Statement of Financial Position

Statement of Changes in Net Assets

Statement Of Operations

Statement of Cash Flows

Notes to Financial Statements

May 31, 2011

1. Organization

   The Climate Change and Emissions Management (CCEMC) Corporation (“CCEMC”) is an Alberta-based, independent, not-for-profit organization incorporated under the Canada Corporations Act on February 17, 2009, whose operations commenced on June 1, 2009. CCEMC’s mandate is to reduce greenhouse gas emissions and adapt to climate change by supporting the discovery, development and deployment of clean technologies. The Climate Change and Emissions Management Fund (the “Fund”) was established under the Climate Change and Emissions Management Act by the Government of Alberta to support investment in innovation and clean technologies that will reduce Alberta’s greenhouse gas emissions and improve its ability to adapt to climate change. The Fund provides the primary source of revenue for the CCEMC. As a not-for-profit organization, CCEMC is exempt from tax under Part I of the Income Tax Act.

2. Significant accounting policies

   These financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada. These financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized below.

   1. Funding accounting

      For financial reporting purposes, the accounts have been classified into the following funds:

      1. General

         The General Fund includes all resources available for immediate purposes and accounts for the Corporation’s general administrative activities. The General Fund includes all unrestricted monies received that are available for use at the Corporation’s discretion.

      2. Restricted

         The Restricted Fund includes those funds whose resources are to be used for an identified purpose as specified by the donor, by funding initiative or as determined by the Board of Directors (the”Board”).

   2. Revenue recognition

      These financial statements have been prepared using the restricted fund method of accounting for contributions, the key elements of which are:

      1. Unrestricted contributions are recognized as revenue in the General Fund when received or upon becoming receivable if the amount to be received can be estimated and collection is reasonably assured.

      2. Externally restricted contributions are recognized as revenue in the Restricted Fund when received or receivable if the amount received can be estimated and collection is reasonably assured. Externally restricted amounts can only be used for the purposes designated by external parties.

      3. Investment income earned on contributions subject to external restrictions is recorded as revenue in the Restricted Fund in the year it is earned.

   3. Financial instruments

      CCEMC’s financial assets include cash, accounts receivable, interest receivable and investments. Cash and investments are classified as held-for -trading and are recorded at fair value with realized and unrealized gains and losses reported in the statement of operations for the period in which they arise. Accounts receivable are classified as loans and receivables and are accounted for at amortized cost using the effective interest rate method. Accounts receivable are initially recorded at fair value. Due to the short-term nature of CCEMC’s receivables, the carrying amount approxmates fair value.

      CCEMC’s financial liabilities include accounts payable and accrued liabilities. These are classified as other liabilities and are accounted for at amortized cost using the effective interest rate method. Financial liabilities are initially measured at fair value. Due to the short-term nature of CCEMC’s payables, the carrying amount approximates fair value.

      The fair value of a financial instrument on initial recognition is normally the transaction price, which is the fair value of the consideration given or received. Subsequent to initial recognition the fair values of financial instruments that are quoted in active markets are based on bid prices for financial assets. Purchases and sales of financial assets aren accounted for at trade dates. Transaction costs on financial instruments are expensed when incurred.

      All derivative instruments, including embedded derivatives, are recorded at fair value unless exempted from derivative treatment as a normal purchase and sale. CCEMC does not currently have any derivative instruments and is not anticipated to enter into any hedge transactions.

   4. Measurement uncertainty

      The financial statements, by their nature, contain estimates and are subject to measurement uncertainty that affect the reported amounts of assets and liabilities, revenue and expenses at the date of the financial statements.

      Significant estimates include accrued liabilities, commitments and fair value of financial instruments. Actual results could differ from estimates.

   5. Cash

      Cash consists of cash on deposit.

   6. Short-term investment

      The short-term investment is a redeemable flexible guaranteed investment contract with an annual interest rate of 1.25% that will mature on February 10, 2012.

3. Restricted Fund

   The Restricted Fund consists of funds that are externally restricted by the Government of Alberta for the purpose of investing in various initiatives and projects relating to one of the four strategic investment areas: conservation and efficiency, carbon capture and storage, greening energy production and adaptation and knowledge. The funds are also restricted for the purpose of administering CCEMC which includes fees, expenses, liabilities and other costs.

   During the year, $82,552 was transferred from the Restricted Fund to the General Fund for the purpose of supporting the GHG Reduction Summit held in May 2011. This expenditure was approved in the annual CCEMC business plan.

4. Grant revenues

   Funds are granted from the Government of Alberta to CCEMC on an annual basis through the Grant Agreement dated March 31, 2009 (“Grant Agreement”), which is effective through to September 1, 2014. The Grant Agreement was amended on March 30, 2010. The Annual Grant amount is determined each provincial year-end and is based on the amount contributed to the Fund in the previous compliance year.

   Annual Grant Amount	2011	2010
   $		$
   March 31, 2008	-	43,000,000
   March 31, 2009	-	83,157,000
   March 31, 2010	62,781,105	-
   62,781,105		126,157,000

5. Board and management remuneration

   Total honorariums and expenses related to the directors of the Board were $114,583 (2010 - $90,513) in the fiscal year. Remuneration paid to directors includes honorariums totalling $69,941 (2010 - $60,242) as follows:

   2011		2010
   $		$
   D. Beever	4,346	2,624
   J. Carter	1,763	5,776
   P. Clark	4,782	2,800
   A. Falkenberg	7,958	5,952
   C. Fischer	2,961	1,564
   R. P. Galachiuk	3,526	1,534
   G. Holden	656	-
   B. Kenny	4,182	2,624
   D. Lewin	9,901	8,404
   D. Lynch	4,674	8,360
   R. L. Mansell	3,362	3,556
   P. Merrin	4,830	4,926
   E. Newell	9,087	-
   R. Neehall	2,829	5,538
   A. Tasker	5,084	6,584
   69,941		60,242

   Of these amounts, $5,107 (2010 - $21,574) is included in accounts payable and accrued liabilities. The remaining expense balance of $44,642 (2010 - $30,271) relates to reimbursements for meals, travel and accommodations.

   Program management expenses include remuneration to contract management who report directly to the Board, totalling fees of $3,208,263 (2010 - $2,552,714). Of this amount, $519,295 (2010 - $444,746) is included in accounts payable and accrued liabilities.

6. Capital disclosures

   CCEMC defines capital as its general and restricted funds. The majority of CCEMC’s funds are granted by the Government of Alberta and paid through the Fund in periodic installments during the year. CCEMC’s objectives for managing capital are to ensure that there are sufficient funds to support its expenses and approved project funding.

   To meet this objective, CCEMC develops and monitors annual and long term budgets. Commitments are based on existing Contribution Agreements, budgets and accumulated reserves. Refer to note 7 for information on commitments.

7. Commitments and guarantees

   Prior to year- end, contribution agreements for CCEMC funding were executed for sixteen projects (2010 - nil). Two of the executed projects commenced and were partially funded by CCEMC during the year. Commitments are the difference between the total funding for executed contribution agreements and project expenses as follows:

   2011		2010
   $		$
   Total funding for executed projects	71,399,477	-
   Project expenses	(142,601)	-
   71,256,876		-

   Fourteen of the sixteen executed projects have not commenced. Funds allocated to the executed contribution agreements are subject to CCEMC’s review and approval prior to disbursement to ensure full compliance with the terms of the contribution agreement. The actual financial commitment could therefore differ materially from $71,256,876, but will not exceed this amount.

   There are also an additional eleven projects, totalling $54,873,650, that have been approved for funding by CCEMC’s Board of Directors but for which contributions agreements have not yet been executed.

   CCEMC indemnifies its directors against claims reasonably incurred and resulting from the performance of their services to the CCEMC. No amounts are reflected in the financial statements related to these indemnifications,

8. Financial instruments

   CCEMC’s financial instruments are exposed to certain financial risks, including credit risk, market risk and liquidity risk.

   Credit risk Credit risk is the risk of financial loss to CCEMC if a party to a financial instrument fails to meet its contractual obligation and arises principally from the cash, short-term investments and accounts receivable. The maximum amount of credit risk exposure is limited to the carrying value of the balances disclosed in these financial statements.

   Management monitors these accounts regularly and does not believe that CCEMC is exposed to significant credit risk at the Statement of Financial Position date.

   Market risk Market risk is the risk that changes in market prices such as interest rates will affect the CCEMC’s earnings or the value of the financial instruments held. CCEMC is subject to interest rate risk arising primarily from fluctuations in interest rates applied to its cash balance.

   Liquidity risk Liquidity risk is the risk that CCEMC will not be able to meet its financial obligations as they become due. Management reduces liquidity risk by monitoring forecasted and actual cash flows to ensure sufficient liquidity to meet its liabilities. Accounts payable and accrued liabilities and project holdbacks payable are due within the current operating period.

9. Economic dependence

   100% of CCEMC’s grant revenue is received from the Fund. The loss of this funding would have a material adverse impact on CCEMC’s operations and financial position. Should a loss of funding occur, all approved project commitments would remain in effect.