BALLARD POWER SYSTEMS
INC.

ANNUAL INFORMATION FORM

MARCH 4, 2008











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|TABLE OF CONTENTS                                                            
|-----------------------------------------------------------------------------
|                                                                             
|BALLARD                                                                      
|Our Corporate History and Corporate
      Structure                          
|Principal Subsidiaries and Alliances                                         
|OUR
      BUSINESS                                                           
|Recent History                                                               
|Strategy                                                                     
|Our
      Markets and Products                                               
|Product Overview                                                             
|Power Generation Commercial Growth Markets                                   
|Materials Handling                                                           
|Back-up Power                                                                
|Residential Cogeneration                                                     
|Supporting Business Segments                                                 
|Automotive                                                                   
|Buses                                                                        
|Contract Technical Services and
      Manufacturing                          
|Material Products                                                            
|Revenues from Market Segments                                                
|Regulatory Overview                                                          
|Strategic Alliances                                                          
|Residential Cogeneration                                                     
|Research and Product Development                                             
|Intellectual Property                                                        
|Manufacturing                                                                
|Facilities                                                                   
|Competition                                                                  
|Residential Cogeneration                                                     
|Back-up Power                                                                
|Materials Handling                                                           
|HUMAN
      RESOURCES                                                        
|SHARE CAPITAL AND MARKET FOR SECURITIES                                      
|Share Incentive
      Plans                                                  
|Share Option Plans                                                           
|Share Distribution Plans                                                     
|Deferred Share Unit Plans                                                    
|Restricted Share Unit Plan                                                   
|Ballard / Ballard Generations Systems Inc. (BGS)
      Option Exchange Plan
|DIVIDEND RECORD
      AND POLICY                                             
|DIRECTORS AND OFFICERS                                                       
|Board of Directors                                                           
|Corporate Governance                                                         
|Board Composition                                                            
|Roles and Responsibilities                                                   
|Board Orientation and Education                                              
|Shareholder Feedback and Communication                                       
|Board and Director Performance Evaluations                                   
|Compliance in Canada and United States                                       
|Board Committees                                                             
|Audit Committee                                                              
|Management Development, Nominating & Compensation
      Committee            
|Corporate Governance Committee                                               
|Executive Officers                                                           
|Shareholdings of Directors and Senior Officers                               
|TRANSFER AGENT
      AND REGISTRAR                                           
|MATERIAL CONTRACTS                                                           
|Detailed Description of the AFCC
      Transaction                           
|RISK FACTORS                                                                 
|ADDITIONAL
      INFORMATION                                                 
|APPENDIX A                                                                   

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- 1 -

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: 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 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 may not be able to successfully
execute our business plan; potential fluctuations in our financial and business
results makes forecasting difficult and may restrict our access to funding for
our commercialization plan; a mass market for our products may never develop or
may take longer to develop than we anticipate; we have limited experience
manufacturing fuel cell products on a commercial basis; we are dependent on
Original Equipment Manufacturers(OEM) for the supply of key materials and
components for our products; regulatory changes could hurt the market for our
products; we depend on our intellectual property and our failure or inability to
protect our intellectual property could adversely affect our future growth and
success; we may be involved in intellectual property litigation that causes us
to incur significant expenses or prevents us from selling 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; we could be
liable for environmental damages resulting from our research, development or
manufacturing operations; our products use flammable fuels, which could subject
us to product liability claims; and the other risks and uncertainties discussed
in the section of this Annual Information Form entitled Risk Factors.

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
regulations, 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.

BALLARD

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. Certain other terms used herein are defined in the attached
Glossary. All dollar amounts are in U.S. dollars unless otherwise indicated.

Our
principal business is the design, development, manufacture, sale and service of
fuel cells for a variety of applications. A fuel cell is an environmentally
clean electrochemical device which combines hydrogen fuel (which can be obtained
from natural gas, kerosene, methanol or other hydrocarbon fuels, or from water
through electrolysis) with oxygen (from air), to produce electricity. It
produces electricity efficiently and continuously (as long as fuel is supplied)
without combustion, with water and heat as the main by-products when hydrogen is
used as the fuel source. 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.

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- 2 -

Our Corporate History and Corporate
Structure

The
Corporations predecessor 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. The Corporation was formed on May 30,
1989 by the amalgamation of a group of affiliated companies under theCanada Business Corporations
Act. We have been developing fuel cell
products since 1983. See Directors and Officers  Executive Officers for
details of our organizational structure.

Principal Subsidiaries and
Affiliates

As of
March 4, 2008, we have four principal subsidiaries and affiliates: Ballard
Material Products Inc., a Delaware corporation that develops and manufactures
carbon fiber products for use in the automotive and fuel cell markets; Ebara
Ballard Corporation (Ebara
Ballard), a Japanese corporation jointly
owned with Ebara Corporation (Ebara) to develop, manufacture,
market and sell stationary fuel cell products for the Japanese market; AFCC
Automotive Fuel Cell Cooperation Corp. (AFCC), a British Columbia corporation
that develops fuel cell products for the automotive fuel cell market; and BDF IP
Holdings Ltd. (IP Holdings), a Canadian corporation that holds intellectual property
assets.

The
following chart shows our current shareholders, and our principal subsidiaries,
their respective jurisdictions of incorporation and our share ownership in each
of them, all as of March 4, 2008:



|Notes
|-----
|     
|(1)  
|     
|(2)  
|     
|(3)  

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- 3 -

Our head office is located at 9000
Glenlyon Parkway, Burnaby, British Columbia, Canada V5J 5J8 and our registered
office is located at 1700-666 Burrard Street, Vancouver, British Columbia,
Canada V6C 2X8.

OUR BUSINESS

We are
recognized as a world leader in hydrogen fuel cell development and
commercialization. We are focused on the design, development, manufacture, sale
and service of fuel cell products for a variety of applications.

Recent History

As a
result of an extensive strategic review process, consistent with our focus on
our core fuel cell business and commitment to continue to improve our financial
performance in the near and medium term by focussing on near-term commercial
fuel cell markets, we signed an agreement on November 7, 2007 with Daimler and
Ford to sell certain of our automotive fuel cell research and development assets
(the AFCC Transaction). The AFCC Transaction, which was completed on January 31,
2008, builds on the sale of our electric drive operations to Siemens VDO
Automotive Corporation completed on February 15, 2007. The AFCC Transaction
further builds on the sale of our automotive fuel cell systems operations with
then DaimlerChrysler AG and Ford completed on August 31, 2005.

The
purpose of the AFCC Transaction was to decrease our investment in automotive
fuel cell research and development due to its high cost, uncertainties
surrounding government mandates relating to the adoption and deployment of
automotive fuel cell powered vehicles, the lengthening timeline to automotive
fuel cell commercialization, and the negative impact of these factors on our
production volumes and revenues. The AFCC Transaction allowed us to focus our
efforts on the development and commercialization of fuel cells for
non-automotive applications, such as materials handling, residential
cogeneration and back-up power while benefiting from the generation of revenues
at positive margins through the provision of products and services to AFCC.

Under the
AFCC Transaction, Ballard received, and cancelled, the 34,261,298 Ballard shares
owned by Daimler and Ford, valued at approximately $173,900,000, and transferred
the following to AFCC: automotive intellectual property; 112 employees,
primarily in the research and technology development areas (approximately 20% of
Ballard's workforce); and certain test equipment and inventory with a book value
of approximately $2,500,000.

Daimler
and Ford contributed $60,000,000 to AFCC and Ballard, in effect, invested
$60,000,000 in AFCC. AFCC is owned as to 50.1% by Daimler, 30.1% by Ford, and
19.9% by Ballard. The value of Ballard's investment in AFCC is protected by a
purchase/sale agreement with Ford for $65,000,000 plus interest. Ballard will
not be obligated to provide any ongoing funding to AFCC.

In
association with its minority ownership in AFCC, Ballard will: receive rights to
use both the transferred and future automotive intellectual property developed
by any of AFCC, Daimler and Ford in non-automotive applications; provide
contract technical services to AFCC, on a profitable basis; and manufacture fuel
cells for AFCC, Daimler and Ford, on a profitable basis.

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- 4 -

As part
of the AFCC Transaction, we have terminated our automotive alliance agreement
with Daimler and Ford that had defined our respective responsibilities for
automotive fuel cell development work. The AFCC Transaction also cancelled the
special voting and veto rights held by Daimler and Ford's appointees to our
board of directors, as well as Daimler and Ford's rights to four seats on our
board.

We believe we will obtain several
benefits from the AFCC Transaction, including:

| | (a) |  | a shortened timeline to
      profitability and a reduction in our annual cash consumption by
      approximately $15,000,000;                                                                                                    
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    
| | (b) |  | a 30% reduction in the number of
      outstanding shares;                                                                                                                                                                        
| |    
| | (c) |  | reduced financing
      requirements;                                                                                                                                                                                             
| |    
| | (d) |  | revenue generation through the
      provision of contract technical services to AFCC, largely offsetting the
      loss of automotive engineering development revenue from Daimler and
      Ford;                               
| |    
| | (e) |  | the right to use transferred
      automotive intellectual property rights in non-automotive
      applications;                                                                                                                  
| |    
| | (f) |  | with respect to certain
      intellectual property rights related to fuel cells developed by Daimler,
      Ford and their subsidiaries while we are a shareholder of AFCC, a right to
      use, in non-automotive applications;
| |    
| | (g) |  | the retention of all of our
      manufacturing facilities and capabilities; and                                                                                                                                                  
| |    
| | (h) |  | the right to pursue opportunities
      for fuel cells in certain bus applications.                                                                                                                                               

Further details of the AFCC Transaction
are provided in the Detailed Description of the AFCC Transaction section of this
Annual Information Form.

Strategy

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 selected target markets. We are focused on our core competencies of PEM fuel
cell design, development, manufacture, sales and service.

Over the
past three years we have intensified our efforts on the development and
commercialization of fuel cell products for non-automotive markets such as
materials handling, back-up power and residential cogeneration. Today, varying
stages of commercialization activities are progressing in each of these markets
in North America, Europe and Asia and we are actively considering other key
non-automotive markets for which our products are well-suited. These markets
represent a very large global opportunity for fuel cell products. We are also
confident that there are opportunities for our products in additional geographic
markets as well as product extension opportunities in different applications.

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- 5 -

In 2007, we operated in three market
segments:

| | (i)   |  | Power Generation: fuel cell
      products and services for the residential cogeneration, materials handling
      and back-up power markets;
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
| |      
| | (ii)  |  | Automotive: fuel cell products
      and services for fuel cell cars, vans and buses; and                                                    
| |      
| | (iii) |  | Material Products: Carbon fiber
      products primarily for automotive transmissions and gas diffusion layers
      (GDLs) for fuel cells.

As a
result of the AFCC Transaction, we are able to focus our efforts on the
development of fuel cells for nearer-term non-automotive applications. Our Power
Generation segment is focussed on the following growth markets:

| | (a) |  | Materials handling;          
| | --- |  | -----------------------------
| |    
| | (b) |  | Back-up power; and           
| |    
| | (c) |  | Residential
    cogeneration.

We also operate in the following
supporting business segments:

| | (a) |  | Material products;                                                                   
| | --- |  | -------------------------------------------------------------------------------------
| |    
| | (b) |  | Buses (part of the Automotive
      segment); and                                    
| |    
| | (c) |  | Contract Technical services and
      manufacturing (part of the Automotive segment).

Our Markets and Products

***Product Overview***

We have
developed a number of fuel cell products for power generation and transit buses.
We also design, develop, manufacture, sell and service carbon based materials
that can be used in a variety of fuel cell and non-fuel cell applications. The
timing of commercialization of our products will largely be influenced by the
market roll-out plans of our customers. The following table lists the key fuel
cell and non-fuel cell products we currently produce or have under development
or testing.

|**Product**                    | **Application**                 | **Status**                    
|------------------------------ | ------------------------------- | ------------------------------
|Mark1030 fuel cell            | Residential heat and            | Primarily sales under Japanese
|product for 1 kW
      natural | power, primarily in
      Japan | government sponsored program  
|gas or kerosene                |                                 |                               
|residential
      cogeneration |                                 |                               
|system                         |                                 |                               
|Mark9 SSL fuel cell           | Materials handling
      and    | Sales to OEMs and system      
|product - 4.4 to 19.3 kW       | back-up power                   | integrators                   
|Mark1020 ACS fuel
      cell  | Back-up power and               | Sales to OEMs and system      
|product  300W to 5kW          | materials handling              | integrators                   

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- 6 -

|Product                        | Application                   | Status                               
|------------------------------ | ----------------------------- | -------------------------------------
|Mark902 fuel cell             | Transit buses                 | Sales for testing
      and fleet    
|product                        |                               | demonstration
      programs         
|Mark1100 fuel cell            | Automotive                    | Prototypes supplied
      for testing
|product                        |                               | and evaluation
      primarily for   
|                               |                               | Daimler and Ford
      development   
|                               |                               | programs and
      fleets            
|HD6 fuel cell bus             | Transit and shuttle buses     | Prototypes supplied
      for testing
|module                         |                               | and
      evaluation                 
|Carbon friction materials      | Mainly automobile             | Sales                                
|                               | automatic
      transmissions |                                      
|AvCarb gas diffusion          | Fuel cells                    | Sales to fuel cell
      developers  
|layer fuel cell
      products |                               |                                      

Power Generation Commercial Growth
Markets

***Materials
Handling*******

Our
materials handling market includes industrial vehicles such as forklifts,
automated guided vehicles (AGV) and ground support equipment
(GSE).
Our initial focus is on Class 1, Class 2 and Class 3 battery powered forklifts
and AGVs. We believe fuel cell driven electric forklift trucks can offer
significant productivity gains in multi-shift operations when compared to
incumbent battery technology. Our primary product for the materials handling
market is the Mark9 SSL fuel cell product, which is applicable to higher power
applications where at least 10 kW of power is required. For smaller
applications, our Mark1020 ACS fuel cell product, our second generation
air-cooled fuel cell product, may be used.

Our key
initial customers are specialized system integrators that are working to achieve
early penetration into the market by developing battery pack replacement fuel
cell systems. We have been working with Plug Power Inc. (Plug Power), which has
initiated or completed field trials with a number of end-users including
Wal-Mart Stores, Inc., Bridgestone Firestone North America Tire, LLC, Sysco
Corporation, H.E. Butt Grocery Company and Nissan North America, Inc. These
trials are the first step in the sales process to end users. Several of Plug
Powers customers have completed the first phase of deployment of the technology
and are now moving to larger trials, for which we are supplying our Mark9 SSL
fuel cell product. We are also supplying fuel cell products to other system
integrators. For example, in early 2008 we signed a two-year supply agreement
with Danish system integrator H2 Logic A/S (H2 Logic), to supply fuel cell
products for the materials handling market.

In 2007,
we initiated a new program with Exide Technologies (Exide) for the development of an
onboard fuel cell recharger for a Class 1 forklift truck. We anticipate that the
first prototype should be completed in 2008, with a small field trial of the
technology being completed with an end-user in late 2008 or early 2009. Exide is
one of the largest distributors of batteries for the industrial materials
handling market. Under our agreement, we anticipate that Exide will meet all of
its fuel cell needs in the materials handling market over the next five years
exclusively with our fuel cell products.

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- 7 -

In order
to support market growth, we will continue to pursue cost reduction of our Mark9
SSL fuel cell product. In 2007 we reduced the cost of this fuel cell product by
over 23%. In 2008, we will continue to work on a low cost membrane electrode
assembly(MEA) that we anticipate will be
integrated into the Mark9 SSL fuel cell product for sales starting in
mid-2009.

***Back-up Power***

Our focus
in the back-up power market is on the telecommunications industry, currently
dominated by batteries. With increasing demand for more reliable communications
networks and longer duration back-up time, we believe fuel cell products offer
significant operating cost savings to the end user. In some geographic regions
such as the EU and U.S., regulatory pressure on telecommunications service
providers for infrastructure backup time of eight hours or longer is, we
believe, creating greater interest in fuel cells as a preferred back-up power
solution. The Mark1020 ACS fuel cell product is our primary product to supporti
the early commercialization of fuel cell products in the back-up power
market.

In 2006,
we supplied a small number of Mark1020 ACS fuel cell products to potential
customers for evaluation and testing purposes. We also entered into a funded
U.S. Government contract to develop and demonstrate an extended duration back-up
power solution for the U.S. Department of Homeland Security Continuity of
Operations (COOP) in collaboration with Plug Power. In 2007, we entered into a
second phase of this contract (COOP2) to continue the development of the product
in collaboration with Plug Power and to significantly reduce the cost of fuel
cell products for volume commercialization. We also entered into a two-year
supply agreement with Dantherm Air Handling A/S to supply 646 kW of Mark1020
ACS fuel cell products.

Through
our development efforts, we expect to reduce our product costs to make the
Mark1020 ACS fuel cell product competitive with current battery costs on a
capital basis. We also plan to enhance the versatility of our back-up power
products to accept fuels such as propane and natural gas, in addition to
hydrogen.

***Residential Cogeneration***

Ebara
Ballard has been manufacturing and delivering 1kW fuel cell cogeneration systems
for residential use since 2005 under the Japanese governments Large Scale
Monitoring Program, which provides subsidies for the installation of fuel cell
cogeneration systems. Powered by our Mark1030 fuel cell product, the system is
designed to generate primary electricity requirements for homes while also
providing hot water using by-product heat from the fuel cell. This will allow
homeowners to cut their primary energy consumption by 20 to 30%, and their
greenhouse gas emissions by 30 to 40%, compared to conventional heat and
electrical generation devices such as hot water combustion boilers.

The
Japanese government, through its national energy policy and market subsidies,
actively supports the commercialization of residential fuel cell cogeneration
systems. Since 2005, the government has sponsored the Large Scale Monitoring
Program for the installation of fuel cell cogeneration systems, supported by
annual budgets of $26,000,000, $32,000,000 and $29,000,000 in 2005, 2006 and
2007, respectively. Given Japans focus on Kyoto Protocol targets for reduced
CO2, and heavy reliance on imported petroleum energy, we believe that
residential fuel cell cogeneration will remain a key component of Japans energy
strategies.

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- 8 -

We
expect the Large Scale Monitoring Program to extend through 2008, followed by
transition to the early commercial phase in 2009. Ebara Ballard is collaborating
with two of Japans largest energy companies, Tokyo Gas and Nippon Oil, to
commercialize this product. Our success will depend upon our ability to
significantly reduce product costs and enhance system durability and
reliability.

Supporting Business Segments

***Automotive***

*Buses*

The
addressable market for fuel cell buses today is comprised of transit buses,
which offer several advantages over automobiles for the adoption of fuel cell
technology. Buses rely on centralized fuelling depots that simplify the hydrogen
infrastructure requirements. Transit buses are government-subsidized, enabling
the purchase of pre-commercial fleets. In addition, their design volume and
drive cycle requirements are less restrictive.

The
first shipment of our sixth generation HD6 fuel cell module, utilizing
Mark1100 fuel cell products, occurred at the end of November 2007. On August 3,
2007 BC Transit announced the contract award for the supply of up to 20 fuel
cell hybrid buses to be delivered in late 2009. These buses will begin revenue
operation in Whistler, British Columbia just before the 2010 Winter Olympic
Games. The consortium of New Flyer Industries (coach manufacturer), ISE
Corporation (hybrid drive integrator) and Ballard (HD6 fuel cell module
supplier) will build the buses.

On
November 13, 2007 the City of London, England announced the contract award for
the supply of five fuel cell hybrid buses to be delivered in 2009. These buses
will begin revenue service in London in 2010. The consortium of Wrights Bus Ltd.
(coach manufacturer), ISE Corporation (hybrid drive integrator) and Ballard
(HD6 fuel cell module supplier) will build the buses.

We
will continue to provide service support for our existing fifth generation P5
bus fleets as well as seeking new opportunities in other markets including
electrified light rail transit, yard-switching locomotives and power for
passenger ferries while they are in harbour.

*Contract Technical Services and
Manufacturing*

We
have entered into a technical services agreement with AFCC under which we
provide AFCC with manufacturing, testing and other engineering services at
positive margins. The areas of service selected were those in which a
longer-term synergy of efforts to meet both Ballard and AFCC requirements could
be met. We manufacture, for AFCC, the fuel cell products required for existing
Daimler and Ford vehicle requirements and to meet the requirements of Daimler
and Ford vehicle programs. We provide manufacturing engineering services and
manufacture experimental and prototype fuel cell products for AFCCs research
and product development requirements. We provide AFCC with both failure analysis
and fuel cell test stand maintenance. We also provide services in the area of
engineering simulation and modeling. The agreement has a term of five years, but
may be terminated by either party on one years written notice.

We
have entered into an administrative services agreement with AFCC for a
transition period of six months from January 31, 2008, under which we provide
short-term finance, human resources, information technology and other
administrative support to AFCC at positive margins.
AFCC is entitled to extend the term of the agreement for a further six months,
and with our consent for a further extension of 12 months.

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- 9 -

***Material Products***

We
develop, manufacture and sell carbon based engineered material products into a
variety of markets. These products are in the form of roll goods as either woven
carbon fiber textile fabrics or as carbon fiber papers. A major application for
carbon fiber fabrics is the friction surface in torque converters for light
vehicle automatic transmissions. Two automotive manufacturers incorporate our
carbon fabric in over 5,000,000 transmissions where its unique characteristics
provide the enabling technology for improved fuel economy and operational
smoothness. We are a Tier 1 supplier with QS-9000 and TS-16949 quality
certification. In 2006, we were awarded a four-year extension by one of our
automotive manufacturing customers, valued at more than $40,000,000, to our
exclusive supply contract for this product.

Beyond automatic transmissions, we supply carbon fiber friction materials
for use in wet brake systems for off road heavy duty construction and mining
equipment. To grow and diversify in this market, we are working with a number of
Tier 1 and Tier 2 automotive suppliers to develop and incorporate our carbon
fiber products in new drivetrain applications.

A
GDL is a significant component of a fuel cell, allowing the uniform diffusion of
hydrogen and air towards the electrocatalyst. The quality of the GDL plays an
important role in the overall performance and cost of a fuel cell. Our AvCarb
GDL materials are available in continuous rolls, and are designed to enable MEAs
to be manufactured using high-speed automated assembly techniques. The first two
members of this family of products are AvCarb P-50 and AvCarb P-50T, which
include a Teflon® coating. Since 2002, we have added a precision carbon coating
capability. We supply several of the major players in the fuel cell industry,
and we use our GDLs in several of our fuel cell products. We have also received
funding to develop and qualify GDLs for phosphoric acid fuel cells used in
stationary power applications. Product qualification will begin in 2008.

Variations of our friction and fuel cell products are being sold in other
markets. Examples of these applications include electrodes and heat exchanger
components for chemical processing, insulation for rocket engines used for
satellite launch systems, raw material for composite body armour and components
for high-end sporting goods.

We
also provide material supply chain management services to our customers. This
started with our friction customers where we manage their subcontractor
suppliers and is evolving in other markets.

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- 10 -

Revenues from Market Segments

Our
business operates in three market segments: Automotive, Power Generation and
Material Products. 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 2006 and 2007:

2007
    2006Revenues from Power GenerationPercentage of total
      revenues
    29.7%
    26.7%Portion representing sales to customers other than investees
    14.2%
    7.2%Portion
      representing sales to investees
    15.5%
    19.5%Revenues from AutomotivePercentage of total
      revenues
    48.8%
    50.3%Portion representing sales to customers other than investees
    48.8%
    50.3%Portion representing sales to investees
    Nil
    NilRevenues from Material ProductsPercentage of total
      revenues
    21.5%
    23.0%Portion representing sales to customers other than investees
    21.5%
    23.0%Portion representing sales to investees
    Nil
    Nil


Regulatory Overview

United States.In 2004, the
government began funding and implementing the announced $1,200,000,000 hydrogen
and fuel cell initiative to run for a five-year period from 2004 to 2008. The
initiative supports the administrations Hydrogen Fuel Initiative and is largely
being delivered through the United States Department of Energy (DOE).

In
2005, the United States passed into law the Hydrogen and Fuel Cell Act of 2005.
It is a comprehensive, 10-year initiative aimed at accelerating programs that
will lead to the wide-spread commercialization and adoption of hydrogen and fuel
cell technology. In October 2007, the Federal Communications Commission
(FCC) mandated that, over the next 12 months, local exchange carrier
(LEC) and commercial mobile radio service(CMRS) providers place a minimum of 24 hours of power back-up
at central offices and a minimum of eight hours of power back-up at cellular
sites, remote switches, and digital loop carrier system remote terminals. This
regulatory change is expected to drive demand for extended duration back-up
power favouring fuel cell system solutions.

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- 11 -

Canada.The British Columbia
provincial and Canadian governments are providing support through an investment
of $89,000,000 in the fleet of up to 20 fuel cell hybrid buses to be delivered
to BC Transit just before the 2010 Winter Olympic Games and related refueling
infrastructure.

Japan. We manufacture and
deliver 1kW residential cogeneration fuel cell systems throughout Japan through
Ebara Ballard under the Large Scale Monitoring Program. In 2005, 2006 and 2007,
the Japanese government provided $26,000,000, $32,000,000 and $29,000,000
respectively, in annual subsidies for a total of $87,000,000 in subsidies for a
total of 2,187 residential cogeneration fuel cell systems.

Strategic Alliances

***Residential Cogeneration***

In
1998, Ballard and Ebara formed Ebara Ballard to develop, market and sell
stationary fuel cell systems for the Japanese market. Ebara Ballard is currently
focused on the development, manufacture, marketing and sale of 1 kW residential
cogeneration fuel cell systems in Japan.

We
and Ebara have each granted intellectual property licenses to Ebara Ballard for
the development, production and manufacture of stationary fuel cell systems in
Japan and in particular, the 1 kW residential cogeneration fuel cell system. In
1998, we granted Ebara Ballard an exclusive, royalty-free license to our
intellectual property to manufacture, market, sell, distribute and service
stationary power systems (excluding the fuel cell) in Japan. As long as this
license is in place, (a) Ebara Ballard must purchase PEM fuel cells exclusively
from us, (b) we must sell PEM fuel cells for stationary fuel cell products in
Japan only to Ebara Ballard, (c) neither Ebara nor Ebara Ballard can compete
with Ballard in the business of PEM fuel cells, (d) Ebara cannot compete with
Ebara Ballard or Ballard in the business of stationary PEM fuel cell power
systems, and (e) Ballard cannot compete with Ebara Ballard in the business of
stationary PEM fuel cell power systems in Japan.

On
September 29, 2005, we completed a transaction with Ebara and Ebara Ballard that
covers a broad range of activities that will enhance our competitive position
and commitment to the Japanese residential cogeneration market and provided
funding for the development of our third generation fuel cell residential
cogeneration system. Under its terms: we receive $18,000,000 over four years for
the ongoing development of Mark1030 fuel cell products, subject to the
completion of work pursuant to technical milestones under the development
program; Ebara Ballard is gaining rights, over time, through an exclusive,
royalty-bearing license, to assemble, service, develop, manufacture and sell our
Mark1030 fuel cell products in Japan, as part of a joint long-term strategy to
localize fuel cell development and manufacturing in Japan for the Japanese
market; and we retain all rights related to stationary cogeneration fuel cell
markets outside of Japan.

As a
result of the transaction, we received an equity investment from Ebara of
$11,700,000 in two equal payments. The first half of the equity investment was
received at closing, with the payment by Ebara of $5,850,000 in exchange for
1,004,178 of our common shares. The second half of the equity investment was
received in October 2006 with the payment by Ebara of $5,850,000 in exchange for
a further 1,022,549 of our common shares.

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- 12 -

Ebaras and our rights as shareholders of Ebara Ballard are governed by a
shareholders agreement. We and Ebara are entitled to representation on the
board of directors of Ebara Ballard proportionate to our relative
shareholdings in Ebara Ballard. The shareholders agreement provides for certain
put and call rights in respect of each shareholders ownership, which may only
be exercised in cases of default or where certain significant corporate actions
have taken place against the objections of one of the shareholders.

In
February 2005 Ebara Ballards customer Tokyo Gas launched a 1 kW natural gas
fuelled residential cogeneration fuel cell system. Ebara Ballards customer
Nippon Oil followed in 2006 with the launch of a 1 kW kerosene fuelled
residential cogeneration fuel cell system.

Research and Product
Development

Ballard conducts research in improving the cost, durability and
fundamental understanding of the MEA and its sub-components. In addition,
greater development focus is being placed on the capability of MEAs operating on
reformate fuels, reflecting customer needs in the non-automotive markets. As a
result of the AFCC Transaction, automotive centric research activities such as
freeze-start capability and very long-term technology paths such as platinum
free catalysts will no longer be directly conducted by Ballard.

Intellectual
Property

As
noted above, under the AFCC Transaction we transferred to Daimler and Ford our
automotive intellectual property rights, which represented approximately 20% of
our patent portfolio. After this transfer, our intellectual property holdings
were approximately as follows: 160 U.S. granted patents, 200 non-U.S. granted
patents, 50 U.S. published patent applications and 230 published non-U.S. patent
applications. We then transferred approximately 485 patents and patent
applications to IP Holdings, a holding company established for the purpose of
protecting Daimlers and Fords license rights granted as part of the AFCC
Transaction. We then entered into a license agreement with IP Holdings
evidencing our exclusive right to use fundamental intellectual property rights
and improvements thereto for non-automotive applications. Following these two
transfers, we own 212 patents and 69 patent applications. We also hold
exclusive and non-exclusive license rights to additional intellectual property
from a number of third parties, including licenses to approximately 2000 patents
and patent applications included in the AFCC Transaction. Our patents will
expire between 2009 and 2027. We also have royalty-free access to all of the
intellectual property rights held by NuCellSys GmbH (NuCellSys, an
entity jointly owned by Daimler and Ford) as well as royalty-free access to all
of the intellectual property rights relating to fuel cells developed while we
are a shareholder of AFCC by Daimler, Ford and their subsidiaries.

Manufacturing

Our
fuel cell manufacturing facility is located at Burnaby, British Columbia and is
designed to provide the manufacturing capacity necessary to meet expected
customer demand through the initial market introduction phase for our materials
handling, back-up power, residential cogeneration and bus fuel cell products as
well as to provide contract manufacturing services to AFCC. We expect demand for
our fuel cell products to increase and to require increased manufacturing
capacity. We will either build that capacity to meet the increased demand or
outsource some or all of the manufacturing requirements. In some circumstances,
we may choose to license part or all of the manufacturing for a particular fuel
cell application or customer on a royalty-bearing basis.

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- 13 -

In
Burnaby, we currently have an Integrated Management System registered to ISO/TS
16949, ISO 9001, ISO 14001 and OHSAS 18001 standards. These registrations
reflect our approach to achieving best business system practices in the areas of
Quality, Environment, Health and Safety. We have also developed expertise in the
testing of all aspects of PEM fuel cells and components. We subcontract some
process steps or assemblies to minimize investment in capital equipment,
particularly in the case of processes that will eventually be replaced by new
manufacturing methods or materials and non-core technology processes. We have
developed strategic relationships with key suppliers to ensure a timely supply
of key components. Additionally, we have established relationships with key
material suppliers to enhance the quality and suitability of components supplied
and to assist in the development of our fuel cell products.

Many
of the components we use to manufacture our fuel cell products are unique and
may require long lead times to order. Certain components used in our fuel cell
products have been developed to our specifications under development and supply
agreements. These development and supply agreements provide that the
intellectual property created by the design of these components is owned
exclusively by us, jointly by us and the supplier, or solely by the supplier,
depending upon whether we have assumed any of the development costs.

Our
facility in Lowell, Massachusetts, where we produce our carbon fiber products,
is also ISO 9001 and QS 9000 registered. The experience of our operations in
Lowell in continuous roll to roll manufacturing processes and as a Tier 1
automotive supplier will be valuable to us as we increase commercial production
in our Burnaby manufacturing facility and as we leverage our established quality
and manufacturing practices.

Facilities

We currently have the following
principal facilities: a 116,797 square foot (10,850 square meter) facility in
Burnaby, British Columbia, owned by us, that houses our corporate headquarters,
and our fuel cell development and testing activities; a leased 112,000 square
foot (10,398 square meter) facility in Burnaby, British Columbia that houses our
operations staff and our manufacturing facilities; and a 137,000 square foot
(12,728 square meter) facility in Lowell, Massachusetts, owned by us, that is
used for the development and manufacture of carbon fiber products.

We
have leased and licensed to AFCC an area in our owned facility in Burnaby,
British Columbia totalling approximately 40,000 square feet (3,716 square
meters), comprised of office and laboratory space.

We
have also sublet an area totalling 31,000 square feet (2,880 square meters)
composed of office space in our leased facility in Burnaby, British Columbia.
The remaining 17,000 square feet (1,580 square meters) of office space, as well
as the manufacturing facility (64,000 square feet/5,948 square meters), is
retained for our use.

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 environment, health and safety regulatory standards. Our
commitment is reflected in our corporate Quality, Safety and Environmental
Policy and Guiding Principles, and our underlying programs and initiatives. We
have completed a detailed environmental assessment of our operations in Burnaby.
In turn, we have developed policies, procedures, and work instructions to manage
environmental matters including air, water, and waste management and reduction,
transportation of dangerous goods, environmental impact and hazard assessment,
and internal and external recycling programs.

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- 14 -

Competition

Competition for our products comes from existing power technologies,
improvements to existing technologies and new alternative energy technologies.
Each of our target markets is currently served by manufacturers that offer
proven and widely accepted technologies, and have established customers and
suppliers. In each of our target markets, there are also competitors developing
alternative energy technologies.

***Residential Cogeneration***

Existing Technology.Ebara
Ballards 1 kW residential cogeneration fuel cell system competes primarily
against internal combustion engine (ICE) based systems, the
electrical grid and standard hot water heaters.

Fuel Cells.We believe that PEM fuel cell
technology can be superior to alternative fuel cell technologies in our target
markets, in terms of electrical efficiency, lifetime, responsiveness to load
changes and cost. For applications that operate at higher base loads, higher
temperature fuel cells, such as molten carbonate and solid oxide fuel cells, are
more appropriate than PEM fuel cells.

There are a number of companies actively involved in the manufacture of
PEM fuel cells products for the residential cogeneration market. These companies
include Matsushita Electric Industrial, Mitsubishi Heavy Industries, Sanyo,
Toshiba, Toyota, and Plug Power.

Emerging Technology.Emerging technologies for the
small to mid-sized continuous power generation market in Japan include advanced
ICE based systems and solid oxide fuel cells. Competitors using or developing
these technologies include Honda, in the case of advanced ICE based systems, and
Acumentrics, Kyocera, Mitsubishi Materials and Siemens Westinghouse in the case
of solid oxide fuel cells.

***Back-up Power***

Existing Technology.The back-up
power market is currently dominated by ICEs and batteries. We believe that PEM
fuel cell products are superior to batteries, because of their ability to
provide extended run time without frequent or lengthy recharging, as well as
their ability to offer lower life cycle costs, given that batteries require
periodic replacement.

Fuel Cells.Companies developing PEM fuel
cell systems for back-up power applications include Hydrogenics, IdaTech, Plug
Power, Distributed Energy Systems and ReliOn. We seek to gain competitive
advantage through fuel cell designs that provide superior performance,
efficiency, durability and cost. Some of our competitors purchase, or are
considering the purchase of, PEM fuel cell products from us for use in some of
their products.

Emerging Technology.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.
These issues are addressed by PEM fuel cell technology.

***Materials Handling***

Existing Technologies. Class 1, 2
and 3 lift-trucks are currently dominated by battery-powered solutions
(ICE-power is typically seen as the solution for lift-trucks in classes 4, 5, 6
and 7). We believe that fuel cell systems are superior to batteries in class 1,
2 and 3 lift-trucks 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.

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- 15 -

Fuel Cells.Companies developing
fuel cell systems for materials handling applications include Toyota, Kion,
Jungheinrich, NACCO, Mitsubishi, Komatsu, H2 Logic, Hydrogenics, and Nuvera. We
seek to gain a competitive advantage through fuel cell designs that provide
superior performance, efficiency, durability and cost. Some of our competitors
purchase, or are considering the purchase of, fuel cell products from us for use
in some of their materials handling products.

Emerging Technology.Advanced
battery technology continues to make progress in the materials handling market.
However, advanced battery technology still requires significant time for
recharging and in many cases cannot meet desired run times without requiring
substantial space. These issues are addressed by fuel cell
technology.

HUMAN RESOURCES

As
at March 4, 2008,we had approximately 500 employees in Canada, the U.S.
and Germany, representing such diverse disciplines as electrochemistry, polymer
chemistry, chemical, mechanical, electronic and electrical engineering,
manufacturing, marketing, business development, finance, human resources,
information technology and business management. Our employees are not
represented by any labour union. Each employee must agree to confidentiality
provisions as part of the terms of his or her employment and certain employees
have also executed non-competition agreements with us.

SHARE CAPITAL AND MARKET FOR
SECURITIES

Our
authorized share capital consists of an unlimited number of common shares and an
unlimited number of preferred shares. As at March 4, 2008, our issued share
capital consisted of 82,084,387 common shares (the Outstanding 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 (NASDAQ) under the symbol BLDP.

The
following table shows the monthly trading activity for our common shares on the
TSX and NASDAQ during 2007:

TSX
    NASDAQPrice
range
    Average
    Price
range
    Average(CDN)
    Volume
    (U.S.)
    Volume
      traded****
    traded
    (#)
    ****
    (#)January
    6.42-6.79
    158,065
    5.42-5.79
    591,024February
    6.38-7.95
    261,116
    5.45-6.80
    711,000March
    6.37-7.16
    188,786
    5.53-6.11
    531,920April
    5.54-6.59
    195,199
    4.99-5.69
    524,549May
    4.90-5.63
    165,213
    4.55-5.09
    420,292June
    4.44-5.82
    241,596
    4.18-5.45
    544,090July
    5.03-5.75
    155,787
    4.69-5.50
    332,695August
    4.43-5.30
    158,607
    4.23-5.11
    419,467September
    4.39-5.05
    159,579
    4.35-5.02
    337,832October
    4.49-5.03
    128,605
    4.61-5.10
    317,013November
    4.40-5.24
    257,106
    4.42-5.70
    680,493December
    4.30-5.45
    207,063
    4.34-5.63
    555,791


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- 16 -

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 of directors out of funds legally
available therefor and to receive our remaining property, after satisfaction of
all outstanding liabilities, on liquidation, winding-up or dissolution.

Our
preferred shares are issuable in series and our board of directors 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.

Share Incentive Plans

Our
active share incentive plans include share option plans, share distribution
plans, deferred share unit plans, a restricted share unit plan and an option
exchange plan (collectively, the Share
Incentive Plans).

Each
of the Share Incentive Plans is subject to adjustment upon the occurrence of
certain events, such as a subdivision or consolidation of our common shares, and
the issuance of any stock dividends to our shareholders, among others. Subject
to any applicable approval required in the circumstances from the TSX, or any
other stock exchange or securities regulatory agency, our board of directors may
amend or terminate any of the Share Incentive Plans, as it deems necessary or
appropriate. However, the board of directors is not entitled to reduce the
exercise price of an option granted under the 2002 Option Plan. The written
consent of any holder of stock options, deferred share units(DSUs) or restricted share units
(RSUs) outstanding under any Share Incentive Plan is required if the
amendment or termination of that plan adversely affects that holder's rights
with respect to such security. In general, any share option, DSU or RSU granted
or issued under a Share Incentive Plan is not assignable by its holders except
that in the event of the holder's death it may be transferred to the holder's
personal representative(s).

***Share Option Plans***

During 2003, we changed our compensation philosophy in relation to option
grants for directors. We ceased the practice of granting options to our
directors.

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- 17 -

The
key provisions of our 2002 share option plan dated for reference March 1, 2002,
as amended June 21, 2002, July 27, 2002, March 8, 2006, March 14, 2007 and
January 31, 2008 (the 2002 Option
Plan), are as follows:

All
grants of options are made by our board of directors, on the recommendation of
our Chief Executive Officer and the Management Development, Nominating &
Compensation Committee. All officers and employees of Ballard and its
subsidiaries are currently eligible to participate in the 2002 Option Plan.
Former Ballard employees who have been transferred to AFCC (the Transferred Employees) are permitted to participate in the 2002 Option Plan to a limited
extent, for so long as they remain employees of AFCC. Although new options may
not be granted to Transferred Employees under the plan, options granted to
Transferred Employees will remain in force.

The
exercise price of an option is determined by our board of directors and is to be
no less than the closing price per share of our common shares on the TSX on the
last trading day before the day the option is granted.

Options may have a term of up to 10 years from the date of grant, and
unless otherwise determined by our board of directors, vest in equal amounts on
the first, second and third anniversaries of the date of grant. Vesting of
options may be accelerated in certain cases. If an accelerated vesting event
occurs, any outstanding option may be exercised at any time before the 60th day
after such event. An accelerated vesting event occurs when: a person makes a
take-over bid that could result in that person acquiring at least two-thirds of
our voting shares; any person or persons acting in concert acquire at least
two-thirds of our voting shares; a person purchases all or substantially all of
our assets; or we join in any business combination that results in our
shareholders owning one-third or less of the voting shares of the combined
entity.

The
number of common shares reserved for issue: to any person under all of our stock
option plans may not exceed five percent of the Outstanding Issue (as defined in
the plans); to insiders of Ballard, as a group, under this plan and any other
share compensation arrangements may not exceed 10% of the Outstanding Issue; to
any insider of Ballard or his or her associates, under this plan and any other
share compensation arrangements of Ballard within a one-year period may not
exceed five percent of the Outstanding Issue. Generally, an optionee has either
30 or 90 days to exercise an option after the last day on which the optionee
ceases to be a director, or the officer or employee ceases to work for us, as
the case may be, except that more time is allowed (subject to the option's
expiry date) in the case of the optionee's death, retirement or
disability.

The
provisions of our 1995, 1997 and 2000 share option plans are substantially
similar to those of our 2002 Option Plan. As at December 31, 2007, a total of
3,611,881 common shares had been issued under all of these option plans, and a
total of 5,585,076 common shares were issuable on the exercise of the then
outstanding options. A maximum of 11,503,901 common shares may be allotted for
issuance or issued under all these plans.

***Share Distribution Plans***

The
key provisions of our 2003 share distribution plan dated for reference May 22,
2003, as amended December 5, 2003, December 3, 2004, March 8, 2006, March 14,
2007 and January 31, 2008 (the 2003
Share Distribution Plan), are as
follows:

The
2003 Share Distribution Plan permits our common shares to be issued to
employees, officers and directors of Ballard and its subsidiaries and to
Transferred Employees to satisfy the redemption of previously issued restricted
share units. All issuances of common shares under our 2003 Share Distribution
Plan are made by our board of directors, on the recommendation of the Chief
Executive Officer and the Management Development, Nominating & Compensation
Committee. The purposes of grants under the 2003 Share Distribution Plan are to:
annually recognize, in accordance with our bonus plans, contributions made by the recipients; satisfy directors' annual
retainers, including redemption of deferred share units issued pursuant to the
Directors DSU Plan (as defined below); satisfy any redemption of deferred share
units issued pursuant to the Executive Officers' DSU Plan (as defined below);
enable us to satisfy any redemption of any restricted share units issued
pursuant to our RSU Plan (as defined below); enable us to attract key employees
by issuing shares as a signing bonus; and enable us to settle contractual
amounts payable as a result of termination or statutory severance payments owing
to employees which would otherwise be payable in cash.

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- 18 -

The
issue price of the common shares granted under the 2003 Share Distribution Plan
must not be less than the last closing price per share for our common shares on
the TSX or NASDAQ on the date that our board of directors approves the issuance,
or a price otherwise determined by our board of directors.

The
number of our common shares that may be issued under the 2003 Share Distribution
Plan: to our insiders, may not exceed 10% of the Outstanding Issue (as defined
in the plan) at that time; and to any one insider and his or her associates,
within a one-year period, may not exceed five percent of the Outstanding Issue
at that time.

The
aggregate number of common shares that may be issued under the 2003 Share
Distribution Plan to directors (other than directors who are also officers of
Ballard or any of its subsidiaries) cannot exceed 200,000 common shares.

The
provisions of our 2000 share distribution plan are substantially similar to
those of our 2003 Share Distribution Plan, except that the 2000 share
distribution plan does not provide that common shares may be issued for
conversions or redemptions of restricted share units or deferred share units. As
of December 31, 2007, a total of 2,743,927 common shares had been issued under
these plans, and a total of 931,298 common shares had been reserved under the
2003 Share Distribution Plan for issuance upon any future redemption or
conversion of outstanding deferred share units and restricted share
units.

***Deferred Share Unit
Plans***

Effective September 16, 2003, we implemented a DSU plan for our
independent directors, as amended on December 9, 2005 and March 9, 2007 (the
Directors DSU Plan), and effective December 15, 2003, we implemented a DSU
plan for our executive officers, as amended on December 9, 2005, February 19,
2007 and March 14, 2007 (the Executive
Officers DSU Plan).

A
DSU is a notional common share having the same value as one of our common shares
at the time of grant. The DSU, however, cannot be redeemed until such time as
the director leaves the board of directors or the executive officer leaves us,
and its value on redemption would be based on the value of our common shares at
the time of issuance. The Directors DSU Plan and the Executive Officers DSU
Plan provide the financial equivalent of an ongoing equity interest in us
through our directors and executive officers periods of service to us. Common
shares reserved under our 2003 Share Distribution Plan or a successor plan will
be used to satisfy the redemption of DSUs issued pursuant to the Directors DSU
Plan and the Executive Officers DSU Plan. As of December 31, 2007, a total of
69,889 common shares had been issued and a total of 299,991 common shares had
been reserved for issue under the 2003 Share Distribution Plan for the
redemption of any then outstanding DSUs.

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- 19 -

Under the Directors DSU Plan, each
independent outside director elects annually the proportion (zero to 100%) of
his or her annual retainer that he or she wishes to receive in DSUs or our
common shares. Under the Executive Officers DSU Plan, DSUs are granted at the
election of each executive officer of Ballard who is eligible (as determined by
our board of directors) in partial or full payment of his or her annual bonus,
which otherwise is usually paid in our common shares.

DSUs are
credited to an account maintained for each eligible person by us. The number of
DSUs to be credited to an eligible person are determined on the date set by the
board of directors by dividing the amount of eligible remuneration to be
deferred into DSUs by the fair market value per share on that date, being a
price not less than the closing sale price per share at which our common shares
are traded on the TSX or NASDAQ on the relevant date. On any date on which a
dividend is paid on shares, an eligible person's account will be credited with
the number of DSUs calculated by (i) multiplying the amount of the dividend per
share by the aggregate number of DSUs that were credited to that account as of
the record date for payment of the dividend, and (ii) dividing the amount
obtained in (i) by the fair market value (determined as set out above) of our
common shares on the date on which the dividend is paid.

A
departing director or executive officer may receive common shares in respect of
the DSUs credited to that person's account (at the ratio of one common share per
DSU, subject to the deduction of any applicable withholding tax in the case of
an eligible person who is a United States citizen or resident for the purpose of
United States tax).

***Restricted Share Unit
Plan***

Effective
December 3, 2004, we implemented a restricted share unit plan (the
"RSU Plan")
for employees of Ballard and its subsidiaries, as amended March 14, 2007 and
January 31, 2008, to recognize their contributions and to provide an incentive
which aligns their interests with those of our shareholders. The vesting of RSUs
issued under this plan occurs up to three years from the date of issuance,
subject to the achievement of any performance criteria which may be set by our
board of directors and to earlier vesting upon the occurrence of any Accelerated
Vesting Event (as defined in the RSU Plan). Each RSU is convertible into one
common share, which will be issued under our 2003 Share Distribution Plan or a
successor plan. As of December 31, 2007, 79,281 common shares had been issued
under the RSU Plan, and a total of 631,307 common shares had been reserved for
issuance under the 2003 Share Distribution Plan upon the conversion of any then
outstanding RSUs.

All RSUs
awarded to a participant under the RSU Plan, except those previously granted to
Transferred Employees, will expire, and the participant will no longer be
entitled to receive any common shares upon conversion of those RSUs, on the last
day on which the participant works for Ballard or any of its subsidiaries
(except that in the event of the participant's death or total disability, the
performance criteria and conditions specified in the participant's award of RSUs
will, unless otherwise specified in the award, be deemed satisfied and the RSUs
will be converted into shares). Exisiting RSUs previously granted to Transferred
Employees will remain in force and may be redeemed with no change in terms
(including restriction period) for so long as the Transferred Employee remains
an employee of AFCC.

***Ballard/Ballard
Generation Systems Inc. ("BGS") Option Exchange Plan***

We
established a Ballard/BGS option exchange plan (the Ballard/BGS Option Exchange Plan)
dated for reference February 21, 2000 to provide our officers and employees who
were employees of BGS with a right to exchange the shares of BGS they may
acquire on the exercise of BGS options for our common shares. The number of our common shares they
will receive is determined according to an exchange ratio under which they will
receive common shares as if they had received an option from us at the time of,
and instead of, the option they received from BGS. The exchange ratio is based
upon the ratio between the exercise price of the BGS share option that was
granted and the closing price of our common shares on the TSX on the date the
BGS share option was granted.

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- 20 -

The
exchange mechanism set out in the Ballard/BGS Option Exchange Plan was amended
effective December 5, 2003. Under the amended plan, outstanding BGS options will
be exchanged for options to purchase that number of our common shares that would
have been acquired under the prior share exchange mechanism. There was no change
in the exchange ratio or the number of our common shares issuable. The options
covered by this plan expire on or before December 9, 2009. As of December 31,
2007, a total of 155,890 of our common shares had been issued and a total of
42,338 common shares had been reserved for issue upon the exercise of the
options then outstanding under the Ballard/BGS Option Exchange Plan.

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 4, 2008: the name
and province or state of residence of each of our directors, each directors
principal occupation during the past five years, the period of time each has
served as a director and the number of shares and DSUs beneficially owned or
controlled by each of them. The term of office of each director expires at the
conclusion of our next annual shareholders meeting.

|                        |                                    |          | Shares        | Deferred     
|----------------------- | ---------------------------------- | -------- | ------------- | -------------
|Nameand                 |                                    |          | Beneficially  | Share Units  
|Province/State          |                                    | Director | Owned or      | Owned or     
|of
      Residence(1)   | Principal
      Occupation(1)      | Since    | Controlled(1) | Controlled(2)
|John
      Sheridan     | Executive of
      Ballard.        | 2001     | 159,779       | 57,942       
|British
      Columbia, | Formerly
      President and Chief |          |               |              
|Canada                  | Operating
      Officer of Bell    |          |               |              
|                        | Canada
      (2000-2003)           |          |               |              

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- 21 -

|                         |                                     |          | Shares        | Deferred     
|------------------------ | ----------------------------------- | -------- | ------------- | -------------
|Nameand                  |                                     |          | Beneficially  | Share Units  
|Province/State           |                                     | Director | Owned or      | Owned or     
|of
      Residence(1)    | Principal
      Occupation(1)       | Since    | Controlled(1) | Controlled(2)
|Ian A.
      Bourne      | Corporate
      Director.           | 2003     | 1,824         | 64,764       
|Alberta,
      Canada    | Executive Vice
      President,     |          |               |              
|                         | TransAlta
      Corporation         |          |               |              
|                         | (electricity generation and         |          |               |              
|                         | marketing) from 1998 to             |          |               |              
|                         | 2006. Chief
      Financial         |          |               |              
|                         | Officer,
      TransAlta            |          |               |              
|                         | Corporation from
      1998 to      |          |               |              
|                         | 200.                                |          |               |              
|                         |                                     |          |               |              
|Ed Kilroy                | Chief Executive
      Officer,      | 2002     | 2,424         | 36,162       
|Ontario,
      Canada    | Symcor Inc.
      (business         |          |               |              
|                         | process
      outsourcing           |          |               |              
|                         | services) since January             |          |               |              
|                         | 2005. President,
      IBM Canada   |          |               |              
|                         | Ltd.
      (information technology) |          |               |              
|                         | from 2000 to
      2005.            |          |               |              
|                         |                                     |          |               |              
|Dr. C.S.
      Park      | Corporate
      Director, Chief     | 2007     | 11,366        | Nil          
|California,
      USA    | Executive
      Officer of Maxtor   |          |               |              
|                         | Corporation
      (storage          |          |               |              
|                         | solutions and
      hard disk       |          |               |              
|                         | drives)from November 2004           |          |               |              
|                         | to May 2006.
      Managing         |          |               |              
|                         | Director,
      Investment Partner  |          |               |              
|                         | and Senior
      Advisor, H&Q       |          |               |              
|                         | Asia Pacific
      (private equity  |          |               |              
|                         | investment) from November           |          |               |              
|                         | 2002 to
      September 2004.       |          |               |              
|                         |                                     |          |               |              
|Dr. Gerri
      Sinclair | Executive
      Director, World     | 2005     | 176           | 20,302       
|British
      Columbia,  | Center for
      Digital Media      |          |               |              
|Canada                   | since May 2006.
      Chair of the  |          |               |              
|                         | Canadian                            |          |               |              
|                         | Telecommunications Policy           |          |               |              
|                         | Review Panel,
      and Strategic   |          |               |              
|                         | Management
      Consultant         |          |               |              
|                         | from October
      2004 to 2006.    |          |               |              
|                         | General Manager,
      MSN          |          |               |              
|                         | Canada
      (internet services)    |          |               |              
|                         | from September
      2002 to        |          |               |              
|                         | October
      2004.                 |          |               |              

---

- 22 -

|                        |                                      |          | Shares        | Deferred     
|----------------------- | ------------------------------------ | -------- | ------------- | -------------
|Nameand                 |                                      |          | Beneficially  | Share Units  
|Province/State          |                                      | Director | Owned or      | Owned or     
|of
      Residence(1)   | Principal
      Occupation(1)        | Since    | Controlled(1) | Controlled(2)
|David J.
      Smith    | Member, British
      Columbia       | 2006     | 1,358         |              
|British
      Columbia, | Securities
      Commission since    |          |               |              
|Canada                  | July 2006.
      Counsel with        |          |               |              
|                        | Lawson Lundell
      LLP (law        |          |               |              
|                        | firm) from May
      2005 until      |          |               |              
|                        | April 2006.
      Partner at         |          |               |              
|                        | Lawson Lundell
      LLP prior to    |          |               |              
|                        | that.                                |          |               |              
|                        |                                      |          |               |              
|David
      Sutcliffe   | Corporate
      Director. Chief      | 2005     | 3,600         |              
|British
      Columbia, | Executive
      Officer, Sierra      |          |               |              
|Canada                  | Wireless, Inc.
      (electrical and |          |               |              
|                        | electronic
      industrial          |          |               |              
|                        | products) from May 1995
      to     |          |               |              
|                        | October 2005.
      Chair of the     |          |               |              
|                        | Board of Sierra
      Wireless, Inc. |          |               |              
|                        | from May 2001 to
      April         |          |               |              
|                        | 2005.                                |          |               |              
|                        |                                      |          |               |              
|Mark
      Suwyn        | Chief Executive
      Officer,       | 2003     | 1,130         |              
|Florida,
      U.S.A.   | NewPage
      Corporation            |          |               |              
|                        | (coated paper) since
      March     |          |               |              
|                        | 2006, and Chair
      of the         |          |               |              
|                        | Board, NewPage
      Corporation     |          |               |              
|                        | since May 2005.
      Chief          |          |               |              
|                        | Executive
      Officer, and Chair   |          |               |              
|                        | of the Board,
      Louisiana-       |          |               |              
|                        | Pacific
      Corporation (building  |          |               |              
|                        | products) from 1996 to               |          |               |              
|                        | 2004.                                |          |               |              
|                        |                                      |          |               |              
|Douglas
      W.G.      | President and
      Chief            | 1998     | 4,383         |              
|Whitehead               | Executive
      Officer, Finning     |          |               |              
|British
      Columbia, | International
      Inc. (heavy      |          |               |              
|Canada                  | equipment
      reseller) since      |          |               |              
|                        | April
      2000.                    |          |               |              

|Notes
|-----
|     
|(1)  
|     
|(2)  

Corporate Governance

Our board
and senior management consider good corporate governance to be central to our
effective and efficient operation. We monitor corporate governance initiatives
as theydevelop and benchmark industry practices
to ensure that we are in compliance with corporate governance rules and
following best corporate governance practices at all times.

---

- 23 -

Our
corporate governance practices are reflected in our Corporate Governance
Guidelines that provide for director qualification standards, director
responsibilities, the form and amount of director compensation, director
orientation and continuing education, management succession planning and
performance evaluation of the board. A copy of the Corporate Governance
Guidelines can be found on our website.

We have
also reviewed our internal control and disclosure procedures and are satisfied
that they are sufficient to enable our Chief Executive Officer and Chief
Financial Officer to certify our annual reports filed with or submitted to the
U.S. Securities and Exchange Commission (SEC), and to certify our interim and
annual reports filed with Canadian securities authorities.

***Board Composition***

The
majority of our directors are independent. Independence is judged in
accordance with the provisions of the United StatesSarbanes-Oxley Act of 2002("Sarbanes-Oxley"), and as determined by the Canadian Securities Administrators
(CSA) and
the NASDAQ. We conduct an annual review of the other corporate boards on which
our directors sit, and have determined that currently twoboard interlock exists
with respect to our directors. The board has also established a guideline for
the maximum number of corporate boards on which a director should sit. This
guideline has been set at five corporate boards.

The board
has established director resignation guidelines, which set out the circumstances
under which a director would be compelled to offer a resignation or be asked to
resign.

***Roles and
Responsibilities***

The board
and the individual directors operate under a formal board mandate and terms of
reference for individual directors, both of which can be found on our website.
We have a Code of Ethics which applies to our board, officers and employees,
which can also be found on our website. The board has also established terms of
reference for the chairs of the board committees, our Chief Executive Officer
and our Chair of the Board, each of which is reviewed annually and can be found
on our website.

***Board Orientation and
Education***

We have
established a formal director orientation and ongoing education program. Each
director, upon joining our board, receives an orientation regarding our
business. Such orientation consists of site visits, presentations regarding our
business, technology and products, and a manual which contains various reference
documents and information. Continuing education is offered by way of ongoing
circulation of informative materials aimed at topical subject matters and
management presentations at board meetings, as well as guest speakers who are
invited to speak to our board on various topics. In the past, we have invited
guest speakers to speak to our board about the fuel cell industry, government
regulation, corporate governance and risk management, and internal management
representatives to speak about various issues relating to our technology and
business. The educational presentations which are made by internal management
provide an opportunity for the board members to meet and interact with members
of our management team.

---

- 24 -

***Shareholder Feedback and
Communication***

We have
set up an e-mail process for shareholders to communicate with the board, through
the Chair of the Board. Shareholders who wish to send a message to the Chair of
the Board can find the details of this process on our website.In addition, a summary of
shareholder feedback which is received by us is provided to the board of
directors through a semi-annual report.

***Board and Director
Performance Evaluations***

The
directors conduct an annual performance evaluation of the board, board
committees, and the Chair of the Board through a process overseen by the
Corporate Governance Committee. Evaluation questionnaires are completed and a
summary report is generated for and reviewed by the Corporate Governance
Committee. The Corporate Governance Committee works with management to improve
board processes and to address concerns raised in the evaluation questionnaires,
and reports to the full board on the evaluation results and proposed action
items. In addition, the directors evaluate each other every two years and
conduct individual self-evaluations in the alternate years, the results of which
are forwarded to the Chair of the Board who then reviews the results and meets
with each director to conduct an individual director performance evaluation.

***Compliance in Canada and
United States***

We
believe that we comply with all applicable NASDAQ and CSA corporate governance
rules. We have an exemption from the NASDAQ corporate governance rule requiring
that each NASDAQ quoted company have in place a minimum quorum requirement for
shareholder meetings of 33 1/3% of the outstanding shares of the companys
voting common stock. Our by-laws currently provide that a quorum is met if
holders of at least five percent of the votes eligible to be cast at a meeting
are present or represented by proxy at a shareholder meeting. The CSA requires
that listed corporations subject to Canadian Securities National Instrument
58-101 - Disclosure of Corporate Governance (NI 58-101) disclose the corporations
policies respecting corporate governance in accordance with such instrument. We
comply with NI 58-101, which addresses matters such as the constitution and
independence of corporate boards, the functions to be performed by boards and
their committees, and the effectiveness and education of board members.

Board Committees

Our board
of directors has established three standing committees: the Audit Committee, the
Management Development, Nominating & Compensation Committee, and the
Corporate Governance Committee. Each of these committees has been delegated
certain responsibilities, performs certain advisory functions, and either makes
certain decisions or makes recommendations to the full board. Each of the
committee chairs reports on the activities of the committee to the full board
following each committee meeting. Each of the board committees holdsin-camerasessions at the end of each committee meeting. Each board committee operates
under a mandate that is approved by the board of directors which sets out the
responsibilities of the committee. A copy of each committees mandate is posted
on our website. The mandates of each of the committees are reviewed annually and
each committees performance is assessed annually through a process overseen by
the Corporate Governance Committee.

---

- 25 -

***Audit Committee***

The Audit Committee
is constituted in accordance with SEC rules, and assists the board of directors
in fulfilling its responsibilities by reviewing financial information, the
systems of corporate controls and the audit process. The Audit Committee is
responsible for overseeing the audit process and ensuring that our financial
statements are fairly presented in accordance with generally accepted accounting
principles. The Audit Committee meets with our financial officers and our
internal and external auditors to review matters affecting financial reporting,
the system of internal accounting and financial disclosure controls and
procedures and the audit procedures and audit plans. The Audit Committee reviews
our significant financial risks and the appointment of financial senior
executives, and annually reviews our insurance coverage, tax loss carry
forwards, pension and health care liabilities and off-balance sheet
transactions. The Audit Committee has at least one member, Ian Bourne, who
qualifies as an audit committee financial expert under applicable securities
regulations. All of the members of the Audit Committee are independent directors
and are financially literate.

The Audit Committee
is responsible for appointing our external auditors (subject to shareholder
approval), 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 has the authority to terminate the external auditors engagement. The
Audit Committee also approves in advance, on a case-by-case basis, any services
to be provided by the external auditors which are not related to the audit. The
following table shows the costs incurred with KPMG in 2007 and 2006 for audit
and non-audit related work, all of which were approved by the Audit Committee:

Type of
      Audit Fees
    **2007**
    **2006**Audit Fees
    $360,884
    $306,938Audit-Related Fees
    $143,058 (1)
    $11,110(1)Tax Fees
    $132,130(2)
    $95,625(2)All Other Fees
    Nil
    Nil


|Notes
|-----
|     
|(1)  
|     
|(2)  

In
addition, the Audit Committee is mandated to review all financial disclosure
contained in prospectuses, annual reports, annual information forms, management
proxy circulars and other similar documents. The Audit Committee is also
responsible for ensuring that the internal audit function is being effectively
carried out. The Audit Committee reviews and approves, in advance, related party
transactions on a case-by-case basis. As at March 4, 2008, the committee was
composed of Ian Bourne, Ed Kilroy (Chair), David Sutcliffe, Mark Suwyn and
Douglas Whitehead. In addition to each committee members general business
experience, the education and experience of each member that is relevant to the
performance of his or her responsibilities as a member of the Audit Committee
are set forth below.

---

- 26 -

Mr.
Bourne is a Corporate Director. He was TransAltas Executive Vice-President
until December 2006. Up until the end of 2005 he was the Chief Financial Officer
of TransAlta and responsible for all financial policy, planning and reporting,
as well as tax, treasury and risk management planning and implementation. Prior
to TransAlta, Mr. Bourne was Senior Vice-President and Chief Financial Officer
of Canada Post Corporation. Mr. Bourne was also with General Electric for 21
years, where he held several key positions including European Treasurer, Chief
Financial Officer for GE Canada and Chief Financial Officer for GE Medical
Systems Europe. He sits on the boards of Wajax Income fund, Wajax Limited,
Canadian Pension Plan Investment Board and Canadian Oil Sands
Trust.

Mr.
Kilroy has been the Chief Executive Officer of Symcor Inc. since January 2005.
Prior to that Mr. Kilroy was the President of IBM Canada Ltd. from 2000 to 2005.
Mr. Kilroy is also a director of Symcor Inc. and The Conference Board of
Canada.

Mr.
Sutcliffe is a Corporate Director. He 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. Mr. Sutcliffe also
currently sits on the boards of Sierra Wireless, Inc. and E-Comm 911. Mr.
Sutcliffe's public company chief executive officer experience includes Canadian
and U.S. reporting. He serves on the audit committee of E-Comm 911 and has
attended the Directors Education Program of the Institute of Corporate
Directors.

Mr. Suwyn
is the Chair of the Board and the Chief Executive Officer of NewPage
Corporation. From 1996 until 2004, Mr. Suwyn was the Chair of the Board and the
Chief Executive Officer of Louisiana-Pacific Corporation. He sits on the boards
of BlueLinx Corporation, NewPage Corporation and Hope College Board of
Trustees.

Mr.
Whitehead is the President and Chief Executive Officer of Finning International
Inc. He joined Finning International in January 1999 as President and Chief
Operating Officer, and was elected to the Finning Internationals s board of
directors on April 23, 1999. He was appointed Chief Executive Officer of Finning
International in April 2000. Mr. Whitehead is also a director of INMET Mining
and Belkorp Industries. He is a member of the Canadian Council of Chief
Executives, the Board of Governors for the Business Council of British Columbia,
the B.C. Progress Board and the Board of Governors of the University of British
Columbia.

The Audit
Committees mandate is attached at Appendix A, as required by Multilateral
Instrument 52-110F1 under Canadian securities laws.

***Management Development,
Nominating & Compensation Committee***

The
Management Development, Nominating & Compensation Committee is responsible
for considering and authorizing terms of employment of executive officers,
matters of compensation, approving share compensation plans, reviewing awards
under share incentive plans, and providing advice on our organizational and
compensation structures in the various jurisdictions in which we operate.

In
addition to approving the compensation of our executive officers, the committee
also regularly reviews and sets the minimum share ownership requirement for
executive officers. The committee is also responsible for ensuring appropriate
senior management succession planning, recruitment, development, training and
evaluation. In particular, the committee annually reviews the performance
objectives of our Chief Executive Officer and is responsible for conducting his
annual performance evaluation. Any compensation consultants engaged by us, at
the direction of the committee, report directly to thecommittee, and the committee has the authority to appoint such
consultants, determine their level of remuneration, and oversee and terminate
their services.

---

- 27 -

In
fulfilling its nominating function, the committee seeks out and recommends
nominees for election to the board of directors, annually reviews the board
succession plan, and annually reviews the composition of director talents and
skills against board requirements to identify any gaps.

As at
March 4, 2008, the committee was composed of Ian Bourne, Dr. C.S. Park, Dr.
Gerri Sinclair, David J. Smith and David Sutcliffe (Chair), all of whom are
independent of management.

***Corporate Governance
Committee***

Our
Corporate Governance Committee is responsible for recommending to the board of
directors the size of the board and membership on board committees, monitoring
corporate governance issues, assessing board and director performance,
determining the compensation of the board of directors and approving director
compensation plans, conducting succession planning for the Chair of the Board
and overseeing a director education program.

The
Corporate Governance Committee has taken responsibility for monitoring the
developments in the U.S. and Canada relating to corporate governance to ensure
that we are following best corporate governance practices.

The
Corporate Governance Committee is responsible for ensuring a formal process to
evaluate the performance of the board, board committees, individual directors
and the Chair of the Board, and ensuring that appropriate actions are taken,
based on the results of the evaluation, to improve board effectiveness.

As at
March 4, 2008, the committee was composed of, Ian Bourne, Ed Kilroy, Dr. Gerri
Sinclair and David J. Smith (Chair). All of the members of the committee are
independent of management.

Executive Officers

As at
March 4, 2008, we had six 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 Sheridan            |  | President &
      Chief Executive |  | Executive of
      Ballard.       
|****British Columbia, Canada |  | Officer                           |  | Formerly
      President and Chief
|                             |  |                                   |  | Operating
      Officer, Bell     
|                             |  |                                   |  | Canada (2000 to
      2003).      
|                             |  |                                   |  |                                   
|****Bill Foulds, MA, USA     |  | President,
      Ballard Material |  | Executive of
      Ballard.       
|                             |  | Products &
      Vice President,  |  |                                   
|                             |  | Ballard                           |  |                                   

---

- 28 -

|Name and Province/State      |  |                                   |  |                                   
|---------------------------- |  | --------------------------------- |  | ----------------------------------
|of
      Residence           |  | Position                          |  | Principal
      Occupation        
|****Christopher Guzy         |  | Vice President
      Operations & |  | Executive of
      Ballard.       
|****British Columbia, Canada |  | Chief Technology
      Officer    |  | Formerly General
      Manager of 
|                             |  |                                   |  | GE Healthcares
      product     
|                             |  |                                   |  | development and
      supply      
|                             |  |                                   |  | chain operations
      in Hungary 
|                             |  |                                   |  | (2001-2005).                      
|                             |  |                                   |  |                                   
|****Noordin Nanji            |  | Vice President
      & Chief      |  | Executive of
      Ballard.       
|****British Columbia, Canada |  | Customer
      Officer            |  |                                   
|                             |  |                                   |  |                                   
|****David Smith              |  | Vice President
      & Chief      |  | Executive of
      Ballard.       
|****British Columbia, Canada |  | Financial
      Officer           |  |                                   
|                             |  |                                   |  |                                   
|****Glenn Kumoi              |  | Vice President
      Human        |  | Executive of
      Ballard.       
|****British Columbia, Canada |  | Resources &
      Chief Legal     |  | Formerly
      Associate Counsel, 
|                             |  | Officer                           |  | Davis LLP
      (2006-2007),      
|                             |  |                                   |  | Acting VP EMEA
      MDSI         
|                             |  |                                   |  | (2006), Chief
      Administrative
|                             |  |                                   |  | Officer MDSI
      (2004-2005),   
|                             |  |                                   |  | Chief Legal
      Officer MDSI    
|                             |  |                                   |  | (2002-2004).                      

Shareholdings of Directors and
Senior Officers

As at
March 4, 2008, our directors and executive officers, as a group, beneficially
owned, directly or indirectly, or exercised control or direction over 740,228 of
our common shares, being 0.90% of our issued and outstanding common shares as at
March 4, 2008, and 298,275 DSUs.

TRANSFER AGENT AND REGISTRAR

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

MATERIAL CONTRACTS

Particulars of every contract, other than a contract entered into in the
ordinary course of business, that is material to the company 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 is listed below.
Disclosure of a contract that was entered into before January 1, 2002 is not
provided.

|Parties             | Date                        | Consideration | Key Terms
|------------------- | --------------------------- | ------------- | ---------
|Daimler,
      Ford | Particulars provided below.

---

- 29 -

Detailed Description of the AFCC
Transaction

The AFCC
Transaction generally provided for the transfer of certain of our automotive
fuel cell research and development assets (the Transferred Automotive R&D Assets) to Daimler and Ford. The AFCC Transaction was implemented through: our
transfer to AFCC of certain of our automotive research and development assets
and the assumption by AFCC of our automotive fuel cell warranty liabilities to
Daimler, Ford and their affiliates in return for a 100% equity interest in AFCC;
our transfer to Daimler of 50.1% of our equity interest in AFCC, an interest in
and a license to use certain of our intellectual property rights, and
$36,200,000; our transfer to Ford of 30% of our equity interest in AFCC, an
interest in and a license to use certain of our intellectual property rights and
$21,800,000; and the transfer to us by Daimler and Ford, for cancellation, of
their entire direct and indirect shareholdings in Ballard.

We have
valued the shares being returned by Daimler and Ford to us at $173,900,000. The
AFCC Transaction is described more fully in the remainder of this section.

*Transfer of Automotive Fuel Cell
Research and Development Assets*

AFCC,
which is controlled by Daimler and Ford, was created to carry on the business
involving the Transferred Automotive R&D Assets. As an initial step, we
transfered to AFCC our automotive fuel cell test equipment, automotive fuel cell
inventory, office equipment, $2,000,000 in cash and all automotive fuel cell
development contracts between Ballard, Daimler and Ford. In exchange, AFCC
assumed our automotive fuel cell warranty liabilities to Daimler, Ford and their
affiliates and issued to Ballard a 100% equity interest in AFCC.

Ballard
then transfered to Daimler a 50.1% interest in the outstanding shares of AFCC,
an undivided half interest in our intellectual property rights principally used
for propulsion systems in cars, vans, trucks and buses (Automotive Propulsion Applications) (such intellectual property rights being referred to as
Automotive Intellectual Property
Rights) and $36,200,000, as well as
providing Daimler with a license to use our intellectual property rights
fundamental to both Automotive Propulsion Applications and non-Automotive
Propulsion Applications (Non-Automotive
Applications) (such intellectual property
rights being referred to as Fundamental
Intellectual Property Rights) and our
intellectual property rights used in Non-Automotive Applications
(Non-Automotive Intellectual Property
Rights), in Automotive Propulsion
Applications; and Ford, a 30% interest in the outstanding shares of AFCC, the
remaining undivided half interest in our Automotive Intellectual Property Rights
and $21,800,000, as well as providing Ford with a license to use our Fundamental
Intellectual Property Rights and our Non-Automotive Intellectual Property Rights
for Automotive Propulsion Applications.

As a
result of the foregoing, we hold a 19.9% interest in AFCC. In addition, under
the AFCC Transaction, we have retained the right to continue to develop fuel
cell modules for large buses (other than Daimler and Ford branded large buses),
as well as shuttle buses in Canada for use by transit authorities.

In
exchange, Daimler transfered to us 21,392,598 common shares and 50 Class A
shares in DBF Pref Shareholdings Inc. (DBF an entity jointly owned by
Ballard, Daimler and Ford) (collectively representing Daimlers entire direct
and indirect equity interest in Ballard) and Ford transfered to us 12,868,700
common shares and 50 Class C shares in DBF (collectively representing Fords
entire direct and indirect equity interest in Ballard). We valued the shares
being returned by Daimler and Ford to us at $173,900,000. In addition, Daimler
and Ford provided initial funding to AFCC of $118,000,000 for engineering,
development and testing work to be conducted by AFCC.

---

- 30 -

*Employee Transfers*

We
transfered to AFCC 112 personnel (representing approximately 20% of our
personnel) (the Transferred
Employees). In order to make the
transfer of the Transferred Employees from Ballard to AFCC as seamless as
possible, we continue to honour, for so long as a Transferred Employee remains
an employee of AFCC, all equity-based, long-term, compensation issued to that
Transferred Employee by us. However, in the future, we will not issue further
options or restricted share units of Ballard to the Transferred Employees. Doing
so required amendments to Ballards stock option, restricted share unit plans
and share distribution plans. The amendments were made by resolution of the
board.

*Termination of Automotive
Alliance*

As a
result of the AFCC Transaction, we are no longer directly involved in automotive
fuel cell research and development. As a result, we entered into a termination
agreement (the Termination
Agreement) with Daimler and Ford under
which we terminated the Amended and Restated Fourth Alliance Agreement between
Ballard, Daimler, Ford and DBF dated February 15, 2007 (Fourth Alliance Agreement). The only aspects of the Fourth Alliance Agreement which survived the
termination are: Ballards non-competition obligations in favour of NuCellSys,
which are continued on substantially the same terms under an agreement between
Ballard, Daimler, Ford and NuCellSys (the NuCellSys Agreement), since
Ballard received from Daimler and Ford the consideration for this
non-competition obligation in 2005; and Ballards right to acquire fuel cell
intellectual property rights developed by Daimler or Ford prior to the
termination of the Fourth Alliance Agreement, which is continued under the
shareholders agreement to be entered into by Ballard, Daimler, Ford and AFCC
(the AFCC Shareholders
Agreement).

*Amendment of Articles*

With
the termination of the Fourth Alliance Agreement and the return by Daimler and
Ford to Ballard of their entire equity interest in Ballard, Daimler and Ford
lost their right to appoint nominees to the board and the right of those
nominees to exercise certain special approval rights in respect of certain
fundamental matters, such as (a) our annual business plan, (b) any significant
proposed acquisition, disposition or borrowing not set out in our annual
business plan, or (c) fundamental corporate changes such as an amalgamation,
arrangement or reorganization. In order to terminate these rights, we amended
our articles to eliminate the Class A share and Class B share from our
authorized capital, which required the Special Resolution approved by our
shareholders.

*Arrangements with Respect to
AFCC*

Our
19.9% retained interest in AFCC is subject to a purchase agreement (the
Share Purchase Agreement) under which Ford will purchase our interest in AFCC
for $65,000,000 (plus interest accruing at LIBOR rates) on January 31, 2013,
provided that: (a) at our request, such purchase will occur on an earlier date
specified by us in the event of (i) a change of control of Ford, Daimler or
AFCC; (ii) Daimler, Ford or AFCC being subject to insolvency or bankruptcy
proceedings; or (iii) AFCC being the subject of a significant reorganization; or
(b) at Fords request, such purchase will occur on an earlier date specified by
Ford in the event of (i) a change of control of Ballard; or (ii) Ballard being
subject to insolvency or bankruptcy proceedings.

---

- 31 -

In
addition, Ford has the right, subject to the consent of Daimler, to purchase our
interest at any time to accommodate another automotive manufacturer desiring to
obtain an ownership interest in AFCC. In that case, the price paid to Ballard
will be the greater of the base price set out above and a proportionate share of
any higher price paid by the automotive manufacturer.

While we remain a shareholder of AFCC: we have no obligation to fund any
of AFCCs operating expenses; we are entitled to appoint one director to AFCCs
board of directors (provided that we hold more than 7.5% of the issued and
outstanding shares in AFCC); we will not compete with Daimler, Ford or AFCC in
fuel cells for Automotive Propulsion Applications or Automotive Fuel Cell
Systems, except for large bus applications worldwide (other than Daimler and
Ford branded buses) and shuttle buses in Canada; Daimler, Ford and AFCC will not
compete with us in fuel cells for Non-Automotive Applications or fuel cell
systems for Non-Automotive Applications; we will not solicit the employees of
AFCC, Daimler and Ford; and AFCC, Daimler and Ford will not solicit our
employees.

For
a period of 18 months from January 31, 2008, we will not hire employees of AFCC
and AFCC will not hire employees of Ballard.

*Treatment of Intellectual
Property*

In
addition to our transfer of our Automotive Intellectual Property Rights to
Daimler and Ford and the licensing of our Fundamental Intellectual Property
Rights and our Non-Automotive Intellectual Property Rights to Daimler and Ford
as described above, the AFCC Transaction involved the following additional
arrangements in respect of intellectual property (excluding trade-marks and
tradenames): Daimler and Ford provided us with a non-exclusive, royalty-free
license to use the Automotive Intellectual Property Rights for Non-Automotive
Applications; we provided each of Daimler and Ford with a non-exclusive,
royalty-free license to use, for Automotive Propulsion Applications, all of the
intellectual property rights relating to fuel cells which we develop while we
are a shareholder of AFCC; Daimler and Ford provided us with a non-exclusive,
royalty-free license to use for Non-Automotive Applications, all of the
intellectual property rights relating to fuel cells which they or their
affiliates develop (either directly or through AFCC) while we are a shareholder
of AFCC; and NuCellSys transfered to us its ownership interest in Fundamental
Intellectual Property Rights and Non-Automotive Intellectual Property Rights
that are currently jointly owned with us.

There is some uncertainty as to the survival of license rights under
Canadian bankruptcy law upon the bankruptcy of an owner or licensor of
intellectual property rights. Therefore, in order to protect the license rights
of Daimler and Ford in respect of the Fundamental Intellectual Property Rights
in the limited event of our bankruptcy or insolvency, we transfered
substantially all of our Fundamental Intellectual Property Rights, and agreed to
transfer all improvements thereto made while we are a shareholder of AFCC, to a
new entity, IP Holdings. We then entered into a license agreement with IP
Holdings evidencing our exclusive right to use such Fundamental Intellectual
Property Rights and improvements thereto for Non-Automotive Applications. In
addition, we have covenanted not to enter into joint development arrangements
with third parties, unless our interest in any improvements to the Fundamental
Intellectual Property Rights arising out of those arrangements are either
transferred to IP Holdings or, at a minimum, are licensed to IP Holdings (with a
right to sublicense to Daimler and Ford). We provided each of Daimler and Ford
with a 33% voting, non-participating interest in IP Holdings, while retaining a
34% voting interest in IP Holdings and a 100% participating interest in IP
Holdings, and entered into a unanimous shareholder agreement with them to ensure
that IP Holdings will not take any action that would place the license rights of
the parties at risk. According to the terms of the
unanimous shareholder agreement, IP Holdings may not take any decision or action
other than to hold the Fundamental Intellectual Property Rights and any
improvements thereto without the unanimous approval of its shareholders.

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- 32 -

*Service Arrangements with AFCC*

We
entered into a number of agreements with AFCC in order to enable it to carry on
business: we lease or license to AFCC, on a cost-recovery basis, 40,000 square
feet of space in our facilities for use by the Transferred Employees; we provide
AFCC with key testing and engineering services on a time and materials basis, at
a positive margin; we sell products to AFCC at prices intended to produce a
positive margin; and we provide AFCC with certain administrative services, on a
time and materials basis, at a positive margin.

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, 2007. 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, cost and performance of these products, and to develop
commercial volume manufacturing processes for these 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. Developing the
technology for high-volume commercialization requires substantial capital, and
we may not be able to generate or secure sufficient funding on terms acceptable
to us to pursue our high-volume commercialization plans. 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, including useful life,
reliability and durability, our commercialization schedule could be delayed, and
potential purchasers may decline to purchase our products.

We
may become subject to product liability lawsuits which could result in
significant expense to us, adversely affecting our resources and the development
of sales of our products, and thereby delaying the commercialization of our
products.

The
commercialization of our fuel cell products 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.

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- 33 -

We expect our cash reserves to
be reduced due to future operating losses 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 over the next several years. If we are unable
to successfully implement our business plan, our cash requirements may increase
and we may find it difficult to raise additional funding. We expect our cash
reserves will be reduced due to future operating losses, 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 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. In
addition, we cannot guarantee that we will be able to leverage our relationships
with suppliers for the development of our technology. If we experience
significant cost overruns on any of 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.

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 and foreign currency risks. As a result, it is possible that in one
or more future quartersour 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.

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. 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 consumer reluctance to buy a new product.

---

- 34 -

If a
mass market fails to develop, or develops more slowly than we anticipate, we may
be unable to recover the losses we will have incurred in the development of our
products, and 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 have limited experience
manufacturing fuel cell products on a commercial basis.

To
date, we have focused primarily on research and development, and have limited
experience manufacturing fuel cell products on a commercial basis. To meet the
quality, price, engineering, design and production standards or production
volumes required to successfully mass market our products, we will have to
produce our fuel cell products through high volume automated processes. These
large scale, automated processes will require significant advances in
manufacturing technology. We do not know whether or when we will be able to
develop the manufacturing technology necessary to achieve efficient,
high-volume, low-cost manufacturing capability and processes. Moreover,
developing these processes will require substantial capital, and we do not know
whether we will be able to secure sufficient funding on terms acceptable to us.
Our failure to develop such manufacturing processes and capabilities could have
a material adverse effect on our business and 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. To the extent that the processes which 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. In addition, platinum
is a key component of our fuel cell products. Platinum is a scarce natural
resource and we are dependent upon a sufficient supply of this commodity. While
we do not anticipate significant near or long term shortages in the supply of
platinum, such shortages could adversely affect our ability to produce
commercially viable fuel cell products or significantly raise our cost of
producing such products.

We are dependent upon Original
Equipment Manufacturers (OEM) to purchase certain of our products.

To
be commercially useful, our fuel cell products must be integrated into products
manufactured by OEMs. We can offer no guarantee that 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 OEMs could adversely affect the market for our
fuel cell products and our financial results.

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- 35 -

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 U.S. and other countries
have driven interest in fuel cells. The deregulation of the electric utility
industry in Japan and elsewhere has created market opportunities for our fuel
cell products in the power generation market. 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 U.S. 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 could seriously
harm our business and prospects because we believe that developing new products
that are unique to us is critical to our success. We rely on patent, trade
secret, trademark and copyright law 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 2009 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: 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 any of our pending or future
patent applications will be issued with the breadth of claim coverage sought by
us, if issued at all. In addition, effective patent, trade secret, trademark and
copyright protection may be unavailable, limited or not applied for in certain
countries.

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

Certain of our intellectual property has 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 licenses under the patents or other intellectual property rights of
others. However, we may not be able to obtain such licenses or the terms of any
offered licenses may not be acceptable to us. The failure to obtain a license
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 be involved in
intellectual property litigation that causes us to incur significant expenses or
prevents us from selling our products.

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. In the event of an adverse outcome as a defendant in any such litigation,
we may, among other things, be required to: pay substantial damages; cease the
development, manufacture, use, sale or importation of products that infringe
upon other patented intellectual property; expend significant resources to
develop or acquire non-infringing intellectual property; discontinue processes
incorporating infringing technology; or obtain licenses to the infringing
intellectual property.

---

- 36 -

We may
not be successful in such development or acquisition or that such licenses would
be available on reasonable terms. Any such development, acquisition or license
could require the expenditure of substantial time and other resources, and could
have a material adverse effect on our business and financial results.

We currently face and will continue
to face significant competition.

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

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

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

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

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

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

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- 37 -

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

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

Our products use flammable fuels,
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. 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 us may be found on SEDAR at
www.sedar.com. In particular, additional information regarding directors and
officers remuneration and indebtedness, principal holders of our securities and
securities authorized for issuance under equity compensation plans is contained
in our information circular for our most recent annual meeting of security
holders 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, 2007, each interim financial statement issued after
December 31, 2007, 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 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.

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
      appointing (subject to approval by the shareholders at the Corporations
      annual meeting of shareholders) 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, and the Audit Committee has the
      authority to terminate the external auditors engagement;
|  
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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- 39 -

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

Composition and Eligibility

|A) |  | Following each annual
      meeting of shareholders of the Corporation, the board will elect 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 the Canadian Securities Administrators under Multilateral
      Instrument 52-110, any applicable statutes, or applicable rules or
      regulations of the U.S. Securities Exchange Commission or Canadian
      regulatory authorities.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|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) |  | The Committee will
      appoint the Committee Chair.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|D) |  | If the Chair is not
      present at any meeting of the Committee, one of the members of the
      Committee who is present at the meeting shall be chosen by the Committee
      to preside at the meeting.                                                                                                                                                                                                                                                                                                                                                                                  
|  
|E) |  | A majority of Committee
      members constitute a quorum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|F) |  | The Committee will
      appoint its own Secretary, who need not be a director, who will be
      responsible for taking and keeping the Committees meeting
    minutes.                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|G) |  | 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.                                                                                                                                                                                                                                                                                    
|  
|H) |  | 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  

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- 40 -

|   |                                                                                                                          | (iii)                                                                                                                                                                                                                                                                                |  | experience preparing, auditing, analyzing or evaluating
      financial statements that present a breadth and level of complexity of
      accounting issues that are generally comparable to the breadth and
      complexity of issues that can reasonably be expected to be raised by the
      Corporations financial statements, or experience actively
      supervising one or more person engaged in such activities;
|-- | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                          |                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                          | (iv)                                                                                                                                                                                                                                                                                 |  | an
      understanding of internal controls and procedures for financial reporting;
      and                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                          |                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                          | (v)                                                                                                                                                                                                                                                                                  |  | an
      understanding of audit committee functions.                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                          |                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The financial expert must have acquired the requisite
      attributes through any one or more of the following methods:
|   |                                                                                                                          |                                                                                                                                                                                                                                                                                     
|   |                                                                                                                          | (i)                                                                                                                                                                                                                                                                                  |  | education and experience as a principal financial officer,
      principal accounting officer, controller, public accountant or auditor or
      experience in one or more positions that involve the performance of
      similar functions;                                                                                                                                                                                 
|  
|   |                                                                                                                          | (ii)                                                                                                                                                                                                                                                                                 |  | experience actively supervising a principal financial
      officer, principal accounting officer, controller, public accountant,
      auditor or person performing similar functions;                                                                                                                                                                                                                                       
|  
|   |                                                                                                                          | (iii)                                                                                                                                                                                                                                                                                |  | experience overseeing or assessing the performance of
      companies or public accountants with respect to the preparation, auditing
      or evaluation of financial statements; or                                                                                                                                                                                                                                         
|  
|   |                                                                                                                          | (iv)                                                                                                                                                                                                                                                                                 |  | other relevant experience, based on the determination by
      the board of directors as to the specific experience which satisfies this
      requirement.                                                                                                                                                                                                                                                                   
|  
|I) |                                                                                                                          | Any member of the Committee who serves on more than three
      public company audit committees must inform the Chairman of the Board, so
      that the board may consider and discuss with such member any issues
      related to his or her effectiveness and time
  commitment.

Meetings and Operations

|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) |  | 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

---

- 41 -

|C) |  | 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. 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. 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.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|D) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|E) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|F) |  | The minutes of all
      meetings of the Committee will be provided to the board of directors. The
      Committee will report to the board of directors at its next regular
      meeting all action it has taken since the previous reports.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|G) |  | Supporting schedules
      and information reviewed by the Committee will be available for
      examination by any director upon request to the Secretary of the
      Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|H) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|I) |  | The Committee members
      will receive minutes of all meetings of the Corporations internal
      Disclosure Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|J) |  | 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) |  | Financial
      Reporting Control Systems
|-- |  | -----------------------------------------
|   |  |                                          
|   |  | The Committee
  will:                    
|   |  |                                          
|   |  | (i)                                      
|   |  |                                          
|   |  | (ii)                                     
|   |  |                                          
|   |  | (iii)                                    

---

- 42 -

|   |  | (iv)                                                                                                                                                                                                                                                                                                               |  | annually
      review the Mandate of the Committee;                                                                                                                                                                                                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  | (v)                                                                                                                                                                                                                                                                                                                |  | annually
      review specific matters affecting financial reporting, including but not
      limited to, the Corporations insurance coverage, the status of the
      Corporations tax loss carry-forwards, pension and health care
      liabilities, and off balance sheet transactions;                                                                
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  | (vi)                                                                                                                                                                                                                                                                                                               |  | review the
      appointment of the financial senior executives of the Corporation, prior
      to recommendation by the Management Development, Nominating &
      Compensation Committee to the board;                                                                                                                                                     
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  | (vii)                                                                                                                                                                                                                                                                                                              |  | 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;
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  | (viii)                                                                                                                                                                                                                                                                                                             |  | discuss and
      consider policies with respect to risk assessment and risk management,
      including:                                                                                                                                                                                                                                                    
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  |                                                                                                                                                                                                                                                                                                                    |  | a)                                                                                                                                                                                                                                                                                                                                                           
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  |                                                                                                                                                                                                                                                                                                                    |  | b)                                                                                                                                                                                                                                                                                                                                                           
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  |                                                                                                                                                                                                                                                                                                                    |  | c)                                                                                                                                                                                                                                                                                                                                                           
|   |  |                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                              
|   |  | (ix)                                                                                                                                                                                                                                                                                                               |  | 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.                                                                                                                                                  
|   |  |                                                                                                                                                                                                                                                                                                                   
|B) |  | 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.
|  
|C) |  | 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;                                                                                                                                                                                                           
|  
|   |  | (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;                                                                                                     

---

- 43 -

|   |  | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |  |                                          
|D) |  | Relationship
      with External Auditors
|  
|   |  | The
      Committee will:                
|  
|   |  | (i)                                       |  | appoint the external
      auditors (subject to 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, and the Committee has the authority to terminate the external
      auditors engagement. The Committee will not appoint 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;                                          
|  
|   |  | (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 (F) below, Independence of External
  Auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

- 44 -

| | (v)    |  | review the
      audit plan with the external auditors and approve all substantive audit
      services in advance;                                                                                                                                                                                                                                                   
| | ------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       
| | (vi)   |  | approve in
      advance any services to be provided by the external auditors which are not
      related to the audit, including the fees and terms of engagement relating
      to such non-audit services for the Corporation and its subsidiaries.
      Specifically, the Committee must not allow the external auditors to
      provide the following services:
| |       
| |        |  | a)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | b)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | c)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | d)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | e)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | f)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | g)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | h)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| |        |  | i)                                                                                                                                                                                                                                                                                                                                                                    
| |       
| | (vii)  |  | review
      quarterly all fees paid to external auditors;                                                                                                                                                                                                                                                                                                            
| |       
| | (viii) |  | review
      performance against audit proposal plan;                                                                                                                                                                                                                                                                                                                 
| |       
| | (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)                                                                                                                                                                                                                                                                                                                                                                    

---

- 45 -

|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | f)                                                                                                                                                                                                                                                                                                                                                                |  | all relationships between the
      external auditors and the Corporation as detailed in §(i) under Section F
       Independence of External Auditors;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                         
|   |  | (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.                                                                                  
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                         
|E) |  | Treasury                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                         
|   |  | The Committee
      will:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                         
|   |  | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | review and
      approve the Treasury Policy;                                                                                                                                                                                                                                                                                                                    
|  
|   |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | review the
      quarterly Treasury Report; and                                                                                                                                                                                                                                                                                                                  
|  
|   |  | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | review and
      approve the Foreign Exchange Policy.                                                                                                                                                                                                                                                                                                            
|  
|F) |  | 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.
|  
|G) |  | Internal
      Audit and Controls                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | 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. The Committee will review quarterly the
      internal auditors report on the adequacy of the Corporations internal
      controls, policies and procedures. The Committee will annually review and
      approve the internal audit plan.

---

- 46 -

|H) |  | 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 Management Development, Nominating & Compensation Committee,
      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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | (xi)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

- 47 -

| | (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.

Other

The
Committee will: perform an annual review of managements compliance with the
Corporations code of ethics and workplace guidelines policy; perform an annual
review of the succession plans for the Corporations CFO and Controller; 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 annually review the audit of the expense reports of the Chairman
of the Board of Directors and the CEO.

Performance Evaluation

|J) |  | The Committee will
      perform an annual evaluation of its performance, having regard to the
      issues reviewed during the year.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------

---

- 48 -

COMMITTEE TIMETABLE

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

|Committee Timetable                                        |  
|---------------------------------------------------------- | -
|Agenda
      Items                                         | J
|A) Financial
      Reporting Control Systems               |  
|Review with management any significant
      changes in    |  
|financial risks
      facing the Corporation.              |  
|Review with management procedures
      followed with      |  
|respect to
      disclosure controls and procedures.       |  
|Review the management letter from the
      external       |  
|auditor and corporations responses to
      suggestions   |  
|made.                                                      |  
|Annually review the
      Committee mandate.               |  
|Review specific matters as required
      affecting        |  
|financial reporting such as insurance
      coverage, the  |  
|status of the Corporations tax loss
      carry-forwards, |  
|pension and health care liabilities,
      and off balance |  
|sheet
      transactions.                                  |  
|Review the appointment of the
      financial senior       |  
|executives of the
      Corporation.                       |  
|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, and
      review           |  
|submissions as
      received.                             |  
|Discuss and consider policies with
      respect to risk   |  
|assessment and risk
      management.                      |  
|Meet separately and periodically, no
      less than       |  
|annually, with management, with
      internal auditors    |  
|(or persons responsible for the
      internal audit       |  
|function) and with
      independent auditors.             |  

---

- 49 -

|Committee Timetable                                          |  
|------------------------------------------------------------ | -
|Agenda
      Items                                           | J
|Interim
      Financial Statements                           |  
|Review and approval of interim
      financial statements    |  
|and
      MD&A.                                              |  
|Annual Financial Statements and
      Other                  |  
|Financial
      Information                                  |  
|Review any changes in accounting
      policies or           |  
|financial reporting requirements that
      may affect the   |  
|current years
      financial statements.                   |  
|Obtain summaries of significant
      transactions, and      |  
|other complex matters whose treatment
      in the           |  
|annual financial statements merits
      advance             |  
|consideration.                                               |  
|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.                         |  
|Review summary provided by the
      Corporations legal     |  
|counsel of the status of any material
      pending or       |  
|threatened
      litigation, claims and assessments.         |  
|Discuss the annual financial
      statements, MD&A and      |  
|the auditors report thereon in detail
      with the        |  
|Corporations
      officers and the external auditors.      |  
|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.                                                   |  
|Before the release of each quarterly
      report and        |  
|annual financial statements, discuss
      with the          |  
|external auditors all matters required
      by SAS 61 and   |  
|Handbook section
      5751.                                 |  
|Provide the board with a
      recommendation for            |  
|approval of the
      annual financial statements.           |  
|Discuss earnings press releases and
      earnings           |  
|guidance as well as the release of
      significant new     |  
|financial
      information.                                 |  
|Relationship
      with External Auditors                    |  
|Annually appoint (subject to
      shareholder approval)     |  
|external
      auditor.                                      |  
|Annually review and approve terms of
      engagement        |  
|and determine
      remuneration of external auditor.        |  
|Review representation letters given by
      management      |  
|to external
      auditor.                                   |  
|Monitor the external auditors
      qualifications and      |  
|independence through the activities
      listed in Section  |  
|F.                                                           |  

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- 50 -

|Committee Timetable                                          |  
|------------------------------------------------------------ | -
|Agenda
      Items                                           | J
|Review the audit plan with the
      external auditors and   |  
|approve all
      substantive audit services in advance.     |  
|Approve permissible
      non-audit services in advance.     |  
|Review all fees paid
      to external auditors.             |  
|Review performance
      against audit proposal plan.        |  
|Discuss in private with the external
      auditors matters  |  
|affecting the conduct of their audit
      and other         |  
|corporate
      matters.                                     |  
|Receive a report from the external
      auditor with        |  
|respect to:                                                  |  
|                                                             |  
|all critical accounting policies and
      practices;        |  
|                                                             |  
|all alternative treatments of
      financial information    |  
|within GAAP that have been discussed
      with              |  
|management, implications of their use
      and the          |  
|external auditors preferred
      treatment;              |  
|                                                             |  
|any other material written
      communications between      |  
|the auditor and management;                                  |  
|                                                             |  
|the internal quality-control procedures of
      the         |  
|external auditors;                                           |  
|                                                             |  
|any material issues raised by the most
      recent          |  
|internal quality-control review of the
      external        |  
|auditors firm, or by an inquiry or investigation
      by   |  
|governmental or professional authorities, within
      the   |  
|preceding five years, respecting one or
      more           |  
|independent audits carried out by such firm,
      and       |  
|any steps taken to deal with any such issues;
      and      |  
|                                                             |  
|all relationships between the external auditors
      and    |  
|the Corporation, as detailed in §(i) under
      Section F  |  
|Independence of External
      Auditors.                     |  
|Resolve all disagreements between
      management           |  
|and the external auditors regarding
      financial          |  
|reporting                                                    |  
|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.                                                    |  
|Treasury                                                     |  
|Review and approve the Treasury
      Policy.                |  
|Review the Quarterly Treasury
      Report.                  |  
|Review and approve the Foreign
      Exchange Policy.        |  
|Independence of External
      Auditors                      |  

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- 51 -

|Committee Timetable                                          |  
|------------------------------------------------------------ | -
|Agenda
      Items                                           | J
|Receive from the external auditors, on
      a periodic      |  
|basis, a formal written statement
      delineating all      |  
|relationships between the external
      auditors and the    |  
|Corporation
      consistent with ISB No. 1.                 |  
|Review and actively discuss with the
      Board of          |  
|Directors, if necessary, and the
      external auditors, on |  
|a periodic basis, any disclosed
      relationships or       |  
|services between the external auditors
      and the         |  
|Corporation or any other disclosed
      relationships or    |  
|services that may impact the
      objectivity and           |  
|independence of the
      external auditors.                 |  
|Recommend, if necessary, that the
      Board take           |  
|action to satisfy itself, of the
      external auditors    |  
|independence.                                                |  
|Ensure 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                    |  
|Internal Audit
      and Controls                            |  
|Ensure that the Corporation has
      appropriate            |  
|systems of internal
      control.                           |  
|Review quarterly the internal
      auditors report on the  |  
|adequacy of the internal controls,
      policies and        |  
|procedures.                                                  |  
|Annually review and
      approve internal audit plan        |  
|Related Party
      Transactions                             |  
|Review and approve the Corporations
      related party     |  
|transactions over
      US$60,000.                           |  
|Review a summary of the Corporations
      related          |  
|party transactions to ensure that such
      transactions    |  
|are consistent with the terms and
      conditions           |  
|previously approved
      by the Committee.                  |  
|Other                                                        |  
|Annually review managements
      compliance with the       |  
|Corporations Code of Ethics &
      Workplace Guidelines    |  
|Policy.                                                      |  
|Annually review the succession plans
      for the           |  
|Corporations CFO
      and Controller.                      |  
|Annually review the audit of expense
      reports of the    |  
|Chairman of the
      Board of Directors and the CEO.        |  
|Performance
      Evaluation                                 |  
|Review annual evaluation of the
      Committees            |  
|performance.                                                 |  

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