2007 annual reportt.m. (mike) apsey, dr. alain caillé, dr. elizabeth parr-johnston and e.a. (dee)...

2007 ANNUAL REPORT

Capitalizing on Cleantech

Report Contents

SDTC at a Glance ......................................................... IFC-1Message from the Chairman ............................................ 2Message from the President and CEO .............................. 4The Paths to Market for Cleantech ................................... 6 Equity: Vaperma ............................................................. 8 Equity: Lignol ............................................................... 10 Debt Financing: ARISE ................................................. 12 Customer/Self Financing: Tenova ................................ 14Conversations in Cleantech ............................................. 16Performance versus Objectives ................................. 18-21Auditor’s Report and Financials ................................ 22-32Board of Directors ............................................................ 33Member Council and Contact Information ..................... 34SDTC Team ....................................................................... 35

SDTC reports on specific aspects of its performance and future plans in this annual report and two complementary documents: the Annual Report Supplement and the Corporate Plan – Executive Summary.

All are available online at www.sdtc.ca. Hard copies may be obtained on request.

SDTC at a Glance

Sustainable Development Technology Canada (SDTC) is a not-for-profit

foundation that was created by the Government of Canada as part of its commitment

to create a healthy environment and a high quality of life for all Canadians.

SDTC’s mandate is aimed at the development and demonstration of innovative

technologies that deliver environmental and economic benefits. To achieve this

mandate, SDTC works with the private sector, the financial sector, academia,

non-governmental organizations and with all three levels of government.

Management of Two Funds that total $1,050,000,000

SD Tech Fund™

The $550M SD Tech Fund™ supports the late-stage

development and pre-commercial demonstration of

clean technology solutions: products and processes

that contribute to clean air, clean water and clean land,

and that address climate change while improving

the productivity and the global competitiveness of

Canadian industry.

NextGen Biofuels Fund™

The $500M NextGen Biofuels Fund™ supports

the establishment of first-of-kind commercial

scale demonstration facilities for the production of

next-generation renewable fuels and co-products. The purpose of the fund is to

encourage retention and growth of technology expertise and innovation capacity for

cellulosic ethanol and biodiesel production in Canada.

Funding Snapshot*

Approved SDTC Funding $ 300 million

Leveraged Funding $ 711 million

Total SDTC Portfolio Value $ 1.01 billion* Information as of December 31 2007

SDTC 2007 AR �

Total Portfolio Value$1,010,541,357

Approved SDTC Funding $299,875,134

133 SDTC Supported Projects

7 Major Economic SectorsPERCENTAGE OF

SDTC FUNDING

1. Energy Exploration and Production Total Projects : 24 SDTC Current Investment : $ 78,243,000 Leveraged Funding : $ 211,416,000

26 %

2. Power Generation Total Projects : 22 SDTC Current Investment : $ 58,146,000 Leveraged Funding : $ 116,333,000

19 %

3. Energy Utilization Total Projects : 34 SDTC Current Investment : $ 58,686,000 Leveraged Funding : $ 133,271,000

20 %

4. Transportation Total Projects : 21 SDTC Current Investment : $ 48,915,000 Leveraged Funding : $ 105,723,000

16 %

5. Agriculture Total Projects : 8 SDTC Current Investment : $ 16,565,000 Leveraged Funding : $ 41,108,000

6 %

6. Forestry, Wood Products, and Pulp and Paper Products Total Projects : 9 SDTC Current Investment : $ 15,717,000 Leveraged Funding : $ 39,962,000

5 %

7. Waste Management Total Projects : 15 SDTC Current Investment : $ 23,604,000 Leveraged Funding : $ 62,854,000

8 %

� Capitalizing on Cleantech 2 Capitalizing on Cleantech

Message from the Chairman

I was honoured to be appointed Chairman of SDTC’s Board of Directors in 2007. Over its first five years,

this Foundation has set an impressive example of the dynamic, proactive role a public funder can play in

enabling innovation and fostering economic opportunity.

Last year, the Government of Canada recognized the effectiveness of SDTC’s approach with

a further expansion of the Foundation’s mandate, allocating $500 million for the establishment of the

NextGen Biofuels Fund™ to support the creation of large scale facilities for producing next generation

renewable fuels. These fuels are derived from non-traditional renewable feedstocks, such as fast-growing

grasses, agricultural residues and forest biomass. By using materials typically considered waste or of

little agricultural value, cellulosic ethanol can move renewable fuels away from the food-vs-fuel debate.

Cellulosic ethanol will also, through the production of co-products, encourage a shift towards biorefineries

and a new bio-based economy.

This new fund, which builds upon and complements SDTC’s existing $550 million SD Tech

Fund™, will provide a bridge across the ‘High-Capex gap’ by supporting capital intensive infrastructure

projects that deter conventional investors due to their technology risk, high cost and lengthier returns.

I thank the Government for bestowing upon SDTC this responsibility, and applaud its wisdom in

recognizing the importance of filling a critical funding void as Canada moves towards a cleaner

energy economy.

Canada is a leading developer of biofuel technologies. They are an important part of our

world-leading clean technology sector, which encompasses a vast range of applications from solar and

hydrogen-powered technologies to advanced battery and lighting solutions.

My predecessor, James M. Stanford, was a strong proponent of emerging clean technologies, and

I congratulate him on his work during the Foundation’s formative years. He played a critical role in guiding

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the organization and its Board through its inception and growth.

Also, I would like to thank for their contributions the

following directors whose term completed in 2007:

T.M. (Mike) Apsey, Dr. Alain Caillé, Dr. Elizabeth Parr-Johnston and

E.A. (Dee) Marcoux. I welcome our new directors—Kenneth Ross

Creelman, Juergen Puetter, Dr. Dipak Roy and Catherine Smith. I look

forward to working with these accomplished individuals and am

certain the Board will benefit from their broad range of experience.

In 2008, we will focus on moving the NextGen Biofuels

FundTM forward while continuing to build Canada’s clean technology

infrastructure with the SD Tech FundTM.

These are busy and exciting times in the cleantech

field and at SDTC. It is a privilege for me personally to have this

opportunity to participate in them.

Stephen Probyn Chairman of the Board of Directors

“Canada is a leading developer of biofuel technologies. They are an important part of our world-leading clean technology sector, which encompasses a vast range of applications from solar and hydrogen-powered technologies to advanced battery and lighting solutions.”

It is with deep regret that SDTC must announce that Stephen Probyn passed away on March 30, 2008. He provided strong support to the Foundation, creating much promise for the future.

� Capitalizing on Cleantech 4 Capitalizing on Cleantech

Message from the President and CEO

Canada is ideally equipped for success in cleantech. It has abundant resources and good capacity for

innovation. To date, the country’s entrepreneurs have produced a vast range of solutions, many of which

are on the road to commercialization. While investments have been made in Canada in sustainable

technologies, the size of the opportunity, both domestic and global, is enormous.

The cleantech market matured further in 2007. Investments made three and four years ago

began to provide exit opportunities, generating an increase in IPO and merger and acquisition activities.

Market indices focused specifically on sustainable technology are outperforming benchmark market

indices. All of these are encouraging and well recognized indicators of market viability.

While the level of private sector investment has risen steadily over the past several years, much

of it remains focused on known renewable energy technologies. Willingness to invest in less proven or

unfamiliar areas of early stage clean technology remains relatively low. Exceptions are the early-stage

investments in some technologies, such as solar, with the hope of strong returns, albeit with a backdrop of

high valuations. Overall, the majority of investments tend to be Series B and mezzanine financings. In the

U.S., just one percent of all cleantech investment is seed financing, a number also reflected in the Canadian

market. In Europe the figure is two percent. Yet earlier stage investment is essential to support the critical,

high risk phases of development and demonstration. This lack of early stage deal-flow will constrain late

stage financing, creating problems for longer term viability of the emerging cleantech sector.

SDTC’s SD Tech FundTM is meeting this need for seed funding and has become defined as the

market maker in Canada for the cleantech market. Last year, our projects under management exceeded

one billion dollars in direct and leveraged funding of which more than one half comes from the private-

sector. The SD Tech FundTM remains the world’s largest fund of its kind supporting the development and

demonstration phases of innovation. SDTC’s portfolio of 133 projects now has the breadth and diversity to

provide the foundation for a national cleantech infrastructure in all aspects of our economy.

Early-stage financing isn’t the only ‘need’ facing clean technology development in Canada.

After analyzing our portfolio in 2006, SDTC identified a ‘High-Capex gap’ that impedes the development

of large scale, capital intensive energy technologies. Through the investment analysis SDTC undertakes

SDTC 2007 AR �

“The cleantech market matured further in 2007. Investments made three and four years ago began to provide exit opportunities, generating an increase in IPO and merger and acquisition activities. Market indices focused specifically on sustainable technology are outperforming benchmark market indices.”

to produce the SD Business Cases, it has determined that to realize

opportunities in areas such as waste-to-energy and biofuels requires

substantial investments, with a total in the tens of billions of dollars.

This type of investment far outstrips Canadian investors’ appetites

for risk. The Government acknowledged the need for additional

support in this area, particularly in the promising biofuels sector,

and in its 2007 Budget allocated $500 million for the creation of the

NextGen Biofuels Fund™.

The expansion of our mandate in 2007, combined with

increased reporting requirements, has resulted in the growth of our

organization. We continue to build our team and diversify our skill

base in order to fulfill our new responsibilities, while remaining

committed to operating in as lean and efficient a manner as

possible. The entire team, which is comprised of a unique mix of

skills necessary to meet SDTC’s mandate and differentiated by their

personal belief in sustainable development, must be commended for

their continued efforts.

In 2008, we will undertake a number of initiatives to

help our companies move beyond SDTC and see greater success

in the marketplace. This ensures that the evolution of cleantech in

Canada continues and that Canadians receive wide-ranging benefits

in both their work and personal lives.

Vicky J. Sharpe President and CEO

� Capitalizing on Cleantech � Capitalizing on Cleantech

The Paths to Market for Cleantech

Over the past five years, cleantech has evolved from an innovative concept into an economic force.

While other technology areas tend to focus on a single market sector and can be subject to volatility,

clean technology answers the needs of a well-diversified global market.

Seed and angel investors, venture capitalists, corporate investors and increasingly the

public equity markets are recognizing the potential returns cleantech can bring. They are enabling

the development and commercialization of technologies. According to industry statistics, investments

in clean technology in Canada by the venture capital community alone totaled $379 million in 2007,

more than double the 2004 total of $155 million.

Canadian cleantech companies take different paths to market. Their choices depend on

the technology’s stage of development, the company’s management capability and capacity, the size

and timing of investments and returns, and the particulars of the market into which the technology

will ultimately be deployed. By understanding the factors that lead to the choice of path to market, a

company can best position itself for successful market entry. Helping companies navigate these paths

and helping remove some of the obstacles is one of the non-financial ways that SDTC contributes to

their success.

SDTC has chosen to categorize these paths to market as Equity, Debt and Customer / Self-

Finance. Equity financing is often the route for companies that do not foresee a positive cash flow

during early deployment. Where the deployment of the technology is High-Capex (highly capital

intensive), some portion of debt financing is the preferred route. If the company has other sources of

revenue while developing the new technology, it may be able to finance the deployment internally or

through strategic partnerships.

The company profiles in this report illustrate the strategic decisions involved in following

a particular path to market. Also, they provide examples of how, with SDTC’s support, Canadian

entrepreneurs are creating value for investors by developing and demonstrating clean technologies

with environmentally and economically beneficial applications at home and around the world.

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� Capitalizing on Cleantech � Capitalizing on Cleantech

Venturing out: Attracting venture capital

Often, the first major financing step for an emerging technology developer is securing venture capital.

To carry out the growth strategy that originated in the technology developer’s garage to deployment

in ethanol production facilities around the world, Canadian cleantech innovator Vaperma determined

venture capital financing was the appropriate path to follow.

Making connections has played a key role in Vaperma’s financial evolution, starting with

SDTC. Funding from SDTC was crucial for Vaperma’s early capitalization, with other investors waiting

for confirmation of SDTC’s non-dilutive contribution to the project. Since securing this early funding,

the company has utilized its contacts to build a network of partners to support the development

of its innovative dehydration membrane system.

With its international end market in clear view, Vaperma’s board is rounded out by

experienced directors from North America and Europe. The company’s investors and partners hail

from around the world. In 2007, Vaperma signed deals with Britain’s Low Carbon Accelerator Limited

and with Volvo Technology of Sweden as part of a funding round that yielded $21.5 million.

Vaperma’s primary objective today is commercialization. With the help of SDTC, the

company is successfully demonstrating its technology in Canada at sites in Tiverton and Chatham,

Ontario. Vaperma is also planning a demonstration plant in Brazil with partner Dedini S/A Indústrias

de Base.

Venture Capital

Venture capital is a form of financing

raised to help an organization grow

quickly into a new area of business.

The VC model is based on a high-risk,

high-return funding philosophy. With

little to no fixed assets of value, a project

that fails means a complete loss for

investors. For companies that thrive,

value to the VC is realized once shares are

liquidated—typically through an initial

public offering (IPO), merger

or acquisition.

Equity

Market Fact

Vaperma raised $21.5 million as part of second round funding.

SDTC 2007 AR �

Total Project Value$13,228,594

SDTC Funding $4,365,436

Polymer Membrane —fueling ethanol production

Vaperma Inc. is demonstrating a technology that will improve the efficiency and cost-effectiveness of

ethanol production. Using an innovative polymer membrane to separate water vapour from ethanol

fuel—typically a very energy-intensive process—Vaperma is lowering the energy costs of ethanol

production by up to 40 percent, which translates into significant GHG reductions.

In Canada, Vaperma’s membrane technology has

the potential to dramatically increase the cost-

competitiveness of ethanol versus traditional gasoline.

In Brazil, the second largest producer of ethanol in

the world, Vaperma’s dehydration technology and the

associated energy savings has the potential to enable

ethanol producers to create alternate revenue streams

by allowing them to sell their excess electricity to the

power grid.

�0 Capitalizing on Cleantech�0 Capitalizing on Clean Tech �0 Capitalizing on Cleantech

Public Equity

Some companies raise a significant

amount of financing by selling equities

to the general public, typically through a

stock exchange. An initial public offering

(IPO) and subsequent capital raisings

provide them with the capital they

require to grow. Securities from a public

company typically have an established

fair market value at any given time,

allowing holders to buy or sell their

shares relatively quickly.

Going public: Casting a wider net

Lignol Energy Corporation opted to go public in January 2007, determining that public equity would

provide the fastest, most abundant source of financing to support its growth plans.

The company had previously financed itself through government grants and private

investments but knew it would be challenging to raise $20 to $30 million in venture capital to

demonstrate its integrated cellulose-to-ethanol conversion process. The amount of investment

capital available to Canada’s VCs is relatively small, leaving them unable to invest too great a sum

in any one company. As well, VCs are typically disinclined to contribute to High-Capex projects that

prove difficult to achieve the required return on investment in a relatively short timeframe. By listing

on the TSX Venture Exchange, Lignol was able to attract institutional investors seeking larger, longer-

term opportunities.

SDTC’s funding helped make Lignol’s biomass project more attractive to investors by

mitigating some of the risks associated with the costly phases of development and demonstration.

The involvement of SDTC is also helping Lignol carry out its strategy to partner with major

corporations that have a compelling business interest in the deployment of its technology. Suncor

Energy, for example, is a member of Lignol’s SDTC project consortium and is also in discussions with

Lignol to co-build the next scale-up production facility.

Equity

Market Fact

Lignol raised $17.5 million through public markets in 2007.

SDTC 2007 AR ��

Lignol Innovations is demonstrating a biorefinery process for effectively and economically converting

cellulose-based biomass such as forest industry waste into ethanol and other marketable chemical

products, leaving virtually no waste behind. The two-stage process starts with separation and extraction

of wood components from waste material using Lignol’s proprietary solvent-based process. The

remaining insoluble cellulose is broken down into sugars

and an enzymatic and fermentation process is applied to

convert those sugars into fuel-grade ethanol.

Lignol’s delignification process answers the demand for

ethanol produced from low-value feedstocks, and by

providing a renewable alternative will serve to reduce

the chemical industry’s reliance on petroleum.



Cellulosic Ethanol —converting waste into fuel

�� Capitalizing on Cleantech �� Capitalizing on Cleantech

Debt Financing

Debt: Striking the right balance

The path to market can have several branches for companies developing capital-intensive clean

technologies. ARISE Technologies Corporation, a solar photovoltaic (PV) systems integrator and

manufacturer of PV cells and PV silicon, has leveraged both public equity and debt financing en route

to commercialization.

With funding and support from SDTC, the company constructed and made operational a

mini-pilot plant of its innovative silicon manufacturing process. It is now planning the construction

of a full-scale production facility. This is a High-Capex proposition. The company expects to fund this

project at least partially with debt. This approach would be similar to the one it took in Germany

when it secured a credit facility to build a photovoltaic cell manufacturing site.

By adding debt to its financing mix, ARISE can reduce the overall cost of financing and

improve the returns to its shareholders.

ARISE has used SDTC’s support to establish credibility among the financial community,

emphasizing the Foundation’s rigorous due diligence. The full-scale pilot will serve as a further,

powerful proof of the viability of ARISE’s silicon solution.

For companies that require substantial

funds upfront to implement their

technology solution, debt financing

is the typical avenue. Debt financing

serves to cover high capital expenditures

associated with infrastructure (buildings,

pipelines, equipment)—assets that

can be resold or liquidated in the event

of insolvency. Typically, to access debt

finance instruments, High-Capex projects

require both a reasonable equity level

and an adequate revenue stream to

comfortably service the debt,

which can be a challenge for new

technology proponents.

Market Fact

ARISE secured Euro 47.05 million in debt financing in 2007.

SDTC 2007 AR ��



Solar Energy —making the grade

ARISE is a solar technology company developing and demonstrating an innovative technique for

producing silicon specifically for PV solar applications. This answers a critical need in the solar industry,

which has to date relied on high-cost and limited supplies of semi-conductor grade silicon feedstocks.

By avoiding conventional semi-conductor processes

and instead using a simplified, more integrated process,

ARISE plans to cut capital and production costs while

meeting the specifications of high-efficiency solar PV cell

manufacturers. This will help make solar technologies

more affordable to end users. Through ongoing

refinement of its process, the company expects to attain

consistent quality and productivity objectives and

complete the path to commercialization.

�� Capitalizing on Cleantech �� Capitalizing on Clean Tech �� Capitalizing on Cleantech

Customer/ Self Financing

Expediting time to market: Self-financing and strategic alliances

Dr. Howard Goodfellow self-financed the initial development of his unique monitoring system

for electric arc furnaces (EAFs) out of his environmental consulting business, supported by various

grants and loans.

Determining his technology was geared more for the global marketplace than in any one

specific region, Dr. Goodfellow knew he had to act quickly. Competitively, there wasn’t time to raise

funds and build an international sales channel from scratch.

Rather than seek private or public equity investment, Goodfellow Consulting turned

to strategic partners. After some time with Stantec Consulting, Dr. Goodfellow introduced the

technology and team to its largest potential customer, Tenova.

While Tenova evaluated the technology, Dr. Goodfellow assessed the cultural fit between

the two organizations. Tenova was an ideal match, possessing a culture of innovation and well

established in the steel industry where the EAF monitoring system was being demonstrated.

Backed by Tenova’s resources and leveraging its international reach, Dr. Goodfellow has

been able to focus on maintaining technological leadership while gaining access to global markets.

With the advice of SDTC, Tenova Goodfellow broadened the potential markets for its

technology by extending its application both within and beyond the steelmaking industry.

For companies with adequate existing

revenue streams, self-financing is a

viable option to fund the initial phases

of their technology project. For other

companies, partnering with customers

is the best means to allow the research,

development and commercialization

of the technology to be funded. By

partnering with large organizations,

small companies can accelerate the

development of their technologies and

reach their target markets.

Market Fact

Tenova’s parent company Techint had $19.8 billion USD in revenues in 2006/2007.

SDTC 2007 AR ��



Characterization Probe —in the heat of the action

Tenova Goodfellow Inc. is demonstrating a full-scale version of its proprietary Expert Furnace System Optimization Process (EFSOP®), which is capable of continuously measuring the composition of exhaust gases from industrial Electric Arc Furnaces (EAFs). Tenova Goodfellow’s temperature and gas characterization probe withstands these harsh environments, allowing operators to manage these energy-intensive processes more accurately and efficiently, realizing cost savings and achieving higher environmental performance.

Tenova’s technology will be applied to three industries identified as significant contributors to greenhouse gas generation in Canada: Basic Oxygen Furnace (BOF) steelmaking, cement production, and coal-fired thermal power generation, which together account for approximately 19% of Canada’s greenhouse gas emissions. Managing these energy-intensive processes more accurately will enable both cost savings and higher environmental performance.

�� Capitalizing on Cleantech �� Capitalizing on Cleantech

Conversations in Cleantech

SDTC: How did the cleantech market evolve in �00�?

Claude Haw: You could say that in 2007 the cleantech market had its coming-out party. Attendance

at industry conferences increased dramatically, the level of funding grew considerably and exits through

acquisition and IPO were unprecedented.

David Henderson: The market hit an inflexion point. Cleantech became the largest

VC investment category.

David Berkowitz: It truly was a banner year. There was growing awareness of climate change

among governments, consumers, corporations and institutional investors: awareness of the challenges it

creates as well as the business opportunities it presents. Cleantech as an investment opportunity largely

became mainstream.

SDTC: What are some of the key trends you see emerging?

Claude Haw: Public awareness of the whole sector has been raised by popular phenomena such

as Al Gore’s movie, “An Inconvenient Truth.” Fortune 500 companies like WalMart and GE have got on

board to create more sustainable businesses and product offerings. Renewable energy generation has

become a significant growth sector as oil hovers above $100 per barrel. Efficiency for both buildings and

transportation has become very important as the days of cheap energy fade into distant memory.

David Berkowitz: Right now solar continues to dominate. We’re seeing an increased emphasis on

transportation markets; the electrification of the automobile and the inevitable arrival of clean diesel in

North America. Biofuels—particularly ethanol—have shown the dark side of herd investing. Investors

are moving away from traditional undifferentiated biofuels projects and more towards more promising

approaches such as cellulosic ethanol and algae. And, finally, ‘low hanging fruit’ applications such as green

building technologies are gaining momentum.

David Henderson: Looking ahead, the next big area of investment focus will be water. It will follow a

similar path to energy.

SDTC: How is Canada faring competitively?

Claude Haw: Canadian companies have great potential but are not always achieving lift-off due to a lack

of venture funding.

David Berkowitz: Canada has historically been at the forefront of cleantech investing, and for that

reason I think we’re still viewed favourably internationally. We have great technology, but I’m concerned

SDTC recently connected with some

of Canada’s leading analysts in the

clean technology space to get their

perspectives on the state of the

market, emerging trends and areas of

opportunity for Canadian entrepreneurs.

Conversations in Cleantech captures the

highlights of those conversations.

David Berkowitz General Partner, Ventures West Capital

Claude Haw Managing Partner,

Venture Coaches

David Henderson Managing Director, XPV Capital Corporation

The Participants

SDTC 2007 AR ��

we may be falling behind because we have not been as aggressive as others in this sector. We lack access to later stage venture capital;

we’re wanting for depth in the management pools from which we recruit. It is far more difficult for a Canadian company to raise Series C

financing or recruit a world-class management team than it would be for a comparable firm in California. That being said, we at Ventures

West have shifted more attention to Canada because we see this market as ripe for investment.

David Henderson: We have the opportunity to be home to world-class centres in green auto technology, water, fuels, new material

science and more—opportunities that involve the transformation of multi-billion (in some cases trillion) dollar industries. To seize upon

these opportunities we need to strengthen our focus and vision.

SDTC: How well supported are Canadian cleantech companies?

David Berkowitz: There are a number of cleantech VCs in Canada, but the funds are not large enough to fully support opportunities that

are capital intensive. The VC community here is working hard to attract cleantech investors from around the globe into its syndicates so it

can properly capitalize the great opportunities available. Fortunately, SDTC and some of the other government programs help bridge the

gap to commercialization. SDTC has been of terrific assistance to our portfolio companies. It forces start-ups to engage with partners and

form consortia that result in lasting value. To me, SDTC is a key competitive advantage of building a cleantech company in Canada.

David Henderson: Canadian companies do face challenges. This country has a conservative investment community: it likes to

follow rather than lead. There are only a handful of institutional investors dedicated to cleantech in Canada, and consequently there is a

lack of capital. I would say SDTC’s program is one to be proud of. It has a very impressive record of creating partnerships between

industry and investors.

Claude Haw: Canadian cleantech companies are able to access solid technology from a variety of government and university labs.

SDTC is doing a very good job helping companies reach commercial demonstration for their products through its funding and support of

industry consortia. In general, however, Canadian companies struggle when they need serious venture funding. This applies to cleantech

as well as other sectors. While U.S. and European investors are interested in Canadian companies and technology, they generally insist on

having a local partner and this has become a serious handicap for Canadian companies.

SDTC: What do you see on the horizon in �00� for clean technology?

David Henderson: It will be interesting to see how clean technology performs in weaker economic times. I think in certain cleantech

areas there will be a shakeout as investors rationalize their cleantech portfolios. This will be an important test: only technologies that

improve the bottom line and the environment will survive.

Claude Haw: I hope we will see strong support for venture funding in 2008 in this country.

David Berkowitz: In Canada, cleaning up the tar sands will dominate cleantech in 2008. Cost-effective carbon capture will be on

everyone’s agenda. Globally, the U.S. economy and election, $100 oil, and the Beijing Olympics will be the big news stories—all of which

will drive ongoing awareness and investment in cleantech.

�� Capitalizing on Cleantech

Performance versus Objectives SDTC measures its efforts to build Canada’s cleantech economy against a number of specific objectives, some mandated by its Funding Agreements and others chosen by SDTC itself as relevant indicators of progress.

Results to date affirm the potential of clean technologies to deliver environmental benefits, stimulate economic activity and realize competitive advantages for Canadian industries in the world economy. SDTC consistently met or exceeded its objectives in 2007, as it has done every year since its inception.

Resonating with Private-sector InvestorsIn 2007, technologies supported by SDTC received a ringing vote of confidence from private markets. Some $255 million in publicly disclosed financing went to 15 small and medium-sized enterprises (SMEs) with projects funded by SDTC, up from $156 million in 2006. Investments represented a mix of venture capital, public equity and debt financing.

Leveraging InvestmentsBy leveraging project consortia and private-sector contributions, SDTC ensures that its funding represents no more than 33 percent of total project value averaged across its entire portfolio. In reality, SDTC has exceeded this objective by leveraging private-sector and public-sector support that brings its overall investment level for the portfolio to 29.7 percent.

SDTC and Leveraged Funding by Year (total portfolio)*

SDTC Investment

Industry Leveraged Funding

Other Funding from Government and Academia

Total Eligible Project Value

2002 $ 7,090,542 $ 12,342,705 $ 7,103,201 $ 26,536,448

2003 $ 24,913,324 $ 54,465,228 $ 12,337,350 $ 91,715,901

2004 $ 45,688,794 $ 93,275,136 $ 31,139,053 $ 170,102,983

2005 $ 68,402,558 $ 121,398,843 $ 30,570,818 $ 220,372,219

2006 $ 75,935,731 $ 155,875,873 $ 23,165,174 $ 254,976,778

2007 $ 77,844,184 $ 141,644,621 $ 27,348,223 $ 246,837,028

% of 2007 31.5% 57.4% 11.1% 100.0%

Total $ 299,875,134 $ 579,002,406 $ 131,663,819 $ 1,010,541,357

% of Total 29.7% 57.3% 13.0% 100.0%

* SDTC launched its first round of funding in April 2002 and approved its first projects in November of that year.

The Foundation will continue to seek an investment level of at least 67 percent from project participants across all projects so that every dollar it invests is matched by more than two dollars of leveraged funding.

SDTC 2007 AR ��

SDTC and Consortium Leveraged Funding by Economic Sector: Allocations in 2007

SDTC has consistently taken a balanced approach to its investment portfolio, attracting projects across a number of strategic economic sectors as noted below. In 2007, all key sectors continued to attract funding from SDTC. There was an increase in transportation-related projects, with the largest share of allocated funding in this sector. Waste Management projects also attracted a significantly increased share of funding in 2007 compared to 2006, with a doubling of the size of this part of the portfolio.

Sector SDTC Investment

Consortium Leveraged Funding

Total Eligible Project Value

Energy Exploration and Production $ 11,912,379 $ 32,022,333 $ 43,934,712

Power Generation $ 14,994,160 $ 27,948,508 $ 42,942,668

Energy Utilization $ 13,870,164 $ 30,553,332 $ 44,423,496

Transportation $ 17,642,745 $ 36,572,963 $ 54,215,708

Agriculture $ 6,931,000 $ 12,880,500 $ 19,811,500

Forestry, Wood Products and Pulp & Paper Products $ 800,000 $ 1,640,000 $ 2,440,000

Waste Management $ 11,693,736 $ 27,375,208 $ 39,068,944

Total $ 77,844,184 $ 168,992,844 $ 246,837,028

Building CapacitySMEs drive innovation in the cleantech marketplace, a fact mirrored in SDTC’s portfolio where more than 90 percent of projects are SME-led. To build the capacity of smaller entrepreneurs and create the best chances for technologies to reach the marketplace, SDTC requires its projects to assemble consortia of partners who together complete the essential set of go-to-market capabilities.

SME Funding Focus — Number of Projects

5 Projects — 4%Large lead (no SMEs in consortium)

7 Projects — 5%Large lead (with SMEs in consortium)

91 Projects — 68%SME as lead (with large companies in consortium)

More than 90 percent ofprojects are SME-led

30 Projects — 23%SME as lead (no large companies in consortium)

SME Funding Focus — SDTC Funding

$16,750,515 — 6%Large lead (no SMEs in consortium)

$21,689,147 — 7%Large lead (with SMEs in consortium)

$198,899,384 — 66%SME as lead (with large companies in consortium)

$62,533,127 — 21%SME as lead (no large companies in consortium)

�0 Capitalizing on Cleantech

Potential Environmental Benefits of SDTC PortfolioOf the SD Tech Fund’s total value of $550M, an amount of $200M is to be made available for projects that have an environmental benefit that relates primarily to clean water and clean soil, based on demand and merit of proposals received. The remaining balance of the Fund is to be allocated 80% for projects where the environmental benefit is primarily climate change and 20% for projects where the environmental benefit is primarily clean air.

SDTC is on track to meet the above requirement with allocations to date as follows:

• 77% of the designated funds have been allocated to projects that address primarily climate change; and • 23% of the designated funds have been allocated to projects that address primarily clean air.

Since 2006, SDTC has allocated $22M to projects that primarily address soil and water environmental benefits.*

While targeting the above, it is important to keep in mind that projects with the potential for multiple environmental benefits are encouraged. Of the total portfolio of 133 funded projects:

• 89% of SDTC-funded projects have climate change benefits; • 81% have clean air benefits; • 38% have soil or water benefits; and • 87% of all SDTC projects have more than one environmental benefit.

The diagram below illustrates the interrelation of co-benefits for the portfolio of SDTC projects under the SD Tech Fund™.

87% Co-benefits116 Projects 6% Climate Change benefits 8 Projects

2% Soil and Water benefits 2 Projects

5% Clean Air benefits 7 Projects

Projects with Only One Environmental Benefit

* The soil and water grant to SDTC was made available in Q2 2005.

How SDTC Forecasts GHG Emissions ReductionsGHG emission reduction projections are inherently forward-looking statements. They involve risks and uncertainties that could cause actual results to differ materially from those contemplated. SDTC believes it has a reasonable basis for making such forward-looking statements by:

• Requiring every applicant to estimate future GHG emission reductions using a prescribed methodology based on accepted ISO and IPCC practices.

• Reviewing the reasonableness of projected GHG emissions reductions reported by applicants and, as new information is reported, adjusting projections and excluding projects on hold.

• Applying a 90 percent discount rate to the projections to account for potential technology failures and market uncertainties.

SDTC cautions that undue reliance should not be placed on forward-looking statements.

GHG Reduction

Estimated total annual GHG reduction in 2012

Attributable to all 133 projects funded by SDTC since inception (90 percent discounted) 13.5 Megatonnes

SDTC 2007 AR ��

Applications ReceivedUnder the SD Tech FundTM, SDTC is required to issue one call for funding applications each year. These are referred to as statements of interest, or SOIs. In reality, the demand throughout industry to access development and demonstration funding is sufficiently significant that SDTC has made a practice of issuing two calls for submissions each year. It did so again in 2007.

SD Tech FundTM Statements of Interest

Round 11 70

Round 12 101

Total SOIs received in 2007 171

Total SOIs since inception 1420

Under the NextGen Biofuels FundTM, SDTC is required to issue one call for applications for funding each year. During 2007, one Application For Funding (AFF) was received.

Future PlansSDTC will continue building capacity within Canadian businesses and communities through wide dissemination of the findings of its SD Business CasesTM, as well as through conferences and SDTC conducted workshops. SDTC’s Corporate Plan – Executive Summary, which is a complementary document to this Annual Report, provides details on planned upcoming activities (available at www.sdtc.ca).

SD Tech FundTM

In 2008, SDTC will issue two calls for SOIs, one in February and one in September. The Foundation will continue to seek technologies relating to climate change, clean air, clean water and clean land, with an emphasis on solutions that integrate multiple benefits.

NextGen Biofuels FundTM

In 2008, SDTC will issue a formal call for applications once during the year and remain open for applications throughout the year.

SDTC asset allocationsSDTC invests its undisbursed funds in eligible securities as shown below in accordance with the guidelines of its Funding Agreements.

SDTC’s Grant Investment Portfolio of Eligible Securities as of December 31, 2007

1 2

7 56

3 4 Rating Current % Maximum Available %1. Government AAA 32.7 % No Limit No Limit2. Government AA 13.7 % No Limit No Limit3. Government A 2.7 % No Limit No Limit4. Other AAA 10.8 % 80% of portfolio 69.2 %5. Other AA 24.5 % 70% of portfolio 45.5 %6. Other A 9.5 % 20% of portfolio 10.5 %7. Money Market Securities 6.0 % No Limit No Limit

SDTC 2007 AR ��

Auditors’ Report

To the Members of

Canada Foundation for Sustainable Development Technology

We have audited the statement of financial position of Canada Foundation for Sustainable Development Technology as

at December 31, 2007 and the statements of operations and cash flows for the year then ended. These financial statements are the

responsibility of the Foundation’s management. Our responsibility is to express an opinion on these financial statements based on

our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we

plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial

statement presentation.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Foundation as at

December 31, 2007 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally

accepted accounting principles. As required by the Canada Corporations Act, we report that, in our opinion, these principles have been

applied on a basis consistent with that of the preceding year.

Chartered Accountants, Licensed Public Accountants

Ottawa, Canada February 15, 2008


Statement of Financial PositionDecember 31, 2007, with comparative figures for 2006

�00� �00� NextGen SD Tech BioFuels SD Tech Fund Fund Total Fund

Assets

Current assets:Cash and cash equivalents $ 29,389 $ – $ 29,389 $ 799,379Goods and services tax refund receivable 63,989 – 63,989 69,418Inter fund receivable (note 3) – 2,579,020 2,579,020 –Prepaid expenses 127,111 – 127,111 119,900

��0,�� ,��,0�0 �,��,�0� ��,��Investments (note 4) 507,663,062 – 507,663,062 522,446,591Capital assets (note 5) 570,808 – 570,808 633,115 $ �0�,��,�� $ �,��,0�0 $ ��,0��,�� $ ��,0��,�0�

Liabilities and Deferred Contributions

Current liabilities: Bank indebtedness $ – $ 119 $ 119 $ –Accounts payable and accrued liabilities 891,512 10,000 901,512 1,174,734Inter fund payable (note 3) 2,579,020 – 2,579,020 –Current portion of obligations under capital lease (note 6) 6,083 – 6,083 –

�,��,�� 0,�� ,��,�� ,��,��

Deferred lease inducements 30,160 – 30,160 34,137Obligations under capital lease (note 6) 14,479 – 14,479 –Deferred contributions:

Expenses of future periods (note 7) 504,933,105 2,568,901 507,502,006 522,859,532Change in accounting policy (note 2)Commitments (note 8) $ �0�,��,�� $ �,��,0�0 $ ��,0��,�� $ ��,0��,�0�

See accompanying notes to financial statements.

SDTC 2007 AR ��

Statement of OperationsYear ended December 31, 2007, with comparative figures for 2006


Revenue:Amortization of deferred contributions (note 7) $ 34,548,374 $ 733,195 $ 35,281,569 $ 39,526,425

Expenses: Governance 547,111 93,255 640,366 585,179Mandatory reporting 656,590 26,341 682,931 989,053Project screening and evaluation 2,205,200 135,409 2,340,609 2,555,810Project contracting and monitoring 708,671 29,822 738,493 587,298Infrastructure development & outreach 906,346 122,757 1,029,103 820,760Financial audit 27,933 15,150 43,083 23,800General administration 904,615 2,634 907,249 899,854Amortization of capital assets 178,632 – 178,632 234,310Outsourced services 755,845 307,827 1,063,672 692,412

�,��0,�� ,�� ,��,�� ,��,��

Project expenditures:Project disbursements 27,624,366 – 27,624,366 31,953,150Technical and financial audit costs 33,065 – 33,065 184,799

Total project expenditures ��,��,�� – ��,��,�� ,��,��

Total expenditures 34,548,374 733,195 35,281,569 39,526,425

Excess of revenue over expenses $ – $ – $ – $ –



Statement of Cash FlowsYear ended December 31, 2007, with comparative figures for 2006


Cash provided by (used in):

Operating activities:Excess of revenue over expenses $ – $ – $ – $ –Items not involving cash: Amortization of capital assets 178,632 – 178,632 234,310 Amortization of deferred lease inducements (3,977) – (3,977) (15,559) Amortization of deferred contributions (34,548,374) (733,195) (35,281,569) (39,526,425)Investment fund management fees paid (532,310) – (532,310) (546,609)Changes in non-cash operating working capital items 2,294,016 (2,569,020) (275,004) 112,829

(��,��,0��) (�,�0�,��) (��,��,��) (��,��,��)

Investing activities:Purchase of capital assets (83,136) – (83,136) (592,190)Sales (purchase) of investments - net 11,710,250 – 11,710,250 18,613,256Lease inducements – – – 36,126Investment income 20,227,536 10,754 20,238,290 20,211,589

��,��,��0 �0,�� ,��,�0� ��,��,��

Financing activities:Increase in bank indebtedness – 119 119 –Grant contribution – 3,291,342 3,291,342 –Repayment of obligations under capital lease (12,627) – (12,627) –

(��,��) �,��,�� ,��,�� –

Decrease in cash and cash equivalents (��,��0) – (��,��0) (�,��,��)

Cash and cash equivalents, beginning of year 799,379 – 799,379 2,272,052

Cash and cash equivalents, end of year $ ��,�� $ – $ ��,�� $ ��,��

The Foundation considers cash equivalents to be highly liquid investments with original maturities of three months or less, held by the Foundation to fund current operations.


SDTC 2007 AR ��

Notes to Financial StatementsYear ended December 31, 2007

Canada Foundation for Sustainable Development Technology – Fondation du Canada pour l’appui technologique au développement durable (the “Foundation”) was established by Bill C-4 of the First Session of the thirty-seventh Parliament of Canada and was incorporated under the Canada Corporations Act as a not-for-profit corporation on March 8, 2001. The Foundation is not an agent of Her Majesty, however is accountable to Parliament through the Ministry of Natural Resources Canada. Environment Canada and Industry Canada are the other key departments involved in the work of the Foundation. The Foundation’s mandate, governance, operations, performance requirements, accountability and relationship to the Government of Canada are defined in funding agreements that have been executed by the Foundation and the Ministers of both Natural Resources Canada and Environment Canada. In this way, the Foundation operates as a fully accountable instrument of the Government of Canada to help provide timely development and demonstration of innovative technology solutions to the nationally important issues of climate change, clean air and water and soil quality. The Foundation manages two funds at present: the SD Tech Fund and the NextGen Biofuels Fund, which are further described below.

SD Tech Fund

To date the Foundation has received $550,000,000 from the Government of Canada to provide financial support to projects that develop and demonstrate new technologies that have the potential to advance sustainable development, including technologies to address climate change, clean air and water and soil quality issues. This support is provided to eligible recipients that have established partnerships which are comprised of a private sector commercial corporation and one or more of: a private sector commercial corporation, a university or college, a private sector research institute, a not-for-profit corporation, or a federal or provincial crown corporation (or subsidiary) whose role is the provision of resources and/or facilities to the consortium as a subcontractor. The Foundation shall endeavour to ensure that there are funds available to allocate to new eligible projects up to the year ended December 31, 2010 and, where eligible projects warrant, to disburse funds in each year up to December 31, 2012. With the exception of a reasonable amount reserved for related project monitoring and evaluation, and for wind-up costs, the Foundation shall also endeavour to manage and disburse the funds in total by June 30, 2015.

NextGen Biofuels Fund

During the year the Foundation entered into a funding agreement with the Government of Canada which provided for a conditional grant of $500,000,000 to be paid over the period to March 31, 2015, to create the NextGen Biofuels Fund (the “NextGen Fund”). The NextGen Fund will provide financial support towards the establishment of first-of-kind facilities that demonstrate production pathways for next-generation renewable fuels at large demonstration scale. This support is provided to eligible recipients that are for-profit corporations, partnerships, limited partnerships or business trusts with legal capacity in Canada and that have access to expertise in next-generation renewable fuels production pathways. Agreements for financial support to eligible recipients include provisions for repayability from free cash flow of the funded project. The Foundation shall disburse up to March 31, 2017 (the “disbursement period”) its share of eligible project costs incurred or to be incurred by eligible recipients. With the exception of a reasonable amount reserved for related project monitoring and evaluation, collection of repayments and for wind-up costs, the Foundation shall return any portion of the NextGen Fund at the earlier of the end of the funding agreement on September 30, 2027, and such earlier time or times subsequent to the end of the disbursement period as the Government of Canada may determine.


�. Significant accounting policies: The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include the following significant accounting policies:

(a) Revenue recognition: The Foundation follows the deferral method of accounting for contributions whereby contributions, including grants received and interest earned on the invested amounts are deferred and amortized to revenue as expenses and project disbursements are incurred.

(b) Capital assets: Purchased capital assets are recorded at cost. Capital assets under capital leases are originally stated at the present value of future minimum lease payments. Amortization is provided on a straight-line basis over the assets’ estimated useful lives using the following annual rates:

Asset Rate

Computer hardware 30%Computer software 50%Office furniture and equipment 20% Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or their estimated useful lives.

(c) Investments: Investments are designated for financial reporting purposes as available for sale and are measured at fair value. Realized investment income and unrealized gains or losses from the change in fair value are recorded in deferred contributions. Fair value is determined at quoted market prices.

For the 2006 comparative period, investments are recorded at cost plus accrued interest and unamortized premiums/discounts. If the market value of investments was lower than cost and this decline in value was considered to be other than temporary, the investments were written down to market value (see note 2).

(d) Deferred lease inducements: Deferred lease inducements are amortized on a straight-line basis over the term of the lease and are accounted for as a reduction in rent expense.

(e) Leases: Leases are classified as either capital or operating in nature. Capital leases are those which substantially transfer the benefits and risks of ownership to the lessee. Assets acquired under capital leases are amortized at the same rates as those described in note 1(b). Obligations recorded under capital leases are reduced by the principal portion of lease payments. The imputed interest portion of lease payments is charged to expense.

(f ) Use of estimates: The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. These estimates are reviewed annually and as adjustments become necessary, they are recognized in the financial statements in the period they become known.


SDTC 2007 AR ��

�. Accounting change – financial instruments: In 2005, the Canadian Institute of Chartered Accountants released Handbook Section 3855, Financial Instruments - Recognition and Measurement. This new standard changed the way certain financial assets and liabilities are accounted for and reported in the financial statements.

The Foundation implemented this Section effective January 1, 2007. In accordance with the transitional provisions of this Section, the Foundation has prospectively adopted the recommendations, and therefore the 2006 comparative figures have not been restated.

The Foundation has designated its investments for financial reporting purposes as available for sale and, as such, these investments are recorded at fair value for the 2007 fiscal year. Prior to fiscal 2007, investments were recorded at cost plus accrued interest and unamortized premiums/discounts, and realized gains and losses were recognized in the year of disposal.

As a result of adopting this new accounting standard, the opening balance of Deferred Contributions: Expenses of future periods in fiscal 2007 has been decreased by $2,637,121 to $520,222,411 to reflect the prior years’ excess of carrying value over the fair value of investments.

�. Inter fund balance and transactions: The inter fund balance receivable/payable bears no interest and is not governed by terms of repayment. During the year, $3,291,342 of NextGen Fund funds were deposited by the SD Tech Fund on behalf of the NextGen Fund. During the year, $733,195 of NextGen Fund operating expenses and allocated staff costs were incurred on behalf of the NextGen Fund by the SD Tech Fund using the funds held on behalf of the NextGen Fund. At year end, a balance of $2,579,020 was held by the SD Tech Fund on behalf of the NextGen Fund.

�. Investments:

�00� �00� Market Market SD Tech Fund Value Cost Value Cost

Money market funds $ 30,287,033 $ 30,143,255 $ 23,062,183 $ 23,062,183Fixed income securities 477,376,029 480,593,086 496,747,287 499,384,408

$ �0�,��,0�� $ ��0,��,�� $ ��,�0�,��0 $ ��,��,��

(a) Investment risk: Investment in financial instruments renders the Foundation subject to investment risk. This risk arises from changes in interest rates if investment instruments are withdrawn prior to maturity or should market interest rates increase significantly over those of the investments of the Foundation. The Foundation invests in money market funds and fixed income securities, which management considers being low risk.

(b) Concentration risk: Concentration risk exists when a significant portion of the portfolio is invested in securities with similar characteristics or subject to similar economic, political or other conditions. Management believes that the diversification of the investments in money market funds and fixed income securities described above does not represent excessive risk.


�0 Capitalizing on Cleantech

�. Capital assets:

�00� �00� Accumulated Net book Net bookSD Tech Fund Cost amortization value value

Computer hardware $ 196,415 $ 126,852 $ 69,563 $ 74,148Computer software 190,504 172,305 18,199 8,325Office furniture and equipment 420,041 283,802 136,239 192,214Office furniture and equipment under capital leases 33,189 12,925 20,264 –Leasehold improvements 388,344 61,801 326,543 358,428

$ �,��,�� $ ��,�� $ ��0,�0� $ ��,��

During the year, capital assets were acquired at an aggregate cost of $116,325 (2006 - $592,190), of which office furniture and equipment of $33,189 (2006 - $Nil) was acquired by means of capital lease obligations.

Cost and accumulated amortization at December 31, 2006 amounted to $1,112,168 and $479,053, respectively.

�. Obligations under capital lease: Future minimum capital lease payments as at December 31, 2007 are:

�00�

Year ending December 31:2008 $ 7,7322009 7,8182010 4,4012011 4,161

Total minimum lease payments ��,��

Less amount representing interest (at rates ranging from 8.0% to 9.5%) 3,550

Present value of net minimum capital lease payments �0,��

Current portion of obligations under capital lease 6,083

$ ��,��


SDTC 2007 AR ��

�. Deferred contributions - expenses of future periods: Deferred contributions related to expenses of future periods represent the unspent balance in the Fund that is restricted for disbursement to eligible sustainable development technology projects and operations of the Foundation, as defined in the Funding Agreement. The change in the deferred contributions balance is as follows:


Balance, beginning of year $ 522,859,532 $ – $ 522,859,532 $ 542,720,977

Accounting changes - financial instruments (note 2) (2,637,121) – (2,637,121) –

Balance, beginning of year, as restated ��0,��,�� – ��0,��,�� ,��0,��

Conditional grant received – 3,291,342 3,291,342 –Investment income 20,227,536 10,754 20,238,290 20,211,589Unrealized loss on investments (436,158) – (436,158) – ��0,0��,�� ,�0�,0�� ,��,�� ,��,��

Less amount amortized as revenue (34,548,374) (733,195) (35,281,569) (39,526,425)Less investment fund management fees (532,310) – ( 532,310) (546,609) (��,0�0,��) (��,��) (��,��,��) (�0,0��,0��)

$ �0�,��,�0� $ �,��,�0� $ �0�,�0�,00� $ ��,��,��

During the year the Foundation received an initial conditional contribution of $3,291,342 to the NextGen Fund to fund estimated operating expenses and eligible project costs for the period from April 1, 2007 to March 31, 2008.

During the year, no other funding or donations were provided to the Foundation.



�. Commitments:

SD Tech Fund: During the year, the Foundation awarded grants for a maximum amount of $57.0 million (2006 - $76.2 million). Total disbursements to eligible recipients during the fiscal year were $27.6 million (2006 - $32.0 million). Since incorporation, the Foundation has awarded grants for a maximum of $299.9 million of which $84.6 million has been disbursed as of the end of the fiscal year. The balance of the awarded grants will be recorded as expense in subsequent years as funds are disbursed.

The Foundation has executed contracts for eligible projects through 2012 in the amount of $88.5 million, which are anticipated for disbursement over that period as recipients meet their pre-funding performance requirements. Also, it has commitments to lease office space as follows: 2008 - $455,522; 2009 - $455,522; 2010 - $455,522; 2011 - $465,953; 2012 - $476,384; 2013 and after - $1,190,959.

NextGen Fund: The Foundation did not make funding allocations to eligible recipients during the year.

�. Fair value of financial instruments: The fair values of goods and services tax refund receivable, bank indebtedness and accounts payable and accrued liabilities approximate their carrying values due to the relatively short period to maturity.

Senior Management and Directors’ compensation*

In accordance with the Funding Agreement, SDTC Senior Management and Directors’ compensation for the fiscal year ending December 31, 2007 including salary, allowances and other benefits was within the annual compensation ranges listed below.

Positions Total Annual Compensation Additional Performance Based Compensation

President & CEO $ 240,000 – $ 310,000 $ 0 – $ 64,500 Senior Vice President $ 165,000 – $ 195,000 $ 0 – $ 26,500 Vice Presidents $ 145,000 – $ 180,000 $ 0 – $ 16,000 Directors & Senior Professionals $ 105,000 – $ 130,000 $ 0 – $ 9,000

Chairman of the Board $ 12,000 stipend**Directors of the Board $ 5,000 stipend**

* This information is not part of the audited statements.

** All Directors of the Board received a meeting fee of $550 per meeting. The Directors of the Board who sit on the Investment

and Project Review Committees received a meeting fee of $1,500 per committee meeting.


SDTC 2007 AR ��

Board of Directors

SDTC is governed by a Board of Directors reflecting the broad interests of the public, private and academic sectors in Canada. It is composed of 15

Directors, seven of whom are appointed by the Government of Canada and eight of whom are appointed by Members of the Foundation. The Board

has five committees: the Audit and Grant Investment Committee, the Corporate Governance Committee, the Human Resources Committee, the Project

Review Committee - NextGen Biofuels Fund, and the Project Review Committee - SD Tech Fund.

Directors of the Board are subject to conflict of interest guidelines requiring them to declare potential conflicts of interest and refrain from

participating in any discussions regarding matters that could give rise to a conflict of interest.

Name Title Board Committee

Stephen Probyn Chairman and CEO, Probyn Group of Companies; Founding Chairman and Director, Canadian Association of Income Funds

Chairman

Dr. Francesco Bellini, O.C., O.Q., G.U. Chairman, President & Chief Executive Officer, Neurochem Inc. CGC

Michael J. Brown Chairman of the Board, Chrysalix Energy Management Inc. PRC-S

Dr. Angus Bruneau, O.C. Corporate Director PRC-N*, PRC-S

Charles S. Coffey, O.C. Community Volunteer HRC*

Kenneth Ross Creelman Managing Director, Marwood Ltd. HRC

Dr. David Johnston, C.C. President, University of Waterloo AC

David Kerr Corporate Director, Brookfield Asset Management AC*, PRC-N

Ken Oglivie Executive Director, Pollution Probe CGC, HRC

Jane E. Pagel Senior Vice President, Government and Corporate Relations, Jacques Whitford Ltd. PRC-S*, PRC-N

David Pollock President, Pollock Advisory and Management Services, and former Executive Director, BIOCAP Canada and the Pembina Institute for Appropriate Development

CGC*, HRC

Juergen Puetter President, Chairman and Chief Executive Officer, Aeolis Wind Power Corporation

PRC-N

Dr. Dipak Roy Chairman, D-TA Enterprises Inc. ; Director, SensorCom Inc. ; Director, Personica Inc.

PRC-S

Dr. Jacques Simoneau Executive Vice President, Investments, Business Development Bank of Canada AC

Catherine Smith Community Volunteer AC

* Committee Chair AC – Audit and Grant Investment Committee CGC – Corporate Governance Committee HRC – Human Resources Committee PRC-N – Project Review Committee - NextGen Biofuels Fund PRC-S – Project Review Committee - SD Tech Fund


Member Council

The Members of the Foundation include 15 leaders who together provide an informed and representative perspective on, and contribution toward, the

achievement of SDTC’s mission and goals. Originally, it was required that seven of those Members be appointed by the Government of Canada, with

those seven appointing the remaining eight. In future, as vacancies occur, new appointments will be made by Members only.

Name Title

Pierre Alvarez President, Canadian Association of Petroleum Producers

Mary Louise Bernard AFN Renewal Commissionaire, Assembly of First Nations

Carl Brothers, P.Eng. General Manager, Frontier Power Systems Inc.

Dr. Peter Hackett President and CEO, Alberta Ingenuity

D.Christine Hollstedt, RPF Founding President and Chief Executive Officer, FORREX Forest Research Extension Partnerships

James Knight CEO, Federation of Canadian Municipalities

Hans R. Konow President and CEO, Canadian Electricity Association

Dr. Louis LaPierre Professor Emeritus, Université de Moncton

Manon Laporte President and CEO, Enviro-Access Inc.

Mark Nantais President, Canadian Vehicle Manufacturers’ Association

David Runnalls President and CEO, International Institute for Sustainable Development

Dr. Laurier L. Schramm President and CEO, Saskatchewan Research Council

Andrew T.B. Stuart Chairman, Sustainability Shift Inc.

Katherine Trumper Management Consultant, Full Circle Architecture

Dr. Joseph D. Wright Retired (April 2006) President and CEO, Pulp and Paper Research Institute of Canada

Sustainable Development Technology Canada45 O’Connor Street, Suite 1850 Ottawa, ON K1P 1A4

www.sdtc.caTelephone: 613.234.6313 Fax: [email protected]

SDTC 2007 AR ��

SDTC Team

SDTC comprises a growing, dedicated team headquartered in Ottawa and supported by a large network of allies and stakeholders.

The following lists all full time SDTC staff as of December 31, 2007.

Vicky Sharpe President and CEO

Patrice Nadeau Research Analyst

Maria Aubrey Senior Vice President, Operations

Dominique Naud Communications Coordinator

Chris Boivin Manager, Screening and Evaluation

Charley Pappas Senior Manager, Screening and Evaluation

Patrice Breton Director, Communications

Sébastien Prince-Richard Manager, Applications

Brad Brohman Director, Governance

Sheri Ravi Executive Assistant to SVP, Operations

Gertie Smedts-Baglin Records Administrator

Guy Roy Applications Administrator

Anne Charette Manager, Outreach

Angela Saddington Governance & Operations Administrator

Johanne Dery Database Administrator

Sheila Schindel Manager, Projects

John Dodd Manager, Screening and Evaluation

Shannon Sethuram Accountant

Maureen Dubé Contracts Coordinator

Shanaz Sigouin Executive Assistant to VP, Investments

Doug Feniak Manager, Projects

Diana Smithson Executive Assistant to President and CEO

Aida Filipovic Manager, Projects

Eric Terreau Manager, Data and Records Management

Kate Fleming Manager, Projects

Sailesh Thaker Vice President, Industry & Stakeholder Relations

Steven Higgins Manager, Corporate Performance

Zoltan Tompa Senior Manager, Applications

Alain Jegen Manager, Screening and Evaluation

Keith Watson Manager, Screening and Evaluation

Sabrina Kalapati Administrative Assistant

Robyn Wiltshire Senior Administrative Assistant, Office of the President and CEO

Blaine Kennedy Manager, Screening and Evaluation

Rick Whittaker Vice President, Investments

Gail Lagowski Human Resources, Recruitment

Philip Wong Senior Manager, Projects and Quality Assurance

Shelley Murdock Executive Assistant to VP, Industry & Stakeholder Relations

2007 annual reportt.m. (mike) apsey, dr. alain caillé, dr. elizabeth parr-johnston and e.a. (dee)...

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