BALLARD POWER SYSTEMS
INC.

ANNUAL INFORMATION FORM

FEBRUARY 25, 2016

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TABLE OF CONTENTS

|CORPORATE STRUCTURE                                                       |  | 2 
|------------------------------------------------------------------------- |  | --
|Name, Address and Incorporation                                           |  | 2 
|Our Mission, Vision and
Values                                            |  | 2 
|Intercorporate Relationships                                              |  | 3 
|Recent History                                                            |  | 4 
|Equipment Supply Agreement with
      Guangdong Synergy Hydrogen Power    |  |   
|Technology Co., Ltd.                                                      |  | 4 
|Protonex Order
      from the U.S. Army                                   |  | 4 
|Nisshinbo Holdings Inc. Private
      Placement                           |  | 4 
|Light Rail
      Agreement with Tangshan Railway Vehicle Company, Limited |  | 4 
|Acquisition of Protonex
      Technology Corporation                      |  | 5 
|Sale of
      ElectraGen  Hydrogen Modules to the Aditya Birla Group     |  | 5 
|Agreements with CRRC Qingdao
      Sifang Company, Ltd.                   |  | 5 
|Public
      Offering of Common Shares                                    |  | 5 
|Nantong Zehe New Energy
      Technology Co., Ltd. and Guangdong Synergy  |  |   
|Hydrogen Power Technology Co.,
      Ltd. License and Supply Agreements   |  | 5 
|Reliance Jio
      Infocomm Limited ElectraGen Order                     |  | 6 
|Audi IP Asset Transfer                                                    |  | 6 
|Plug Long Term
      Sales Agreement                                      |  | 6 
|UTC IP Acquisition                                                        |  | 6 
|October 2013
      Public Offering                                        |  | 7 
|Anglo Investment                                                          |  | 7 
|March 2013
      Public Offering                                          |  | 7 
|Technology Development Agreement
      with Volkswagen AG                 |  | 7 
|OUR BUSINESS                                                              |  | 8 
|Revenues from Market Segments                                             |  | 9 
|Our Markets, Products and
      Services                                  |  | 10
|Product & Service
      Overview                                          |  | 10
|Fuel Cell Products and
    Services                                       |  | 11
|Power Products Markets                                                    |  | 11
|Heavy Duty Motive                                                         |  | 11
|Portable Power Management Solutions                                       |  | 12
|Material Handling                                                         |  | 14
|Telecom Backup Power                                                      |  | 15
|Technology
      Solutions                                                |  | 16
|Competition                                                               |  | 16
|Impact of Regulations and Public
      Policy                             |  | 16
|Research and Product Development                                          |  | 18
|Intellectual Property                                                     |  | 18
|Manufacturing                                                             |  | 19
|Safety                                                                    |  | 19

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|Quality                                                         |  | 20
|--------------------------------------------------------------- |  | --
|Facilities                                                      |  | 20
|Human Resources                                                 |  | 21
|SHARE CAPITAL AND MARKET FOR SECURITIES                         |  | 21
|DIVIDEND RECORD AND POLICY                                      |  | 22
|ESCROWED SECURITIES AND SECURITIES SUBJECT TO
      CONTRACTUAL |  |   
|RESTRICTIONS ON TRANSFER                                        |  | 22
|DIRECTORS AND OFFICERS                                          |  | 23
|Board of Directors                                              |  | 23
|Senior Officers                                                 |  | 27
|Shareholdings of Directors and Senior Officers                  |  | 27
|AUDIT COMMITTEE MATTERS                                         |  | 28
|Audit Committee Mandate                                         |  | 28
|Composition of the Audit
      Committee                        |  | 28
|Audit Fees                                                      |  | 30
|Audit-Related Fees                                              |  | 31
|Tax Fees                                                        |  | 31
|All Other Fees                                                  |  | 31
|TRANSFER AGENT AND REGISTRAR                                    |  | 31
|LEGAL PROCEEDINGS                                               |  | 31
|INTERESTS OF EXPERTS                                            |  | 31
|INTERESTS OF MANAGEMENT AND OTHERS IN
      MATERIAL            |  |   
|TRANSACTIONS                                                    |  | 31
|MATERIAL CONTRACTS                                              |  | 32
|Protonex Acquisition                                            |  | 32
|Audi IP Asset Transfer                                          |  | 32
|UTC IP Acquisition                                              |  | 33
|Technology Development Agreement with Volkswagen
    AG         |  | 33
|RISK FACTORS                                                    |  | 34
|ADDITIONAL INFORMATION                                          |  | 46
|APPENDIX A AUDIT COMMITTEE
      MANDATE                      |  | 47

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This Annual Information Form and
the documents incorporated by reference herein contain forward-looking
statements that are based on the beliefs of management and reflect our current
expectations as contemplated under the safe harbor provisions of Section 21E of
the United States Securities Exchange Act of 1934, as amended. When used in this
Annual Information Form, the words estimate, project, believe,
anticipate, intend, expect, plan, predict, may, could, should,
will, the negatives of these words or other variations thereof and comparable
terminology are intended to identify forward-looking statements. Such statements
reflect our current views with respect to future events based on currently
available information and are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated in those
forward-looking statements, including, without limitation the following risks
and uncertainties which are discussed in the section of this Annual Information
Form entitled Risk Factors: we may not be able to achieve commercialization of
our products on the timetable we anticipate, or at all; we expect our cash
reserves will be reduced due to future operating losses and working capital
requirements, and we cannot provide certainty as to how long our cash reserves
will last or that we will be able to access additional capital when necessary; a
mass market for our products may never develop or may take longer to develop
than we anticipate; we have limited experience manufacturing fuel cell products
on a commercial basis; warranty claims could negatively impact our gross margins
and financial performance; we may not be able to successfully execute our
business plan; global economic conditions are beyond our control and may have an
adverse impact on our business or our key suppliers and/or customers; in our
Heavy-Duty Motive market, we depend on Chinese customers for a majority of our
revenues. Global macro-economic conditions, including significant and recent
volatility in Chinas capital markets, may adversely impact our Chinese
customers access to capital and program plans which could adversely impact our
business; in our Technology Solutions market, we depend on a single customer for
the majority of our revenues; in our Material Handling market, we depend on a
single customer for the majority of our revenues; we may not be able to
successfully conclude and realize any benefits or value from our ongoing review
of strategic alternatives for our Telecom Backup Power business; potential
fluctuations in our financial and business results make forecasting difficult
and may restrict our access to funding for our commercialization plan; we could
be adversely affected by risks associated with acquisitions; we are subject to
risks inherent in international operations; exchange rate fluctuations are
beyond our control and may have a material adverse effect on our business,
operating results, financial condition and profitability; commodity price
fluctuations are beyond our control and may have a material adverse effect on
our business, operating results, financial condition and profitability; we are
dependent upon Original Equipment Manufacturers and Systems Integrators to
purchase certain of our products; we are dependent on third party suppliers for
the supply of key materials and components for our products and services; we
currently face and will continue to face significant competition; we could lose
or fail to attract the personnel necessary to run our business; public policy
and regulatory changes could hurt the market for our products; we depend on our
intellectual property, and our failure to protect that intellectual property
could adversely affect our expected future growth and success; we could be
liable for environmental damages resulting from our research, development or
manufacturing operations; our products use flammable fuels and some generate
high voltages, which could subject our business to product liability claims; and
the other risks and uncertainties discussed elsewhere in this Annual Information
Form.

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The forward-looking statements
contained in this Annual Information Form speak only as of the date of this
Annual Information Form. Except as required by applicable legislation, Ballard
does not undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this Annual Information Form, including the occurrence of unanticipated
events.

In this Annual Information Form,
references to Corporation, Ballard, we, us and our refers to Ballard
Power Systems Inc. and, as applicable, its subsidiaries. All dollar amounts are
in United States dollars unless otherwise indicated. Canadian dollars are
indicated by the symbol C$, and euros by the symbol €.

Except where otherwise indicated, all
information presented is as of December 31, 2015.

CORPORATE STRUCTURE

Name, Address and Incorporation

Ballard was incorporated on November
12, 2008 under theCanada Business
Corporations Act, under the name 7076991
Canada Inc. Ballard changed its name to Ballard Power Systems Inc. on
December 31, 2008. Ballard's head office is located at 9000 Glenlyon Parkway,
Burnaby, British Columbia, Canada V5J 5J8, and its registered office is located
at Suite 1700, 666 Burrard Street, Vancouver, British Columbia, Canada V6C
2X8.

Previously, Ballard Power Systems Inc.
was a British Columbia company incorporated on May 30, 1989. The original
predecessor to Ballard was founded in 1979 under the name Ballard Research Inc.
to conduct research and development on high-energy lithium batteries. In the
course of investigating environmentally-clean energy systems with commercial
potential, we began to develop fuel cells and have been developing fuel cell
products since 1983.

Our Mission, Vision and Values

Our vision is to be the leading global
provider of innovative clean energy solutions, and our mission is to use our
extensive fuel cell and systems know-how to profitably deliver innovative clean
energy solutions to our customers, create rewarding opportunities for our team,
and provide extraordinary value to our shareholders.

Our values represent our core beliefs,
and underpin how we carry on our business: Listen and Deliver  We listen to our
customers, understand their business, and deliver valuable solutions for lasting
partnerships; Quality. Always  We deliver quality in everything we do, without
exception; Inspire Excellence  We inspire excellence through leadership,
empowerment and consistent demonstration of integrity, urgency, and passion; Row
Together  We achieve success through collaboration, respect, and trust; Own It
 We step up, take ownership for our results, and trust others to do the
same.

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Intercorporate Relationships

We have five principal subsidiaries and
affiliates: Ballard Fuel Cell Systems Inc., a Delaware corporation that develops
methanol-fueled clean energy backup power systems; Dantherm Power A/S
(Dantherm Power), a Denmark-based corporation jointly owned with Dantherm A/S; BDF IP
Holdings Ltd. (IP Holdings), a Canadian corporation that holds intellectual property
assets; Ballard Services Inc., a British Columbia company that provides
engineering services; and Protonex Technology Corporation (Protonex), a Delaware
corporation that is a leading designer and manufacturer of advanced power
management products and portable fuel cell solutions.

The following chart shows these
principal subsidiaries and affiliates, their respective jurisdictions of
incorporation and our percentage of share ownership in each of them, all as of
February 25, 2016:




Notes


|(1) |  | The Corporation holds
      57% of the shares of Dantherm Power A/S and Dantherm A/S holds
    33%.                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | The Corporation holds
      all of the non-voting, participating shares of IP Holdings and 34% of the
      voting, non-participating shares of IP Holdings, with each of Daimler AG
      and Ford Motor Company holding 33% of the voting, non-participating
      shares.

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Recent History

Over the past three years, we have
continued to focus on building a clean energy business and expanding our
recognized leadership in proton exchange membrane(PEM) fuel cell development and commercialization. The following are key
recent developments:

Equipment Supply Agreement
with Guangdong Synergy Hydrogen Power Technology Co., Ltd.

On January 21, 2016, we announced the
signing of an equipment supply agreement, valued at $12 million, with an
existing partner in China, Guangdong Synergy Hydrogen Power Technology Co., Ltd.
(Synergy)
to provide FCvelocity-9SSL fuel cell stacks for range extension applications
in commercial vehicles in China. We expect to deliver the stacks in 2016 and
2017. Synergy will collaborate with Dongfeng Xiangyangtouring Car Co., Ltd.,
which is part of Dongfeng Motor Corporation, a Chinese state-owned automobile
manufacturer headquartered in Wuhan, China. Dongfeng Motor Corporation is the
largest manufacturer of commercial vehicles in China.

Protonex Order from the U.S. Army

On December 29, 2015, Protonex received
a follow-on purchase order from the U.S. Army for more than 400 Squad Power
Manager (SPM-622) Special Operations Kits, with a value of approximately $2.8
million.

Nisshinbo Holdings Inc. Private
Placement

On November 10, 2015, we successfully
closed a $5 million strategic equity investment in Ballard by Nisshinbo Holdings
Inc. (Nisshinbo). The investment was made through a private placement subscription of
3,322,479 common shares issued from treasury at a price per share of
$1.5049.

On January 20, 2016, we announced that
we had received a follow-on purchase order from Nisshinbo for a further phase of
a Technology Solutions program related to the development of a breakthrough
catalyst technology intended to reduce the cost of certain proton exchange
membrane fuel cells. The program, now entering its seventh phase, has been
underway for approximately 2.5 years. This is a continuation of the Technology
Solutions project work related to the development of the breakthrough catalyst
technology announced in May 2015.

Light Rail Agreement with
Tangshan Railway Vehicle Company, Limited

In November 2015, we signed a
definitive agreement with Tangshan Railway Vehicle Company, Limited
(TRC) for
development of a new fuel cell module that will be designed to meet the
requirements of tram or Modern Ground Rail Transit Equipment applications. The
value of this work to Ballard is approximately $3 million and represents the
next step toward a commercial product, following the June 2015 signing and
announcement of a framework agreement between Ballard and TRC.

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Acquisition of Protonex
Technology Corporation

On October 1, 2015, Ballard completed
the acquisition of Protonex. As consideration for the merger, Ballard assumed
and paid certain of Protonexs debt obligations and transaction costs at
closing, being approximately $3.8 million, and paid the balance of the
consideration through the issuance of approximately 11.4 million Ballard
shares.

Sale of ElectraGen  Hydrogen
Modules to the Aditya Birla Group

On September 30, 2015, we announced
receipt of a purchase order from Aditya Birla Group for fifty ElectraGen-H2
direct hydrogen modules that will be deployed in the Idea Cellular network in
India, representing the culmination of the extensive testing and trialing
undertaken by Idea Cellular of Ballards ElectraGen products since late-2013.
All of the modules were shipped in 2015.

Agreements with CRRC Qingdao
Sifang Company, Ltd.

On September 28, 2015, we signed a
joint development agreement and a supply agreement to develop and commercialize
a fuel cell engine specifically designed for integration into low floor trams
manufactured by CRRC Qingdao Sifang Company, Ltd.(CRRC Sifang), a Chinese rolling stock manufacturer. The agreements
include the expected delivery in 2016 of ten customized FCveloCity® modules. The
joint development agreement and a supply agreement have an initial value
expected to be approximately $6 million. An initial deployment of eight fuel
cell-powered trams is planned by CRRC Sifang and the City of Foshan, China on
the Gaoming Line starting in 2017.

Public Offering of Common Shares

On July 7, 2015, we closed an
underwritten offering of 9,343,750 common shares for gross proceeds of
approximately $15.0 million, which included the exercise in full by the
underwriters of their option to purchase up to an additional 15% of common
shares to cover over-allotments.

Nantong Zehe New Energy
Technology Co., Ltd. and Guangdong Synergy Hydrogen Power Technology Co., Ltd.
License and Supply Agreements

On June 8, 2015, we entered into
license and supply agreements with Nantong Zehe New Energy Technology Co., Ltd.
and Synergy to provide fuel cell power products and technology solutions to
support the planned deployment of an initial 33 fuel cell-powered buses in two
Chinese cities. The agreements have an estimated value of approximately $10
million through 2015. On September 25, 2015, Ballard signed long-term license
and supply agreement with Synergy to provide fuel cell Power Products and
Technology Solutions in support of the planned deployment of approximately 300
fuel cell-powered buses in the cities of Foshan, China and Yunfu, China. The
long-term license and supply agreement has an estimated initial value of $17
million expected through 2016, with the opportunity for significant recurring
royalties starting in 2017.

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Reliance Jio Infocomm Limited
ElectraGen Order

On April 29, 2015, Reliance Jio
Infocomm Limited (RJIL) placed an order for 100 ElectraGen-ME fuel cell backup
power systems to be deployed in its wireless telecom network in India. All 100
systems were delivered to RJIL in 2015 and are being installed.

Audi IP Asset Transfer

On February 11, 2015, we entered into
an agreement with Audi AG under which we agreed to transfer to Audi certain of
the transportation-related fuel cell intellectual property assets we previously
acquired from United Technologies Corporation(UTC). These assets consist of approximately 900 patents and patent
applications as well as know-how primarily related to proton exchange membrane
fuel cell technology. On February 23, 2015 as consideration for the patents and
patent applications, Ballard received $40 million from Audi, of which $10
million was paid to UTC as a royalty under the terms of our prior acquisition
from UTC. As consideration for the transfer of the know-how, Ballard will
receive $10 million from Audi in the first quarter of 2016, of which $900,000
will be paid to UTC. In addition, we retain the sole right to use the know-how,
patents and patent applications transferred to Audi for all non-automotive
purposes, as well as a non-exclusive right for use in buses, and a non-exclusive
right for use in certain limited pre-commercial automotive purposes, all on a
royalty-free basis. We also retain the right to provide technology solutions
services to other automotive OEMs. In connection with the transaction,
Volkswagen AG extended its existing technology development agreement with us as
described below.

Plug Long Term Sales
Agreement

On October 8, 2014, we entered into a
long term supply agreement with Plug Power Inc. (Plug Power) to provide fuel cell
stacks for use in Plug Powers GenDrive® systems deployed in forklift
trucks. The new supply agreement replaces an existing agreement and runs to the
end of 2017, with the provision for two 1-year potential extensions.

UTC IP Acquisition

On April 24, 2014, we acquired the
transportation- and stationary-related fuel cell intellectual property assets of
UTC. As consideration for the patents and patent applications, as well as patent
licenses, invention disclosures and know-how, UTC received 5,121,507 million
common shares of Ballard, $2 million in cash, a grant back license to use the
patent portfolio in UTCs existing businesses and a royalty on Ballards future
intellectual property licensing income generated from the combined intellectual
property portfolio.

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October 2013 Public Offering

On October 9, 2013, we closed an underwritten offering in the United
States(October 2013 Offering) of 10.35
million units at a price of $1.40 per unit for gross proceeds of $14.5 million,
which includes the exercise in full by the underwriters of their option to
purchase up to an additional 15% of common shares and warrants to cover
over-allotments. Each unit in the October 2013 Offering was comprised of one
common share and 0.25 of a warrant to purchase one common share. Each whole
warrant is exercisable immediately upon issuance, having a 5-year term and an
exercise price of $2.00 per share. As of December 31, 2015, 1.675 million share
purchase warrants from the October 2013 Offering remain outstanding.

Anglo Investment

On March 28, 2013, we completed a
private placement with Anglo American Platinum Limited (Anglo) under which Anglo
invested $4.0 million in Ballard through its PGM Development Fund. The
investment was in the form of a $4.0 million, 5-year, non-interest bearing
convertible promissory note (Note) issued by Ballard. The Note was
converted into 4.76 million common shares in March 2014.

March 2013 Public
Offering

On March 26, 2013, we closed an
underwritten offering in the United States (March 2013 Offering) of 7.275 million
units at a price of $1.10 per unit for gross proceeds of $8.0 million. Each unit
in the March 2013 Offering was comprised of one common share and one warrant to
purchase one common share. Each warrant is exercisable immediately upon issuance
and has a 5-year term and an exercise price of $1.50 per share. During 2015,
125,000 share purchase warrants from the March 2013 Offering were exercised for
Ballard common shares generating proceeds of $187,500. As of December 31, 2015,
122,563 share purchase warrants from the March 2013 Offering remain
outstanding.

Technology Development Agreement
with Volkswagen AG

On March 6, 2013, we entered into an
agreement with Volkswagen AG under which we will provide Volkswagen with
engineering services to advance development of fuel cells for use in powering
demonstration cars in Volkswagens fuel cell automotive research program. The
original contract term was for 4 years, with an option for a 2-year extension.
Work under the contract involves the design and manufacture of a next-generation
fuel cell for use in Volkswagen HyMotion demonstration cars. Ballard engineers
are supporting critical areas of fuel cell product design  including the
membrane electrode assembly (MEA), plate and stack components  along with testing and
integration work. On February 11, 2015, Volkswagen extended the contract for two
years to February 2019 for anticipated revenues of approximately C$30-50 million
and also extended the notice period for Volkswagens right to terminate the
contract for convenience from one year to two years. These extensions do not
affect Volkswagens continuing right to extend the term of the contract for a
further 2-year period. Ballard and Volkswagen have also confirmed Ballards
position as a potential supplier of PEM fuel cell products to the Volkswagen
Group.

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OUR BUSINESS

At Ballard, we are building a clean
energy growth company. We are recognized as a world leader in PEM fuel cell
development and commercialization.

Our principal business is the design,
development, manufacture, sale and service of fuel cell products for a variety
of applications, focusing on our power product markets of Heavy-Duty Motive
(consisting of bus and tram applications), Portable Power, Material Handling and
Telecom Backup Power, as well as the delivery of Technology Solutions including
engineering services and the license and sale of our extensive intellectual
property portfolio and fundamental knowledge for a variety of fuel cell
applications.

A fuel cell is an environmentally clean
electrochemical device that combines hydrogen fuel with oxygen (from the air) to
produce electricity. The hydrogen fuel can be obtained from natural gas,
kerosene, methanol or other hydrocarbon fuels, or from water through
electrolysis. Ballard fuel cell products feature high fuel efficiency, low
operating temperature, low noise and vibration, compact size, quick response to
changes in electrical demand, modular design and environmental cleanliness.
Embedded in each Ballard PEM fuel cell product lies a stack of unit cells
designed with Ballards proprietary technology which draws on intellectual
property from our patent portfolio together with our extensive experience and
know-how in key areas of fuel cell stack operation, system integration, and fuel
processing.

We provide our customers with an
attractive value proposition, including positive economic and environmental
benefits. We plan to build value for our shareholders by developing,
manufacturing, selling and servicing industry-leading power products to meet the
needs of our customers in select target markets.

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Strategy

Our business strategy is a two-pronged
approach to build shareholder value through the sale and service of power
products and the delivery of technology solutions.

| | (1) | In power product sales, our focus
      is on meeting the power needs of our customers by delivering high value,
      high reliability, high quality and innovative clean energy power products
      that reduce customer costs and risks.                                                                                                                                                                                                                    
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (2) | Through technology solutions, our
      focus is on enabling our customers to solve their technical and business
      challenges and accelerate their fuel cell and power systems by delivering
      customized, high value, bundled technology solutions, including
      specialized engineering services, access to our deep intellectual property
      portfolio and know-how through licensing or sale, and providing technology
      component supply.

Revenues from Market Segments

During 2015 we reported our results in
the single operating segment of Fuel Cell Products and Services. Our Fuel Cell
Products and Services segment consists of the sale and service of fuel cell
products for our power product markets of Heavy-Duty Motive (consisting of bus
and tram applications), Portable Power, Material Handling and Telecom Backup
Power, as well as the delivery of Technology Solutions including engineering
services and the license and sale of our extensive intellectual property
portfolio and fundamental knowledge for a variety of fuel cell
applications.

The following chart shows the
percentage of total revenues which arises from sales to investees and sales of
products and services to other customers, for the years 2015 and
2014:

|                                                                   | 2015 | 2014
|------------------------------------------------------------------ | ---- | ----
|Revenues from Fuel Cell Products and
      Services                |      |     
|Percentage of total
      revenues                                 | 100% | 100%
|Portion
      representing sales to investees                      | Nil  | Nil 
|Portion
      representing sales to customers other than investees | 100% | 100%

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Our Markets, Products and
Services

Product & Service
Overview

Ballards product offering provides for
a cost effective and flexible set of fuel cell power solutions. Ballard provides
products in three distinct product classes:

|(1) |  | Fuel cell stacks: Ballard provides
      FCgen® and FCveloCity® fuel cell stacks to original
      equipment manufacturer (OEM) customers and system integrators
      that use the stacks to produce fuel cell systems for power solutions. As
      the stack provider, Ballard is the power inside the system.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 
|(2) |  | Fuel cell modules: Ballard builds the stacks into
      self-contained FCveloCity**®** motive modules that are
      plug-and-play into a larger system. As a fuel cell module provider, we
      make it easier for OEMs and system integrators to create fuel cell
      systems.                                
|   
|(3) |  | Fuel cell systems: Ballard also builds complete
      fuel cell systems for stationary power markets that are designed to solve
      certain energy needs of our customers. The ElectraGen product
      lines provide fuel-flexible (hydrogen & methanol) system solutions for
      Backup power markets.      

Ballards technology solutions offering
primarily involves the provision of engineering services and customer access
through licensing to Ballards deep intellectual property portfolio and
know-how.

The following table lists the key fuel
cell and non-fuel cell products we currently produce, have under development or
are testing.

|Motive Power Product
      Family: FCveloCity® Fuel Cell
      Products
|-----------------------------------------------------------------------
|Product Name                                                           
|FCveloCity®-9SSL                                                       
|FCveloCity®-1020ACS                                                    
|FCveloCity® modules                                                    

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|Stationary Power Product Family:
      FCgen® Fuel Cell Products and System Products
|------------------------------------------------------------------------------------
|Product Name                                                                        
|FCgen®-1020ACS                                                                      
|ElectraGen-H2                                                                      
|ElectraGen-ME                                                                      

Fuel Cell Products and
Services

Power Products
Markets

Heavy Duty Motive

We provide fuel cell modules for public
transit systems including buses and light rail. These fuel cell buses and light
rail systems rely on centralized fuelling depots that simplify the hydrogen
infrastructure requirements and are government-subsidized, thus enabling the
purchase of pre-commercial fleets.

We design and manufacture the
FCveloCity® fuel cell module platform, which in various forms is
capable of delivering 30 kW to 200kW of power for use in the Heavy Duty Motive
market. We supply the fuel cell modules to hybrid drive, bus and light rail
manufacturer customers that deliver zero-emission fuel cell-powered vehicles to
transit operators around the world. The demand for zero-emission mass transit
systems is driven in many jurisdictions by the requirement to reduce greenhouse
gases and other harmful emissions in urban areas.

FCveloCity® power module
platform cost reduction efforts have focused on unit cell design enhancements,
including improved durability and lifetime. This ongoing effort was partially
funded by a C$4.8 million award announced in January 2010 (revised to C$6.9
million in June 2012) from Sustainable Development Technology Canada
(SDTC),
and was successfully completed in 2014 to further develop fuel cell power module
technology for the transit bus market. Product cost reductions continued with
the launch in 2015 of our seventh generation motive module
FCveloCity® platform, which reduced the total cost of the module by
25%. This new platform is available in various configurations ranging in power
from 30kW to 200kW to address different levels of battery/fuel cell
hybridization and a variety of applications. The FCveloCity®-MD
series is optimized for smaller buses (less than 12 meters in length), the
FCveloCity®-HD module is the workhorse of the standard-size (12-18
meter) fuel cell bus industry, and the FCveloCity®-XD series is aimed
at light rail.

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To date, Ballard-powered fuel cell
buses have accumulated more than 8 million kilometres in service, and a single
bus has logged more than 20,000 hours of commercial operation.

In 2015, Ballard FCveloCity® power
modules were used to power the worlds first fuel cell light rail system in the
city of Foshan, China opening up a new market for the FCveloCity® heavy duty
power modules.

Competition

Diesel-powered buses currently dominate
the market today. Compressed natural gas (CNG) and diesel electric hybrid buses
are lower-emission alternatives to diesel buses, but are in limited service
today. Other variants available today include gasoline hybrid buses and CNG
hybrid buses. Electric trolley buses provide a zero-emission alternative;
however, their purchase price is high and the overhead catenary power
infrastructure is expensive to maintain and is considered aesthetically
undesirable in many urban centres. The recent developments in battery-powered
powertrain vehicles have created a zero emission alternative to fuel cell buses
in the form of battery electric buses. These buses will continue to offer a
viable zero emission bus for applications where long range and extended
operating hours between recharges are not a requirement.

We believe that fuel cells are the best
zero-emission alternative for transit applications. They offer much greater fuel
efficiency than conventional diesel buses, eliminate greenhouse gas emissions
and eliminate the need for unsightly overhead catenary wires. Fuel cell buses
are the most flexible zero-emissions option. Unlike other electric solutions,
fuel cell buses can be operated like diesel buses providing longer daily driving
distances and faster refuelling.

Companies developing fuel cell systems
for transit bus applications include Hydrogenics and Nedstack. We have
accumulated far more operating hours in real transit operations than any other
fuel cell manufacturer. We believe this experience has enabled us to produce
more reliable, more durable and easier to integrate products than those of our
competitors.

Portable Power Management Solutions

Protonex is a leading designer and
manufacturer of advanced power management products and portable fuel cell
solutions. Protonex has developed several products designed for end-users in
military and commercial markets that are currently underserved by batteries and
small generators. Protonex is also developing products for OEM customers looking to integrate
high-performance power systems into their products and applications.

- 12 -

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Protonex has effectively commercialized
and deployed several of its products, and has received development programs from
U.S. military and U.S. government organizations, including the Air Force, the
Army, the Navy, the Marines, DARPA, the DOE, and SOCOM.

Reduction in the number and type of
batteries used in combat operations has been identified as an urgent need within
the Office of Secretary of Defense. To address this need, Protonex developed
man-wearable power management devices that allow the user access to a variety of
available energy sources (e.g. vehicles, solar and batteries) to capitalize on
their existing rechargeable batteries. The result is a significant reduction in
number and types of batteries, reduced field logistics requirements, enhanced
power reliability, cost savings, and up to 50% improvement in energy use with
corresponding weight reductions.

Protonex has also developed portable
fuel cells that facilitate use of fewer batteries by allowing batteries to be
re-charged while on the move. A series of proprietary fuel reformers that are
both small and allow operation on a variety of available fuels (methanol,
propane, kerosene, diesel, gasoline, biofuels, and military fuels). Protonex
portable fuel cells have a wide range of additional uses that include, sustained
emergency power, marine power, extended surveillance power, vehicle auxiliary
power units (APUs), unmanned aerial (UAV), unmanned ground (UGV) and underwater
(UUV) vehicle propulsion.

Competition

In the power manager arena, Protonex
has a leadership position within the U.S. Department of Defense customers given
our extensive history of development with various organizations. Within the
Department of Defense our biggest competition is the status quo: operation
without a power manager. As these devices are becoming more prevalent, more
companies are developing similar products to compete. To date, several of these
competitive products have gained traction in international markets (e.g. Smart
Fuel Cell Power Manager).

In the arena of small fuel cell
systems, our systems are typically displacing legacy battery or engine solutions
that are underserving the customer needs. Specifically in unmanned systems
applications, our small fuel cell systems have been shown to extend mission
duration over existing battery solutions by 200  700%. Most typically, these
fuel cell systems are developed in concert with the systems integrator. There
are a number of companies that have developed competitive fuel cell systems,
including Horizon Fuel Cell and Smart Fuel Cell. To date no company has
developed a leadership position in this nascent market.

- 13 -

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Material Handling

The material handling market includes
industrial vehicles such as forklifts, automated guided vehicles
(AGVs)
and ground support equipment (GSE). Our initial focus is on
battery-powered Class 1 counter balance lift trucks, Class 2 reach trucks and
Class 3 pallet forklifts and AGVs. Our products for the material handling market
are the FCveloCity®-9SSL, which is applicable to Class 1, Class 2 and Class 3
forklift truck solutions, and the FCveloCity®-1020ACS stack, our
second-generation air-cooled fuel cell product, for Class 3 material handling
applications.

Our main customer and partner in North
America is Plug Power, a specialized system integrator achieving early market
penetration deploying its GenDrivebattery pack replacement fuel cell systems. In 2010, Plug
Power began offering commercial GenDrive systems designed for Class 1, Class 2
and Class 3 trucks, all using Ballard fuel cells. Ballards current equipment
supply agreement with Plug Power was renewed in 2014 for a 3-year term with two
1-year extensions.

Competition

Class 2 and Class 3 forklift trucks are
currently dominated by lead-acid battery-powered solutions, as are Class 1
forklift trucks intended for indoor applications. Internal combustion engine
(ICE)
power is typically seen as the solution for forklift trucks in Class 1 for
outdoor applications. Compared to batteries, fuel cell systems in Class 1, Class
2 and Class 3 forklift trucks can provide extended run time without frequent and
lengthy battery replacement and recharging cycles. For high-throughput,
multi-shift warehouse or manufacturing operations, fuel cell forklift trucks can
provide a lower life cycle cost and total cost of ownership when compared with
traditional lead-acid battery solutions.

Companies developing fuel cell systems
for material handling applications include Nuvera, which was acquired by
Hyster-Yale in 2014, and Hydrogenics. We seek to gain a competitive advantage
through our engineering know-how and fuel cell designs that provide superior
performance, efficiency, durability and cost. Plug Power is the only company
currently offering a full suite of class 1, 2 and 3 forklift solutions to the
material handling market. We currently sell and supply fuel cell stacks to Plug
Power. Plug Power is currently developing its own air-cooled and liquid-cooled
fuel cell stacks to vertically integrate into their material handling solutions.
If Plug Power is successful at developing and commercializing its own fuel cell
stacks, then these fuel cell stacks are expected to compete with our fuel cell
stacks for supply in Plug Powers business.

Advanced battery technology continues
to make progress in the material handling market. However, the high up-front
cost of advanced batteries continues to be a barrier to broad market adoption.
Furthermore, advanced battery technologies still requires significant time for
recharging and, in many cases, cannot meet desired run times without requiring
spare batteries and substantial space for battery charging and
storage.

- 14 -

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Telecom Backup Power

Our focus in the backup power market is
on the telecommunications industry. The backup power market demand is created by
two drivers: natural disasters such as typhoons or earthquakes; and poor
electrical grids. Demand due to natural disasters is characterized by
infrequent, extended duration power demand, in areas with reliable grids where
outages typically occur seasonally or less frequently. Characteristic demand in
regions with poor electrical grids occurs daily or weekly with regular outages
often lasting 4-8 hours or more.

We provide clean energy fuel cell
backup power systems for telecom equipment suppliers for installation in either
indoor or outdoor applications. Dantherm Power develops clean energy hydrogen
fuel cell backup power systems, while Ballard Fuel Cell Systems Inc. primarily
focuses on methanol-fueled systems. The FCgen®-1020ACS fuel cell product
is our primary stack platform in the backup power market.

In 2015 we grew the market in Asia with
significant deployments in India. Southeast Asia, Europe, Australia and Africa
continue to show repeat orders through our network of channel partners. Our
market expansion efforts included proof of concept deployments with major
telecommunication operators in Latin America and Myanmar. We continue to review
strategic alternatives for our telecom backup power business, including a sale,
joint venture or orderly wind-up.

Competition

The backup power market is currently
dominated by diesel generators and batteries. Advanced battery technology
continues to make modest progress in the backup power generation market.
However, advanced battery technologies still require lengthy recharging and, in
many cases, cannot meet desired run times without requiring substantial space.
We believe that PEM fuel cell products are superior to batteries in some
applications, because of their ability to provide extended run time without
frequent or lengthy recharging, as well as their ability to offer lower life
cycle costs, given that batteries require periodic replacement. Fuel cell backup
power offers a strong value proposition against diesel generators with lower
operating cost; low emission and noise; and less risk of theft.

Companies developing PEM fuel cell
systems for backup power applications include Altergy, Hydrogenics, and Plug
Power. We seek to gain competitive advantage through fuel cell designs that
provide superior performance, efficiency, durability and cost.

- 15 -

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Technology Solutions

This market (formerly named Engineering
Services) was established in late 2011 to leverage our expertise in fuel cell
design, prototyping, manufacturing and servicing. The mandate of the Technology
Solutions division is to help customers solve difficult technical and business
challenges in their PEM fuel cell programs. We offer customized, bundled
technology solutions, including world-class, specialized engineering services,
access to our intellectual property portfolio and know-how, as well as the
supply of test equipment and technology components.

Our current Technology Solutions
efforts are predominantly in support of multiple automotive research programs;
however, in 2015 we also secured contracts in bus, tram, stationary, and
military applications. We are also initiating new activities in a number of
other emerging markets, including materials handling, aerospace, and
marine.

As noted in the Recent History section
above, in 2015 Volkswagen extended the contract for two years to February 2019
for anticipated revenues of approximately C$30-50 million and also extended the
notice period for Volkswagens right to terminate the contract for convenience
from one year to two years. These extensions do not affect Volkswagens
continuing right to extend the term of the contract for a further 2-year period.
Ballard and Volkswagen have also confirmed Ballards position as a potential
supplier of PEM fuel cell products to the Volkswagen Group. We are supporting
critical areas of fuel cell product design, including the membrane electrode
assembly, plate and stack components, and also conducting important testing and
integration work for Volkswagen.

In addition to our work with
Volkswagen, throughout 2015 we have also continued to execute engineering
services projects for other automotive customers.

Competition

In the automotive sector, our main
competition for engineering services is the automakers in-house capabilities.
Companies providing fuel cell test equipment include FuelCon and Greenlight
Innovation. More broadly, Intelligent Energy provides a partnership model
approach across several markets, including automotive and stationary, ranging
from technology licensing and royalty-based agreements to collaborative joint
ventures. Ricardo offers modeling services and system design, but has more
limited capability in core fuel cell technology.

Impact of Regulations and Public
Policy

Public funding for hydrogen and fuel
cells in Japan, Germany, Europe, South Korea and the United States each exceed
$100 million per year, with the worldwide total exceeding $1 billion per year.
This funding has, and is expected to continue to, help drive demand for fuel
cell products.

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In the United States, at the federal
level, the Emergency Economic Stabilization Act of 2008 includes tax incentives
to help minimize the cost of hydrogen and fuel cell projects. It offers an
investment tax credit of 30% for qualified fuel cell property or $3,000/kW of
the fuel cell nameplate capacity (i.e., expected system output), whichever is
less. The equipment must be installed by December 31, 2016. In addition, it
features a credit of 10% for combined-heat-and-power-system property. The
American Recovery and Reinvestment Act of 2009 expanded incentives to encourage
the installation of fuel cells and hydrogen fueling infrastructure.

At the state level, the California
Self-Generation Incentive Program, which is funded by ratepayers and
administered by utilities, provides incentives for fuel cell and other clean
distributed generation technologies. In 2014, the California state senate
extended the program through 2019. The California Air Resources Board
Zero-Emission Vehicle (ZEV) regulations continue to lead the US regulatory environment
for fuel cell vehicles with additional ZEV sales requirements brought into
effect with the 2014 program revisions.

In Europe, the Fuel Cells and Hydrogen
Joint Undertaking (FCH JU)  a partnership of the European Commission with
industry and the research community under the framework of the Fuel Cells and
Hydrogen Joint Technology Initiative - supports research, technological
development and demonstration (RTD) activities in fuel cell and hydrogen energy
technologies in Europe. Its aim is to accelerate the market introduction of
these technologies. In May 2014, the Council of the European Union formally
agreed to continue the Fuel Cells and Hydrogen Joint Technology Initiative under
the EU Horizon 2020 Framework Program. This phase (2014-2020), will have a total
budget of €1.33 billion, provided on a matched basis. Calls for proposals under
Horizon 2020 have occurred for 2014 and 2015, with 2016 calls for proposals open
through May 2016.

In China, the Ministry of Finance in
April 2015 extended subsidies for new energy vehicles to 2020, with subsidies
being those subsidies being reduced by 20 percent in 2017 and 2018 and by 40
percent in 2019 and 2020. Subsidies will be granted to buyers of pure electric,
highly electrified plug-in hybrid and fuel-cell vehicles, including both cars
and buses.

In Japan, incentives focus on fuel cell
systems for residential co-generation systems and transportation. A cumulative
total of 130,000 co-generation systems were installed in Japan in 2009 through
2014, with more than 50,000 of those in 2014 alone. The current government
subsidy for the purchase of a hydrogen fuel cell car is approximately $20,000.
The government recently announced that it plans to spend 45.2 billion yen (more than $350 million) on
fuel-cell vehicle subsidies and hydrogen stations for the 2020 Olympics as part
of a plan to reduce Japans reliance on nuclear power.

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In Canada, Sustainable Development
Technology Canada (SDTC) operates the SD Tech Fund which supports the late-stage
development and pre-commercial demonstration of clean technology solutions.
These solutions being products and processes that contribute to clean air, clean
water and clean land, that address climate change and improve the productivity
and the global competitiveness of the Canadian industry. SDTC does not require
any repayments of the financial contributions it provides to funded projects
through the SD Tech Fund.

Research and Product Development

Ballards research activities are
primarily focused on the MEA and its subcomponents, aimed at improving the
overall cost, durability, and reliability of our products. Material development
for other unit cell components, such as bipolar plates, frames, seals and
adhesives, is another area of research focus. Product development activities
have been primarily directed at cost reduction. Progress is driven by leveraging
stack component designs, materials, and manufacturing processes across multiple
product platforms. In addition, warranty cost reduction is enabled through
improved durability and reliability growth.

Intellectual Property

Ballards technical strengths lay in
our proprietary MEA design, combined with our extensive stack and system
integration capabilities, which enables development of complete end-user systems
that meet or exceed customer specifications, across a wide range of market
applications.

Our intellectual property covers
multiple aspects of our technology, including: materials and components; cell,
stack and systems architecture; stack/system operation and control; and
manufacturing processes. Our intellectual property portfolio is not limited to
our patents and patent applications; it also includes know-how and trade secrets
developed over more than 30 years of research and product
development.

As of February 25, 2016, Ballard owns
or controls through IP: 76 United States granted patents; 92 non-United States
granted patents; 9 United States published patent applications; and 26 published
non-United States patent applications. Our patents will expire between April
2016 and February 2036.

Protonexs intellectual property
comprises approximately 40 United States granted patents, 23 non-US granted
patents, 7 United States published patent applications and 15 published
non-United States patent applications.

- 18 -

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We hold licence rights to additional
intellectual property from a number of third parties. We have a royalty-free
license to approximately 750 issued patents and pending patent applications from
Audi AG for bus and non-automotive applications as well as for certain limited
pre-commercial purposes in automotive applications. We also have a royalty-free
non-exclusive license to approximately 320 patents and patent applications from
IdaTech LLC (now known as H2 PowerTech, LLC) for methanol reforming and other
fuel cell-related technologies. In addition, these licences include
non-exclusive, royalty-free access to all of the intellectual property rights
held by NuCellSys GmbH, a Daimler subsidiary, and to all of the intellectual
property rights relating to fuel cells developed by Daimler, Ford and their
subsidiaries (either directly or through AFCC Automotive Fuel Cell Cooperation
Corp. (AFCC)), including any intellectual property rights developed by them to
January 31, 2013. As of February 25, 2016, of the approximately 2,000 patents
and patent applications that were included in these licenses, approximately 500
of them are currently granted or pending.

Manufacturing

We currently manufacture our fuel cell
products in four facilities  two in Burnaby, British Columbia, one in Tijuana,
Mexico, and one in Southborough, Massachusetts. The Burnaby facilities are
focused on our core fuel cell competencies, which include the production of
MEAs, integration and testing of fuel cell stacks, assembly and testing of
motive modules, as well as support of other products required through our
engineering services contracts. We continue to make investments in our
manufacturing capabilities and processes which are targeted at supporting high
volume production and automated processing to support future growth. Our
facility in Tijuana, Mexico, is focused on the integration of our fuel cell
stacks into the ElectraGen product line. Protonex develops, tests, and
manufactures its portable power management products in Southborough,
Massachusetts.

Many of the materials and components
used in the production of MEAs, fuel cell stacks, and balance of plant are
proprietary in nature and have been developed in joint collaboration between
Ballard and our key supply base. Strategic supply agreements have been executed
with these suppliers to ensure security of supply, protection of our
intellectual property, and adherence to our strict quality and reliability
standards.

Safety

Our products are designed and
manufactured with the safety of our employees, customers, and end-users in mind.
All products are third party certified and manufactured in accordance with the
standards adopted by the Canadian Standards Association. All equipment and
processes that are introduced into our working environment are evaluated using a
rigorous Preliminary Hazard Assessment procedure to ensure they are safe to
use.

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In 2015 we re-committed ourselves to
developing a culture of safety. We baselined our goals with respect to days lost
due to injury and lost time incidents and have set meaningful targets for 2016.
In December 2015, we obtained our Occupational Safety Standard of Excellence
(OSSE) certification. Obtaining this certification is a reflection of our
commitment to operate in a manner that protects the health and well-being of our
employees and those in the communities where we operate.

Quality

Quality is an integral part of the Ballard
culture. Our processes and systems are focused on ensuring that every product
that is shipped to our customers conforms to their expectations and contractual
requirements while being produced in a safe and environmentally conscious
manner. We adhere to our Quality Policy Statement, which reads, Ballard is
committed to being a world leader in the commercialization of cost effective
fuel cells by conducting our business in a manner that meets or exceeds our
customer and stakeholder requirements, manufactures the highest quality
products, safeguards the health and safety of all, and, sustains our natural
environment.

Ballard maintains quality registration to ISO
9001 in all of our manufacturing facilities, and during 2013, we also
successfully achieved registration to ISO 14001 for the Burnaby facilities.
Conformance to these quality systems is ensured through our Integrated
Management System. We also strive for continuous improvements in our
manufacturing processes through such practices as Lean Manufacturing, 5-S and
Six Sigma. We have trained 40 people across the organization in Lean Six Sigma
practices in 2015.

Facilities

We, or our wholly-owned subsidiaries,
currently have the following principal facilities: (a) a leased 116,797 ft2
(10,850 m2) facility in Burnaby, British Columbia that houses our corporate
headquarters and our fuel cell development, manufacturing and testing
activities; (b) a leased 112,000 ft2 (10,405 m2 ) facility in Burnaby that
houses some of our manufacturing facilities, as well as manufacturing facilities
of Mercedes-Benz Canada Inc. and AFCC through subleases; (c) approximately
10,000 ft2 (930 m2) of assembly space in Burnaby that is used to support motive
module assembly; (d) a leased 10,596 ft2 (984 m2) facility in Bend, Oregon that
houses our ElectraGen product development group and system test lab; (e) a
leased 4,100 ft2 (381 m2) facility in Hobro, Denmark; (f) a leased 38,000 ft2
(3,530 m2) facility in Tijuana, Mexico which we operate under a shelter
agreement for the manufacturing and testing of our ElectraGen systems; (g) a
leased 17,000 ft2 (1580 m2) facility in Southborough, Massachusetts that houses
all of Protonexs operations.

- 20 -

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As per our Quality Statement, we are committed
to ensuring that each of these facilities is operated in full compliance with
all applicable laws, as well as all health, safety, and regulatory
standards.

Human Resources

As of December 31, 2015, we had approximately
410 employees, 300 in Canada, 80 in the United States and 30 in Denmark,
representing such diverse disciplines as electrochemistry, polymer chemistry,
chemical, mechanical, electronic and electrical engineering, manufacturing,
marketing, sales, business development, legal, finance, human resources,
information technology and business management. Our employees in Canada and the
United States are not represented by any labour union. In Denmark, there are two
groups of technical employees subject to collective agreements, totalling less
than 15 employees. Each employee must agree to confidentiality provisions as
part of the terms of his or her employment, and certain employees have also
executed non-competition agreements with us.

SHARE CAPITAL AND MARKET FOR
SECURITIES

Our authorized share capital consists of an
unlimited number of common shares and an unlimited number of preferred shares.
As of February 25, 2016, our issued share capital consisted of156,839,687 common shares. Our common shares
are listed and trade on the Toronto Stock Exchange (TSX) under the symbol BLD and on the
National Association of Securities Dealers Automated Quotation Global Market(NASDAQ) under the symbol BLDP.

The following table shows the monthly trading
activity for our common shares on the TSX and NASDAQ during 2015:

|         | TSX                       | NASDAQ                              
|-------- | ------------------------- | ------------------------------------
|         | Price
      Range**(C$)** | **Average
      Daily**Volume**(#)**
|January  | 1.17  1.63               | 161,823                             
|February | 1.30  1.71               | 618,672                             
|March    | 1.23  1.55               | 137,071                             
|April    | 1.13  1.45               | 172,439                             
|May      | 1.17  1.34               | 84,725                              

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|             | TSX                       | NASDAQ                        
|------------ | ------------------------- | ------------------------------
|             | Price
      Range**(C$)** | **Average Daily**Volume**(#)**
|June         | 1.35  1.72               | 151,341                       
|July         | 2.05  2.44               | 219,677                       
|August       | 2.07  2.20               | 74,710                        
|September    | 2.02  2.40               | 94,708                        
|October      | 2.01  2.37               | 107,071                       
|**November** | 1.61  2.92               | 181,503                       
|**December** | 1.46  1.98               | 122,349                       

The holders of our common shares are entitled
to one vote for each share held on all matters to be voted on by such
shareholders and, subject to the rights and priorities of the holders of
preferred shares, are entitled to receive such dividends as may be declared by
our Board out of funds legally available therefore and, in the event of
liquidation, wind-up or dissolution, to receive our remaining property, after
the satisfaction of all outstanding liabilities.

Our preferred shares are issuable in series
and our Board is entitled to determine the designation, preferences, rights,
conditions, restrictions, limitations and prohibitions to be attached to each
series of such shares. Currently there are no preferred shares outstanding.

DIVIDEND RECORD AND POLICY

To date, we have not paid any dividends on our
shares and, because it is anticipated that all available cash will be needed to
implement our business plans, we have no plans to pay dividends in the immediate
future.

ESCROWED SECURITIES AND SECURITIES
SUBJECT TOCONTRACTUAL RESTRICTIONS ON TRANSFER

The following tables sets out the number of
common shares in escrow and the percentage that number represents of the
outstanding securities of that class.

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|Designation of Class | Number of Securities Held in Escrow orthat
      are Subject to a ContractualRestriction on Transfer | Percentage of Class
|-------------------- | ---------------------------------------------------------------------------------------------------- | -------------------
|Common               | 3,962,781                                                                                            | 2.527%             

In connection with Merger Agreement, 640,302
our common shares were deposited in escrow with U.S. Bank National Association,
a national banking association, through its nominee Embassy & Co. Subject to
(a) claims by us as permitted by the Merger Agreement and (b) the agreement of
the parties to the Merger Agreement, the common shares held in escrow will be
released at the close of business of the escrow agent on October 1,
2016.

In connection with the Nisshinbo private
place, pursuant to which 3,322,479 of our common shares were issued, Nisshinbo
may not transfer the acquired shares until after March 10, 2016.

DIRECTORS AND OFFICERS

Board of Directors

The following chart provides the following
information as of February 25, 2016: the name and province or state of residence
of each of our directors; each directors respective positions and offices held
with Ballard, their principal occupation during the past five years; the period
of time each has served as a director; and the number of shares and deferred
share units (the DSUs)
beneficially owned or controlled by each of them.

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|Name,                                          | Principal Occupation(1)                                                                                                                                                                                                                                                                                              | Director | Shares          | Deferred Share
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | --------------- | --------------
|Province/State                                 |                                                                                                                                                                                                                                                                                                                      | Since    | Beneficially    | Units Owned or
|and Country of                                 |                                                                                                                                                                                                                                                                                                                      |          | Owned or        | Controlled(2) 
|Residence(1)                                   |                                                                                                                                                                                                                                                                                                                      |          | Controlled or   | (#/% of Class)
|                                               |                                                                                                                                                                                                                                                                                                                      |          | Directed(1)(#/% |               
|                                               |                                                                                                                                                                                                                                                                                                                      |          | of Class)       |               
|Ian
      A. BourneAlberta, Canada             | Corporate Director and Chair of the Board of Ballard
      since May 2006. Formerly Executive Vice President and Chief Financial
      Officer of TransAlta Corporation (electricity generation and marketing)
      from January 1998 to December 2006, and from January 1998 to December
      2005, respectively. | 2003     | 26,824/0.017%   | 234,937/25.60%
|                                               |                                                                                                                                                                                                                                                                                                                      |          |                 |               
|Douglas
      P.HayhurstBritishColumbia,Canada | Corporate Director of Ballard. Formerly an executive
      with IBM Canada Business Consulting Services (consulting services) and a
      Partner with PricewaterhouseCoopers Management Consultants *(consulting
      services)*.                                                                                  | 2012     | 5,000/0.003%    | 116,911/12.74%
|                                               |                                                                                                                                                                                                                                                                                                                      |          |                 |               
|Edwin J. Kilroy Ontario,
      Canada          | Chief Executive Officer of
      MedAvail Technologies Inc. since November 2012. Formerly Chief Executive
      Officer of Symcor Inc. (business process outsourcing services) from
      January 2005 to November 2010.                                                                                             | 2002     | 2,752/0.002%    | 155,150/16.91%
|                                               |                                                                                                                                                                                                                                                                                                                      |          |                 |               
|R.
      RandallMacEwenBritishColumbia,Canada  | President and Chief Executive Officer of Ballard since
      October 2014.                                                                                                                                                                                                                                           | 2014     | 30,312/0.019%   | 0/0%          

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|Name,                                            | Principal Occupation(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Director | Shares          | Deferred Share
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | --------------- | --------------
|Province/State                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Since    | Beneficially    | Units Owned or
|and Country of                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |          | Owned or        | Controlled(2) 
|Residence(1)                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |          | Controlled or   | (#/% of Class)
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |          | Directed(1)(#/% |               
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |          | of Class)       |               
|Marty T. Neese
California, USA                   | Chief Operating Officer of SunPower
      Corporation (solar power equipment and
      services) since June 2008. From October 2007
      to June 2008, Mr. Neese served as an Executive Vice President, Worldwide
      Operations of Flextronics International Ltd.(electronics manufacturing
      services). From September 2004 to October 2007,
      he served in a variety of senior management positions at Flextronics
      Corporation.                                   | 2015     | 0/0%            | 0/0%          
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |          |                 |               
|James Roche
Ontario, Canada                      | Founding member and executive at Newbridge Networks
    Corporation. President and currently the CEO of Stratford Managers Corporation. to President and CEO of Stratford
    Managers Corporation *(management consulting services).* Formerly President and CEO of Tundra Semiconductor
    (semiconductor component manufacturer) from 1995-2006 and Founding member and executive at Newbridge Networks Corporation
    (communications equipment manufacturer) from 1986-1995. | 2015     | 0/0%            | 12,115/1.32%  
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |          |                 |               
|Carol M.
      StephensonBritish Columbia,Canada | Corporate Director of Ballard.
      Formerly Dean of the Richard Ivey School of Business at the University of
      Western Ontario, a position she had held since 2003. Previously, served as
      President and Chief Executive Officer of Lucent Technologies Canada from
      1999 to 2003.                                                                                                                                                                                    | 2012     | 3,550/0.002%    | 126,536/13.79%

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|Name,                                         | Principal
      Occupation(1)                                                                                                                                                                                                                                                                                                                                                         | Director | Shares          | Deferred Share
|--------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | --------------- | --------------
|Province/State                                |                                                                                                                                                                                                                                                                                                                                                                                       | Since    | Beneficially    | Units Owned or
|and Country of                                |                                                                                                                                                                                                                                                                                                                                                                                       |          | Owned or        | Controlled(2) 
|Residence(1)                                  |                                                                                                                                                                                                                                                                                                                                                                                       |          | Controlled or   | (#/% of Class)
|                                              |                                                                                                                                                                                                                                                                                                                                                                                       |          | Directed(1)(#/% |               
|                                              |                                                                                                                                                                                                                                                                                                                                                                                       |          | of Class)       |               
|David
      B.SutcliffeBritishColumbia,Canada | Corporate
      Director of Ballard. Chief Executive Officer of Sierra Wireless, Inc.
      (electrical and electronic industrial
      products) from May 1995 to October
      2005. From May 2001 to April 2005, he was also the Chair of the Board of
      Sierra Wireless, Inc.                                                                                                 | 2005     | 3,600/0.002%    | 127,447/13.89%
|                                              |                                                                                                                                                                                                                                                                                                                                                                                       |          |                 |               
|Ian
      Sutcliffe Ontario, Canada           | Corporate
      Director of Ballard. Partner at Sutcliffe & Associates Management
      Consultants (management consulting services)since June 1985. Formerly CEO, Chairman
      and independent director of BluePoint Data (IT services) from September 2001
      to June 2011 and Vice Chair and CEO of BCS Global (video conferencing services) from January 2003 to March 2004. | 2013     | 10,000/0.006%   | 41,546/4.53%  

|Notes |  |                                                                                                                                                                                                                                                                                                         
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)   |  | The information as to place of residence,
      principal occupation, business or employment of, and shares beneficially
      owned, or controlled or directed, directly or indirectly, by a director is
      not within the knowledge of our management and has been furnished by the
      director.
|(2)   |  | Rounded to the nearest whole
      number.                                                                                                                                                                                                                                                              

Directors are elected yearly at our annual
shareholders meeting and serve on the Board until the following annual
shareholders meeting, at which time, they either stand for re-election or leave
the Board. If no meeting is held, each director serves until his or her
successor is elected or appointed, unless the director resigns earlier.

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Senior Officers

As of February 25, 2016, we had five senior
officers. The name and province or state of residence of each senior officer,
the offices held by each officer and each officers principal occupation during
the last five years are as follows:

|Name and Province/State ofResidence           |  | Position                                              |  | Principal Occupation                                                                                                                                   
|--------------------------------------------- |  | ----------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|R. Randall MacEwenBritish Columbia, Canada    |  | President and Chief ExecutiveOfficer                  |  | Executive of Ballard. Formerly CEO of Sparq Systems Inc. (2013 to
      2014) and Founder and Managing Director at NextCleanTech LLC
      (2010-2014).
|                                             
|Tony GuglielminBritish Columbia,
      Canada |  | Vice President and ChiefFinancial
      Officer       |  | Executive of Ballard. Formerly SVP
      Finance and Chief Financial Officer of Canada Line Rapid Transit Inc.
      (2005 to 2009).                   
|                                             
|David WhyteBritish Columbia, Canada           |  | Vice President, Operations                            |  | Senior officer of Ballard. Formerly Director, Operations of
      Ballard.                                                                             
|                                             
|Kevin
      ColbowBritish Columbia, Canada    |  | Vice
      President, Technology &Product Development |  | Senior
      officer of Ballard. Formerly Vice President, Technology Solutions of
      Ballard.                                                       
|                                             
|Karim KassamBritish Columbia, Canada          |  | Vice President, Commercial                            |  | Senior officer of Ballard. Formerly Vice President, Business and
      Corporate Development of Ballard.                                               

Shareholdings of Directors and Senior
Officers

As of February 25, 2016, our directors and
executive officers, as a group, beneficially owned, or controlled or directed,
directly or indirectly, 502,375 of our common shares, being 0.32% of our issued
and outstanding common shares, and 917,625 DSUs.

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AUDIT COMMITTEE
MATTERS

Audit Committee Mandate

The Audit Committee operates under a mandate
that is approved by the Board and which outlines the responsibilities of the
Audit Committee. A copy of the Audit Committees mandate is attached as Appendix
A and posted on our website. This mandate is reviewed annually and the Audit
Committees performance is assessed.

Composition of the Audit Committee

The following table sets forth the name of
each of the current members of the Audit Committee, whether such member is
independent, whether such member is financially literate and the relevant
education and experience of such member.

|Name                           | Independent? | **FinanciallyLiterate?** | Relevant Education
      and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------------------ | ------------ | ------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Ian A.Bourne(ex
      officio) | Yes          | Yes                      | Mr. Bourne was TransAlta
      Corporations Executive Vice President from January 1998 to December 2006.
      From January 1998 to December 2005, Mr. Bourne was the Chief Financial
      Officer of TransAlta and was responsible for all financial policy,
      planning and reporting, as well as tax, treasury and risk management
      planning and implementation. Mr. Bourne has completed the Directors
      Education Program of the Institute of Corporate Directors and has received
      his ICD.D designation.                                                                                                                                      
|                               |              |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Douglas P.Hayhurst             | Yes          | Yes                      | Mr. Hayhurst was an executive
      with IBM Canada Business Consulting Services and a Partner with
      PricewaterhouseCoopers Management Consultants. Prior to that, Mr. Hayhurst
      held various senior executive management roles with Price Waterhouse
      including National Deputy Managing Partner (Toronto) and Managing Partner
      for British Columbia (Vancouver). Mr. Hayhurst received a Fellowship (FCA)
      from the Institutes of Chartered Accountants of British Columbia and of
      Ontario. He has completed the Directors Education Program of the Institute
      of Corporate Directors and has received his ICD.D
    designation.

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|Name                     | Independent? | **FinanciallyLiterate?** | Relevant Education
      and Experience                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------ | ------------ | ------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Edwin J.Kilroy(Chair)    | Yes          | Yes                      | Mr. Kilroy has been the Chief
      Executive Officer of MedAvail Technologies Inc. since November 2012.
      Previously, he was the Chief Executive Officer of Symcor Inc. from January
      2005 to November 2010. Prior to that, Mr. Kilroy was the Chief Executive
      Officer of IBM Canada Ltd. from April 2001 to January
  2005.                                                                                               
|                         |              |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Marty
      T.Neese      | Yes          | Yes                      | Chief Operating Officer of
      SunPower Corporation since June 2008. From October 2007 to June 2008, Mr.
      Neese served as an Executive Vice President, Worldwide Operations of
      Flextronics International Ltd. From September 2004 to October 2007, he
      served in a variety of senior management positions at Flextronics
      Corporation.                                                                              
|                         |              |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|James Roche              | Yes          | Yes                      | Mr. Roche is currently President
      and CEO of Stratford Managers Corporation, and was a founding member and
      executive at Newbridge Networks Corporation. He subsequently co-founded
      Tundra Semiconductor Corporation, and was President and CEO of the
      publicly-traded company before it was acquired by IDT in 2006. Mr. Roche
      has also served as President and CEO of CMC Microsystems and CANARIE
      Inc.
|                         |              |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Carol
      M.Stephenson | Yes          | Yes                      | Ms. Stephensons principal
      occupation is corporate director. Previously, she was the Dean of the
      Richard Ivey School of Business at the University of Western Ontario from
      2003 until 2013. Prior to that, she served as President and Chief
      Executive Officer of Lucent Technologies Canada from 1999 to 2003. Ms.
      Stephenson was invested as an Officer into the Order of Canada in
      2010.            
|                         |              |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|David B.Sutcliffe        | Yes          | Yes                      | Mr. Sutcliffe was the Chief
      Executive Officer of Sierra Wireless, Inc. from May 1995 to October 2005.
      From May 2001 to April 2005, he was also the Chair of the Board of Sierra
      Wireless, Inc. He has completed the Directors Education Program of the
      Institute of Corporate Directors and has received his ICD.D
      designation.                                                                              

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|Name          | Independent? | **FinanciallyLiterate?** | Relevant Education
      and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------------- | ------------ | ------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Ian Sutcliffe | Yes          | Yes                      | Mr. Sutcliffe has been a partner
      at Sutcliffe & Associates Management Consultants since June 1985.
      Previously, he was CEO, Chairman and independent director of BluePoint
      Data from September 2001 to June 2011 and Vice Chair and CEO of BCS Global
      from January 2003 to March 2004. Mr. Sutcliffe was President of
      Mediconsult.com from June 1995 to June 1999 and President and CEO from
      1999 to 2001. Prior to that, he was with Coopers & Lybrand in
      Vancouver and London, England from June 1979 to June
  1985.

The Audit Committee is responsible for
recommending the appointment of our external auditors (for shareholder approval
at our annual general meeting), monitoring the external auditors qualifications
and independence, and determining the appropriate level of remuneration for the
external auditors. The external auditors report directly to the Audit Committee.
The Audit Committee also approves in advance, on a case-by-case basis, any
services to be provided by the external auditors that are not related to the
audit. The following table shows the costs incurred with KPMG LLP in 2015 and
2014 for audit and non-audit related work, all of which were approved by the
Audit Committee:

Type of Audit
      Fees
    2015
    2014(C$)
    (C$)Audit Fees
    $534,000
    $438,362Audit-Related Fees
    $7,500
    $7,350Tax Fees
    Nil
    $3,467All Other Fees
    Nil
    Nil


Audit Fees

Audit fees were for professional services
rendered by KPMG LLP for the audit of the annual financial statements, quarterly
reviews and services provided in connection with statutory and regulatory
filings or engagements relating to prospectuses and other offering documents.

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Audit-Related Fees

Audit-related fees were for
assurance and related services reasonably related to the performance of the
audit or review of the annual statements and are not reported under the heading
audit fees above.

Tax Fees

The Tax Fees for 2014
related to tax advisory and transfer pricing services.

All Other Fees

There were no fees paid to
KPMG LLP that would be considered Other Fees in 2015 or 2014. Fees to be
disclosed under this category would be for products and services other than
those described under the headings audit fees, audit-related fees and tax fees
above.

TRANSFER AGENT AND
REGISTRAR

Our transfer agent and
registrar is Computershare Trust Company of Canada, 100 University Avenue,
9th Floor, Toronto, Ontario, M5J 2Y1.

LEGAL PROCEEDINGS

We are not involved in any
material legal proceedings, nor are any such proceedings known to be
contemplated. From time to time, we may be involved in litigation relating to
claims arising out of our operations in the normal course of business.

INTERESTS OF EXPERTS

KPMG LLP, our independent
auditors, has audited our consolidated financial statements for the years ended
December 31, 2015 and 2014. As at the date hereof, KPMG LLP has confirmed that
they are independent with respect to the company within the meaning of the Rules
of Professional Conduct of the Institute of Chartered Accountants of British
Columbia and the Public Company Accounting Oversight Board (United States).

INTERESTS OF MANAGEMENT
AND OTHERS IN MATERIAL TRANSACTIONS

None of our insiders,
directors or executive officers, nor any associate or affiliate of such persons,
has had any material interest, direct or indirect, in any transaction of ours
within our three most recently completed financial years, nor in any transaction
or proposed transaction within our current
financial year that has materially affected or would materially affect us or any
of our subsidiaries.

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MATERIAL CONTRACTS

Particulars of every
contract that is material to Ballard, other than a contract entered into in the
ordinary course of business that is not required to be disclosed under the
CSAsNational Instrument 51-102 
Continuous Disclosure Obligations, and that was entered into within the most recently completed financial
year, or before the most recently completed financial year but is still in
effect, are listed below.

Protonex Acquisition

On June 29, 2015, Ballard
entered into an agreement and plan of merger with BPC Subco Inc.
(MergerCo), a wholly-owned subsidiary of Ballard, and
Protonex (the Merger
Agreement) under which MergerCo
merged with Protonex. Pursuant to the Merger Agreement Ballard Power
Corporation, a wholly-owned subsidiary of Ballard, became the sole stockholder
of the post-merger corporation, also named Protonex Technology
Corporation.

As consideration for the
merger Ballard assumed and paid certain of Protonexs debt obligations and
transaction costs at closing, which occurred October 1, 2015, being
approximately $3.8 million, and paid the balance of the consideration through
the issuance of approximately 11.4 million Ballard shares.

Audi IP Asset Transfer

On February 11, 2015, we
entered into an agreement with Audi AG (the IP Transfer and License Agreement)
under which we agreed to transfer to Audi certain of the transportation-related
fuel cell intellectual property assets we previously acquired from United
Technologies Corporation. These assets consist of approximately 900 patents and
patent applications as well as know-how primarily related to PEM fuel cell
technology.

As consideration for the
patents and patent applications, Ballard received $40 million from Audi, of
which $10 million was paid to UTC as a royalty under the terms of our prior
acquisition from UTC. As consideration for the know-how, Ballard will receive
$10 million from Audi on transfer thereof, which is expected to occur in the
first quarter of 2016, of which $900,000 will be paid to UTC.

In addition, we retain the
sole right to use the patents, patent applications and know-how transferred to
Audi for all non-automotive purposes, as well as a non-exclusive right for use
in buses, and a non-exclusive right for use in certain limited pre-commercial automotive purposes, all on a
royalty-free basis. We also retain the right to provide technology solutions
services to other automotive OEMs.

- 32 -

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In connection with the
transaction, Volkswagen AG extended its existing technology development
agreement with us as described below.

Ballard filed the IP
Transfer and License Agreement on SEDAR on February 20, 2015 in conjunction with
the filing of a Material Change Report in respect of the transaction.

UTC IP Acquisition

On April 24, 2014, we
acquired the transportation- and stationary-related fuel cell intellectual
property assets of UTC. These assets consist of approximately 800 patents and
patent applications as well as patent licenses, invention disclosures and
know-how primarily related to proton exchange membrane fuel cell
technology.

As consideration for the
patents and patent applications, as well as patent licenses, invention
disclosures and know-how, UTC received 5,121,507 million common shares of
Ballard, $2 million in cash, a grant back license to use the patent portfolio in
UTCs existing businesses and a royalty on Ballards future intellectual
property licensing income generated from the combined intellectual property
portfolio.

In connection with the
transaction, Ballard and UTC formed a strategic alliance led by a joint Advisory
Council that will focus on licensing and other commercial market opportunities
arising from the combination of the acquired UTC portfolio and Ballards
extensive intellectual property.

Ballard filed the agreement
on SEDAR on April 24, 2014 in conjunction with the filing of a Material Change
Report in respect of the transaction.

Technology Development
Agreement with Volkswagen AG

On March 6, 2013, we entered into an agreement
with Volkswagen AG (the Technology Development Agreement) under which we will
provide Volkswagen with engineering services to advance development of fuel
cells for use in powering demonstration cars in Volkswagens fuel cell
automotive research program. The original contract term was for 4 years, with an
option for a 2-year extension. The original expected contract value was in the
range of C$60-100 million.

Work involves the design
and manufacture of a next-generation fuel cell for use in Volkswagen HyMotion
demonstration cars. Ballard engineers are supporting critical areas of fuel cell
product design  including the MEA, plate and stack components  along with
testing and integration work. Volkswagen will own all intellectual property
generated during the program while Ballard
retains a royalty-free license to use it for all non-vehicular applications.

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Ballard filed the
Technology Development Agreement on SEDAR on March 15, 2013 as an attachment to
the Material Change Report in respect of the transaction.

On February 11, 2015, we
entered into an agreement with Volkswagen (the TDA Amending Agreement) under which Volkswagen extended the Technology
Development Agreement for 2 years to February 2019 for anticipated revenues of
approximately C$30-50 million and also extended the notice period for
Volkswagens right to terminate the Technology Development Agreement for
convenience from 1 year to 2 years. These extensions do not affect Volkswagens
continuing right to extend the term of the Technology Development Agreement for
a further 2-year period. Ballard and Volkswagen have also confirmed Ballards
position as a potential supplier of PEM fuel cell products to the Volkswagen
Group.

Ballard filed the TDA
Amending Agreement on SEDAR on February 20, 2015 in conjunction with the filing
of a Material Change Report in respect of the transaction.

RISK FACTORS

An investment in our common
shares involves risk. Investors should carefully consider the risks and
uncertainties described below and the other information contained in, and
incorporated into, this Annual Information Form, including Managements
Discussion and Analysis and our financial statements for the year ended
December 31, 2015. The risks and uncertainties described below are not the only
ones we face. Additional risks and uncertainties, including those that we do not
know about now or that we currently deem immaterial, may also adversely affect
our business.

We may not be able to
achieve commercialization of our products on the timetable we anticipate, or at
all.

We cannot guarantee that we
will be able to develop commercially viable fuel cell products on the timetable
we anticipate, or at all. The commercialization of our fuel cell products
requires substantial technological advances to improve the durability,
reliability and performance of these products, and to develop commercial volume
manufacturing processes for these products. It also depends upon our ability to
significantly reduce the costs of these products, since they are currently more
expensive than products based on existing technologies, such as ICEs and
batteries. We may not be able to sufficiently reduce the cost of these products
without reducing their performance, reliability and durability, which would
adversely affect the willingness of consumers to buy our products. We cannot
guarantee that we will be able to internally develop the technology necessary for commercialization of our fuel cell
products or that we will be able to acquire or license the required technology
from third parties.

- 34 -

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In addition, before we
release any product to market, we subject it to numerous field tests. These
field tests may encounter problems and delays for a number of reasons, many of
which are beyond our control. If these field tests reveal technical defects or
reveal that our products do not meet performance goals, our commercialization
schedule could be delayed, and potential purchasers may decline to purchase our
products.

We expect our cash
reserves will be reduced due to future operating losses and working capital
requirements, and we cannot provide certainty as to how long our cash reserves
will last or that we will be able to access additional capital when necessary.

We expect to incur
continued losses and generate negative cash flow until we can produce sufficient
revenues to cover our costs. We may never become profitable. Even if we do
achieve profitability, we may be unable to sustain or increase our profitability
in the future. For the reasons discussed in more detail below, there are
substantial uncertainties associated with our achieving and sustaining
profitability. We expect our cash reserves will be reduced due to future
operating losses and working capital requirements, and we cannot provide
certainty as to how long our cash reserves will last or that we will be able to
access additional capital if and when necessary.

A mass market for our
products may never develop or may take longer to develop than we anticipate.

Our fuel cell products
represent emerging markets, and we do not know whether end-users will want to
use them in commercial volumes. In such emerging markets, demand and market
acceptance for recently introduced products and services are subject to a high
level of uncertainty and risk. The development of a mass market for our fuel
cell products may be affected by many factors, some of which are beyond our
control, including the emergence of newer, more competitive technologies and
products, the cost of fuels used by our products, regulatory requirements,
consumer perceptions of the safety of our products and related fuels, and
end-user reluctance to buy a new product.

If a mass market fails to
develop, or develops more slowly than we anticipate, we may never achieve
profitability. In addition, we cannot guarantee that we will continue to
develop, manufacture or market our products if sales levels do not support the
continuation of the product.

- 35 -

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We have limited
experience manufacturing fuel cell products on a commercial basis.

To date, we have limited
experience manufacturing fuel cell products on a commercial basis. We cannot be
sure that we will be able to develop efficient, low-cost, high-volume automated
processes that will enable us to meet our cost goals and profitability
projections. While we currently have sufficient production capacity to fulfill
customer orders in the near-term, we expect that we will increase our production
capacity based on market demand. We cannot be sure that we will be able to
achieve any planned increases in production capacity or that unforeseen problems
relating to our manufacturing processes will not occur. Even if we are
successful in developing high-volume automated processes and achieving planned
increases in production capacity, we cannot be sure that we will do so in time
to meet our product commercialization schedule or to satisfy customer demand. If
our business does not grow as quickly as anticipated, our existing and planned
manufacturing facilities would, in part, represent excess capacity for which we
may not recover the cost, in which case our revenues may be inadequate to
support our committed costs and planned growth, and our gross margins and
business strategy would be adversely affected. Any of these factors could have a
material adverse effect on our business, results of operations and financial
performance.

Warranty claims could
negatively impact our gross margins and financial performance.

There is a risk that our
warranty accrual estimates are not sufficient and we may recognize additional
expenses, including those related to litigation, as a result of warranty claims
in excess of our current expectations. Such warranty claims may necessitate
changes to our products or manufacturing processes and/or a product recall, all
of which could hurt our reputation and the reputation of our products and may
have an adverse impact on our financial performance and/or on future sales.
While we attempt to mitigate against these risks through product development,
quality assurance and customer support and service processes, there can be no
assurance that these processes are adequate. Even in the absence of any warranty
claims, a product deficiency such as a design or manufacturing defect could be
identified, necessitating a product recall or other corrective measures, which
could hurt our reputation and the reputation of our products and may have an
adverse impact on our financial performance and/or on future sales.

New products may have
different performance characteristics from previous products. In addition, we
have limited field experience with existing commercial products, including but
not limited to the ElectraGen systems, from which to make our warranty accrual
estimates.

- 36 -

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We may not be able to
successfully execute our business plan.

The execution of our
business plan poses many challenges and is based on a number of assumptions. We
may not be able to successfully execute our business plan. If we experience
significant cost overruns on our programs, or if our business plan is more
costly than we anticipate, certain research and development activities may be
delayed or eliminated, resulting in changes or delays to our commercialization
plans, or we may be compelled to secure additional funding (which may or may not
be available) to execute our business plan. We cannot predict with certainty our
future revenues or results from our operations. If the assumptions on which our
revenue or expenditure forecasts are based change, the benefits of our business
plan may change as well. In addition, we may consider expanding our business
beyond what is currently contemplated in our business plan. Depending on the
financing requirements of a potential acquisition or new product opportunity, we
may be required to raise additional capital through the issuance of equity or
debt. If we are unable to raise additional capital on acceptable terms, we may
be unable to pursue a potential acquisition or new product
opportunity.

Global macro-economic
conditions are beyond our control and may have an adverse impact on our business
or our key suppliers and/or customers.

Current global economic
conditions, including volatility in China, may adversely affect the development
of sales of our products, and thereby delay the commercialization of our
products. Customers and/or suppliers may not be able to successfully execute
their business plans; product development activities may be delayed or
eliminated; new product introduction may be delayed or eliminated; end-user
demand may decrease; and some companies may not continue to be commercially
viable.

In our Heavy-Duty Motive
market, we depend on Chinese customers for a majority of our revenues. Global
macro-economic conditions, including significant and recent volatility in
Chinas capital markets, may adversely impact our Chinese customers access to
capital and program plans which could adversely impact our
business.

We sell most of our
products in the Heavy-Duty Motive market to a small number of Chinese customers,
and while we are continually seeking to expand our customer base, we expect this
will continue for the next several years. Any significant economic slowdown in
China could have an adverse impact on our business, financial condition and
results of operations. Our future success is dependent upon the continued
purchases of our products by these customers. Any fluctuations in demand from
these customers may negatively impact our business, financial condition and
results of operations. If we are unable to broaden our customer base and expand
relationships with other potential customers in other geographic markets, our
business in the Heavy-Duty Motive market will continue to be impacted by
unanticipated demand fluctuations due to our
dependence on these customers. Unanticipated demand fluctuations can have a
negative impact on our revenues and business, and an adverse effect on our
business, financial condition and results of operations. In addition, our
dependence on a small number of customer in this market exposes us to numerous
other risks, including: (i) a slowdown or delay in the customers deployment of
our products could significantly reduce demand for our products as well as
increase pricing pressure on our products due to increased purchasing leverage;
(ii) reductions in a few customers forecasts and demand could result in excess
inventories; (iii) the current or future economic conditions could negatively
affect our major customers and cause them to significantly reduce operations, or
file for bankruptcy; (iv) concentration of accounts receivable credit risk,
which could have a material adverse effect on our liquidity and financial
condition if one of our major customer declared bankruptcy or delayed payment of
their receivables; and (v) changes in government support for clean energy
vehicles could have adversely affect the end-user cost of vehicles incorporating
our heavy-duty motive products.

- 37 -

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In our Technology
Solutions market, we depend on a single customer for the majority of our
revenues.

We provide most of our
services in the Technology Solutions market to a single customer, Volkswagen AG,
and while we are continually seeking to expand our customer base, we expect this
will continue for the next several years. Our future success in this market is
dependent upon the continued demand by this customer and expansion of our
customer base. Any decline in or loss of demand from this customer or other
customers for any reason may have a negative impact on our revenues, and an
adverse effect on our business, financial condition and results of operations.
In addition, our dependence on a single customer in this market exposes us to
numerous other risks, including: the current or future economic conditions could
negatively affect our major customer and cause them to significantly reduce
operations or file for bankruptcy.

In our Material Handling  market, we depend on a single customer for the majority
of our revenues and are subject to risks from that customers internal fuel cell stack development and commercialization
plans.

We sell most of our  products in the Material Handling
market to a single customer, Plug Power, and  while we are continually seeking to expand our customer base, we expect this
will continue for the next several years. Plug Power is currently developing its own fuel cell stacks to integrate into their
material handling products.  If Plug Power is successful at developing and commercializing its own fuel cell stacks, then
these fuel cell stacks may compete directly with our fuel cell stacks. Any decline in business with this  customer could have
an adverse impact on our business, financial condition and  results of operations. Our future success is dependent upon the
continued  purchases of our products by this customer. Any fluctuations in demand from this  customer or other customers may
negatively impact our business, financial  condition and results of operations. If we are unable to broaden our customer
base and expand relationships with other potential customers, our business in  this market will continue to be impacted by
unanticipated demand fluctuations  due to our dependence on a single customer. Unanticipated demand fluctuations  can have a
negative impact on our revenues  and business, and an adverse effect on our business, financial condition and  results of
operations. In addition, our dependence on a single customer in this  market exposes us to numerous other risks, including:
(i) a slowdown or delay in  the customers deployment of our products could significantly reduce demand for  our
products as well as increase pricing pressure on our products due to  increased purchasing leverage; (ii) reductions in a
single customers forecasts  and demand could result in excess inventories; (iii) the current or future  economic
conditions could negatively affect our major customer and cause them to  significantly reduce operations, or file for
bankruptcy; (iv) concentration of  accounts receivable credit risk, which could have a material adverse effect on  our
liquidity and financial condition if our major customer declared bankruptcy  or delayed payment of their receivables; and (v)
reductions in a single  customers demand as a result of their own strategic action to dual source their  supply of fuel
cell stacks.

- 38 -

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We may not be able to
successfully conclude and realize any benefits or value from our ongoing review
of strategic alternatives for our Telecom Backup Power business.

We may not be able to
successfully conclude and realize any benefits or value from our ongoing review
of strategic alternatives for our Telecom Backup Power business. If a strategic
alternative is chosen, the ability to successfully conclude that plan will be in
part dependent on managements ability to identify potential acquirers or joint
venturers for our telecom backup power business.

Acceptable potential
acquirers or joint venturers might not be available. Divestitures involve a
number of risks, including: (i) liabilities of the telecom backup power business
that, as owner of the telecom backup power business, we may remain legally and
financially responsible for; (ii) the additional expenses associated with
completing a divestiture; and (iii) the potential disruption of our other
businesses and the distraction of management from our day-to-day operations.
These risks and difficulties, if they materialize, could disrupt our ongoing
business, distract management, result in the loss of key personnel, increase
expenses and otherwise have a material adverse effect on our business, results
of operations and financial performance.

In our Portable Power
market, defense spending volatility could have an adverse impact on our
business.

Defense spending in the
U.S. has been volatile but with potential upsides in the areas of innovation,
modernization and increased efficiency. Budget volatility could have negative
consequences for Protonex, both with respect to timing and volume of development
programs with defense partners and with respect to product orders.

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In our Portable Power
market, defense acquisition process changes could have an adverse impact on our
business.

The U.S. Department of
Defense at times modifies its procurement processes, cycles, and regulations.
Protonex has been successful in understanding the very complex world of
government procurement, but there can be no assurance that the government will
not change its processes, regulations, and policies in a manner that will
adversely affect Protonexs ability to sell products and services to the
Department of Defense, which in turn would harm Protonexs business
operations.

Potential fluctuations
in our financial and business results make forecasting difficult and may
restrict our access to funding for our commercialization plan.

We expect our revenues and
operating results to vary significantly from quarter to quarter. As a result,
quarter-to-quarter comparisons of our revenues and operating results may not be
meaningful. Due to the stage of development of our business, it is difficult to
predict our future revenues or results of operations accurately. We are also
subject to normal operating risks such as credit risks, foreign currency risks
and fluctuations in commodity prices. As a result, it is possible that in one or
more future quarters, our operating results may fall below the expectations of
investors and securities analysts. Not meeting investor and security analyst
expectations may materially and adversely impact the trading price of our common
shares, and restrict our ability to secure required funding to pursue our
commercialization plans.

We could be adversely
affected by risks associated with acquisitions.

We may in future, seek to
expand our business through acquisitions. Any such acquisitions will be in part
dependent on managements ability to identify, acquire and develop suitable
acquisition targets in both new and existing markets. In certain circumstances,
acceptable acquisition targets might not be available. Acquisitions involve a
number of risks, including: (i) the possibility that we, as successor owner, may
be legally and financially responsible for liabilities of prior owners; (ii) the
possibility that we may pay more than the acquired company or assets are worth;
(iii) the additional expenses associated with completing an acquisition and
amortizing any acquired intangible assets; (iv) the difficulty of integrating
the operations and personnel of an acquired business; (v) the challenge of
implementing uniform standards, controls, procedures and policies throughout an
acquired business; (vi) the inability to integrate, train, retrain and motivate
key personnel of an acquired business; and (vii) the potential disruption of our
ongoing business and the distraction of management from our day-today
operations. These risks and difficulties, if they materialize, could disrupt our
ongoing business, distract management, result in the loss of key personnel,
increase expenses and otherwise have a material adverse effect on our business,
results of operations and financial performance.

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The post-acquisition risk
factors highlighted under the heading Risk Factors in the prospectus
supplement dated July 1, 2015 to the Short Form Base Shelf Prospectus dated May
21, 2014 continue to apply to the integration of Protonex.

We are subject to risks
inherent in international operations.

Our success depends in part
on our ability to secure international customers. We have limited experience
developing and manufacturing products that meet foreign regulatory and
commercial requirements in our target markets. We face numerous challenges in
our international business activities, including war, insurrection, civil
unrest, strikes and other political risks, negotiation of contracts with
government entities, unexpected changes in regulatory and other legal
requirements, fluctuations in currency restrictions and exchange rates, longer
accounts receivable requirements and collections, difficulties in managing
international operations, potentially adverse tax consequences, restrictions on
repatriation of earnings and the burdens of complying with a wide variety of
international laws. Any of these factors could have a material adverse effect on
our business, results of operations and financial performance.

Exchange rate
fluctuations are beyond our control and may have a material adverse effect on
our business, operating results, financial condition and profitability.

We report our financial
results in United States dollars. Our operating expenditures are particularly
affected by fluctuations in the exchange rate between the Canadian dollar and
the United States dollar. We generate the majority of our revenues in United
States dollars while the majority of our operating expenditures are incurred in
Canadian dollars. As a result, any increase in the value of the Canadian dollar,
relative to the United States dollar, increases the amount of reported operating
expenditures in excess of any corresponding increase in revenues and gross
margins. Exchange rate fluctuations are beyond our control, and the Canadian
dollar may appreciate against the United States dollar in the future, which
would result in higher operating expenditures and lower net income. In order to
reduce the potential negative effect of a strengthening Canadian dollar, we
occasionally enter into various hedging programs. However, if the Canadian
dollar increases in value, it will negatively affect our financial results and
our competitive position compared to other fuel cell product manufacturers in
jurisdictions where operating costs are lower.

Commodity price
fluctuations are beyond our control and may have a material adverse effect on
our business, operating results, financial condition and profitability.

Commodity prices, in
particular the price of platinum and palladium, affect our costs. Platinum and
palladium are key components of our fuel cell products. Platinum and palladium
are scarce natural resources and we are dependent upon a sufficient supply of
these commodities. While we do not anticipate significant near or long-term shortages in the supply of platinum or
palladium, such shortages could adversely affect our ability to produce
commercially viable fuel cell products or significantly raise our cost of
producing such products. In order to reduce the impact of platinum price
fluctuations, we occasionally enter into various hedging programs.

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We are dependent upon Original
Equipment Manufacturers and Systems Integrators to purchase certain of our
products.

To be commercially useful, our fuel
cell products must be integrated into products manufactured by Systems
Integrators and OEMs. We can offer no guarantee that Systems Integrators or OEMs
will manufacture appropriate, durable or safe products or, if they do
manufacture such products, that they will choose to use our fuel cell products.
Any integration, design, manufacturing or marketing problems encountered by
Systems Integrators or OEMs could adversely affect the market for our fuel cell
products and our financial results.

We sell most of our products in the
Heavy Duty Motive market in China and to relatively small System Integrator
customers with limited experience developing fuel cell system products on a
commercial basis. We do not know whether these customers will be able to
successfully develop, manufacture or market products to their customers. In
addition, our dependence on such customers in this market increases the risks of
difficulties in integration, design, manufacturing or marketing of their
products; and that current or future macro-economic conditions in China could
negatively affect them and cause them to significantly reduce operations, or
file for bankruptcy.

We are dependent on third party
suppliers for the supply of key materials and components for our products and
services.

We have established relationships with
third party suppliers, on whom we rely to provide materials and components for
our products. A suppliers failure to supply materials or components in a timely
manner, or to supply materials and components that meet our quality, quantity or
cost requirements, or our inability to obtain substitute sources for these
materials and components in a timely manner or on terms acceptable to us, could
harm our ability to manufacture our products. In addition, to the extent that
our product development plans rely on development of supplied materials or
components, we cannot guarantee that we will be able to leverage our
relationships with suppliers to support these plans. To the extent that the
processes that our suppliers use to manufacture the materials and components are
proprietary, we may be unable to obtain comparable materials or components from
alternative suppliers, which could adversely affect our ability to produce
viable fuel cell products or significantly raise our cost of producing such
products.

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We currently face and will continue
to face significant competition.

As fuel cell products have the
potential to replace existing power products, competition for our products will
come from current power technologies, from improvements to current power
technologies, and from new alternative energy technologies, including other
types of fuel cells. Each of our target markets is currently serviced by
existing manufacturers with existing customers and suppliers. These
manufacturers use proven and widely accepted technologies such as ICEs and
batteries as well as coal, oil and nuclear powered generators.

Additionally, there are competitors
working on developing technologies other than PEM fuel cells (such as other
types of fuel cells and advanced batteries) in each of our targeted markets.
Some of these technologies are as capable of fulfilling existing and proposed
regulatory requirements as the PEM fuel cell.

Within the PEM fuel cell market, we
also have a large number of competitors. Across the world, corporations,
national laboratories and universities are actively engaged in the development
and manufacture of PEM fuel cell products and components. Each of these
competitors has the potential to capture market share in each of our target
markets.

Many of our competitors have
substantial financial resources, customer bases, manufacturing, marketing and
sales capabilities, and businesses or other resources, which give them
significant competitive advantages over us.

We could lose or fail to attract the
personnel necessary to run our business.

Our success depends in large part on
our ability to attract and retain key management, engineering, scientific,
marketing, manufacturing and operating personnel. As we develop additional
manufacturing capabilities and expand the scope of our operations, we will
require more skilled personnel. Recruiting personnel for the fuel cell industry
is highly competitive. We may not be able to continue to attract and retain
qualified executive, managerial and technical personnel needed for our business.
Our failure to attract or retain qualified personnel could have a material
adverse effect on our business.

Public policy and regulatory changes
could hurt the market for our products.

Changes in existing government
regulations and the emergence of new regulations with respect to fuel cell
products may hurt the market for our products. Environmental laws and
regulations in the United States and other countries have driven interest in
fuel cells. We cannot guarantee that these laws and policies including subsidies
or incentives associated with the adoption of clean energy products, will not
change. Changes in these laws and other laws and policies, or the failure of
these laws and policies to become more widespread, could result in manufacturers
abandoning their interest in fuel cell products or favouring alternative
technologies. In addition, as fuel cell products are introduced into our target
markets, the United States government and other governments may impose
burdensome requirements and restrictions on the use of fuel cell products that
could reduce or eliminate demand for some or all of our products.

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Government budgetary constraints could
reduce the demand for our products by restricting the funding available to
public transportation agencies and militaries. We cannot guarantee that current
government direct and indirect financial support for our products will
continue.

We depend on our intellectual
property, and our failure to protect that intellectual property could adversely
affect our expected future growth and success.

Failure to protect our existing
intellectual property rights may result in the loss of our exclusivity or the
right to use our technologies. If we do not adequately ensure our freedom to use
certain technology, we may have to pay others for rights to use their
intellectual property, pay damages for infringement or misappropriation, or be
enjoined from using such intellectual property. We rely on patent, trade secret,
trademark and copyright laws to protect our intellectual property. However, some
of our intellectual property is not covered by any patent or patent application,
and the patents to which we currently have rights expire between 2011 and 2027.
Our present or future-issued patents may not protect our technological
leadership, and our patent portfolio may not continue to grow at the same rate
as it has in the past. Moreover, our patent position is subject to complex
factual and legal issues that may give rise to uncertainty as to the validity,
scope and enforceability of a particular patent. Accordingly, there is no
assurance that: (a) any of the patents owned by us or other patents that third
parties license to us will not be invalidated, circumvented, challenged,
rendered unenforceable or licensed to others; or (b) any of our pending or
future patent applications will be issued with the breadth of claim coverage
sought by us, if issued at all. In addition, effective patent, trade secret,
trademark and copyright protection may be unavailable, limited or not applied
for in certain countries.

We also seek to protect our proprietary
intellectual property, including intellectual property that may not be patented
or patentable, in part by confidentiality agreements and, if applicable,
inventors rights agreements with our strategic partners and employees. We can
provide no assurance that these agreements will not be breached, that we will
have adequate remedies for any breach, or that such persons or institutions will
not assert rights to intellectual property arising out of these relationships.

Certain of our intellectual property
have been licensed to us on a non-exclusive basis from third parties who may
also license such intellectual property to others, including our competitors. If
necessary or desirable, we may seek further licences under the patents or other
intellectual property rights of others. However, we may not be able to obtain
such licences or the terms of any offered licences may not be acceptable to us.
The failure to obtain a licence from a third party for intellectual property we
use could cause us to incur substantial liabilities and to suspend the
manufacture or shipment of products or our use of processes requiring the use of
such intellectual property.

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We may become subject to lawsuits in
which it is alleged that we have infringed the intellectual property rights of
others or commence lawsuits against others who we believe are infringing upon
our rights. Our involvement in intellectual property litigation could result in
significant expense to us, adversely affecting the development of sales of the
challenged product or intellectual property and diverting the efforts of our
technical and management personnel, whether or not such litigation is resolved
in our favour.

We could be liable for environmental
damages resulting from our research, development or manufacturing operations.

Our business exposes us to the risk of
harmful substances escaping into the environment, resulting in personal injury
or loss of life, damage to or destruction of property, and natural resource
damage. Depending on the nature of the claim, our current insurance policies may
not adequately reimburse us for costs incurred in settling environmental damage
claims, and in some instances, we may not be reimbursed at all. Our business is
subject to numerous laws and regulations that govern environmental protection
and human health and safety. These laws and regulations have changed frequently
in the past and it is reasonable to expect additional and more stringent changes
in the future. Our operations may not comply with future laws and regulations,
and we may be required to make significant unanticipated capital and operating
expenditures. If we fail to comply with applicable environmental laws and
regulations, governmental authorities may seek to impose fines and penalties on
us, or to revoke or deny the issuance or renewal of operating permits, and
private parties may seek damages from us. Under those circumstances, we might be
required to curtail or cease operations, conduct site remediation or other
corrective action, or pay substantial damage claims.

Our products use flammable fuels and
some generate high voltages, which could subject our business to product
liability claims.

Our business exposes us to potential
product liability claims that are inherent in electrical products, and in
products that use hydrogen or hydrogen-rich reformate fuels. High-voltage
electricity poses potential shock hazards, and hydrogen is a flammable gas and
therefore a potentially dangerous fuel. Any accidents involving our products or
other hydrogen-based products could materially impede widespread market
acceptance and demand for our fuel cell products. Involvement in litigation
could result in significant expense to us, adversely affecting the development
and sales of our products, and diverting the efforts of our technical and
management personnel, whether or not the litigation is resolved in our favour.
In addition, we may be held responsible for damages beyond the scope of our
insurance coverage. We also cannot predict whether we will be able to maintain
our insurance coverage on acceptable terms.

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ADDITIONAL INFORMATION

Additional information regarding
Ballard may be found on SEDAR atwww.sedar.com. In particular, additional
information regarding directors and officers remuneration and indebtedness,
principal holders of our securities and securities authorized for issuance under
security compensation plans is contained in our information circular for our
most recent annual meeting of securityholders that involved the election of
directors. Additional financial information is provided in our financial
statements and Managements Discussion and Analysis for the most recently
completed financial year.

Copies of this Annual Information Form
and the documents incorporated by reference herein, our comparative financial
statements (including the auditors report) for the year ended December 31,
2015, each interim financial statement issued after December 31, 2015, our
management proxy circular and our Annual Report may be obtained upon request
from our Corporate Secretary, 9000 Glenlyon Parkway, Burnaby, British Columbia,
V5J 5J8, or on our website atwww.ballard.com.

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APPENDIX A AUDIT COMMITTEE MANDATE

Purpose

The purpose of the Audit Committee (the
Committee) is to assist the board of directors in fulfilling its oversight
responsibilities by reviewing the financial information which will be provided
to the shareholders and the public, the systems of corporate controls which
management and the board of directors have established, and overseeing the audit
process. The Committee also is mandated to review and approve all related party
transactions, as further described below under Duties and Responsibilities,
other than those related party transactions in respect of which the board has
delegated review to a special committee of independent directors.

In this Mandate, the Corporation
means Ballard Power Systems Inc. and a director means a board member.

More specifically the purpose of the
Committee is to satisfy itself that:

|A) |  | the Corporations
      annual financial statements are fairly presented in accordance with
      generally accepted accounting principles and to recommend approval of the
      annual financial statements to the board;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B) |  | the financial
      information contained in the Corporations quarterly financial statements,
      Annual Report to Shareholders and other financial publications such as
      Managements Discussion and Analysis, the Annual Information Form,
      Management Proxy Circular and information contained in any prospectus is
      complete and accurate in all material respects and to recommend to the
      board approval of these materials other than the quarterly financial
      statements for which approval authority has been delegated to the
      Committee hereunder;                                                                                                                                                                                                       
|  
|C) |  | the Corporation has
      appropriate systems of internal control over the safeguarding of assets
      and financial reporting to ensure compliance with legal and regulatory
      requirements and to manage financial and asset related risks;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|D) |  | the external audit
      function has been effectively carried out and that any matter which the
      external auditors wish to bring to the attention of the Committee or board
      of directors has been addressed. The Committee is also responsible for
      recommending the appointment (for approval by the shareholders at the
      Corporations annual meeting of shareholders) of, and overseeing the
      external auditors, monitoring the external auditors qualifications and
      independence, pre-approving all substantive audit services and non-audit
      services performed by the external auditors, and determining the
      appropriate level of remuneration for the external auditors. The external
      auditors will report directly to the Audit
Committee;

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|E) |  | management has
      established and is maintaining processes to assure compliance by the
      Corporation with all applicable laws, regulations and corporate
      policies;                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|F) |  | the internal audit
      function is being effectively carried out, that the Committee is meeting
      with the internal auditor (or persons responsible for the function) as
      necessary, and that any matter which the internal auditor wishes to bring
      to the attention of the Committee or board of directors has been
      addressed;
|  
|G) |  | the related party
      transactions being reviewed by the Committee are in the best interests of
      the Corporation; and                                                                                                                                                                                                                          
|  
|H) |  | it has engaged any
      necessary independent counsel or other advisors in fulfilling its duties
      and responsibilities, as set forth in this
Mandate.                                                                                                                                                                                           

Composition and Eligibility

|A) |  | Following
      each annual meeting of shareholders of the Corporation, the board will
      appoint from its members not less than three directors to serve on the
      Committee. Each member of the Committee must meet the independence and
      expertise requirements for audit committees imposed by any listing
      standards of NASDAQ or requirements of the Canadian securities regulatory
      authorities under National Instrument 52-110, any applicable statutes, or
      applicable rules or regulations of the U.S. Securities Exchange
      Commission. Directors who have served as the CEO of the Corporation at any
      time, or as the CFO within the past three years, are ineligible for
      appointment to the Committee.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B) |  | Any member
      may be removed or replaced at any time by the board and will cease to be a
      member upon ceasing to be a director of the Corporation. Each member will
      hold office until the close of the next annual meeting of shareholders of
      the Corporation or until the member resigns or is replaced whichever
      occurs first.                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|C) |  | All members
      of the Committee must have working familiarity with basic finance and
      accounting practices, and be able to read and understand fundamental
      financial statements, including a balance sheet, income statement and cash
      flow statement at the time of their appointment.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|D) |  | At least one
      member of the Committee must be an audit committee financial expert as
      defined by the applicable rules set out by the U.S. Securities and
      Exchange Commission (the SEC) or any other regulatory authority. The
      financial expert must have all of the following five
  attributes:                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| | (ii)  |  | the ability to assess the general
      application of such principles in connection with the accounting for
      estimates, accruals and reserves;                                                                                                                                                                                                                                                                          
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      
| | (iii) |  | experience preparing, auditing,
      analyzing or evaluating financial statements that present a breadth and
      level of complexity of accounting issues that are generally comparable to
      the breadth and complexity of issues that can reasonably be expected to be
      raised by the Corporations financial statements, or experience actively
      supervising one or more person engaged in such activities;
| |      
| | (iv)  |  | an understanding of internal
      controls and procedures for financial reporting; and                                                                                                                                                                                                                                                                                                                                       
| |      
| | (v)   |  | an understanding of audit
      committee functions.                                                                                                                                                                                                                                                                                                                                                                          

The financial expert must have acquired
the requisite attributes through any one or more of the following methods:

| | (i)   |  | education and
      experience as a principal financial officer, principal accounting officer,
      controller, public accountant or auditor or experience in one or more
      positions that involve the performance of similar functions;
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      
| | (ii)  |  | experience actively
      supervising a principal financial officer, principal accounting officer,
      controller, public accountant, auditor or person performing similar
      functions;                                                
| |      
| | (iii) |  | experience overseeing
      or assessing the performance of companies or public accountants with
      respect to the preparation, auditing or evaluation of financial
      statements; or                                                  
| |      
| | (iv)  |  | other relevant
      experience, based on the determination by the board of directors as to the
      specific experience, which satisfies this requirement.                                                                                 
| |      

|E) |  | Any member of the
      Committee who serves on more than three public company audit committees
      must inform the Chair of the Board, so that the board may consider and
      discuss with such member any issues related to his or her effectiveness
      and time commitment.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Meetings

|A) |  | The Committee will
      meet at least quarterly. The meetings will be scheduled to permit timely
      review of the interim and annual financial statements, as well as the
      Corporations other financial disclosures and related party transactions.
      The Chair, CEO, CFO, Controller, internal and external auditors or any
      member of the Committee may request additional
  meetings.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|B) |  | The Committee will appoint its
      own Secretary, who need not be a director. The Secretary in conjunction
      with the Chair of the Committee will draw up an agenda, which will be
      circulated, in advance to the members of the Committee with the materials
      for the meeting. The Secretary will be responsible for taking and keeping
      the Committees meeting minutes.                                                                           
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|C) |  | Meetings will be chaired by the
      Chair of the Committee, or if the Chair is absent, by a member chosen by
      the Committee from among themselves.                                                                                                                                                                                                                                                                                                                 
|  
|D) |  | If all members consent, and
      proper notice has been given or waived, a member or members of the
      Committee may participate in a meeting of the Committee by means of such
      telephonic, electronic or other communication facilities as permit all
      persons participating in the meeting to communicate adequately with each
      other, and a member participating in such a meeting by any such means is
      deemed to be present at that meeting.
|  
|E) |  | All directors who are not
      Committee members will be given notice of every meeting of the Committee
      and will be allowed to attend as observers, unless deemed inappropriate by
      the Committee in cases where a potential conflict of interest may exist,
      such as discussions concerning related party transactions.                                                                                                                                 
|  
|F) |  | The CEO, CFO, Controller and
      internal auditor shall have direct access to the Committee and shall
      receive notice of and attend all meetings of the Committee, except the
      in-camera sessions.                                                                                                                                                                                                                                                            
|  
|G) |  | The external auditors will be
      given notice of, and have the right to appear before and to be heard at,
      every meeting of the Committee and will appear before the Committee when
      requested to do so by the Committee.                                                                                                                                                                                                                                    
|  
|H) |  | The Committee is authorized to
      request the presence, at any meeting, of senior management, legal counsel
      or anyone else who could contribute substantively to the subject of the
      meeting.                                                                                                                                                                                                                                                               
|  
|I) |  | The Committee members will
      receive minutes of all meetings of the Corporations internal Disclosure
      Committee.                                                                                                                                                                                                                                                                                                                                                
|  
|J) |  | A majority of Committee members
      constitute a quorum.                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|K) |  | All decisions made by the
      Committee may be made at a Committee meeting or evidenced in writing and
      signed by all Committee members, which will be fully effective as if it
      had been made or passed at a Committee meeting.                                                                                                                                                                                                                              
|  
|L) |  | The minutes of all meetings of
      the Committee will be provided to the board of directors. The Chair of the
      Committee will provide an oral report on the Committees activities to the
      board of directors at the next regularly scheduled meeting of the board
      following each Committee meeting.                                                                                                                                                    

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|M) |  | Supporting schedules and
      information reviewed by the Committee will be available for examination by
      any director upon request to the Secretary of the Committee.                                                                                                                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|N) |  | The Committee may form and
      delegate authority to subcommittees. In particular, the Committee may
      delegate to one or more of its members the authority to pre-approve audit
      or permissible non-audit services, provided that the decisions of any
      member(s) to whom pre-approval authority is delegated will be presented to
      the Committee at the next Committee meeting.

Duties and Responsibilities

|A) |  | Investigations                                                                                                                                                                                                                                                                                                                                                               
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Committee is
      empowered to investigate any activity of the Corporation and all employees
      are to co-operate as requested by the Committee. The Committee may retain
      outside advisors having special expertise to assist it in fulfilling its
      responsibilities, and determine the appropriate level of remuneration for
      such outside advisors.
|  
|B) |  | Financial Reporting
      Control Systems                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | The Committee
      will:                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | (i)                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | (ii)                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | (iii)                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | (iv)                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | (v)                                                                                                                                                                                                                                                                                                                                                                          

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| | (vi)   |  | establish and maintain
      a set of procedures for the receipt, retention and treatment of complaints
      received by the Corporation concerning accounting, internal accounting
      controls or auditing matters and the confidential anonymous submission by
      employees of concerns regarding questionable accounting or auditing
      matters;
| | ------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       
| | (vii)  |  | discuss and consider
      policies with respect to risk assessment and risk management,
      including:                                                                                                                                                                                                                                                    
| |       
| |        |  | a)                                                                                                                                                                                                                                                                                                                                                           
| |       
| |        |  | b)                                                                                                                                                                                                                                                                                                                                                           
| |       
| |        |  | c)                                                                                                                                                                                                                                                                                                                                                           
| |       
| | (viii) |  | meet separately and
      periodically, no less than annually, with management, with internal
      auditors (or the persons responsible for the internal audit function) and
      with external auditors.                                                                                                                                                  
| |       

|C) |  | Interim Financial
      Statements                                                                                                                                                                                                                                                                                 
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Committee will,
      prior to their release, review and approve the interim (quarterly)
      financial statements and Managements Discussion and Analysis with the
      Corporations officers and external auditors. This will include
      significant transactions, which have occurred in the quarter.
|  
|D) |  | Annual Financial
      Statements and Other Financial Information                                                                                                                                                                                                                                                  
|  
|   |  | The Committee
      will:                                                                                                                                                                                                                                                                                          
|  
|   |  | (i)                                                                                                                                                                                                                                                                                                                
|  
|   |  | (ii)                                                                                                                                                                                                                                                                                                               
|  
|   |  | (iii)                                                                                                                                                                                                                                                                                                              

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|   | (iv)                                      | review a summary
      provided by the Corporations legal counsel of the status of any material
      pending or threatened litigation, claims and assessments;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | (v)                                       | review and approve the
      annual financial statements, Managements Discussion and Analysis and the
      auditors report thereon, and discuss them in detail with the
      Corporations officers and the external auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | (vi)                                      | review and recommend
      to the board of directors approval of all financial disclosure contained
      in prospectuses, annual information forms, management proxy circulars and
      other similar documents;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | (vii)                                     | before the release of
      each quarterly report and the annual financial statements, discuss with
      the external auditors all matters required by SAS 61 (including the
      auditors responsibility under GAAP, the selection of and changes in
      significant accounting policies or their application, management judgments
      and accounting estimates, significant audit adjustments, the external
      auditors responsibility for information other than financial statements,
      disagreements with management, consultation with other accountants, and
      difficulties encountered in performing the audit) and CICA Handbook
      section 5751 (which governs the communications between the external
      auditors and the Committee); and
|  
|   | (viii)                                    | provide the board of
      directors with a recommendation for approval of the annual financial
      statements; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   | (ix)                                      | discuss earnings press
      releases and earnings guidance, as well as the release of significant new
      financial information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|E) | Relationship
      with External Auditors
|   |                                          
|   | The
      Committee will:                
|  
|   | (i)                                       | recommend the
      appointment of the external auditors (for approval by the shareholders at
      the Corporations annual meeting of shareholders); if there is a plan to
      change auditors, review all issues related to the change and the steps
      planned for an orderly transition. The external auditors will report
      directly to the Committee. The Committee will not recommend the
      appointment of an external auditor who has previously employed the
      Corporations CEO, CFO, Controller or chief accounting officer and where
      such person participated in any capacity in the audit of the Corporation
      within the past year;                                                                                                 

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| | (ii)   | annually
      review and approve the terms of engagement and determine the remuneration
      of the external auditors;                                                                                                                                                                                                                                              
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |        |                                                                                                                                                                                                                                                                                                                                                                       
| | (iii)  | review the
      quarterly and annual representation letters given by management to the
      external auditors;                                                                                                                                                                                                                                                      
| |       
| | (iv)   | monitor the
      external auditors qualifications and independence through the activities
      listed in section (G) below, Independence of External
  Auditors;                                                                                                                                                                                                 
| |       
| | (v)    | review the
      audit plan with the external auditors and approve all substantive audit
      services in advance;                                                                                                                                                                                                                                                   
| |       
| | (vi)   | approve in
      advance any services to be provided by the external auditors which are not
      related to the audit, including the fees and terms of engagement relating
      to such non-audit services for the Corporation and its subsidiaries.
      Specifically, the Committee must not allow the external auditors to
      provide the following services:
| |       
| |        | a)                                                                                                                                                                                                                                                                                                                                                                    
| |        |                                                                                                                                                                                                                                                                                                                                                                       
| |        | b)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        | c)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        | d)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        | e)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        | f)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        | g)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        | h)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        | i)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| | (vii)  | review
      quarterly all fees paid to external auditors;                                                                                                                                                                                                                                                                                                            
| |       
| | (viii) | review
      performance against audit proposal plan;                                                                                                                                                                                                                                                                                                                 

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|   | (ix)                      | discuss in
      private with the external auditors matters affecting the conduct of their
      audit and other corporate matters;                                                                                                                                            
|-- | ------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | (x)                       | receive from
      the external auditors a report with respect to:                                                                                                                                                                                                             
|  
|   |                           | a)                                                                                                                                                                                                                                                                             
|   |                           |                                                                                                                                                                                                                                                                                
|   |                           | b)                                                                                                                                                                                                                                                                             
|  
|   |                           | c)                                                                                                                                                                                                                                                                             
|  
|   |                           | d)                                                                                                                                                                                                                                                                             
|  
|   |                           | e)                                                                                                                                                                                                                                                                             
|  
|   |                           | f)                                                                                                                                                                                                                                                                             
|  
|   | (xi)                      | resolve all
      disagreements between management and the external auditors regarding
      financial reporting; and                                                                                                                                                          
|  
|   | (xii)                     | ensure that
      the audit partners representing the external auditors meet the rotation
      requirements set out by the U.S. Securities and Exchange Commission and by
      any other applicable Canadian or U.S. securities regulatory authority or
      stock exchange.
|  
|F) | Treasury                 
|   |                          
|   | The
      Committee will:
|  
|   | (i)                       | review and
      approve the Treasury Policy;                                                                                                                                                                                                                                  
|  
|   | (ii)                      | review the
      quarterly Treasury Report;                                                                                                                                                                                                                                    
|  
|   | (iii)                     | review and
      approve the Foreign Exchange Policy; and                                                                                                                                                                                                                      
|  
|   | (iv)                      | review and
      approve any commodities hedging policy.                                                                                                                                                                                                                       

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|G) | Independence
      of External Auditors                                                           
|-- | --------------------------------------------------------------------------------------------------
|  
|   | The
      Committee will oversee the independence of the Corporations external
      auditors by:
|  
|   | (i)                                                                                               
|   |                                                                                                   
|   | (ii)                                                                                              
|  
|   | (iii)                                                                                             
|  
|   | (iv)                                                                                              
|  
|H) | Internal
      Audit and Controls                                                                 
|   |                                                                                                   
|   | (i)                                                                                               
|  
|   | (ii)                                                                                              
|  
|   | (iii)                                                                                             
|  
|   | (iv)                                                                                              
|  
|   | (v)                                                                                               

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|   | (vi)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | The Committee will
      direct, review, monitor, oversee and provide guidance to the internal
      audit function and review the performance of the internal auditor at least
      annually.                                      
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                      
|I) | Related
      Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The
      Committee will review and approve all related party transactions, other
      than those related party transactions in respect of which the board has
      delegated review to a special committee of independent directors or those
      related party transactions which are previously approved under the mandate
      of the CGCC, including, but not limited to, executive employment
      agreements and compensation matters. A related party transaction is
      defined as a transaction in which the Corporation or any of its
      subsidiaries is to be a party, which involves an amount exceeding $60,000
      and in which any of the following persons have a direct or indirect
      material interest:
|  
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | a director or
      executive officer of the Corporation;                                                                                                                                                                            
|  
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | any nominee for
      election as a director of the Corporation;                                                                                                                                                                     
|  
|   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | any security holder of
      the Corporation known by the Corporation to own (of record or
      beneficially) more than 5% of any class of the Corporations voting
      securities; and                                           
|  
|   | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | any member of the
      immediate family of any of the foregoing persons.                                                                                                                                                            
|  
|   | In carrying
      out its responsibilities in reviewing and approving related party
      transactions, the Committee will:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | receive details of all
      related party transactions proposed by the Corporation, other than those
      related party transactions which the board has delegated review of to a
      special committee of independent directors;
|  
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | discuss such related
      party transactions with the representatives of the relevant parties (the
      Representatives) and with the Corporations executive
  officers;                                                        
|  
|   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | review the terms and
      conditions of each related party transaction;                                                                                                                                                             
|  
|   | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | with respect to the
      holders of common shares, consider the effect of the related party
      transaction on, and the fairness of the related party transaction to, such
      shareholders;                                    
|  
|   | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | recommend any
      revisions to the structure of the related party transaction that the
      Committee considers to be necessary or
advisable;                                                                                     

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|   | (vi)                                                                                                                                                                                                        | if a valuation or
      fairness opinion is required by any applicable statutes or regulations,
      supervise the preparation of such valuation or fairness
  opinion;                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | (vii)                                                                                                                                                                                                       | if approval of the
      board of directors is necessary, provide a recommendation to the board of
      directors with respect to the related party transaction; and                                    
|  
|   | (viii)                                                                                                                                                                                                      | review a summary of
      completed related party transactions to ensure that such transactions are
      consistent with the terms and conditions previously approved by the
      committee.           
|   |                                                                                                                                                                                                             |                                                                                                                                                                                                          
|   | As part of
      its review of all related party transactions, the Committee will review
      all modifications to existing loans and advances to the Corporations
      executive officers or directors.
|  
|J) | Other                                                                                                                                                                                                      
|  
|   | The
      Committee will:                                                                                                                                                                                  
|  
|   | (i)                                                                                                                                                                                                         | perform an annual
      review of managements compliance with the Corporations Code of Ethics
      & Workplace Guidelines and Corporate Watch Policy;                                                 
|  
|   | (ii)                                                                                                                                                                                                        | perform an annual
      review of the Corporations Code of Ethics & Workplace Guidelines and
      Corporate Watch Policy, with any recommended changes being forwarded to
      the board for approval;
|  
|   | (iii)                                                                                                                                                                                                       | perform an annual
      review of the succession plans for the Corporations CFO and
      Controller;                                                                                                   
|  
|   | (iv)                                                                                                                                                                                                        | perform an annual
      review of this Committee mandate, with any recommended changes being
      forwarded to the CGCC and ultimately the board for approval;
  and                                    
|  
|   | (v)                                                                                                                                                                                                         | annually review the
      audit of the expense reports of the Chair of the Board of Directors and
      the CEO.                                                                                         
|  
|K) | Performance
      Evaluation                                                                                                                                                                               
|  
|   | The
      Committee will perform an annual evaluation of its performance, having
      regard to the issues reviewed during the year.                                                                      

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AUDIT COMMITTEE TIMETABLE

The timetable below generally outlines
the Committees anticipated schedule of activities during the year.

|Committee
      Timetable
|-------------------------
|Agenda Items             
|A)                       
|(i)                      
|(ii)                     
|(iii)                    
|(iv)                     
|(v)                      
|(vi)                     
|(vii)                    
|(viii)                   
|(ix)                     

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|Committee
      Timetable
|-------------------------
|Agenda Items             
|B)                       
|(i)                      
|C)                       
|(i)                      
|(ii)                     
|(iii)                    
|(iv)                     
|(v)                      
|(vi)                     
|(vii)                    
|(viii)                   
|(ix)                     
|D)                       
|(i)                      
|(ii)                     

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|Committee
      Timetable
|-------------------------
|Agenda Items             
|(iii)                    
|(iv)                     
|(v)                      
|(vi)                     
|(vii)                    
|(viii)                   
|(ix)                     
|(x)                      
|                         
|                         
|                         
|                         
|                         
|                         
|(xi)                     

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|Committee Timetable
|-------------------
|Agenda Items       
|(xii)              
|E)                 
|(i)                
|(ii)               
|(iii)              
|F)                 
|(i)                
|(ii)               
|(iii)              
|(iv)               
|G)                 
|(i)                
|(ii)               

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|Committee Timetable
|-------------------
|Agenda Items       
|(iii)              
|(iv)               
|(v)                
|H)                 
|(i)                
|(ii)               
|I)                 
|(i)                
|(ii)               
|(iii)              
|(iv)               
|J)                 
|(i)                

- 63 -

---