Exhibit 13.4

 

**TRANSALTACORPORATION**

** **

**RECONCILIATIONTO UNITED STATES**

**GENERALLYACCEPTED ACCOUNTING PRINCIPLES**

** **

** **

**DECEMBER31, 2009**

 

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**INDEPENDENTAUDITORS’ REPORT ON RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTINGPRINCIPLES**

 

**To the Board of Directors ofTransAlta Corporation**

 

On February 23, 2010, we reported on theconsolidated balance sheets of TransAlta Corporation as at December 31,2009 and 2008 and the consolidated statements of earnings and retainedearnings, comprehensive income and cash flows for each of the years in thethree year period ended December 31, 2009 (the “Consolidated FinancialStatements”) which are included in the Annual Report on Form 40-F.

 

In connection with our audits conducted in accordancewith Canadian generally accepted auditing standards and the standards of thePublic Company Accounting Oversight Board (United States) of the ConsolidatedFinancial Statements, we also have audited the related supplemental note entitled“Reconciliation to United States Generally Accepted Accounting Principles”included in the Form 40-F. This supplemental note is the responsibility ofthe Corporation’s management. Our responsibility is to express an opinion onthis supplemental note based on our audit.

 

In our opinion, such supplemental note, whenconsidered in relation to the Consolidated Financial Statements taken as awhole, presents fairly, in all material respects, the information set forththerein.

 

As discussed in the supplemental note entitled“Reconciliation to United States Generally Accepted Accounting Principles”, theCorporation changed its method of accounting for business combinations andnon-controlling interest by the adoption of the guidance originally issued bythe Financial Accounting Standards Board (FASB) Statement No. 141(R), *Business Combinations* (codified in FASBAccounting Standards Codification (ASC) Topic 805, *Business Combinations),* and FASB Statement No. 160, *Noncontrolling Interests in Consolidated FinancialStatements*, an amendment of Accounting Research Bulletin (ARB)No. 51 (codified in FASB ASC Topic 810, *Consolidation)*,both effective January 1, 2009.

 

 

Calgary, Canada

February 23, 2010

Chartered Accountants

 

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**RECONCILIATIONTO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES**

 

Thisfinancial information has been prepared in accordance with Canadian GenerallyAccepted Accounting Principles (“Canadian GAAP”), which, in most respects,conform to the United States Generally Accepted Accounting Principles (“U.S.GAAP”). This information does not include all of the disclosures included inTransAlta Corporation’s annual consolidated financial statements. Accordingly,this information should be read in conjunction with the Corporation’s mostrecent annual audited consolidated financial statements. All amounts herein arein millions of Canadian dollars unless otherwise noted.

 

Thematerial differences to reconcile Canadian GAAP to U.S. GAAP are described below:

 

**A. EARNINGS, EARNINGS PER SHARE (“EPS”) ANDCOMPREHENSIVE INCOME INFORMATION**

 
| **Year ended Dec. 31**                                                              | * *   | *Reconciling  items* | ** ** | **2009**   | 2008   | 2007   |
|------------------------------------------------------------------------------------------|------------|----------------------|------------|------------|--------|--------|
|                                                                                     |       |                 |       |       |   |   |   |   |   |
| Net earnings -  Canadian GAAP                                                            |       |                 | ** ** | **181**    |   | 235    |   | 309 |   |
| Net earnings  attributable to non-controlling interests                                  |       |                 | ** ** | **38**     |   | 61     |   | 48 |   |
| Revenues, net of  tax                                                                    | * *   | *X*                  | ** ** | **(21**    | **)**  | -      |   | - |   |
| Pension cost, net  of tax                                                                | * *   | *V*                  | ** ** | **(6**     | **)**  | (6     | ) | (5 | ) |
| Start-up costs,  net of tax                                                              | * *   | *III*                | ** ** | **5**      |   | -      |   | - |   |
| Share-based  payment, net of tax                                                         | * *   | *VII*                | ** ** | **(1**     | **)**  | 1      |   | - |   |
| Sale of minority  interest in Kent Hills                                                 | * *   | *VIII*               | ** ** | **(1**     | **)**  | -      |   | - |   |
| Acquisition-related  costs, net of tax                                                   | * *   | *IX*                 | ** ** | **(26**    | **)**  | -      |   | - |   |
| **Net  earnings - U.S. GAAP**                                                            |       |                 | ** ** | **169**    |   | 291    |   | 352 |   |
| Net earnings  attributable to non-controlling interests - U.S. GAAP                      |       |                 | ** ** | **38**     |   | 61     |   | 48 |   |
| **Net  earnings attributable to TransAlta - U.S. GAAP**                                  |       |                 | ** ** | **131**    |   | 230    |   | 304 |   |
| ** **                                                                               | ** ** |                 |       | ** ** |   |   |   |   |   |
| **Weighted  average number of common shares outstanding in****the period**               | ** ** |                 |       | **201**    |   | 199    |   | 202 |   |
| ** **                                                                               | ** ** |                 |       | ** ** |   |   |   |   |   |
| **Net  earnings attributable to TransAlta per share, basic and****diluted  - U.S. GAAP** | ** ** |                 |       | **0.65**   |   | 1.16   |   | 1.50 |   |
| ** **                                                                               | ** ** | ** **           |       |       |   |   |   |   |   |
| **Year ended Dec. 31**                                                              | * *   | *Reconciling  items* | ** ** | **2009**   | 2008   | 2007   |
| ** **                                                                               | ** ** | ** **           |       | ** ** |   |   |   |   |   |
| **Net  earnings - U.S. GAAP**                                                            |       |                 | ** ** | **169**    |   | 291    |   | 352 |   |
| ** **                                                                               |       |                 | ** ** | ** ** |   |   |   |   |   |
| **Other  comprehensive income (loss) - Canadian GAAP**                                   |       |                 | ** ** | **246**    |   | 306    |   | (3 | ) |
| Difference in  cumulative translation adjustment between U.S. and Canadian GAAP          |       |                 |       | -          |   | -      |   | 7 |   |
| Employee future  benefits                                                                | * *   | *V*                  | ** ** | **(22**    | **)**  | (18    | ) | 12 |   |
| Cash flow hedges                                                                         | * *   | *I*                  | ** ** | **(12**    | **)**  | 7      |   | - |   |
| **Comprehensive  income - U.S. GAAP**                                                    |       |                 | ** ** | **381**    |   | 586    |   | 368 |   |
| Comprehensive  income attributable to non-controlling interests - U.S. GAAP              | ** ** |                 |       | **38**     |   | 61     |   | 48 |   |
| **Comprehensive  income attributable to TransAlta - U.S. GAAP**                          |       |                 | ** ** | **343**    |   | 525    |   | 320 |   |

 

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**B.  BALANCESHEET INFORMATION**

 
| ** **                                     | * * | * *                     | ** ** | **2009**           |       | 2008           |       |
|------------------------------------------------|----------|------------------------------|------------|--------------------|------------|----------------|------------|
| ** **                                     | * * | * *                     | ** ** | ** **         |       |           |       |   |   |   |   |
| **As at Dec. 31**                         | * * | *Reconciling  items*         | ** ** | **Canadian  GAAP** | ** ** | **U.S.  GAAP** |       | Canadian  GAAP *(1)*  |   | U.S. GAAP *(1)** * |
| **Assets**                                     | * * | ** **                   | ** ** | ** **         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property,  plant and equipment, net            | * * | *I*                          | ** ** | **7,578**          | ** ** | **7,594**      |       | 6,034 |   | 6,024 |   |
| Goodwill                                       | * * | *IX*                         | ** ** | **434**            | ** ** | **409**        |       | 142 |   | 142 |   |
| Net  risk management assets                    | * * | *X*                          | ** ** | **245**            | ** ** | **216**        |       | 171 |   | 171 |   |
| (including  current portion)                   | * * |                         |       |               |       |           |       |   |   |   |   |
| Other  assets                                  | * * | *III*                        | ** ** | **102**            | ** ** | **102**        |       | 39 |   | 34 |   |
|                                           | * * |                         |       |               |       |           |       |   |   |   |   |
| **Liabilities**                                | * * |                         |       |               |       |           |       |   |   |   |   |
| Long-term  debt                                | * * | * *                     | ** ** | **4,411**          | ** ** | **4,411**      |       | 2,564 |   | 2,566 |   |
| Deferred  credits and other liabilities        | * * | *V*                          | ** ** | **136**            | ** ** | **254**        |       | 131 |   | 212 |   |
| Net  future or deferred income tax liabilities | * * | *I, II,  V, VII, IX, X* | ** ** | **473**            | ** ** | **438**        |       | 359 |   | 331 |   |
| (including  current portion)                   | * * |                         |       |               |       |           |       |   |   |   |   |
| Non-controlling  interests                     | * * | *VIII*                       | ** ** | **478**            | ** ** | **-**          |       | 469 |   | - |   |
|                                           | * * |                         |       |               |       |           |       |   |   |   |   |
| **Equity**                                     | * * |                         |       |               |       |           |       |   |   |   |   |
| Contributed  surplus                           | * * | *IV*                         | ** ** | **-**              | ** ** | **133**        |       | - |   | 132 |   |
| Retained  earnings                             | * * | *III,  IV, V, VII, VIII*     | ** ** | **634**            | ** ** | **436**        |       | 688 |   | 540 |   |
| Accumulated  other comprehensive income        | * * | *I,  V*                      | ** ** | **126**            | ** ** | **69**         |       | 61 |   | 7 |   |
| Non-controlling  interests                     | * * | *VIII*                       | ** ** | **-**              | ** ** | **478**        |       | - |   | 469 |   |

 

(1)    Certain of the comparative figures havebeen reclassified to conform with the current year’s presentation. Suchreclassification did not impact previously reported net earnings or retainedearnings. Refer to Note 2 of the annual audited consolidated financialstatements.

 

**C.  RECONCILING ITEMS**

 

**I.  CashFlow Hedges**

 

UnderCanadian GAAP, certain gains and losses on derivatives designated as cash flowhedges can be included in the carrying amount of the underlying hedged item.Under U.S. GAAP, these gains and losses must be reclassified to OtherComprehensive Income (“OCI”).  Inaddition, amounts from cash flow hedges must be reclassified from OCI into netearnings in the same period during which the underlying hedged item affects netearnings.

 

**II.  IncomeTaxes**

 

Futureincome taxes under Canadian GAAP are referred to as deferred income taxes underU.S. GAAP.

 

Deferredincome taxes under U.S. GAAP are as follows:

 
| **As at Dec. 31**                                   | ** ** | **2009**   | 2008       |
|----------------------------------------------------------|------------|------------|------------|
|                                                     |       |       |       |   |   |
| Future  income tax liabilities (net) under Canadian GAAP | ** ** | **(473**   | **)**      | (359 | ) |
| Start-up  costs                                          | ** ** | **-**      |       | 3 |   |
| Pensions                                                 | ** ** | **32**     |       | 23 |   |
| Cash  flow hedges                                        | ** ** | **(4**     | **)**      | 2 |   |
| Embedded  derivatives                                    | ** ** | **7**      |       | - |   |
| Deferred  income tax liabilities (net) under U.S. GAAP   | ** ** | **(438**   | **)**      | (331 | ) |
|                                                     |       |       |       |   |   |
| Comprised  of the following:                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| **As at Dec. 31**                                   | ** ** | **2009**   |       | 2008 |   |
|                                                     |       |       |       |   |   |
| Current  deferred income tax assets                      | ** ** | **17**     |       | 3 |   |
| Long-term  deferred income tax assets                    | ** ** | **243**    |       | 271 |   |
| Current  deferred income tax liabilities                 | ** ** | **(57**    | **)**      | (9 | ) |
| Long-term  deferred income tax liabilities               | ** ** | **(641**   | **)**      | (596 | ) |
| ** **                                               |       | **(438**   | **)**      | (331 | ) |

 

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OnJan. 1, 2007, TransAlta adopted Financial Accounting Standards Board (“FASB”)Interpretation 48, *Accounting for Uncertaintyin Income Taxes* (“FIN 48”), now contained in FASB AccountingStandards Codification (“ASC”) Topic 740, *Income Taxes.*As of Dec. 31, 2009, the Corporation has $111 million of unrecognized taxbenefits (2008 - $120 million). These unrecognized tax benefits, if recognized,would affect the effective tax rate. No material increase or decrease inunrecognized tax benefits is expected in the next 12 months.

 

Thereconciliation between the opening and closing unrecognized tax benefits isprovided below:

 
| **Accounting for Uncertainty in Income Taxes**                     |       |    |       |
|--------------------------------------------------------------------|------------|---------|------------|
| Balance,  Dec. 31, 2007                                       |       | 135     |       |
| Decrease  as a result of tax positions taken during a prior period |       | (15     | )          |
| Balance,  Dec. 31, 2008                                       |       | 120     |       |
| Increase  as a result of tax positions taken during a prior period |       | 3       |       |
| Decrease  as a result of settlements with taxation authorities     |       | (12     | )          |
| **Balance, Dec. 31, 2009**                                    | ** ** | **111** | ** ** |

 

TheCorporation’s income tax filings are subject to audit examination by taxationauthorities.  As at Dec. 31, 2009,the tax years that remain subject to examination in major jurisdictions are:1997 – 2009 in Canada, 2006 – 2009 in the U.S., 2003 – 2008 in Mexico, and 1996-2009in Australia.

 

TheCorporation’s accounting policy is to include interest and penalties as acomponent of income taxes.  As at Dec. 31,2009, the amount of interest and penalties included in deferred income taxliabilities is $5 million (2008 - $8 million).

 

**III. Start-Up Costs**

 

Starting in 2009, under Canadian GAAP start up costsare no longer deferred and amortized. Consequently, the adjustment for start-up costs that was previouslyrecorded to reconcile Canadian GAAP to U.S. GAAP has been determined to beunnecessary.

 

**IV. Contributed Surplus**

 

In1998, the Corporation transferred generation assets to one of its subsidiaries,TA Cogen. TA Power, an unrelated entity, concurrently subscribed to a minorityinterest in TA Cogen.  The fair valuepaid by TA Cogen for the assets exceeded their historical carrying values.  For Canadian GAAP, the Corporation recognizeda portion of this difference, to the extent it was funded by TA Power’sinvestment in TA Cogen, as a gain on disposition. TA Power held an option toresell its interest in TA Cogen to the Corporation in 2018, but in 2003, TAPower’s option to resell these units was eliminated and the unamortized balanceof the gain was recognized in income.

 

UnderFASB Accounting Research Bulletin (“ARB”) No. 51, *ConsolidatedFinancial Statements,*now contained in FASB ASC Topic 810, *Consolidation,* the option initially held by TA Power topotentially resell TA Cogen units to the Corporation in 2018 causes the excessof the consideration paid by TA Power over the Corporation’s historicalcarrying value in these assets to be characterized as contributed surplus.

 

**V.  PensionPlans**

 

Anadditional difference between Accumulated Other Comprehensive Income (“AOCI”)under Canadian and U.S. GAAP is related to the adoption of Financial AccountingStandards No. 158 (“SFAS 158”), *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans*, nowcontained in FASB ASC Topic 715, Compensation – Retirement Benefits. Under U.S.GAAP, gains and losses recognized on pension plans and post-retirement benefitsare recorded to OCI but are charged to earnings as services are rendered underCanadian GAAP. Consequently, the pension benefit cost under U.S. GAAP is impactedby the amounts amortized through AOCI which does not affect the pension benefitcost under Canadian GAAP. The pension benefit cost is adjusted for thisdifference.

 

Pre-taxamounts recognized in AOCI are as follows:

 
| **Year ended Dec. 31**                                 | ** ** | **2009**              | 2008                |
|-------------------------------------------------------------|------------|-----------------------|---------------------|
|                                                        | ** ** | **Pension  benefits** | **Other  benefits** | **Total** | Pension  benefits | Other  benefits | Total |
| Net  actuarial loss                                         | ** ** | **(80**               | **)**               | **(11** | **)** | **(91** | **)** | (60 | ) | (1 | ) | (61 | ) |
| Past  service cost                                          | ** ** | **(2**                | **)**               | **(2** | **)** | **(4** | **)** | (2 | ) | (3 | ) | (5 | ) |
| Difference  between Canadian and U.S. GAAP included in AOCI | ** ** | **(82**               | **)**               | **(13** | **)** | **(95** | **)** | (62 | ) | (4 | ) | (66 | ) |

 

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Pre-taxamounts recorded in Other Comprehensive Income (“OCI”) were as follows:

 
| **As at Dec. 31**                            | ** ** | **2009**              | ** **          |
|---------------------------------------------------|------------|-----------------------|---------------------|
|                                              | ** ** | **Pension  benefits** | **Other  benefits** | **Total** |
| Amortization  of net loss from AOCI to net income | ** ** | **(1**                | **)**               | **(1** | **)** | **(2** | **)** |
| Net  actuarial loss                               | ** ** | **24**                | ** **          | **12** | ** ** | **36** | ** ** |
|                                                   |            |                       |                     |  |  |  |  |  |

 

Theestimated net actuarial loss and prior service cost for the defined benefitpension plans that will be amortized from AOCI into net periodic benefit costover the next fiscal year are $3 million and nil, respectively.  The estimated net actuarial loss and priorservice cost for the other defined benefit postretirement plans that will beamortized from AOCI into net periodic benefit cost over the next fiscal year are$1 million and nil, respectively.

 

The components of AOCI under U.S. GAAP for adjustmentsas disclosed in reconciling items I and V are as follows:

 
| **Year ended Dec. 31**                                                                                     | ** ** | **2009** | 2008   |
|-----------------------------------------------------------------------------------------------------------------|------------|----------|--------|
| Cumulative  unrealized gains (losses) on translating self-sustaining foreign operations,  net of hedges and tax | ** ** | **(63**  | **)**  | 6 |   |
| Cumulative  unrealized gains (losses) on cash flow hedges, net of tax                                           | ** ** | **201**  |   | 48 |   |
| Pensions,  net of tax                                                                                           | ** ** | **(69**  | **)**  | (47 | ) |
| **Accumulated other comprehensive income**                                                                      | ** ** | **69**   |   | 7 |   |

 

**VI.  JointVentures**

 

Inaccordance with Canadian GAAP, joint ventures are required to beproportionately consolidated regardless of the legal form of the entity.  Under U.S. GAAP, incorporated joint venturesare required to be accounted for by the equity method.  However, in accordance with practices prescribedby the SEC, the Corporation, as a Foreign Private Issuer, has elected to accountfor incorporated joint ventures using the proportionate consolidation method.See disclosure of the amounts proportionately consolidated in Note 32 of theCorporation’s 2009 annual audited consolidated financial statements.

 

**VII. Share-Based Payment**

 

UnderU.S. GAAP, the Corporation is required to measure the cost of employee servicesreceived in exchange for an award of cash-settled instruments based on thecurrent fair value of the award. The fair value of the award will be remeasuredsubsequently at each reporting date through the settlement date.  Changes in fair value during the serviceperiod will be recognized as compensation expense over that period.  FAS 123(R), now contained in FASB ASC Topic718, *Compensation — Stock Compensation,* alsorequires that the adjusted fair value of these instruments be classified as aliability instrument rather than as an equity instrument. The difference inmeasurement had no impact on the financial information presented herein as itwas immaterial.

 

**VIII.  Saleof Minority Interest**

 

During the second quarter of 2009, theCorporation sold 17 per cent of its Kent Hills project to Natural ForcesTechnologies Inc. and recorded a pre-tax gain of $1 million in accordance withCanadian GAAP.  FAS 160, *Noncontrolling Interests in Consolidated Financial Statements*,now contained in FASB ASC Topic 810,*Consolidation*,requires that any difference between the fair value of the considerationreceived and the amount by which the non-controlling interest is adjustedshould be recognized in equity attributable to the parent.  As at Dec. 31, 2009, $1 million of otherincome has been reclassified and included in retained earnings.

 

**IX. Acquisition of Canadian Hydro Developers**

 

**On Oct. 23, 2009, TransAlta completed theacquisition and payment for 87 percent of the outstanding common shares ofCanadian Hydro Developers. On Nov. 4, 2009, TransAlta acquired theremaining 13 percent of the issued and outstanding shares. The total cashconsideration paid was $755 million. This acquisition resulted in acquiredintangibles of $176 million which have a weighted average amortization periodof 19 years and goodwill of $278 million. No amounts of goodwill weredeductible for tax purposes. The results of Canadian Hydro Developers areincluded in the consolidated financial statements of the Corporation from theacquisition date of Oct. 23, 2009.**

** **

**Under U.S. GAAP, FASB ASC Topic 805, *Business Combinations,*the acquisition method is applied wherethe identifiable assets acquired and liabilities assumed are measured at theiracquisition-date fair value. Acquisition-related costs of $26 million, net oftax were expensed under U.S. GAAP rather than capitalized, as was done underCanadian GAAP.**

 

Throughthe acquisition of Canadian Hydro Developers, TransAlta will have unparalleledoperational and development expertise, a robust growth portfolio, and a strongbalance sheet. By expanding the wind operations, TransAlta will be wellpositioned as a North American leader in renewable energy.

 

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Thedetails of the cash consideration are as follows:

 

**Costof the transaction**
| Total  shares acquired (millions) |       | 143.8   |       |
|-----------------------------------|------------|---------|------------|
| Price  per share                  |       | 5.25    |       |
| **Total cash consideration**      | ** ** | **755** | ** ** |

 

Thefollowing table summarizes the estimated fair values of assets acquired andliabilities assumed as of the acquisition date:

 
| **Assets:**                            |       |       |       |    |       |
|----------------------------------------|------------|------------|------------|---------|------------|
| Current  assets                        | ** ** | **49**     |       |    |       |
| Property,  plant, and equipment        | ** ** | **1,291**  |       |    |       |
| Intangible  assets                     | ** ** | **176**    |       |    |       |
| Development  costs                     | ** ** | **22**     |       |    |       |
| Goodwill                               | ** ** | **278**    |       |    |       |
| Total  assets acquired                 |       |       |       | 1,816   |       |
| **Liabilities:**                       |       |       |       |    |       |
| Current  liabilities                   | ** ** | **54**     |       |    |       |
| Current  risk management liabilities   | ** ** | **6**      |       |    |       |
| Long-term  risk management liabilities | ** ** | **34**     |       |    |       |
| Long-term  debt                        | ** ** | **931**    |       |    |       |
| Deferred  income tax liabilities       | ** ** | **33**     |       |    |       |
| Asset  retirement obligation           | ** ** | **3**      |       |    |       |
| Total  liabilities assumed             |       |       |       | 1,061   |       |
| **Total purchase price**               | ** ** | ** ** | ** ** | **755** | ** ** |

 

AlthoughTransAlta does not anticipate material changes to this preliminary allocation,the values may change when the evaluation of fair value information iscomplete.

 

Thefollowing table reflects the operating results of Canadian Hydro Developers thathave been included in the consolidated financial statements since the date ofacquisition:

 
| **For the period ended Dec. 31, 2009** | ** ** | **Total**  |
|---------------------------------------------|------------|------------|
| Revenue                                     | ** ** | **29**     | ** ** |
| Net  earnings                               | ** ** | **–** | ** ** |

 

Thefollowing table reflects pro forma operating results for the Corporation,assuming the acquisition of Canadian Hydro Developers occurred as of thebeginning of each of the periods presented:

 
| **Year ended Dec. 31** | ** ** | **2009**  | 2008   |
|-----------------------------|------------|-----------|--------|
| Revenue                     | ** ** | **2,855** |   | 3,190 |   |
| Net  earnings               | ** ** | **162**   |   | 261 |   |

 

**X.  EmbeddedDerivatives**

 

Under U.S. GAAP, FASB ASCTopic 815, *Derivatives and Hedging,*an embeddedforeign currency derivative instrument is required to be separated from itshost contract when the currency in which the price of the related good orservice that is acquired or delivered is not routinely denominated ininternational commerce and is not the functional currency of the parties to thecontract. Under Canadian GAAP, the separation of the embedded derivative is notrequired since the currency of the embedded foreign currency derivativeinstrument is commonly used in contracts to purchase or sell non-financialitems in the economic environment in which the transaction takes place.  As a result of the difference in standardsfor recognizing embedded foreign currency derivatives, TransAlta was requiredto separately record an embedded derivative under U.S. GAAP.  The amount of the separated embedded foreigncurrency derivative instrument recognized is $29 million and the unrealizedloss of $21 million, net of tax has been recognized in net earnings.

 

**XI.  PrivateEquities**

 

TransAltaholds private equity funds in its Canadian pension plan that are entered intounder ten year agreements at which time they are redeemed. These privateequities seek to provide a return to investors with the following strategies: NorthPole Capital Investments Limited Class A Series 1 is a multi-strategyhedge fund that seeks to inexpensively acquire volatility from multiple, uncorrelatedsources in order to produce absolute returns for investors in all marketconditions. Lumira Capital I Limited Partnership holds a mixture of public andprivate companies in the life sciences sector. Novacap II, L.P. operates aventure capital business specializing in the manufacturing sector andtechnology sector. Northleaf Global Private Equity Investors I seeks to build adiversified portfolio of investments in private equity funds managed by fundmangers with a focus on investments in venture capital and buyout funds,principally in North America and Western Europe.

 

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**D.  CHANGESIN ACCOUNTING STANDARDS**

 

**I.  CurrentAccounting Changes**

 

1. Decreases in Ownershipof a Subsidiary

 

OnDec. 31, 2009, the Corporation adopted ASU 2010-02, *Accounting and Reporting for Decreases in Ownership of a Subsidiary — aScope Clarification*, now contained in FASB ASC Topic 810, *Consolidation.* Thisamendment clarifies scope and disclosure requirements for a decrease inownership of a subsidiary when an entity ceases to have a controlling interestin the subsidiary. The implementation of this standard did not have an impacton this financial information.

 

2. Measuring Fair Value ofCertain Alternative Investments

 

OnDec. 31, 2009, the Corporation adopted ASU 2009-12, *Investments in Certain Entities That Calculate Net Asset Value perShare (or Its Equivalent)*. ASU 2009-12 amends FASB ASC Topic 820, *Fair Value Measurements and Disclosure*, to provideadditional measurement guidance and disclosures on the fair value of certainalternative investments such as private equity. Disclosure required as a resultof adopting this standard can be found in Note XI of this financial information.

 

3.Employers’ Disclosure about Pensions and Other Postretirement Benefits

 

OnDec. 31, 2009, the Corporation adopted FASB Staff Position FAS 132(R)-1, *Employers’ Disclosures about Postretirement Benefit Plan Assets*,to provide increased disclosure on the assets of a defined benefit pension orother postretirement plan. FSP FAS 132(R)-1 is now contained in FASB ASC Topic715, *Compensation — Retirement Benefits.*  Disclosure that meets the requirement of thisstandard can be found in Note 31 of the Corporation’s 2009 annual audited consolidatedfinancial statements.

 

4. FASB AccountingStandards Codification TM

 

On Sept. 30, 2009, theCorporation adopted Accounting Standards Update (“ASU”) No. 2009-01, *The FASB Accounting Standards Codification**TM** and the Hierarchy of Generally AcceptedAccounting Principles*, previously issued as the Statement of Financial Accounting Standard No. 168.The Codification is approved as the single source of authoritativenongovernmental U.S. GAAP which does not change current U.S. GAAP, but isintended to simplify user access to all authoritative U.S. GAAP by providingall the authoritative literature related to a particular topic in one place.All existing accounting standard documents will be superseded and all otheraccounting literature not included in the Codification will be considerednon-authoritative.

 

5.Measuring Liabilities at Fair Value

 

OnSept. 30, 2009, the Corporation adopted ASU 2009-05, *Measuring Liabilities at Fair Value*. ASU 2009-05 amends FASBASC Topic 820, *Fair Value Measurements and Disclosure*,previously issued as FSP, FAS 157-f, *Measuring Liabilities atFair Value*, for the fair value measurement of liabilities when aquoted price in an active market is not available. The implementation of thisstandard did not have an impact on this financial information.

 

6.Accounting for Own-Share Lending Arrangements

 

OnJuly 1, 2009, the Corporation adopted Emerging Issues Task Force (“EITF”)Issue No. 09-1, *Accounting for Own-ShareLending Arrangements in Contemplation of Convertible Debt Issuance*,now contained in ASU 2009-15. The issue requires an entity to initially measurea share-lending arrangement at fair value and for it to be treated as anissuance cost, and to exclude the shares borrowed under the share-lendingarrangement from basic and diluted EPS. ASU 2009-15 also requires the entity torecord a loss in current earnings equal to the fair value of the sharesoutstanding less any recoveries if it becomes probable that the counterpartywill default on the arrangement. The implementation of this standard did nothave an impact on this financial information.

 

7.Subsequent Events

 

OnJune 30, 2009, the Corporation adopted FASB Statement No. 165, *Subsequent Events*, now contained in FASB ASC Topic 855, *Subsequent Events*, which establishes general standards ofaccounting for and disclosure of events that occur after the balance sheet datebut before financial statements are issued or available to be issued.  Disclosure that meets the requirement of thisstandard can be found in Note 33 of the Corporation’s 2009 annual auditedconsolidated financial statements.

 

8.Fair Value of Financial Instruments Disclosures

 

OnJune 30, 2009, the Corporation adopted FASB Staff Position FAS 107-1,Interim *Disclosures about Fair Value of FinancialInstruments*, now contained in FASB ASC Topic 825, *Financial Instruments*, which requires disclosures about fairvalue of financial instruments for interim and annual reporting periods. As aresult of adopting this standard, summarized financial information on financialinstruments provided at annual reporting periods is additionally disclosed atinterim reporting periods.

 

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9.Disclosure on Determining Fair Value When Market Value Declines

 

OnJune 30, 2009, the Corporation adopted FASB Staff Position FAS 157-4, *Determining Fair Value When the Volume and Level of Activity for theAsset or Liability Have Significantly Decreased and Identifying TransactionsThat Are Not Orderly*, now contained in FASB ASC Topic 820*, Fair Value Measurements and Disclosures*, which providesguidance for estimating the fair value when the volume of activity for theasset or liability has significantly decreased. Topic 820 requires disclosureof any change in the valuation technique used to evaluate fair value when thevolume has significantly decreased such as moving from a market approach to anincome approach or moving to a multiple valuation technique. Additionalguidance is provided to identify when a transaction is a forced liquidation ordistressed sale. The implementation of this standard did not have an impact onthis financial information.

 

10.Recognition and Presentation of Other-Than-Temporary Impairments

 

OnJune 30, 2009, the Corporation adopted FASB Staff Position FAS 115-2 andFAS 124-2, *Recognition and Presentation ofOther-Than-Temporary Impairments*, now contained in FASB ASC Topic320, *Investments — Debt and Equity Securities*,which provides guidance on estimating fair value when the volume and level oftransaction activity for an asset or liability has significantly decreased inrelation to normal market activity for the asset or liability. Theimplementation of this standard did not have an impact on this financialinformation.

 

11.Business Combinations

 

OnJan. 1, 2009, the Corporation adopted FASB Statement No. 141(R),Business Combinations, now contained in FASB ASC Topic 805, *Business Combinations.* This standard results in significantchanges with respect to accounting for business combinations in consolidatedfinancial statements. Disclosure required as a result of adopting this standardcan be found in Note IX of this financial information.

 

12.Non-controlling Interests

 

OnJan. 1, 2009, the Corporation adopted FASB Statement No. 160, *Noncontrolling Interests in Consolidated Financial Statements*— *an amendment of ARB No. 51*, inconjunction with the IASB standards and now contained FASB ASC Topic 810, *Consolidation*. Under Topic 810, changes in ownershippercentages without loss of control are treated as equity transactions. Non-controllinginterests are required to be reported under equity and the income attributableto the non-controlling interests is to be disclosed. Disclosure that meets therequirement of this standard can be found in the Earnings, Earnings per Share (“EPS”)and Comprehensive Income Information and the Balance Sheet Information in thisreconciliation.

 

13.Disclosures about Derivative Instruments and Hedging Activities

 

OnJan. 1, 2009, the Corporation adopted FASB Statement No. 161, *Disclosures about Derivative Instruments and Hedging Activities*— an amendment of FASB Statement No. 133, now contained in FASB ASC Topic815, *Derivatives and Hedging*. Topic 815 isintended to improve financial reporting about derivative instruments andhedging activities by requiring entities to provide enhanced disclosures about (a) howand why an entity uses derivative instruments, (b) how derivativeinstruments and related hedged items are accounted for under Topic 815 and itsrelated interpretations, and (c) how derivative instruments and relatedhedged items affect an entity’s financial position, financial performance, andcash flows.  Disclosure that meets therequirement of this standard can be found in Notes 7 and 9 of the Corporation’s2009 annual audited consolidated financial statements.

 

14.Determination of the Useful Life of Intangible Assets

 

OnJan. 1, 2009, the Corporation adopted FSP FAS 142-3*,Determination of the Useful Life of Intangible Assets*. FSP FAS142-3, now contained in FASB ASC Topic 350, *Intangibles – Goodwill andOther*, amends the factors that should be considered in developingrenewal or extension assumptions used to determine the useful life of arecognized intangible asset under SFAS 142. The intent of FSP FAS 142-3 isto improve the consistency between the useful life of a recognized intangibleasset under SFAS 142 and the period of expected cash flows used to measurethe fair value of the asset under SFAS 141(R) and other applicableaccounting literature.  Theimplementation of this standard did not have an impact on this financialinformation.

 

15.Issuer’s Measurement of Debt with a Third-Party Credit Enhancement

 

OnJan. 1, 2009, the Corporation adopted EITF Issue No. 08-5, *Issuer’s Measurement of Debt with a Third-Party Credit Enhancement,*now contained in FASB ASC Topic 820, *Fair Value Measurementsand Disclosures*. This issue addresses that a separable third-partyenhancement, such as a financial guarantee, should not be included in the fairvalue measurement of the liability. The implementation of this issue did nothave an impact on this financial information.

 

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**II.  Future AccountingChanges**

 

1.Variable Interest Entities

 

InDecember 2009, the FASB issued ASU No. 2009-17, *Improvementsto Financial Reporting by Enterprises Involved with Variable Interest Entities,*which is a result of FAS 167 issued in June 2009 and is nowcontained in FASB ASC Topic 810, *Consolidations.*Statement167 is a revision to FASB Interpretation No. 46(R), *Consolidationof Variable Interest Entities* and it provides guidance on how todetermine when an entity that is insufficiently capitalized or is notcontrolled through voting (or similar rights) should be consolidated. Thisstandard will be effective for the Corporation on Jan. 1, 2010. TheCorporation is currently assessing the impact of adopting this standard on thisfinancial information.

 

2.Transfers of Financial Assets

 

InDecember 2009, the FASB issued ASU No. 2009-16, *Accountingfor Transfers of Financial Assets*, which is a result of FAS 166issued in June 2009 and is now contained in FASB ASC Topic 860, *Transfers and Servicing.*Statement 166 is a revision toStatement No. 140, *Accounting for Transfersand Servicing of Financial Assets and Extinguishments of Liabilities*and will require more disclosure on transfers of financial assets, includingsecuritization transactions and continued exposure to the risks related totransferred financial assets. It also eliminates the concept of a “qualifyingspecial-purpose entity,” and provides requirements for derecognizing financialassets. This standard will be effective for the Corporation on Jan. 1,2010. The Corporation is currently assessing the impact of adopting thisstandard on this financial information.

 

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