED METAL ROW ELECTRODES
The row electrodes, together with the ITO electrode
(above), form the matrix that is used to apply the
electrical signals that control the image on the
display. Made of a metal alloy, the row electrodes are
created by a process called screen printing, a very
simple and low cost manufacturing technique which is
well suited to volume production. GLASS SUBSTRATE
Standard inexpensive display float glass.
   In the second quarter of 2004, iFire demonstrated a full colour, approximately 150
cd/m2 high-definition 34-inch prototype flat panel display to industry peers at the
annual Society for Information Display conference. This was the worlds first large screen, high
definition video display made by inorganic EL technology. At the end of 2004, iFire demonstrated
an improved version of the 34 panel, again for industry peers, at the International Display
Workshop conference held in Niigata, Japan. The improvements included higher luminance and
contrast, and more saturated colour. Inorganic EL technologies have traditionally used a type of process called electron-beam
evaporation for creating phosphor layers and until recently iFire also used this process. iFire
believes that, for volume production, it is advantageous to change the method of manufacturing the
phosphor layer to a different type of process called sputtering. The sputtering process is widely
used in various industrial applications for high volume thin film coatings on large substrates.
Accordingly, iFire has been developing a sputtering process for its proprietary blue 5




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phosphor and, at the end of 2004, was successful in producing 17-inch prototypes by this technique.
The Company intends to continue with sputtering development for 34-inch panels in pilot and,
later, full volume production. In the third quarter of 2004, iFire began construction of a $46 million pilot production plant at
its Toronto facility. This project will be partially funded through the $13 million DNP loan
agreement discussed above. The remaining capital costs for the pilot production expansion will be
funded through further partnership agreements or internal Company resources. The expansion
includes an addition of approximately 8,500 square-feet of cleanroom, which was necessary to
accommodate the addition of the larger production-style tools. Pilot manufacturing is the first
step toward volume production which is planned for early 2007 in conjunction with industry
partners. While there are numerous current and emerging flat panel technologies, the Company knows of no
other competitor that has produced a full-colour, thick-film surface luminescent technology based
on solid state electroluminescence. Westaim believes that the iFire display will have superior
characteristics at a lower cost than competing technologies. The Company owns and operates a 38,500 square-foot research and trial manufacturing facility in
Toronto, Ontario. iFire also leases an adjacent 49,700 square-foot building which is primarily
used for research, office and warehouse purposes. iFire employed 144 people as at December 31,
2004. With respect to iFires intellectual property, the Company holds 14 patents related to TDEL
technology in the United States, has 33 pending patent applications in the United States for
advancements and improvements to the technology, and has numerous corresponding issued patents and
patent applications in various other countries. In addition, Westaim owns 219 patents and patent
applications representing 90 different patent families acquired from TDK. Where appropriate, iFire
also maintains certain proprietary technology as trade secrets. Nucryst Pharmaceuticals Corp. Nucryst Pharmaceuticals Corp. (Nucryst) has developed a proprietary nanocrystalline form of
silver which is also applicable to other noble metals such as gold and platinum. While all three of
these metals have medical uses, the Companys first focus is nanocrystalline silver. Silver has
antimicrobial properties and has been used in medicine to treat infections for many years. To be an
effective antimicrobial agent, normally stable silver must be converted into a soluble form. To create its proprietary SILCRYSTTM nanocrystalline silver coating, Nucryst uses a
physical vapor deposition process known as sputtering. In a vacuum chamber, pure silver is
bombarded with positive ions to liberate or sputter individual atoms. Inside the vacuum, the silver
atoms are integrated into an entity known as a plasma, often referred to as a fourth state of
matter. These silver atoms are then re-condensed to form new high-energy nanocrystalline structures
on substrates  such as high-density polyethylene for non-adherent wound care dressings. Nucrysts
proprietary technology can produce thin soluble films that release an effective concentration of
silver over several days. As silver is consumed, additional silver is released to provide continued
antimicrobial activity. Nucryst has also developed proprietary methods to produce free-standing
nanocrystalline powders. These powders can be combined with pharmaceutical carriers such as creams,
gels, solutions or tablets for medical use. Wound Care Products Nucrysts technology can be applied to a wide range of wound care products,
including wound dressings to prevent infections. The Company chose the in-patient burn segment of
the North American wound dressing market as its first target market because large burns present a
life-threatening risk of infection. The Companys first product, ActicoatTM burn dressing, is today part of a larger product
family that includes the ActicoatTM7 dressing, designed to provide protection from
infection for up to seven days, and ActicoatTM Absorbent, an alginate dressing that
absorbs excess fluid and maintains a moist wound bed for optimal wound healing. In 2004, sales of
ActicoatTM dressings to hospitals, clinics and distributors were up nearly 50% from
2003. Nucrysts dressings have been approved by the U.S. Food and Drug Administration (FDA), by
the Health Products and Food 6




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Branch in Canada and have been given European certification (CE mark), thereby permitting the
marketing of the products in the United States, Canada and Europe. As part of Westaims strategy to enter into partnerships and licensing agreements to accelerate the
market penetration of its products, in 2001 Nucryst entered into a global partnership with Smith &
Nephew plc (Smith & Nephew). Under a series of agreements, Smith & Nephew acquired Nucrysts
North American burn dressing business and entered into an exclusive global licensing agreement for
the sale and marketing of ActicoatTM wound care products developed by Nucryst. Nucryst
receives reimbursement of manufacturing costs and royalties based on Smith & Nephews sales of
these products, as well as up to US $56.5 million in milestone payments over the life of the
agreement for the achievement of certain regulatory and sales accomplishments. To the end of 2004,
Nucryst has earned US $14.0 million of these milestone payments. Nucryst owns all of the patents and intellectual property for SILCRYSTTM nanocrystalline
silver coatings and continues to manufacture all ActicoatTM products with
SILCRYSTTM nanocrystals for Smith & Nephew at its Fort Saskatchewan, Alberta plant under
a long-term manufacturing agreement. Under a collaborative agreement, the two companies are working
together to develop new wound care products and obtain additional regulatory approvals. Smith & Nephew is now selling ActicoatTM burn and chronic wound products in 30 countries
around the world. Chronic wounds affect more than 4 million patients in North America alone and the
Company estimates that more than US $1.0 billion is spent annually on chronic wound products
worldwide. Chronic wounds include: diabetic foot ulcers, a serious condition affecting 700,000
individuals in the United States alone, that result in over 80,000 amputations each year (Center
for Disease Control, Diabetes Surveillance, 1999); venous stasis ulcers, a condition caused by
venous insufficiency which affects 1.2 million individuals in the United States every year (Medical
Data International, 1996); and pressure ulcers, which commonly affect elderly, bed-ridden or
chair-bound patients, of which there are more than 2 million cases per year. Currently, there is no
dominant treatment in the chronic wound dressing market. Recently, new competitive silver-coated dressings have been introduced to the wound care market
which has increased the awareness of the anti-microbial attributes of silver and increased the size
of the market for silver-based dressings. Nucryst believes that its products are superior to other
existing products. Other commonly used competitive products use silver in various chemical forms in
creams and solutions which must be applied to wounds several times a day. Nucrysts antimicrobial
technology releases silver over several days, leaves the wound bed undisturbed while fighting
infection and has been shown in the laboratory to be effective against more than 150 pathogens.
Findings from in vitrostudies published in medical journals have demonstrated that Nucrysts
coatings kill bacteria rapidly and have a sustained release of silver. Use of ActicoatTM
dressings provides health care cost savings by preventing infections and reducing the required
number of dressing changes, thereby saving nursing time and medical supply costs. Pharmaceuticals When used commercially on ActicoatTM dressings, Nucrysts proprietary
nanocrystalline silver coatings have proven safe for use by humans and have demonstrated their
efficacy as a barrier to infection. Nucryst is now planning to develop drugs based on customized
formulations of its patented nanocrystalline technology. Nucrysts approach is to find large
disease indications based on market potential, patient need and technical feasibility for its
commercially proven nanocrystalline technology. Nucrysts Rx nanocrystals appear to have two very important therapeutic effects: broad-spectrum
antimicrobial activity and anti-inflammatory activity. This dual activity could be useful for
treating a wide range of diseases. Pre-clinical work by Nucryst has pointed to two broad areas:
dermatological and respiratory diseases. In both these areas, the Company sees new product
opportunities. Diseases of the skin affect millions of people and are not optimally treated with
todays drugs. Nosocomial (hospital acquired) lung infections are a leading cause of death among
hospitalized patients. The total US market size is over US $2.0 billion for dermatology products
and US $3.0 billion for respiratory products (IMS 2002 data). 7




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The first indication that Nucryst is targeting is a form of eczema (atopic dermatitis), a very
common skin disease characterized by inflammation and itching. Infection often accompanies atopic
dermatitis as a result of excessive scratching, which damages or excoriates the skin, and because
eczema patients may lack endogenous antimicrobial substances in their skin. The two leading anti-inflammatory therapies are topical steroids and topical immunomodulators
(TIMS). Topical steroids are typically the first line of prescription treatment for many skin
diseases, but are not always the safest. Steroids are known to cause many side effects such as
atrophy (thinning of the skin), telangiectasia (visible spider-like blood vessels) and striation
(striping) of the skin. In addition, topical steroids are vulnerable to tachyphylaxis (loss of
efficacy over time) and run the risk of systemic absorption. TIMS produce their anti-inflammatory
effect by inhibiting the immune system. Since they are potent immunosuppressants, they are
generally indicated after other treatments (such as topical steroids) have proven to be ineffective
or are deemed inadvisable. In addition to a burning sensation often experienced upon application,
side effects may include the increased risk of superficial skin infections, such as shingles
(herpes zoster virus infection) or eczema herpeticum, due to TIMS potent immunosuppressant
activity. Nucrysts nanocrystalline silver does not appear to significantly suppress the immune system or
damage the skin. Nanocrystalline silver has the added potential benefit of combating secondary
infections that are common to eczema sufferers, something that steroids and TIMS cannot do.
Nucrysts in vivolaboratory results are very encouraging. Despite the risks and limitations of both topical steroids and TIMS, they have a sizeable market,
generating US $674 million and US $332 million in 2003 sales respectively (IMS 2003 data), in the
United States alone. TIMS have only been on the market for three years, demonstrating that
physicians and patients are seeking and willing to try new, more effective treatments. Nucryst
believes that a new dual action drug that addresses both inflammation and infection, without the
risks associated with steroids and TIMS, will be well received by doctors and patients. In 2003, Nucryst filed an Investigational New Drug (IND) application with the US Food and Drug
Administration (FDA) and completed Phase 1 clinical studies for its first dermatology drug, NPI
32101, a topical form of Nucrysts proprietary silver Rx nanocrystals and completed Phase 1
clinical studies. In September 2004, Nucryst announced the results of the Phase 2a clinical study
of NPI 32101 in a cream formulation in patients with mild to moderate atopic dermatitis. This
double-blind, randomized, placebo-controlled study in 224 adult patients involved 23 clinical sites
across the United States. Patients were treated twice daily for a six-week period with one of two
concentrations of NPI 32101, 0.5% and 1.0%, in a cream formulation or with the vehicle alone. The
purpose of the study was to evaluate the safety and effectiveness of topical NPI 32101 in improving
the signs and symptoms of atopic dermatitis. Efficacy in this study was assessed using three commonly-used statistical methods. Using the
intent-to-treat analysis (including all randomized patients who had at least one post-treatment
efficacy assessment) with last observation carried forward method, statistical significance was not
met in investigator overall assessment of disease improvement. However, statistical significance
was achieved with 1.0% NPI 32101 compared to vehicle using intent-to-treat patients who completed
six weeks of treatment method (i.e. without last observation carried forward data imputation
method). In addition, in patients who completed the study in accordance with the protocol (the per
protocol completers method), statistical significance was achieved with 1.0% NPI 32101. NPI 32101
was well tolerated and there were no serious adverse events. Any adverse events reported were not
unusual for a topical drug and did not occur with a greater statistical frequency than was observed
in the vehicle group. For example, application site reactions occurred in 11.4%, 10.3% and 15.7% in
the vehicle, 0.5% and 1.0% creams, respectively. Additional studies will continue to be conducted
to more fully understand the safety profile of NPI 32101. Findings in this study provided Nucryst with important guidance to optimize the product, protocol
and study design for future clinical trials. Using information obtained from these results, Nucryst
plans to design and conduct additional clinical studies in order to prepare for the next Phase 2
clinical trial and the larger Phase 3 clinical trials of NPI 32101. Phase 3 trials, which involve
hundreds of patients in numerous clinical centers, normally take a year or 8




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more to complete. If favourable results are achieved, Nucryst anticipates submitting a New Drug
Application to the FDA in the 2009 timeframe. In general, the regulatory pathway to FDA product approval for pharmaceuticals includes: Pre-clinical Studies These studies evaluate the safety and potential efficacy of a therapeutic
drug or medical device and are necessary prior to initiation of human clinical studies. Phase 1 Clinical Studies These studies test the product in a small number of volunteers to
determine toxicity (safety), maximum dose tolerance and pharmacokinetic (the absorption,
distribution and excretion of a drug) properties. Phase 2 Clinical Studies These studies assess safety and efficacy in patients. Phase 3 Clinical Studies These studies involve a controlled evaluation in an expanded patient
population at multiple sites to determine longer-term clinical safety and efficacy. It is from the
data of these studies that the benefit/risk relationship is established and the final drug labeling
claims are defined. Prior to market approval, results of these controlled clinical studies are detailed in the filing
of a New Drug Application (NDA) for pharmaceuticals, together with detailed information related
to the drug manufacturing process. The FDA full approval process from Phase 1 to market approval is
expected to take up to seven years. Pre-clinical laboratory studies have demonstrated that NPI 32101 possesses both anti-inflammatory
and broad spectrum antimicrobial activities. This combination of pharmacological properties may
have additional therapeutic uses beyond dermatology. Nucryst has begun preclinical research on the
appropriateness of pursuing other drug opportunities to treat diseases involving inflammation
and/or infection. This broad list will be analyzed and prioritized over the next few years as
further preclinical work is conducted. The Company owns and operates a 43,000 sq. ft. production facility in Fort Saskatchewan, Alberta
and leases 19,000 sq. ft. of office and laboratory space in Wakefield, Massachusetts for
administration, marketing, and pharmaceutical research and development. Depending on product
specifications, the Fort Saskatchewan facility is capable of producing up to US $50 million of burn
or wound care product per year. Nucryst is currently adding an additional production line to this
facility which will increase capacity by approximately 65% by the end of 2005. Nucryst employed 92 people in Canada and the U.S. as at December 31, 2004. Nucryst holds 17 issued patents in the United States, has 23 pending applications in the United
States and numerous corresponding patents and patent applications in various other countries. Where
appropriate, Nucryst also maintains certain proprietary technology as trade secrets. ActicoatTM is a trademark of Smith & Nephew and SILCRYSTTM is a trademark of
Nucryst. DISCONTINUED OPERATIONS Ambeon The Ambeon division, including the Companys wholly owned subsidiary, Neomet Limited, was sold on
January 29, 2004. As a result, this business has been accounted for as a discontinued operation. The Ambeon business segment designed, manufactured and marketed advanced materials and
products under three major product lines: turbine engine materials, electronics materials
and catalyst materials. Principal customers were major jet engine manufacturers and
distributors to the jet engine repair and overhaul market. The Ambeon business segment also
produced materials for use in electromagnetic shielding applications. The Companys powders
were 9




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##### 



incorporated into tapes, gaskets, adhesives and other materials used in the manufacture of
portable devices such as cell phones. Included in the sale transaction were the 62,000 sq. ft. production facility for aerospace and
electronics powders in Fort Saskatchewan, Alberta, and the 13,000 sq. ft. leased facility in
Marple, England, operated by Neomet Limited. INVESTMENTS In January 2005, the Company completed a series of transactions whereby two inactive wholly owned
subsidiary companies participated in a Plan of Arrangement with two widely held publicly traded
companies. This resulted in the reorganization of the participating companies into a single
company and the dilution of the Companys investment to approximately 6.0%. The Companys pro rata
interest in the book value of the recapitalized companies amounted to approximately $2,200.
Subsequently, the company created under the Plan of Arrangement was listed on the Toronto Stock
Exchange. The inactive subsidiaries were previously carried at nominal value and this transaction results in
the Company recording a dilution gain of approximately $2,200 recorded in discontinued operations
in the first quarter of 2005. On February 10, 2005, the Company sold this investment for net
proceeds of approximately $11,500 and will record a gain on sale of investments of approximately
$9,300 in the first quarter of 2005. REVENUE BY SEGMENT Year Ended
    
    
    Year Ended(in thousands of Canadian dollars)
    
    December 31, 2004
    
    
    December 31, 2003Emerging TechnologiesNucryst Pharmaceuticals (Note 1)
    
    $
    31,907
    
    
    $
    16,212iFire Technology (Note 2)
    
    
    
    
    
    
    911Other
    
    
    334
    
    
    
    16232,241
    
    
    
    17,285Discontinued Operations (Note 3)
    
    
    
    
    
    
    30,114Consolidated Operations
    
    $
    32,241
    
    
    $
    47,399
  Note 1

Nucryst revenues are earned from one customer, Smith & Nephew.Note 2

iFire revenues are from a licensing agreement entered into in 2001 which was amortized over 3 years, ending in 2003.Note 3

In January 2004, the Company sold its Ambeon business segment. As a result, it has been accounted for on a discontinued basis. 10




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##### 



SELECTED CONSOLIDATED FINANCIAL DATAThe following table sets forth certain financial information for the Company for 2002 to 2004: Year Ended
    
    
    Year Ended
    
    
    Year Ended(in thousands of Canadian dollars, except per share data)
    
    December 31, 2004
    
    
    December 31, 2003
    
    
    December 31, 2002Revenue from continuing operations
    
    $
    32,241
    
    
    $
    17,285
    
    
    $
    12,627Loss from continuing operations
    
    
    (28,731
    )
    
    
    (37,800
    )
    
    
    (39,737
    )Loss per common share from continuing operations
    
    
    (0.34
    )
    
    
    (0.48
    )
    
    
    (0.51
    )Net loss
    
    
    (25,177
    )
    
    
    (35,440
    )
    
    
    (50,389
    )Net loss per common share
    
    
    (0.30
    )
    
    
    (0.45
    )
    
    
    (0.65
    )Total assets
    
    
    172,263
    
    
    
    144,906
    
    
    
    184,183Total long term debt
    
    
    4,795
    
    
    
    
    
    
    
    Dividends declared
    
    
    
    
    
    
    
    
    
    
    
 As disclosed in Description of the Business  Discontinued Operations, the Ambeon business
segment has been accounted for as a discontinued operation in 2003. Prior years information has
been restated accordingly. CONTRACTUAL COMMITMENTS (in thousands of Canadian dollars)
    
    Payments due by PeriodLess than
    
    
    1 - 3
    
    
    3 - 5
    
    
    More thanAs at December 31, 2004
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLong term debt including interest
    
    $
    4,795
    
    
    $
    
    
    
    $
    4,795
    
    
    $
    
    
    
    $
    Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    3,339
    
    
    
    898
    
    
    
    1,886
    
    
    
    555
    
    
    
    Supplier purchase obligations (Note 1)
    
    
    25,676
    
    
    
    25,676
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities reflected
on the Companys balance sheet
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    33,810
    
    
    $
    26,574
    
    
    $
    6,681
    
    
    $
    555
    
    
    $
    
  Note 1

Supplier purchase obligations include commitments related to capital projects in
progress. SUPPLIES AND RAW MATERIALS Westaim purchases its raw materials from a number of suppliers which are both domestic and
international. There are limited suppliers available for key raw materials for the wound care
products produced at Nucryst. Inventory is maintained at levels such that, in the event of the
loss of a key supplier, production could continue while a new supplier is located and approved. Silver, a key raw material used in Nucrysts wound care products, is a precious metal subject to
commodity market price fluctuations. Nucrysts products are sold on a cost plus mark-up basis and
therefore earnings are not significantly impacted by changes in commodity prices. iFires production of prototype flat panel displays require the use of certain raw materials
currently provided from single vendors. Alternate suppliers are available and delays to the
Companys research and development program would not be expected to be significant in the event
that a new supplier needed to be located. 11




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##### 



iFire is in the development stage of commercializing its flat panel display technology and is
therefore not significantly impacted by fluctuations in the price of materials used in its research
and development. Westaim is provided certain utilities and services from an unrelated company at the Fort
Saskatchewan plant site under long term supply and service agreements. These agreements ensure the
continued supply of these inputs which are required for Westaims operations and which Westaim is
not presently equipped to supply itself. Westaim has the right under these agreements to construct
new facilities to supply its needs from third parties in the open market. ENVIRONMENTAL Westaims businesses are subject to extensive federal, provincial and municipal environmental
statutes and regulations, including those relating to air emissions, wastewater discharges,
contaminated soil and groundwater and the handling and disposal of hazardous substances and wastes.
Westaim believes that its operations are in substantial compliance with these statutes and
regulations, and it has an extensive environmental program in place to comply with environmental
regulations and to maintain its facilities in an environmentally safe condition. The Company anticipates that it will continue to incur capital expenditures and operating costs to
comply, on an ongoing basis, with environmental statutes and regulations. It does not believe that
the costs of compliance will have a material adverse effect on its operations, its competitiveness
or its financial position. However, Westaims businesses involve potential environmental risks,
including the risk of harmful substances entering the environment, which could cause damage or
injury. Environmental liabilities under applicable statutes and regulations may arise in respect of events
which occurred prior to completion of the Viridian Reorganization, when the businesses
transferred to Westaim belonged to Viridian. The agreements under which the Viridian
Reorganization was completed provide that Viridian, or its successors, will bear all costs
associated with environmental liabilities that existed prior to June 1996 for the Fort Saskatchewan
sites, the Calgary, Alberta site, and the Saskatoon, Saskatchewan site. With respect to Westaims
operations in Ontario, the previous owner of iFires trial manufacturing plant has provided a
limited environmental indemnity to Westaim in respect of any pre-existing soil or groundwater
contamination. Westaims operations at its iFire subsidiary are conducted under a Certificate of Approval granted
by the Ministry of the Environment (Ontario) on February 16, 1999, and subsequent amendments
thereto. EMPLOYEES As at December 31, 2004, Westaim and its subsidiaries employed a total of 271 salaried employees.
As at February 28, 2005, Westaim and its subsidiaries employed a total of 286 employees. Westaims
workforce includes a number of highly skilled professional, technical and operational personnel.
Many employees have specialized knowledge and skills and are leaders in their fields. RISK FACTORS The risks faced by the Company are described in Managements Discussion and Analysis on
pages 27 to 30 of the Companys 2004 Annual Report. 12




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##### 



FORWARD-LOOKING STATEMENTS Forward-looking statements involve significant risks, uncertainties and assumptions, and
Westaims actual results could differ materially from those anticipated by these forward-looking
statements for various reasons generally beyond Westaims control. Certain statements contained in this Annual Information Form, as well as other public statements by
Westaim, include forward-looking statements within the meaning of Section 21E of the U.S.
Securities Exchange Act of 1934. The words may, could, should, would, will, suspect,
outlook, believe, anticipate, estimate, expect, intend, plan, and words and
expressions of similar import, are intended to identify forward-looking statements concerning
expected iFire and Nucryst product introductions, performance, market penetration, technology
development, production costs, price advantages and applications; potential size of the market for
iFire and Nucryst technology; the timing of clinical studies and expected date and cost of certain
regulatory approvals,including from U.S., Canadian and European authorities, for Nucryst
pharmaceutical products; the expected commencement of iFire product manufacturing and its
introduction of new products into the market for consumer television products; and the expected
global demand in 2006 for television products, including for flat panel televisions.
Forward-looking statements are not guarantees of future performance. They involve significant
risks, uncertainties and assumptions and the Companys actual results could differ materially from
those anticipated by these forward-looking statements for various reasons generally beyond our
control, including: (i) hurdles in the completion and patenting of the iFire technology; (ii)
complexities associated with developing the flat screen manufacturing process; (iii) market and
competing technology developments which might affect the willingness of potential iFire partners to
manufacture and market iFire products; (iv) cost estimates based upon assumptions which may prove
not to be realistic; (v) delays or problems in receiving regulatory approvals for Nucryst s
products; (vi) market or economic conditions which might affect the products development, clinical
studies and demand for iFires or Nucrysts products; (vii) general economic and financing
conditions which may affect the ability to raise new capital or affect potential partner ability to
contribute financially; (viii) general industry and market conditions and growth rates; and (ix)
the other risk factors set forth above. MANAGEMENTS DISCUSSION AND ANALYSIS The information set out under the heading Managements Discussion and Analysis, on pages 19
through 33 of the Companys 2004 Annual Report, is incorporated herein by reference. CAPITAL STRUCTURE The Companys authorized share capital consists of an unlimited number of common shares,
preferred A shares and preferred B shares. As at December 31, 2004, there were 92,828,054 common
shares outstanding (2003  78,073,386). There were no preferred shares outstanding at December 31,
2004 or December 31, 2003. The Company maintains an employee and director stock option plan under which the Company may grant
options to purchase up to 10,750,000 common shares of the Company at an exercise price equal to the
market price of the Companys common shares at the date of grant. As at December 31, 2004, there
were 4,659,600 options outstanding (2003  5,833,400). 13




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##### 



DIVIDENDS The Companys current policy is to retain its cash reserves to finance capital projects and
business growth. No dividends have been paid in the Companys history. MARKET FOR SECURITIES The Common Shares of Westaim are listed on The Toronto Stock Exchange (TSX) under the symbol
WED and on NASDAQ under the symbol WEDX. TSX
Activity Summary  2004VolumeMonth
    
    $High
    
    
    $Low
    
    
    (thousands of shares)January
    
    
    4.98
    
    
    
    3.45
    
    
    
    8,491February
    
    
    4.90
    
    
    
    3.37
    
    
    
    8,333March
    
    
    3.74
    
    
    
    2.83
    
    
    
    10,936April
    
    
    3.75
    
    
    
    3.30
    
    
    
    9,977May
    
    
    4.30
    
    
    
    3.39
    
    
    
    5,059June
    
    
    4.30
    
    
    
    3.75
    
    
    
    2,450July
    
    
    4.03
    
    
    
    3.25
    
    
    
    6,114August
    
    
    3.55
    
    
    
    3.06
    
    
    
    4,875September
    
    
    3.40
    
    
    
    2.95
    
    
    
    3,651October
    
    
    3.24
    
    
    
    2.80
    
    
    
    2,503November
    
    
    3.38
    
    
    
    2.93
    
    
    
    3,593December
    
    
    3.10
    
    
    
    2.80
    
    
    
    2,711Year
    
    
    4.98
    
    
    
    2.80
    
    
    
    68,693
 ESCROWED SECURITIES To the knowledge of the Company, none of its securities are held in escrow. TRANSFER AGENT AND REGISTRAR Computershare Trust Company of Canada is the Companys transfer agent and registrar, and the
register of transfers of the common shares of the Company are kept in their offices in Calgary,
Alberta. EXPERTS The Companys Shareholders auditors are Deloitte & Touche LLP who have prepared the Auditors
Report to Shareholders on page 35 of the annual report. To the knowledge of the Company, the
partners of Deloitte & Touche LLP beneficially own as a group, directly or indirectly, less than one percent of
any class of securities issued by the Company. 14




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##### 



DIRECTORS AND OFFICERS The following table sets forth the names, residency and principal occupation of the directors
of the Company, and the period of service as a director of the Company. Period of ServiceName and Residency
    
    Principal Occupation at Present5
    
    as DirectorNeil Carragher2,4
Ontario, Canada
    
    Chairman of The Corporate Partnership Ltd.(a management consulting group)
    
    May 1996 to dateIan W. Delaney4
Ontario, Canada
    
    Chairman of Sherritt International Corporation(a nickel/cobalt mining and refining, oil and
gas exploration and production, electricity
generation and coal mining company)
    
    May 1996 to dateRoger Downer4
County Clare, Ireland
    
    President and Vice-Chancellor of the University
of Limerick, Ireland
    
    October 2004 to dateBarry M. Heck
Alberta, Canada
    
    President and Chief Executive Officer of the
Company
    
    January 2003 to dateFrank W. King1,4
Alberta, Canada
    
    President of Metropolitan Investment Corporation(a capital investment and management services
company)
    
    May 1996 to dateEdward M. Lakusta1,3,4
Alberta, Canada
    
    Private Business and Energy Consultant
    
    May 1996 to dateDaniel P. Owen2,3,4
Ontario, Canada
    
    Chairman of Molin Holdings Limited(an investment management company)
    
    May 1996 to dateGuy J. Turcotte2,3,4
Alberta, Canada
    
    President and Chief Executive Officer of
Western Oil Sands Inc.(an oil sands production company)
    
    April 1998 to dateBruce V. Walter1,4
Ontario, Canada
    
    President and Chief Executive Officer of
Dynatec Corporation(a mining, drilling and metallurgical
technologies company)
    
    May 1997 to date
 Notes:  1.

Messrs. King, Lakusta and Walter are members of the Audit Committee.2.

Messrs. Carragher, Owen and Turcotte are members of the Compensation Committee.3.

Messrs. Lakusta, Owen and Turcotte are members of the Environmental, Health and Safety
Committee.4.

Messrs. Carragher, Delaney, King, Lakusta, Owen, Turcotte, Walter and Downer are members of
the Corporate Governance Committee.5.

Each of the Directors has been engaged for more than five years in his present principal
occupation except the following:Barry M. Heck    Prior to becoming President and Chief Executive Officer of the Company
on January 15, 2003, Mr. Barry Heck was Senior Vice President of the Company from January
1997.Guy J. Turcotte    Mr. Turcotte became Chief Executive Officer of Western Oil Sands
Inc. in July 1999 and President in January 2002. He has held the position of Chairman of
Fort Chicago Energy Partners L.P. since December 1997 and was Chief Executive Officer of
that company from December 1997 to December 2002.Bruce V. Walter    Prior to becoming President and Chief Executive Officer of Dynatec
Corporation in January 2005, Mr. Walter was Vice-Chairman of Dynatec Corporation from
March 2002 to December 2004. He was Chief Executive Officer of Four Mile Investments Inc.
from August 1993 and Managing Director, BMO Nesbitt Burns Inc. from February 1999 to
November 2001. 15




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##### 



Each of the Directors will hold office until the next meeting of shareholders or until a
successor is duly elected or appointed. The Westaim Corporation does not have a standing executive
committee. The following table sets forth the names, residency and office of the executive officers of the
Company. Names and Residency
    
    Office with CompanyIan W. Delaney,
Ontario, Canada
    
    Chairman of the Board (non-employee)Barry M. Heck,
Alberta, Canada
    
    President and Chief Executive OfficerG.A. (Drew) Fitch,
Alberta, Canada
    
    Senior Vice President and Chief Financial OfficerAnthony B. Johnston,
Alberta, Canada
    
    Senior Vice PresidentBrian D. Heck,
Alberta, Canada
    
    Vice President, General Counsel and Corporate Secretary
 Each of the officers have been in their current positions and these have been their principal
occupations for the past five years, except the following: Barry M. Heck    Prior to becoming President and Chief Executive Officer of the Company on January
15, 2003, Mr. Barry Heck was Senior Vice President of the Company from January 1997. Brian D. Heck    Before becoming Vice President, General Counsel and Corporate Secretary on March
1, 2004, Mr. Brian Heck was General Counsel and Corporate Secretary of the Company from
February 2003. Mr. Brian Heck was in the private practice of law from November
2000 to March 2004, and has been Counsel to the law firm of Henning Byrne Whitmore & McKall since
June 2001. From November 1999 through October 2000, Mr. Brian Heck practiced in the areas of
corporate law and mergers and acquisitions with the law firm of Bennett Jones LLP. The number and percentage of the Companys common shares beneficially owned, directly or
indirectly, or over which control or direction is exercised by all directors and executive officers
of the Company, as a group, as at March 28, 2005 was 7,487,341 common shares (8.07%). Additional Disclosure for Directors and Executive Officers To the knowledge of the Company, no director or executive officer of the Company is or has been, in
the last ten years, a director or executive officer of an issuer that, while that person was acting
in that capacity, (a) was the subject of a cease trade order or similar order or an order that
denied the issuer access to any exemptions under Canadian securities legislation, for a period of
more than 30 consecutive days, (b) was subject to an event that resulted, after that person ceased
to be a director or executive officer, in the issuer being the subject of a cease trade or similar
order or an order that denied the issuer access to any exemption under Canadian securities
legislation, for a period of more than 30 consecutive days, or (c) or within a year of that person
ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise
with creditors or had a receiver, receiver manager or trustee appointed to hold its assets except
for the following: 16




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##### 



Mr. Owen is a former non-executive director of Acuma International Inc. (Acuma). On February 29,
1996, Acuma made a voluntary assignment into bankruptcy. On June 18, 1996, while Acuma was in
bankruptcy, the Ontario Securities Commission issued a cease trading order against Acuma for its
failure to file annual and interim financial statements within the prescribed time period. The
trustee in bankruptcy of Acuma was discharged on November 5, 2003, upon the winding up of the
estate of Acuma. No director or executive officer of the Company or any person that is the direct or indirect
beneficial owner of, or who exercises control or direction over, more than 10% of the Companys
common shares, or any associate or affiliate of any of the foregoing persons, has had any material
interest, direct or indirect, in any transaction within the three most recently completed financial
years of the Company or during the current financial year of the Company which has materially
affected, or will materially affect, the Company. To the knowledge of the Company, no director or officer of the Company has an existing or potential
conflict of interest with the Company or any of its subsidiaries. AUDIT COMMITTEE The Audit Committee of the Board of Directors consists of three independent members: Frank King,
Chairman; Edward Lakusta; and Bruce Walter. Bruce Walter has been designated as the audit
committee financial expert for the Audit Committee and has been determined by the Board to meet
the audit committee financial expert criteria prescribed by the U.S. Securities and Exchange
Commission and the TSX. The responsibilities and duties of the Audit Committee are set out in the Committees charter text
which is set forth in Appendix A to this Annual Information Form. The Board of Directors believes that the composition of the Audit Committee reflects a high level
of financial literacy and expertise. Each member of the Audit Committee has been determined by the
Board to be independent and financially literate as such terms are defined under Canadian and
United States securities laws. The Board has made these determinations based on the education and
breadth and depth of experience of each member of the Committee. The following is a description of
the education and experience of each member of the Committee that is relevant to the performance of
his responsibilities as a member of the Audit Committee: Frank King    Mr. King holds a B.Sc. in Chemical Engineering from The University of Alberta. Mr.
King is currently President of a private capital investment and management services company. Mr.
King was formerly President and CEO of Turbo Resources Inc. and Chairman and CEO of the XV Olympic
Winter Games in Calgary in 1988 and is currently serving on a number of Canadian public company
boards of directors. In these capacities, Mr. King has had extensive experience overseeing
management responsible for the preparation of financial statements. Edward Lakusta    Mr. Lakusta holds a B.Sc. in Petroleum Engineering from the University of
Oklahoma and graduated in the Advanced Management Program (AMP) from Harvard University. Mr.
Lakusta is currently a private business and energy consultant and was formerly President and COO of
Petro-Canada. Prior to that,
Mr. Lakusta held numerous senior executive positions with Gulf Canada and Gulf Oil Corporation. In
these capacities, Mr. Lakusta has had extensive experience overseeing management responsible for
the preparation of financial statements. Bruce Walter    Mr. Walter holds a B.A. degree from the University of Toronto, LL.B. and M.B.A.
degrees from York University and a Ph.D. from the University of Cape Town. He is currently
President and Chief Executive Officer of Dynatec Corporation, a publicly-traded Canadian company.
Mr. Walters experience includes serving as President and Chief Executive Officer of Plaintree
Systems Inc., a Canadian company publicly-traded in both Canada and the United States; President of
Sherritt Inc., a publicly-traded Canadian company; and a Managing 17




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##### 



Director of BMO Nesbitt Burns, an investment bank. In these capacities, Mr. Walter has had
extensive experience overseeing management responsible for the preparation of financial statements. CODES OF CONDUCT The Company has adopted a Code of Conduct and Ethics for Directors, Officers and Employees, as well
as a Finance Code of Conduct for Chief Executive and Senior Financial Officers. These Codes and
any amendments thereto can be found on the Companys website at www.westaim.com. During the most
recently completed fiscal year, no amendments were made to these Codes, and the Company has granted
no waivers of any of the provisions of these Codes. AUDIT FEES The following table summarizes fees paid to the Companys independent auditors, Deloitte & Touche
LLP, for the years ended December 31, 2004 and December 31, 2003. (in thousands of Canadian dollars)
    
    2004
    
    
    2003Audit fees- Audit of the Companys annual consolidated financial
statements (Note 1)
    
    $
    257.6
    
    
    $
    224.8- Review of short-form prospectus dated July 23, 2004
    
    
    75.1
    
    
    
    - Consultation on financial accounting and reporting
standards
    
    
    51.6
    
    
    
    12.0Tax fees- Tax compliance and consulting
    
    
    91.0
    
    
    
    15.6All other fees
    
    
    18.3
    
    
    
    $
    493.6
    
    
    $
    252.4
  Note 1

Includes reviews of quarterly consolidated financial statements and review/audit of the
Companys subsidiaries or divisions financial statements, and services related to regulatory
filings. PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES BY INDEPENDENT AUDITORS The Audit Committee pre-approves all audit services provided to the Company by its independent
auditors. The Audit Committees policy or practice regarding the pre-approval of non-audit
services is that all such services shall be pre-approved by the Audit Committee as a whole or by
the Chairman of the Audit Committee, who must report all such pre-approvals to the Audit Committee
at its next meeting following the granting thereof. Prior to the granting of any pre-approval, the
Audit Committee or its Chairman, as the case may be, must be satisfied that the performance of the
services in question will not compromise the independence of the independent auditors. 18




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##### 



ADDITIONAL INFORMATION Additional information, including directors and officers remuneration and indebtedness,
principal holders of the Companys securities, options to purchase securities and interests of
insiders in material transactions, where applicable, is contained in the Companys information
circular with respect to its most recent annual meeting of shareholders. Additional financial
information is contained in the Companys comparative financial statements for its most recently
completed fiscal year. The Company undertakes, upon request to the Corporate Secretary, The Westaim Corporation, located
at 10102  114 Street, Fort Saskatchewan, Alberta T8L 3W4, to provide to any person, when the
securities of the Company are in the course of a distribution pursuant to a short form prospectus
or when a preliminary short form prospectus has been filed in respect of a distribution of its
securities:  (i)

one copy of the Companys AIF, together with one copy of any document, or the pertinent pages
of any document, incorporated by reference in the AIF;(ii)

one copy of the Companys comparative financial statements for its most recently completed
financial year together with the accompanying report of the auditors and one copy of the most
recent interim financial statements that have been filed for any period after the end of its
most recently completed financial year;(iii)

one copy of the Companys information circular in respect of its most recent annual meeting
of shareholders that involved the election of directors; and(iv)

one copy of any other documents that are incorporated by reference into the preliminary short
form prospectus or the short form prospectus and are not required to be provided under (i) to
(iii) above; or, at any other time, subject to payment of a reasonable charge if the request is made by a person
who is not a security holder of the Company, one copy of any document referred to in (i), (ii) and
(iii) above. Additional information with respect to the Company may be found on SEDAR at www.sedar.com and the
Companys website at www.westaim.com. 19




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##### 



Appendix A THE WESTAIM CORPORATION AUDIT COMMITTEE CHARTER  A.
    Overview and MandateThe Audit Committee (the Committee) is responsible to the Board of Directors (the Board)
of The Westaim Corporation (the Corporation). The Committee shall review the annual
consolidated financial statements of the Corporation and shall report thereon to the Board
of Directors of the Corporation before such annual consolidated financial statements are
approved by the Board. The Committee also shall perform the duties as described under
Duties and Responsibilities below.It is recognized that the Committee will be acting only within the terms of reference set
out herein and it is not intended that the Committee shall usurp any of the powers or
responsibilities of the Board of Directors of the Corporation as set out in the Business
Corporations Actand/or the By-laws of the Corporation.The Committee may engage independent counsel or other advisors as it determines necessary to
carry out its duties.B.
    Membership and Attendance at Meetings  1.
    The members of the Committee shall consist of not fewer than three (3) independent Directors,
all of whom meet the qualifications required by any applicable regulatory authority, including
The Nasdaq Stock Market, Inc. (NASDAQ) and The Toronto Stock Exchange (the TSX). The
Chairman shall be appointed by the Board of Directors.2.
    Members shall serve one-year terms and may serve consecutive terms.3.
    The auditor of the Corporation is entitled to receive notice of every meeting of the
Committee and be heard thereat.C.
    Duties and ResponsibilitiesThe Committee shall fulfill the following duties arising from its mandate set out above:1.
    Review and assess the adequacy of this charter on an annual basis, or more often if deemed
appropriate.2.
    Review the annual consolidated financial statements of the Corporation and the notes thereto
following the examination thereof by the auditors and prior to their approval by the directors
and report to the directors thereon.3.
    Review and approve the quarterly financial statements, notes thereto and quarterly management
discussion and analysis (MD&A) and related press releases of the Corporation prior to their
release. 20




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4.
    Review the annual MD&A, and other public disclosure documents and related press releases,
including a prospectus prior to their approval by the directors.5.
    Review, and approve, the planned scope of the examination of the annual and quarterly
consolidated financial statements and all related audit activities by the auditors of the
Corporation, including expected related audit fees.6.
    Review the accounting principles and practices to be applied and followed by the Corporation
during the fiscal year and any significant changes from those applied and followed during the
previous year.7.
    Review the adequacy of the systems of internal accounting and audit policies, practices and
controls established by the Corporation, and discuss with the auditors the results of their
reviews and reports.8.
    Review all litigation and claims involving or against the Corporation which could materially
adversely affect its financial position and which the auditors or any officer of the
Corporation may refer to the Committee.9.
    Ensure the auditors ultimate accountability to the Board of Directors and the Committee as
representatives of the shareholders and as such representatives, to evaluate the performance
of the auditor and review and report to the directors regarding the nomination and the
remuneration and other material terms of the engagement of the auditors, and the performance
by the auditors thereunder, and to recommend to the shareholders the reappointment or
replacement of the auditor.10.
    Ensure that the auditor submits on a periodic basis to the Committee, a formal written
statement delineating all relationships between the auditor and the Corporation, consistent
with Canadian and U.S. auditor independence standards, and to review such statement and to
actively engage in a dialogue with the auditor with respect to any undisclosed relationships
or services that may impact on the objectivity and independence of the auditor, and to review
the statement and the dialogue with the Board of Directors and recommend to the Board of
Directors appropriate action to ensure the independence of the auditor.11.
    Provide a line of communication between the auditors and the Board of Directors.12.
    Meet with the auditors at least once per quarter without management present to allow a candid
discussion regarding any concerns the auditors may have and to resolve any disagreements
between the auditor and management regarding the Corporations financial reporting.13.
    Review and pre-approve non-audit services provided by the auditors.14.
    Review the annual Internal Audit Plan and review all reports arising from such internal audit
activity.15.
    Review and approve all related party transactions.16.
    Review the status of taxation matters of the Corporation and its major subsidiaries.17.
    Review the short term investment strategies respecting the cash balance of the Corporation.18.
    Review the hedging strategies of the Corporation.19.
    Review the adequacy of all insurance policies maintained by the Corporation. 21




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20.
    Receive, retain, investigate and respond to internal and external complaints regarding
accounting, internal accounting control or audit matters. The Committee has established
procedures for the handling of such complaints and for the confidential, anonymous submission
of such complaints by employees.21.
    The Committee shall review regular reports from management and others with respect to the
Corporations compliance with laws and regulations having a material impact on the financial
statements of the Corporation.22.
    The Committee shall review annually the Corporations reserves with respect to environmental,
health and safety matters.23.
    Conduct or undertake such other duties as may be required from time to time by any applicable
regulatory authorities, including NASDAQ and the TSX.D.
    Meetings  1.
    Meetings of the Committee are held as required and at least quarterly.2.
    Committee meetings may be called by the Committee Chairman or by a majority of the Committee
members.3.
    A quorum for the transaction of business at any meeting of the Committee is a majority of
appointed members.4.
    Meetings may be held by way of telephone conference call.5.
    A written resolution signed by all Committee members entitled to vote on that resolution at a
meeting of the Committee is as valid as one passed at a Committee meeting.6.
    The Corporate Secretary will ensure that minutes of the proceedings of all meetings of the
Committee are maintained and available to the Board when requested.E.
    Reporting  The Committee shall report on its review of the audited consolidated financial statements of
the Corporation to the Board of Directors of the Corporation prior to the approval of
financial statements by the Board of Directors. In addition, the Chairman of the Committee
shall, when deemed necessary or when requested by the Chairman of the Board of Directors,
report to the Board of Directors from time to time on the activities of the Committee. 22