BALLARD POWER SYSTEMS INC.
ANNUAL INFORMATION FORM MARCH 15, 2013




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TABLE OF CONTENTS

|CORPORATE STRUCTURE                                  | 2 
|---------------------------------------------------- | --
|Name, Address and
      Incorporation                | 2 
|Intercorporate
      Relationships                   | 2 
|Recent History                                       | 3 
|Engineering Services Contract with Volkswagen AG     | 4 
|Sale of Ballard Material Products Inc. Assets        | 4 
|Acquisition of Key Assets from IdaTech LLC           | 4 
|Dantherm Power Transaction                           | 5 
|                                                     |   
|OUR BUSINESS                                         | 5 
|Revenues from Market
      Segments                  | 6 
|Our Markets and
    Products                         | 7 
|Product & Service Overview                           | 7 
|Fuel Cell Products                                   | 9 
|Motive Power                                         | 9 
|Material Handling                                    | 9 
|Buses                                                | 10
|Stationary Power                                     | 12
|Back-up Power                                        | 12
|Distributed Generation                               | 13
|Engineering Services                                 | 14
|Material Products                                    | 14
|Impact of Regulations and
      Public Policy        | 14
|United States                                        | 14
|Other Jurisdictions                                  | 15
|Research and Product
      Development               | 16
|Intellectual
Property                                | 16
|Manufacturing                                        | 17
|Quality                                              | 18
|Facilities                                           | 18
|Human Resources                                      | 18
|                                                     |   
|SHARE CAPITAL AND MARKET FOR SECURITIES              | 19
|                                                     |   
|DIVIDEND RECORD AND POLICY                           | 20
|                                                     |   
|DIRECTORS AND OFFICERS                               | 20
|Board of Directors                                   | 20
|Executive Officers                                   | 23
|Shareholdings of Directors and
      Senior Officers | 23
|                                                     |   
|AUDIT COMMITTEE MATTERS                              | 24
|Audit Committee
    Mandate                          | 24
|Composition of the Audit
      Committee             | 24

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|Audit Fees                                                        | 26
|----------------------------------------------------------------- | --
|Audit-Related Fees                                                | 26
|Tax Fees                                                          | 26
|All Other Fees                                                    | 26
|                                                                  |   
|TRANSFER AGENT AND REGISTRAR                                      | 26
|                                                                  |   
|LEGAL PROCEEDINGS                                                 | 26
|                                                                  |   
|INTERESTS OF EXPERTS                                              | 26
|                                                                  |   
|INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL
    TRANSACTIONS   | 27
|                                                                 
|MATERIAL CONTRACTS                                                | 27
|Ballard Material Products
      Asset Sale                        | 27
|IdaTech Asset
      Acquisition                                   | 28
|Dantherm Power
      Acquisition                                  | 29
|Superior Plus Transaction and
      Associated Material Contracts | 29
|Indemnification Arrangements                                      | 30
|                                                                  |   
|RISK FACTORS                                                      | 32
|                                                                  |   
|ADDITIONAL INFORMATION                                            | 40
|                                                                  |   
|APPENDIX “A” Audit Committee Mandate                              | 41
|                                                                  |   
|Committee Timetable                                               | 54

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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”, “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 may not be able to successfully execute
our business plan; we have limited experience manufacturing fuel cell products
on a commercial basis; global economic conditions are beyond our control and may
have an adverse impact on our business or our key suppliers and/or customers;
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; 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 future growth and success; we
could be liable for environmental damages resulting from our research,
development or manufacturing operations; our products use flammable fuels, which
could subject our business to product liability claims; and the other risks and
uncertainties discussed elsewhere in this Annual Information Form.

***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.***

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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.

In this Annual Information Form, references to “Corporation”, “Ballard”,
“BPS”, “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.

Intercorporate Relationships

We have four principal subsidiaries and affiliates: Ballard Fuel Cell
Systems Inc., an Oregon 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 that develops hydrogen-fueled clean
energy backup power systems; BDF IP Holdings Ltd. (“IP Holdings”), a Canadian corporation
that holds intellectual property assets; and Ballard Material Products Inc., a
Delaware corporation that formerly developed and manufactured carbon fiber
products for use in the automotive and fuel cell markets, and which now focuses
on the development of fuel processing components and systems for use in fuel
cell applications.

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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 March 15, 2013(1):



____________________ Notes

|(1) |  | Our 19.9% equity
      interest in AFCC was transferred to Ford on January 31, 2013, pursuant to
      a purchase agreement with Ford, Daimler and AFCC dated January 31, 2008
      (the “Share Purchase Agreement”). As part of an agreement with a financial
      institution in December 2009 to monetize our rights under the Share
      Purchase Agreement, Ballard pledged its shares in AFCC and assigned its
      right to “put” or sell those shares to Ford.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) |  | Following the
      acquisition of the shares of Danfoss Ventures A/S in December 2012, the
      Corporation holds 57% of the shares of Dantherm Power A/S and Dantherm A/S
      hold 43%.                                                                                                                                                                                                                                                                              
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) |  | 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.                                                                                                                                                                                              

Recent History

Over the past three years, we have continued to focus on our core fuel
cell business and on markets with near-term commercial prospects. In support of
this strategy, we have focused on bolstering our cash reserves to strengthen our
capability to execute on our growth priorities. On January 31, 2013,wesold substantially all of the assets of
Ballard Material Products Inc., a subsidiary located in Lowell, MA, a non-core
asset with the majority of its sales generated in industrial sectors unrelated
to fuel cells. The corporate entity, as well as assets and personnel related to
the development of fuel processing components and systems, were retained. On
August 1, 2012, Ballard acquired key assets from IdaTech LLC, a customer in the
telecommunications backup power market. On January 18, 2010, we acquired a
controlling interest in Dantherm Power, a Denmark-based corporation, which
develops clean energy backup power through utilization of our hydrogen fuel cell
technology.

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***Engineering Services Contract with Volkswagen AG***

On March, 2013, we signed an agreement
with Volkswagen AG for an engineering services contract to advance development
of fuel cells for use in powering demonstration cars in Volkswagen’s fuel cell
automotive research program. The contract term is for 4 years, with an option
for a 2-year extension. The expected contract value is in the range of C$60-100
million.

Work will involve the design and manufacture of a next-generation fuel
cell for use in Volkswagen HyMotion demonstration cars. Ballard engineers will
lead critical areas of fuel cell product design  including the membrane
electrode assembly (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 and for bus and motorcycle applications.

***Sale of Ballard Material Products Inc. Assets***

On January 31, 2013, we completed an
agreement to sell substantially all of the assets in our Lowell, Massachusetts
based Material Products division for gross cash proceeds of $10.5 million and
additional potential proceeds of up to $1.5 million. The additional proceeds of
up to $1.5 million are payable in 2014 and 2015 (through a GDL product credit)
if the former Material Products division attains certain financial results in
2013.

***Acquisition of Key Assets from IdaTech LLC***

On August 1, 2012 (announced on July 24, 2012), we completed an agreement
to acquire key assets and product lines from IdaTech LLC (“Idatech”), a customer
of Ballard for the past several years. In exchange for $7.5 million of Ballard
shares issued from treasury (7.1 million Ballard shares valued at $1.05 per
share based on our share price as of the acquisition date), we acquired
Idatech’s key assets including fuel cell systems inventory, prepaid rights to
inventory, product lines for backup power applications, distributor and customer
relationships, a license to intellectual property, the right to assume control
of a manufacturing facility in Tijuana, Mexico, and certain property, plant and
equipment. Acquired fuel cell systems inventory, prepaid rights to inventory,
product lines and intellectual property consist of both direct hydrogen units as
well as methanol fuelled units and are designed for deployment as emergency
backup power in the networks of wireless telecom service providers. The methanol
systems incorporate a fuel reformer to extract hydrogen from a mixture of
methanol and water which is then used as feedstock for the fuel cells. The
assets were transferred to Ballard Fuel Cell Systems Inc., a new company formed
as a result of the transaction.

As part of the transaction, Ballard
exercised its right to assume IdaTech’s manufacturing facilities in Tijuana,
Mexico in January 2013.

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***Dantherm Power Transaction***

On January 18, 2010, we acquired a controlling interest in Denmark-based
Dantherm Power, partnering with co-investors Danfoss Ventures A/S and Dantherm
A/S. In exchange for an initial investment of DKK 30m (approximately $6m) funded
in two tranches in January and August 2010, Ballard obtained a 52% interest in
Dantherm Power. On December 20, 2012, Ballard and Dantherm A/S acquired the
shares of Danfoss Ventures A/S, giving Ballard a 57% interest in Dantherm Power.
Dantherm Power develops clean energy backup power systems utilizing Ballard’s
hydrogen fuel cell technology, for telecom equipment suppliers.

OUR BUSINESS

At Ballard, we are building a clean energy growth company. We are
recognized as a world leader in proton exchange membrane (“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 motive power (material handling and buses) and
stationary power (backup power and distributed generation) markets. We also
provide engineering services 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 our proprietary esencia
technology which draws on intellectual property from our patent portfolio
together with our extensive experience in key areas of fuel cell stack
operation, system integration, and fuel processing.

We provide our customers with the positive economic and environmental
benefits unique to fuel cell power. We plan to build value for our shareholders
by developing, manufacturing, selling and servicing industry-leading fuel cell
products to meet the needs of our customers in select target markets. Our focus
is on leveraging the inherent reliability and durability derived from our legacy
automotive technology into non-automotive markets where demand is near term and
on our core competencies of PEM fuel cell design, development, manufacture,
sales and service.

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Strategy

Our business
strategy is to establish a sharp focus on key growth opportunities with
near-term commercial prospects in our core fuel cell markets, enhanced by our
engineering services operating unit to leverage our expertise in fuel cell
design, prototyping, manufacturing and servicing. To support our business
strategy and our capability to execute on our clean energy growth priorities, we
have also focused our efforts on both product cost reduction and managing our
operating expense base including overall expense reductions, the pursuit of
government funding for our research and product development efforts, and the
redirection of engineering resources to revenue bearing engineering service
projects.

Revenues from Market Segments

In 2012, we operated in two market segments:

| | (a) |  | Fuel Cell Products:
      fuel cell products and services for motive power (material handling and
      bus markets) and stationary power (back-up power and distributed
      generation markets) applications and engineering services for a variety of
      fuel cell applications; and                                           
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    
| | (b) |  | Material Products:
      carbon fiber products primarily for automotive transmissions and gas
      diffusion layers (“GDLs”) for fuel cells. As a result of the disposition of
      this segment on January 31, 2013, the Material Products segment has been
      classified as a discontinued operation as of December 31,
  2012.

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The following chart shows the percentage of total revenues derived from each
segment, and the portion of revenues from each segment which arises from sales
to investees and sales of products and services to other customers, for the
years 2012 and 2011:

|                                                             | 2012  | 2011 
|------------------------------------------------------------ | ----- | -----
|Revenues from
      Fuel Cell Products                       |       |      
|Percentage of total
      revenues                           | 73.8% | 61.1%
|Portion representing sales to investees(1)                   | 7.0%  | 3.2% 
|Portion representing sales to customers other than investees | 66.8% | 57.9%
|                                                             |       |      
|Revenues from
      Contract Automotive(2)                   |       |      
|Percentage of total
      revenues                           | Nil   | 12.2%
|Portion representing sales to investees(1)                   | Nil   | 0.4% 
|Portion representing sales to customers other than investees | Nil   | 11.8%
|                                                             |       |      
|Revenues from
      Material Products                        |       |      
|Percentage of total
      revenues                           | 26.2% | 26.6%
|Portion representing sales to investees                      | 0.1%  | Nil  
|Portion representing sales to customers other than investees | 26.1% | 26.6%

Our Markets and Products

***Product & Service Overview***

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

|(1)                  |  | Fuel cell stacks:
      Ballard provides 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 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
      system.                                 
|____________________

|(1) |  | In the
      table, “investees” means AFCC.                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Contract
      manufacturing services provided primarily for Daimler. With the completion
      of the Daimler  manufacturing contract, this segment ceased to be an
      operating segment as of the end of 2011.

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|(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 Back-up power markets. The ClearGen product line provides
      system solutions for large scale Distributed Generation
    markets.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(4) |  | Material Products: As
      of December 31, 2012, we designed, developed, manufactured, sold and
      serviced carbon fiber materials that can be used in a variety of fuel cell
      and non-fuel cell applications. As of January 31, 2013 Ballard divested
      this business but maintains a strong customer/supplier relationship with
      the purchaser, AvCarb LLC.                                              
|   
|(5) |  | Engineering Services:
      We provide engineering services for a variety of fuel cell
      applications.                                                                                                                                                                                                                                                                                                                   

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®-HD6                                                      

|Stationary Power Product Family:
      FCgen® Fuel Cell Products and System
      Products
|------------------------------------------------------------------------------------------
|Product Name                                                                              
|FCgen®-1020ACS                                                                            
|FCgen®-1300                                                                               
|ClearGen                                                                                 
|ElectraGen-H2                                                                            
|ElectraGen-Me                                                                            

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Fuel Cell Products

Motive
Power

Material Handling

The material handling market includes target industrial vehicles such as
forklifts, automated guided vehicles (AGVs) and ground support equipment.
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 primary product
for the material handling market is the FCvelocity®-9SSL, which is
applicable to Class 1, Class 2 and Class 3 forklift truck solutions. We supply
the FCvelocity®-1020ACS, our
second-generation air-cooled fuel cell product, for light-duty material handling
applications.

Our principle customer 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. The addition of the previously unavailable system
for Class 2 lift trucks filled out Plug Powers product portfolio and enables
full facility conversions, which will help advance market
penetration.

In 2010, we extended our existing supply agreement with Plug Power
through 2014. We are the exclusive supplier of fuel cell stacks for Plug Powers
full suite of GenDrive power units and Plug Power is the exclusive systems
integrator for Ballards fuel cell stacks in the material handling market in
North America. In July 2011, Ballard received a purchase order from Plug Power
for a minimum purchase of 3,250 Ballard fuel cell stacks by the end of 2012, and
which also included requirements for the air-cooled FCvelocity-1020ACS
product.

Material handling fuel cell stack shipments in 2012 totalled 2,022 units,
which represents a 42% increase over 2011 shipment levels.

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In order to
support market growth, we continue to pursue cost reduction of our
FCvelocity®-9SSL and FCvelocity®-1020ACS fuel cell
products. To date we have reduced the cost of this fuel cell product by roughly
55% since its introduction in 2008. With the increased purchase order
commitments from Plug Power, we anticipate that both the scale and cadence of
associated product shipments will contribute to increased manufacturing
efficiency and further reductions in fuel cell stack costs.

*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 Hydrogenics and Nuvera. We seek to gain a competitive advantage through
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.

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.

Buses

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

Ballard designs and manufactures the FCvelocity®-HD6 fuel cell
module delivering 75 - 150 kW of power for use in the bus market. Ballard
supplies the fuel cell modules to hybrid drive and coach manufacturer customers
that deliver zero-emission fuel cell-powered buses to transit operators around
the world.

At the end of 2011, there were 41 Ballard-powered fuel cell buses
operating in nine cities worldwide: Whistler, BC (20)  the largest fuel cell
bus fleet in the world; Palm Desert, California (2);
London (5); Oslo (5); Amsterdam (2); Cologne (2); Shanghai (3); Mumbai (1); and
São Paulo (1). To date, Ballard-powered fuel cell buses have accumulated more
than 200,000 hours of operation, accumulated more than three million kilometres
in service and transported more than seven million passengers.

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In 2011, we
signed a Letter of Intent with the City of São Paulo in support of a 10 to 30
fuel cell bus RFP for that city. In 2012, during the process of negotiating
final agreements the City of São Paulo elected not to follow through with the
project. Ballard is opportunistically looking at other market entry
opportunities in Brazil.

Also in 2011 we signed an equipment supply agreement with Van Hool NV for
up to 21 fuel cell modules for several bus fleet opportunities in Europe:
binding commitments are subject to Van Hool securing agreements relating to
these opportunities, most of which are now in place.

Product cost reduction efforts for the FCvelocity®-HD6 fuel
cell module in 2012 have focused on unit cell design enhancements, including
extension of durability and lifetime. This ongoing effort was partially funded
by a C$4.8 million award received in January 2010 (revised to C$6.9 million in
June 2012) from Sustainable Development Technology Canada (SDTC) for the period from
2010 to 2012 (extended to November 2013) to further develop fuel cell power
module technology for the transit bus market. Product cost reductions will
continue in 2013 with the development of our next generation bus module,
FCvelicity®-HD7, which is anticipated to reduce total cost of the
module by 25%. These ongoing cost reductions remain partially funded through the
support of SDTC.

*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 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. Recently, hydrogen
internal combustion engines have been demonstrated in transit buses with both
conventional and hybrid drive systems. These have not been widely adopted
primarily because of very low fuel efficiency, low power and low operational
reliability.

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.

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Companies
developing fuel cell systems for transit bus applications include United
Technologies, 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 our competitors.

***Stationary Power***

Back-up Power

Our focus in
the back-up power market is on the telecommunications industry, which is
currently dominated by batteries and diesel generators. The back-up power market
is characterized by infrequent power demand, where outages typically occur
monthly or less frequently and last less than eight hours; whereas the
supplemental power market is characterized by often daily outages lasting 4-8
hours or more.

The FCgen®-1020ACS fuel cell
product is our primary stack platform in the backup power market. Shipment of
fuel cell stacks to backup power market customer in 2012 totalled 635
units.

Dantherm Power develops clean energy fuel cell backup power systems for
telecom equipment suppliers, for installation in either indoor or outdoor
applications. Dantherm Powers system deployments include the largest European
fuel cell installation for TETRA emergency networks. In 2012, Dantherm Power
re-branded the DBX 2000 and DBX 5000 fuel cell system products as
ElectraGen-H2.

Ballard Fuel Cell Systems Inc. develops clean energy fuel cell backup
power and supplemental power systems for telecom equipment suppliers, for
installation primarily in outdoor applications. The ElectraGen-ME fuel cell
system is powered by a liquid methanol/water mix; the ElectraGen-H2 fuel cell
system is powered by hydrogen. Both the ElectraGen-ME and ElectraGen-H2
outdoor cabinet solutions are available in 2.5 kW or 5kW models.

In 2012, Ballard completed the commissioning of 30 2kW ElectraGen-H2
modules for Idea Cellular in India, together with partner Delta Power Solutions
(India). Dantherm Power shipped 50 2kW ElectraGen-H2 modules to China for
wide-scale trials by China Mobile. A total of 270 ElectraGen products were also
shipped to telecom operators in South East Asia and Africa, mainly through
channel partners Cascadiant and Inala.

Ballard and Dantherm Power also reported progress on the development of a
fuel-cell powered electric generator for the African rural home market, with
funding from Anglo American Platinum Limited.

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Competition

The back-up power market is currently dominated by ICEs (primarily diesel
gensets) and batteries. Advanced battery technology continues to make modest
progress in the back-up 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.

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

Distributed Generation

Large scale distributed generation (DG) is an exploratory new market for
Ballard. We first entered into this space in 2009, with the announcement of the
supply agreement to deliver a 1 MW solution utilizing our motive power fuel
cells to FirstEnergy, an Ohio based energy company, for use in a utility load
management demonstration project. The unit was shipped in the third quarter of
2010, and began operation on November 1, 2010. The unit has been operated for
demonstration purposes through 2012 and has served as an important reference
site in this market.

The second generation DG product currently under development is the
Ballard ClearGen fuel cell system. The ClearGen system is a complete turnkey
for zero-emission power. The system can operate continuously for baseload power
generation, or intermittently, providing peak power during times of high demand.
The 1 MW modular units are scalable in 500 kW increments, enabling tailored
solutions to meet each customers needs.

In October 2011, we received a Frost & Sullivan award for new product
innovation for the ClearGen fuel cell system (North American Stationary PEM
category). The system was praised for surpassing the competition in terms of
fuel cell durability, product cost and load-following capability, all keys to
commercially viable grid-scale solutions.

In April 2011, Ballard entered into an agreement with Toyota Motor Sales
USA Inc. (Toyota) to deploy a 1 MW ClearGen fuel cell system to provide peak electrical
power and heat at the Toyota facility in Torrance, California. The unit was
successfully installed and commissioned in August of 2012.

- 13 -

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In June 2011,
we obtained an C$7.0 million (revised to C$7.3 million in December 2012) award
agreement from Sustainable Development Technology Canada (SDTC) for the period
from 2011 to 2013 (extended to 2014) to be used to extend the operating life and
lower the product cost of FCgen-1300, the fuel cell product that powers
Ballards CLEARgen distributed generation system.

*Competition*

The distributed generation market is large and varied. As such, depending
on the application, diesel gensets or natural gas gensets would be considered
current technologies. Hydrogen fuelled IC engines, advanced battery technologies
and other fuel cell systems are emerging as competitive technologies. Fuel cell
systems offer significant efficiency and emissions improvements over gensets and
hydrogen fuelled IC engines. Advanced battery technologies cannot meet desired
run times without requiring substantial capital cost and installation space.

Companies developing PEM fuel cell systems for distributed generation
market applications include Nedstack and Hydrogenics. Companies developing other
fuel cell systems for this market are UTC Power (phosphoric acid fuel cells),
which was purchased by ClearEdge Power in December 2012, Fuel Cell Energy
(molten carbonate fuel cells) and Bloom Energy (solid oxide fuel cells).

**Engineering Services**

During the last half of 2011, we refined our business strategy and
established a new engineering services operating unit in order to leverage our
expertise in fuel cell design, prototyping, manufacturing and servicing. This
new operating unit offers a full suite of fuel cell engineering solutions for a
variety of fuel cell applications and is included in our core Fuel Cell Products
segment.

**Material Products**

As of December 31, 2012, we designed, developed, manufactured, sold and
serviced carbon fiber materials for use in a variety of fuel cell and non-fuel
cell applications, including fuel cell GDLs and friction materials in torque
converters for light vehicle automatic transmissions. As of January 31, 2013
Ballard divested from this business but maintains a strong customer/supplier
relationship with the purchaser, AvCarb, ensuring the continued supply of
AvCarb GDL materials.

**Impact of Regulations and
Public Policy**

***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 Dec. 31, 2016. In addition, it features a credit of 10% for
combined-heat-and-power-system property.

- 14 -

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The American
Recovery and Reinvestment Act of 2009 expands incentives to encourage the
installation of fuel cells and hydrogen fueling infrastructure. Incentives
include:

- A fueling facility
  tax credit, which increases the dollar cap of the 30% hydrogen fueling
  infrastructure tax credit from $30,000 to $200,000.
- A manufacturing credit, which creates a 30% credit
  for investment in property used for manufacturing fuel cells and other
  technologies.
- A residential energy-efficiency credit, which
  raises the investment-tax-credit dollar cap for residential fuel cells in
  joint occupancy dwellings to $3,334/kW.

At the state level, the California Self-Generation Incentive Program,
which is funded by ratepayers and administered by utilities, provides incentives
for fuel cell generation. In 2011 the incentive was $2250/kW for power plants
that operate on hydrogen from non-renewable resources and $4250/kW for those
that operate on hydrogen from renewable resources. The program is funded
annually and guidelines are published in a yearly handbook.

The availability of these incentives is expected to help drive demand for
fuel cell products.

***Other Jurisdictions***

In Canada, SDTC operates the $590 million SD Tech Fund which supports
projects that address climate change, air quality, clean water, and clean soil.
The SD Tech Fund provides financial contributions to projects aimed at
supporting the late-stage development and pre-commercial demonstration of clean
technology solutions. SDTC does not require any repayments of the financial
contributions it provides to funded projects through the SD Tech Fund. As noted
elsewhere, SDTC agreed to provide Ballard with up to $11.8 million for funded
projects that will extend through 2013.

As of 2012, feed-in tariff policies have been enacted in 92 jurisdictions
around the world to encourage the adoption of renewable energy sources. Under a
feed-in tariff, utilities are obligated to buy electricity from all eligible
participants at rates based on the cost of renewable energy generation, which
enables a diversity of projects to be developed at a reasonable return on
investment. The rates are typically designed to ratchet
downward over time to track technology improvements and overall cost reductions.
Feed-in tariff programs also typically offer long-term (1525 year) guaranteed
purchase contracts for the electricity generated from such projects. Programs
that support energy generation from hydrogen sources are expected to help drive
demand for fuel cell products.

- 15 -

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Another policy
that is emerging in importance is the quota or renewable portfolio standard
(RPS). A
quota/RPS is a government-mandated obligation on a utility company, group of
companies, or consumers to provide or use a predetermined amount of renewable
electricity. By early 2012, quota/RPS policies existed in 18 countries at the
national level and in at least 53 other jurisdictions at the state, provincial,
or regional level.

Beginning in 2012, the Ministry of Commerce, Industry and Energy (MOCIE)
in Korea introduced an RPS as an alternative plan to the FIT. The program will
mandate that 14 utilities generate 4% of electricity from renewables in 2015,
increasing to 10% by 2020. Fuel cell projects receive the highest level of
support under the Korea RPS system and this is expected to help drive demand for
our products.

In Europe, the Fuel Cells and Hydrogen Joint Undertaking
(FCH JU)
 part of the Joint Technology Initiative - is a public private partnership
supporting research, technological development and demonstration activities in
fuel cell and hydrogen energy technologies that provides subsidies for eligible
projects through a cost share mechanism. FCH JU has a total budget amounting to
nearly 1bn EUR to be invested by 2013 for projects through 2017. The sixth
annual call for proposals has been published with a due date of May
2013.

Research and Product Development

Ballards research activities are primarily focussed on the MEA and its
sub-components, aimed at improving the overall cost, durability, and reliability
of our products. Material development of 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, further
cost reduction will be 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.

- 16 -

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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 25 years of research
and product development.

As of January 31, 2013, Ballard owns or controls through IP Holdings,
patents approximately as follows: 58 United States granted patents, 80
non-United States granted patents, 3 United States published patent applications
and 20 published non-United States patent applications. Our patents will expire
between 2013 and 2030.

We hold licence rights to additional intellectual property from a number
of third parties. We have a royalty-free non-exclusive license to approximately
350 patents and patent applications from IdaTech LLC for methanol reforming and
other fuel cell-related technologies. These licences also include non-exclusive,
royalty-free access to all of the intellectual property rights held by NuCellSys
GmbH (NuCellSys), 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), including any intellectual property rights developed
by them until January 31, 2013. As of January 31, 2013, of the approximately
2,000 patents and patent applications that were included in these licenses,
approximately 700 of them are currently granted or pending.

Manufacturing

Our manufacturing facilities in Burnaby are focused on the production of
membrane electrode assemblies (MEAs) and the integration/testing of our fuel
cell stacks. Additional capabilities include the assembly and test of
FCvelocity®-HD6
fuel cell bus modules along with assembly of our ClearGen distributed
generation systems. Through the transition to automated manufacturing and
roll-to-roll MEA production, we are well positioned to meet manufacturing
capacity requirements for the next few years. As product demand grows, we will
increase capacity either by further investment in automation, leveraging our low
cost production facility in Mexico, or in outsourcing select manufacturing
processes.

Our ElectraGen-ME products are primarily produced in our low cost
manufacturing facility located in Tijuana, Mexico  acquired as part of the
Idatech asset transaction. The ElectraGen-H2 products, deployed mostly in
Europe, are manufactured in Denmark through a combination of outsource contract
manufacturing and in-house integration at our Dantherm Power facilities in
Hobro.

Many of the materials and components comprising the membrane electrode
assemblies and the fuel cell stack, along with key balance of plant items, are
unique and proprietary in nature. They have been developed in joint
collaboration between Ballard and our key supply base. Strategic
relationships have been developed with these key suppliers to ensure security of
supply, protection of our intellectual property, and adherence to our strict
quality and reliability standards.

- 17 -

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Quality

Quality is an
integral part of the Ballard culture and our systems are focused on ensuring
that every product shipped to our customers conforms to their 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 other stakeholder
requirements, manufactures the highest quality products, safeguards the health
and safety of all, and, sustains our natural environment”.

We use an Integrated Management System registered to ISO 9001 and TS16949
standards, as well as robust internal practices in the areas of environment,
health and safety that conform to the requirements of ISO 14001. We strive for
continuous manufacturing improvement through practices such as Lean
Manufacturing, 5-S and advocacy of Six Sigma.

Facilities

We currently have the following principal facilities: (a) a leased
116,797 square foot (10,850 square meter) facility in Burnaby, British Columbia
that houses our corporate headquarters and our fuel cell development,
manufacturing and testing activities; (b) a leased 112,000 square foot (10,398
square meter) facility in Burnaby, British Columbia that houses some of our
manufacturing facilities and manufacturing facilities that we subleased to
Mercedes-Benz Canada and AFCC; (c) a 13,000 square foot (1,207 square metre)
subleased facility in Bend, Oregon that houses our ElectraGen-ME product
development group as well as system test lab; (d) a leased 4100 square foot
(381.5 square meter) facility in Hobro, Denmark, and (e) a leased 38,000 square
foot (3,530 square metre) facility in Tijuana, Mexico which operates under a
shelter agreement arrangement for the manufacture and testing of our
ElectraGen-ME product line.

As per our Quality Statement, we are committed to developing and
manufacturing products, and operating all of our facilities, in full compliance
with all applicable local, regional, national and international environmental,
health and safety regulatory standards.

Human Resources

As of December 31, 2012, we had approximately 395 employees, 295 in
Canada, 65 in the United States and 35 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. Effective February 1, 2013, 39 US based employees left
Ballard’s employment as a result of their transition to the Avcarb as part of
the sale of the Material Products division. 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.

- 18 -

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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 March 15, 2013, our
issued share capital consisted of91,899,633 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 2012:

|          | TSX         | NASDAQ       
|--------- | ----------- | -------------
|          |             | Average Daily
|          | Price Range | Volume       
|          | (CDN$)      | (#)          
|January   | $1.10-1.22  | 61,381       
|February  | $1.19-1.70  | 83,982       
|March     | $1.36-1.55  | 54,096       
|April     | $1.25-1.42  | 26,821       
|May       | $1.16-1.39  | 26,843       
|June      | $1.12-1.23  | 32,783       
|July      | $1.04-1.16  | 22,143       
|August    | $0.92-1.11  | 29,436       
|September | $0.70-0.97  | 73,345       

- 19 -

---



|         | TSX         | NASDAQ       
|-------- | ----------- | -------------
|         |             | Average Daily
|         | Price Range | Volume       
|         | (CDN$)      | (#)          
|October  | $0.70-0.85  | 45,825       
|November | $0.61-0.73  | 35,549       
|December | $0.59-0.66  | 58,596       

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 therefor 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.

DIRECTORS AND OFFICERS

Board of Directors

The following chart provides the following information as of March 15,
2013: 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.

- 20 -

---



|                                                   |  |                                                                                                                                                                                                                                                                                                                |  |          |  | Shares         |  |                 
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | -------------- |  | ----------------
|                                                   |  |                                                                                                                                                                                                                                                                                                                |  |          |  | Beneficially   |  | Deferred Share  
|                                                   |  |                                                                                                                                                                                                                                                                                                                |  |          |  | Owned or       |  | Units Owned     
|Name,                                              |  |                                                                                                                                                                                                                                                                                                                |  |          |  | Controlled or  |  | or Controlled(2)
|Province/State                                     |  |                                                                                                                                                                                                                                                                                                                |  | Director |  | Directed(1)    |  | (#/% of Class)  
|and Country of                                     |  | Principal Occupation(1)                                                                                                                                                                                                                                                                                        |  | Since    |  | (#/% of Class) |  |                 
|Residence(1)                                       |  |                                                                                                                                                                                                                                                                                                                |  |          |  |                |  |                 
|Ian A. Bourne Alberta, 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     |  | 26,824/0.029%  |  | 136,028/30.21%  
|                                                   |  |                                                                                                                                                                                                                                                                                                                |  |          |  |                |  |                 
|Douglas P. Hayhurst
      British Columbia, 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     |  | Nil            |  | 33,327/7.40%    
|                                                   |  |                                                                                                                                                                                                                                                                                                                |  |          |  |                |  |                 
|Edwin J. Kilroy Ontario,
      Canada              |  | Corporate Director of Ballard.
      Formerly Chief Executive Officer of Symcor Inc. (business process outsourcing services) from January 2005 to November 2010.                                                                                                                                               |  | 2002     |  | 2,752/0.003%   |  | 84,503/18.77%   

- 21 -

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|                                                   |  |                                                                                                                                                                                                                                                     |  |          |  | Shares         |  |                 
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | -------------- |  | ----------------
|                                                   |  |                                                                                                                                                                                                                                                     |  |          |  | Beneficially   |  | Deferred Share  
|                                                   |  |                                                                                                                                                                                                                                                     |  |          |  | Owned or       |  | Units Owned     
|Name,                                              |  |                                                                                                                                                                                                                                                     |  |          |  | Controlled or  |  | or Controlled(2)
|Province/State                                     |  |                                                                                                                                                                                                                                                     |  | Director |  | Directed(1)    |  | (#/% of Class)  
|and Country of                                     |  | Principal Occupation(1)                                                                                                                                                                                                                             |  | Since    |  | (#/% of Class) |  |                 
|Residence(1)                                       |  |                                                                                                                                                                                                                                                     |  |          |  |                |  |                 
|Dr. Chong Sup (C.S.) Park
      California, U.S.A. |  | Corporate Director of Ballard.
      Formerly Chairman of the Board and Chief Executive Officer of Maxtor
      Corporation (storage solutions and hard
      disk drives) from November 2004 to May
      2006.                                    |  | 2007     |  | 17,091/0.019%  |  | 33,245/7.38%    
|                                                   |  |                                                                                                                                                                                                                                                     |  |          |  |                |  |                 
|John W. Sheridan British
      Columbia, Canada    |  | President and Chief Executive
      Officer of Ballard since October 2005.                                                                                                                                                                          |  | 2001     |  | 524,522/0.57%  |  | 57,943/12.87%   
|                                                   |  |                                                                                                                                                                                                                                                     |  |          |  |                |  |                 
|Carol M. Stephenson
      British Columbia, Canada |  | Dean of the Richard Ivey School
      of Business at the University of Western Ontario, a position she has held
      since 2003. Previously, served as President and Chief Executive Officer of
      Lucent Technologies Canada from 1999 to 2003 |  | 2012     |  | 3,550/0.004%   |  | 38,013/8.44%    
|                                                   |  |                                                                                                                                                                                                                                                     |  |          |  |                |  |                 
|David B. Sutcliffe
      British Columbia, Canada  |  | Corporate Director of Ballard.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.                                  |  | 2005     |  | 3,600/0.004%   |  | 67,186/14.92%   

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. Information on shares beneficially
      owned, or controlled or directed is accurate as at March 15,
    2013.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Rounded to the nearest
      whole number. Information is accurate as at March 15,
  2013.
|--- |  | ------------------------------------------------------------------------------------------

- 22 -

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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.

Executive Officers

As of March 29, 2013, we had four executive officers. The name and
province or state of residence of each executive 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 of                         |  |                                                  |  |                                                                                                                                    
|-------------------------------------------------- |  | ------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------
|Residence                                          |  | Position                                         |  | Principal
      Occupation                                                                                                         
|John W. Sheridan British
      Columbia, Canada    |  | President and Chief Executive
      Officer      |  | Executive of Ballard.                                                                                                              
|                                                   |  |                                                  |  |                                                                                                                                    
|Tony GuglielminBritish Columbia, Canada            |  | Vice President and Chief
      Financial Officer |  | Executive of Ballard. Formerly
      SVP Finance and Chief Financial Officer of Canada Line Rapid Transit Inc.
      (2005 to 2009)
|                                                   |  |                                                  |  |                                                                                                                                    
|Paul CassBritish Columbia, Canada                  |  | Vice President,
      Operations                 |  | Executive of Ballard. Formerly
      Director, Operations of Ballard.                                                              
|                                                   |  |                                                  |  |                                                                                                                                    
|Christopher J. Guzy British
      Columbia, Canada |  | Vice President and Chief
      Technical Officer |  | Executive of
    Ballard.                                                                                                          

Shareholdings of Directors and
Senior Officers

As of March 15, 2013, our directors and executive officers, as a group,
beneficially owned, or controlled or directed, directly or indirectly, 833,818
of our common shares, being 0.91% of our issued and outstanding common shares,
and 450,243 DSUs.

- 23 -

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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? | Financially | Relevant
      Education and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------------------------- | ------------ | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                 |              | Literate?   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|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.

- 24 -

---



|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.       
|----------------------- | --- | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.

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 in 2012 and 2011 for audit and non-audit related
work, all of which were approved by the Audit Committee:

Type of Audit Fees
    2012
    2011Audit Fees
    $447,340
    $351,078Audit-Related
      Fees
    Nil
    NilTax Fees
    $3,374
    NilAll Other
    Fees
    Nil
    Nil


- 25 -

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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.

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 2012 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 2012 or 2011. 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, have audited our consolidated
financial statements for the year ended December 31, 2012. 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 professional and regulatory
requirements in the U.S..

- 26 -

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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.

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.

Ballard Material Products Asset Sale

On January 31, 2013, we completed an agreement to sell substantially all
of the assets in our Lowell, Massachusetts based Material Products division to
ALY Holdings LLC (“ALY
Holdings”) in partnership with the division’s
senior management, through AvCarb LLC, a new company formed as a result of the
transaction, for gross cash proceeds of $10.5 million and additional potential
proceeds of up to $1.5 million. The additional proceeds of up to $1.5 million
are payable in 2014 and 2015 (through a GDL product credit) if the former
Material Products division attains certain financial results in 2013.

As part of the transaction, Ballard and AvCarb entered into a
non-exclusive agreement for the supply of gas diffusion layer (“GDL”) materials
by AvCarb for Ballard’s products. Ballard also granted a non-exclusive license
to certain of its GDL patents to AvCarb.

Ballard is required to indemnify AvCarb in respect of, and hold them
harmless against, amongst other things, Damages (as the term is defined in the
transaction agreement) incurred or suffered by AvCarb or any Affiliate thereof
resulting from, relating to or constituting any liability, obligation or
commitment of the Seller under or related to any applicable environmental laws
to the extent arising out of or in connection with (i) any actual or alleged
violation of, non-compliance with or liability under, any environmental law, in
any case arising out of circumstances or conditions occurring on or prior to the
closing date in connection with any acquired assets, (ii) the release of any
materials of environmental concern on or prior to the closing date at, on, in,
under or migrating onto or from, any of the acquired assets or any property
formerly owned, leased or used by Ballard Material Products Inc. or any of its
predecessors or affiliates, (iii) the transportation,
storage, release or recycling of, or arrangement for such activities with
respect to, materials of environmental concern from, at or to any location on or
prior to the closing date, (iv) the exposure of any person, on or prior to the
closing date, to materials of environmental concern that were generated from or
located on or in any property currently or formerly owned, leased or used by the
Ballard Material Products Inc. or any of its predecessors or affiliates, and (v)
any division, subsidiary or predecessor of, or any property owned, leased or
used by, Ballard Material Products Inc. that was sold or otherwise transferred
on or prior to the closing date.

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The
indemnification obligation is conditioned on AvCarb’s not undertaking any
subsurface investigation, drilling, excavation or other disturbance (unless
reasonably necessary for normal maintenance of existing structures and
improvements or for the expansion of existing structures or construction of new
structures on the purchased property) or otherwise precipitating through its
actions any Damages for a period of four years from the closing date of the
transaction. Ballard’s obligations are limited to 90% of the total cost of the
remedial work required to comply with the remedial requirements applicable to
properties used for industrial or commercial purposes.

Ballard filed a Material Change Report in respect of the Ballard Material
Products transaction on SEDAR on February 8, 2013.

IdaTech Asset Acquisition

On August 1, 2012 (announced on July 24, 2012), we completed an agreement
to acquire key assets and product lines from IdaTech LLC (“Idatech”), a customer
of Ballard for the past several years. In exchange for $7.5 million of Ballard
shares issued from treasury (7.1 million Ballard shares valued at $1.05 per
share based on our share price as of the acquisition date), we acquired
Idatech’s key assets including fuel cell systems inventory, prepaid rights to
inventory, product lines for backup power applications, distributor and customer
relationships, a license to intellectual property, the right to assume control
of a manufacturing facility in Tijuana, Mexico, and certain property, plant and
equipment. Acquired fuel cell systems inventory, prepaid rights to inventory,
product lines and intellectual property consist of both direct hydrogen units as
well as methanol fuelled units.

As part of the transaction, IdaTech agreed to contract manufacture
products for Ballard until the end of the year. The transaction also provided
Ballard with an option to assume IdaTech’s manufacturing facilities in Tijuana,
Mexico, which Ballard exercised as of January 2013.

Ballard filed a Material Change Report in respect of the IdaTech asset
acquisition on SEDAR on August 2, 2012.

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Dantherm Power Acquisition

On January 18, 2010, Ballard acquired a controlling interest in
Denmark-based Dantherm Power A/S (“Dantherm
Power”), partnering with co-investors Danfoss
Ventures A/S (“Danfoss”) and Dantherm A/S (“Dantherm”). Pursuant to a share
subscription agreement among Ballard, Dantherm, Danfoss and Dantherm Power (the
“Subscription Agreement”), Ballard obtained an initial 45% interest in Dantherm Power
including the right to nominate a majority of the members of the Board of
Directors. In return, Ballard invested DKK 15m (approximately $3m) and
contributed knowledge and intellectual property related to core fuel cell
technology. On September 1, 2010, Ballard invested a further DKK 15m
(approximately $3m) pursuant to the Subscription Agreement, increasing its
interest in Dantherm Power to 52%.

As part of the acquisition, Ballard and Dantherm Power entered into a
technology transfer agreement (the “Technology
Transfer and License Agreement”, dated
January 18, 2010). Under the agreement, Dantherm Power transferred all
Intellectual Property Rights relating to fuel cells or fuel cell systems.
Ballard agreed to transfer certain Know-How to Dantherm Power and granted a
non-exclusive, royalty-free license to Ballard Intellectual Property Rights for
use in Stationary Power Systems.

Dantherm Power develops clean energy backup power systems, utilizing
Ballard’s fuel cell technology, for telecom equipment suppliers including
Motorola and Ericsson. Dantherm Power will continue its current commercial
initiatives, including sales of hydrogen-based products incorporating Ballard’s
fuel cell stack. In addition to its cash investment, Dantherm agreed to continue
to provide operational support and collaborative sales and marketing activities
through its worldwide sales organization. Danfoss invested cash, proprietary
technology, expertise, as well as operational and commercial assistance through
its network of 93 sites in 25 countries. Executives from the three companies
formed a new board of directors for Dantherm Power.

Ballard filed a Business Acquisition Report in respect of the Dantherm
Power transaction on SEDAR on April 16, 2010.

Superior Plus Transaction and
Associated Material Contracts

We entered
into an arrangement agreement dated October 30, 2008 with Superior Plus (the
“Arrangement Agreement”), which specified the parties’ respective obligations with
respect to the Superior Plus Transaction. That transaction was implemented by
way of a statutory plan of arrangement under section 192 of theCanada Business Corporations Act, whereby Ballard caused its entire business and operations, including
all assets and liabilities, to be transferred to a new corporate entity, such
that the new corporate entity now has all of the same assets, liabilities,
directors, management and employees as Ballard formerly had under its old
corporate entity, except for its tax attributes. Under the arrangement, Ballard
shareholders exchangedtheir common shares in the
capital of the old corporate entity for common shares in the capital of the new
corporate entity on a one-for-one basis, and Superior Plus obtained 100% of the
common shares in the capital of Ballard’s old corporate entity. Ballard received
a cash payment of approximately C$46.3 million (C$41 million net of expenses) in
consideration for allowing Superior Plus to use its old corporate entity as the
vehicle to complete its conversion from an income trust to a corporation.
Following completion of the Superior Plus Transaction, Ballard continued to
carry on its business operations as a public entity, and retained all the rights
it previously held to related intellectual property.

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The purpose of the Superior Plus Transaction was to obtain non-dilutive
financing for Ballard. In addition to the increase in both Ballard’s cash
reserves and shareholders’ equity of approximately C$41 million, the Superior
Plus Transaction allowed Ballard to step up the Canadian tax basis in its
assets, which may be applied towards sheltering future taxable income.

Indemnification Arrangements

We entered into an indemnification agreement with Superior Plus dated
December 31, 2008 (the “Indemnity
Agreement”), which specifies the parties’
respective continuing indemnification obligations to the other. The Indemnity
Agreement provides that we are liable to Superior Plus for all Losses (as
defined in the Indemnity Agreement) which it may suffer, sustain, pay or incur,
and we will indemnify and hold Superior Plus harmless from and against all
Losses which may be brought against or suffered by Superior Plus or which
Superior Plus may suffer, sustain, pay or incur arising out of, resulting from,
attributable to or connected with:

| | (a) |  | any debts,
      liabilities, commitments or obligations of any nature (whether matured or
      unmatured, accrued, fixed, contingent or otherwise) of any kind whatsoever
      resulting from any matters, actions, events, facts or circumstances
      related to the activities, affairs or business of Ballard which occurred
      prior to the Effective Time (as defined in the Indemnity
    Agreement);                                                                                                                                                                            
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    
| | (b) |  | any debts,
      liabilities, commitments or obligations of any nature (whether matured or
      unmatured, accrued, fixed, contingent or otherwise) of any kind whatsoever
      resulting from any matters, actions, events, facts or circumstances
      related to the activities, affairs or business of Ballard which occur on
      or after the date of the Indemnity Agreement; and                                                                                                                                                                                                   
| |    
| | (c) |  | any breach (including any failure or
      inaccuracy) of any of the representations and warranties of Ballard under
      the Arrangement Agreement, or any failure of Ballard to perform or observe
      any covenant or agreement to be performed by it under the Arrangement
      Agreement,excluding any Losses which
      Superior Plus may suffer, sustain, pay or incur, relating to or based upon
      the existence or availability of Superior Plus’ Tax Pools (as defined in
      the Indemnity Agreement), other than as a result of fraud or wilful
      misrepresentation.

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The Indemnity
Agreement also provides that Superior Plus will be liable to the Corporation for
all Losses which the Corporation may suffer, sustain, pay or incur and will
indemnify and hold the Corporation harmless from and against all Losses which
may be brought against or suffered by the Corporation or which the Corporation
may suffer, sustain, pay or incur arising out of, resulting from, attributable
to or connected with any breach (including any failure or inaccuracy) of any of
the representations and warranties of Superior Plus under the Arrangement
Agreement, or any failure of Superior Plus to perform or observe any covenant or
agreement to be performed by it under the Arrangement Agreement.

The Indemnity Agreement does not contain any limit on the amount of the
claims that can be indemnified nor is there any threshold before indemnification
is provided. In addition, the Indemnity Agreement specifically extends the
limitation period within which a party is entitled to make a claim under the
Indemnity Agreement to two years after the notice of claim with respect to such
obligation was given. However, with the exception of certain limited adjustments
to address differences in the amount of specific Tax Pools of Ballard, which is
described below, the indemnification provisions of the Indemnity Agreement do
not provide indemnification to Superior Plus in respect of the amount or the
availability of the Tax Pools.

The Indemnity
Agreement also provides for certain compensation payments to be made by Ballard
and Superior Plus depending on the final determination of the amount of certain
Tax Losses (as defined in the Indemnity Agreement) of Ballard to the extent that
such amounts are more or less than the amounts estimated at the time the
Arrangement Agreement was executed or to the extent that such Tax Pools are used
to reduce Ballard’s income, taxable income, or income taxes for any period
ending at any time at or before the completion of the Arrangement. Ballard’s
obligations under the Indemnity Agreement relating to NCL Obligations (as
defined in the Indemnity Agreement) are limited to an aggregate of C$7,350,000
with a threshold amount of C$500,000 before there is an obligation to make a
compensation payment.

The Indemnity
Agreement provides detailed procedures for claims under the Indemnity Agreement,
which, provided Ballard acknowledges liability under the Indemnity Agreement
with respect to such matter, gives Ballard the right to elect to take carriage
and control of the dispute process relating to such claims.

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RISK FACTORS

An investment in our common shares involves risk. Investors should
carefully consider the risks 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, 2011. 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.

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 lossesand 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 capitalrequirements, 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.

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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.

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.

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

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.
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; and (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.

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.

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Global 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 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.

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-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. These risks are applicable to our acquisition of Dantherm
Power in the first quarter of 2010 and to our acquisition of IdaTech assets in
the third quarter of 2012.

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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 without a
corresponding increase in revenues. 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 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 are dependent on third party
suppliers for the supply of key materials and components for our products.

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.

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.

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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 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.

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

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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.

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.

- 39 -

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Our products use flammable fuels,
which could subject our business to product liability claims.

Our business
exposes us to potential product liability claims that are inherent in hydrogen
and products that use hydrogen. Hydrogen is a flammable gas and therefore a
potentially dangerous product. 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.

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, 2012, each interim financial statement
issued after December 31, 2012, 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 at www.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.                                                                                                                                                                                                                                                                                                                                                                                                                                                    

- 42 -

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|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)                                                                                                                                                                                                                                                                                                                     
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|                                                                                                                         | (ii)                                                                                                                                                                                                                                                                                                                    
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|                                                                                                                         | (iii)                                                                                                                                                                                                                                                                                                                   
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|                                                                                                                         | (iv)                                                                                                                                                                                                                                                                                                                    
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|                                                                                                                         | (v)                                                                                                                                                                                                                                                                                                                     
|                                                                                                                        
|The financial expert must have acquired the requisite
      attributes through any one or more of the following methods:
|                                                                                                                        
|                                                                                                                         | (i)                                                                                                                                                                                                                                                                                                                     
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|                                                                                                                         | (ii)                                                                                                                                                                                                                                                                                                                    
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|                                                                                                                         | (iii)                                                                                                                                                                                                                                                                                                                   
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|                                                                                                                         | (iv)                                                                                                                                                                                                                                                                                                                    
|                                                                                                                         |                                                                                                                                                                                                                                                                                                                         
|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.                                   

- 43 -

---



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.                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|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.                                                                                                                                                                                                                                                                                                                                                                                                                

- 44 -

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|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.                                                                                
|                           
|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)                                                                                                                                                                                                                                                                                                                                                                                                  

- 45 -

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|   | (v)                                                                                                                                                                                                                                                                                                                 | review the appointment of the
      financial senior executives of the Corporation, prior to recommendation by
      the Human Resources & Compensation Committee (“HRCC”) to the
      board;                                                                                                                                                           
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                    
|   | (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)                                                                                                                                                                                                                                                                                                                 | review any changes in accounting
      policies or financial reporting requirements that may affect the current
      year’s financial statements;                                                                                                                                                                                                       

- 46 -

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|   | (ii)                                | obtain summaries of significant transactions, and other complex
      matters whose treatment in the annual financial statements merits advance
      consideration;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                    
|   | (iii)                               | obtain draft annual financial statements in advance of the
      Committee meeting and assess, on a preliminary basis, the reasonableness
      of the financial statements in light of the analyses provided by the
      Corporations officers;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                    
|   | (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;                                                                                                     

- 48 -

---



| | (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)                                                                                                                                                                                                                                                                                                                                                                    

- 49 -

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|   | (vii)                     | review quarterly all fees paid to external
      auditors;                                                                                                                                                                                                               
|-- | ------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                           |                                                                                                                                                                                                                                                                          
|   | (viii)                    | review performance against audit proposal
      plan;                                                                                                                                                                                                                    
|   |                           |                                                                                                                                                                                                                                                                          
|   | (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;                                                                                                                                                                                                                            

- 50 -

---



|   | (ii)                                                                                               | review the quarterly Treasury Report;                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                   
|   | (iii)                                                                                              | review and approve the Foreign Exchange Policy; and                                                                                                                                                                                                                                                                                                        
|   |                                                                                                   
|   | (iv)                                                                                               | review and approve any commodities hedging policy.                                                                                                                                                                                                                                                                                                         
|   |                                                                                                    |                                                                                                                                                                                                                                                                                                                                                            
|G) | Independence of External Auditors                                                                 
|  
|   | The
      Committee will oversee the independence of the Corporations external
      auditors by:
|  
|   | (i)                                                                                                | receiving from the external auditors, on a periodic basis, a formal
      written statement delineating all relationships between the external
      auditors and the Corporation consistent with ISBS No. 1 and CICA Handbook
      Section 5751;                                                                                                         
|  
|   | (ii)                                                                                               | reviewing and actively discussing with the board of directors, if
      necessary, and the external auditors, on a periodic basis, any
      relationships or services between the external auditors and the
      Corporation or any other relationships or services that may impact the
      objectivity and independence of the external auditors;     
|  
|   | (iii)                                                                                              | recommending, if necessary, that the board of directors take action
      to satisfy itself, of the external auditors independence;
and                                                                                                                                                                                                                   
|  
|   | (iv)                                                                                               | ensuring that the Corporation does not hire as the Corporations
      CEO, CFO, Controller or chief accounting officer any person who was
      employed by the Corporations external auditors and who participated in
      any capacity in the audit of the Corporation during the one-year period
      preceding the initiation of the current audit.
|  
|H) | Internal
      Audit and Controls                                                                 
|  
|   | (i)                                                                                                | The Committee will ensure that 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.                                                                          
|  
|   | (ii)                                                                                               | The Committee will review quarterly the internal auditors report
      on the adequacy of the Corporations internal controls, policies and
      procedures.                                                                                                                                                                                             
|  
|   | (iii)                                                                                              | The Committee will annually review and approve the internal audit
      plan.                                                                                                                                                                                                                                                                              
|  
|   | (iv)                                                                                               | The Committee will regularly review progress against the approved
      internal audit plan, and adjust the plan to deal with emerging issues as
      required.                                                                                                                                                                                           

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|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 or
      independent directors or those related party transactions which are
      previously approved under the mandate of the HRCC, 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 U.S. $60,000 and in which any of the following persons
      have a direct or indirect material interest:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | In carrying out its responsibilities in
      reviewing and approving related party transactions, the Committee
      will:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | (vi)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | (vii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | (viii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | (ix)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | (x)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|   | (xi)                                                                                                                                                                                                        | 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                              
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                            
|   | (xii)                                                                                                                                                                                                       | 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 Corporate Governance Committee
      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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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)                

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

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

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

- 58 -

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