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Heart and Stroke Foundation of Ontario Financial Statements August 31, 2009

November 3, 2009

PricewaterhouseCoopers LLP Chartered Accountants North American Centre 5700 Yonge Street, Suite 1900 North York, Ontario Canada M2M 4K7 Telephone +1 416 218 1500 Facsimile +1 416 218 1499

Auditors’ Report To the Members of Heart and Stroke Foundation of Ontario

We have audited the statement of financial position of the Heart and Stroke Foundation of Ontario (the Foundation) as at August 31, 2009 and the statements of revenue and expenditures, changes in net assets 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. Except as explained in the following paragraph, 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 common with many charitable organizations, the Foundation derives a substantial portion of its revenue from fundraising, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of fundraising revenue, other than bequests and major gifts, direct marketing (which is included in centralized programs) and lottery revenue, was limited to the amounts recorded in the records of the Foundation and we were not able to determine whether any adjustments might be necessary to revenue, excess (deficiency) of net revenue over expenditures and net assets. In our opinion, except for the effect of adjustments, if any, which we might have determined to be necessary had we been able to satisfy ourselves concerning the completeness of revenue referred to in the preceding paragraph, these financial statements present fairly, in all material respects, the financial position of the Foundation as at August 31, 2009 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.

Chartered Accountants, Licensed Public Accountants

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

Heart and Stroke Foundation of Ontario Statement of Revenue and Expenditures For the year ended August 31, 2009 (in thousands of dollars) Unrestricte d and Inte rnally Restricte d Funds $

Exte rnally Restricte d Funds (note s 2 and 6) $

30,168 27,315 4,078

2009 $

2008 $

401 8,882 46,215 5,285 404

30,569 36,197 46,215 5,285 4,482

32,546 43,559 46,639 4,315 6,867

61,561

61,187

122,748

133,926

6,861 5,276 168

20 35,823 -

6,861 5,296 35,823 168

6,782 5,015 35,902 168

12,305

35,843

48,148

47,867

Net Revenue Fund raising revenue Community based programs Centralized programs Lottery Government sponsored projects Interest, dividends and realized gains on investments

23,307 22,039 3,910

401 8,862 10,392 5,285 404

23,708 30,901 10,392 5,285 4,314

25,764 38,544 10,737 4,315 6,699

Net revenue before operating and mission expenditures

49,256

25,344

74,600

86,059

Operating expenditures Fund raising Administration

15,432 3,209

164

15,432 3,373

15,457 3,707

18,641

164

18,805

19,164

Net revenue before mission expenditures

30,615

25,180

55,795

66,895

Mission expenditures Research (note 11(a)) Health promotion and community programs

29,558 18,807

16,801 8,379

46,359 27,186

52,351 30,819

48,365

25,180

73,545

83,170

Other than te mporary impairments on investments

(17,750) (444)

(16,275) -

Excess (deficiency) of revenue over expenditures for the year

(18,194)

(16,275)

Gross Revenue Fundraising revenue Community based programs Centralized programs Lottery Government sponsored projects Interest, dividends and realized gains on investments

Direct Costs Fund raising revenue Community based programs Centralized programs Lottery Interest, dividends and realized gains on investments

Heart and Stroke Foundation of Ontario Statement of Changes in Net Assets For the year ended August 31, 2009 (in thousands of dollars)

2009

Net assets, beginning of year

Internally Restricted Funds (notes 2 and 6) Approved Strategic Plan Initiatives SparkFuture Total High Blood Together For Grant Internally Pressure Healthy Kids Other Awards Reserve Restricted $ $ $ $ $ $ 3,454 9,384 3,102 23,369 6,992 46,301

Unrestricted Funds (note 2) 2009 Total $ 16,306

$ 62,607

Excess (deficiency) of revenue over expenditures for the year Increase (decrease) in reserve (note 6) Unrealized loss on investments (note 2) Other than temporary impairments on investments

(2,077) -

(2,804) -

(391) (2,711) -

1,865 -

(773) -

(5,272) (1,619) -

(12,922) 1,619 (2,769) 444

(18,194) (2,769) 444

Net assets, end of year

1,377

6,580

25,234

6,219

39,410

2,678

42,088

2008

Net assets, beginning of year

Unrestricted Funds (note 2) 2008 Total $ 25,123

$ 81,152

Excess (deficiency) of revenue over expenditures for the year Increase (decrease) in reserve (note 6) Unrealized loss on investments (note 2)

(3,174) -

(4,771) -

(2,614) (2,635) -

(807) 5,173 -

(900) -

(11,366) 1,638 -

(4,909) (1,638) (2,270)

(16,275) (2,270)

Net assets, end of year

3,454

9,384

3,102

23,369

6,992

46,301

16,306

62,607

Heart and Stroke Foundation of Ontario Statement of Cash Flows For the year ended August 31, 2009 (in thousands of dollars)

_____________________________________________________________________________________________ 2009 2008 $ $ Cash provided by (used in)

Operating activities Excess (deficiency) of revenue over expenditures for the year Items not involving cash Amortization of property and equipment Amortization of leasehold inducements Rent allowance Income accrued investments Other than temporary decline in fair value of investments classified as available for sale Realized gains on investments Net cash inflow (outflow) from working capital (note 12)

(18,194)

(16,275)

311 (130) (83) 565

287 (130) 237 (245)

444 (403) (5,432)

(1,436) 13,996

(22,922)

(3,566)

(4,291)

(1) 10,155

(4,291)

10,154

(112,889) 138,492 (290)

(270,290) 266,785 (44)

25,313

(3,549)

Increase (decrease) in cash and cash equivalents during the year

(1,900)

3,039

Cash and cash equivalents – Beginning of year

32,523

29,484

Cash and cash equivalents – End of year

30,623

32,523

Financing activities Additions (reductions) to leasehold inducements Increase (decrease) in deferred contributions, net (note 5)

Investing activities Purchase of investments Proceeds from sale of investments Additions to property and equipment

Non cash transactions (note 12)

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Nature of organization The Heart and Stroke Foundation of Ontario is incorporated under the Ontario Corporations Act as a not-for-profit organization. The Foundation is a registered charity under the Income Tax Act (Canada Revenue Agency business number 10747-2839-RR0001) and, accordingly, is exempt from income taxes, provided certain requirements of the Income Tax Act are met. The Foundation, a volunteer-based health charity, leads in eliminating heart disease and stroke and reducing their impact through the advancement of research and its application, the promotion of healthy living, and advocacy. Community-based fundraising programs include Jump Rope for Heart, Big Bike, Hoops for Heart, and Ride for Heart. Centralized programs include bequests, major gifts, direct marketing, in-honour gifts and corporate sponsorship. Lottery proceeds contribute directly towards vital research and health education. Financial income and government sponsored projects account for the remaining contribution. Certain major gifts, some philanthropic donations and some corporate sponsorships may be externally restricted dependent on the terms specified by the donor. Other externally restricted revenue sources such as government sponsored projects, the Heart and Stroke Foundation Centre for Stroke Recovery (“Centre for Stroke Recovery” or the “CSR”) campaign, the defibrillator initiative and lottery proceeds, require the Foundation to expend the funds raised for designated or mutually agreed expenditures.

Summary of significant accounting policies Fund accounting These financial statements are presented on a fund accounting basis using the deferral method of accounting for contributions. Externally restricted funds Externally restricted funds reflect restrictions imposed by regulatory requirements or donor intent. These restrictions require that funds are to be spent as designated. Internally restricted funds Internally restricted funds represent amounts that have been designated by the Board of Directors to fund grants awarded in the current year and other Board approved initiatives. Internally restricted amounts are not available for any other purposes without the approval of the Board of Directors. Unrestricted funds The unrestricted funds reflect amounts remaining after externally and internally restricted funds, and are available to fund operations of current and future periods as required. Revenue recognition Unrestricted contributions are recognized as revenue when received or receivable if the amount can be reasonably estimated and collection is reasonably assured. Pledges are generally not recognized as revenue until received.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Restricted contributions, arising primarily from government sponsored projects and other designated funding programs, including the Centre for Stroke Recovery, the defibrillator initiative and certain corporate and philanthropic donations, are recognized as revenue in the year in which the related expenditures or commitments are incurred. Contributions not yet spent are generally reflected as deferred contributions. Realized investment income, including interest, dividends and gains or losses on sales of investments, is recognized as revenue when earned. Expenditures On an annual basis, a review is performed by management on the allocation of all expenditures. Expenditures are allocated to the various expenditure categories based on an estimate of time spent, material costs, delivery costs and headcount. Direct fund raising program costs are those directly attributable to various fund raising programs and reduce gross revenues to arrive at net revenues. Fund raising expenditures include operating and salary costs related to fund raising, but not specifically attributable to a fund raising program. Research includes grants for research projects, fellowships, new and career investigator awards, graduate student awards and other research related activities including administration of research programs and awards, strategic planning of research funds and public messaging of knowledge from research findings. Health promotion and community programs include all costs related to health promotion and community programs delivered either directly or through area offices. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible into known amounts of cash. Inventory Inventory is carried at the lower of cost or net realizable value. Cost is determined on a weighted average basis and includes direct and indirect expenditures incurred in bringing an item to its existing location and condition. Inventory includes marketing and educational materials on hand, which are either sold or used for health promotion and fund raising, as well as incentive products utilized within specific fund raising programs. Investments Investments are accounted for at their fair values, which are determined as follows: a) Fixed income investments are determined based on quoted market values and equities are determined based on closing bid prices. b) Investments in pooled funds are valued at their net asset values.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Unrealized gains or losses on investments are reflected in the statement of changes in net assets, except where a decline in value is deemed to be other than temporary, in which case it is recognized in the statement of revenue and expenditures. Transaction costs are expensed as incurred. Property and equipment Property and equipment purchased by the Foundation are recorded at cost and those donated to the Foundation are recorded at their fair value at the date of acquisition. Property and equipment are amortized as follows: Asset Category

Amortization Method

Amortization Period

Leasehold improvements Computer hardware System software and development costs Furniture and equipment

Straight-line Straight-line Straight-line Straight-line

over expected lease term three years five years five years

Leasehold inducements and rent allowances The Foundation enters into long-term leases and receives leasehold inducements and rent allowances, which are amortized on a straight-line basis over the expected lease term. Research grants and awards Research grants and awards are expensed when the amounts are committed. The Foundation approves and commits only to the first year of a multi-year grant and will approve and commit to subsequent years, one year at a time. Unexpended balances of terminated grants are offset against the current year’s expenditures. Heart and Stroke Foundation Centre for Stroke Recovery The Centre for Stroke Recovery is a jointly controlled enterprise to promote research on recovery after stroke and is comprised of the Foundation, The Ottawa Health Research Institute, The University of Ottawa, The Sunnybrook Health Sciences Centre and The Baycrest Centre for Geriatric Care. As a jointly controlled enterprise, the Foundation reflects expenditures or commitments to the Centre for Stroke Recovery as mission expenditures. Contributed services A number of volunteers contribute services to the Foundation each year. Due to the difficulty of determining the fair value, these contributed services are not recognized or disclosed in the financial statements.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Financial instruments Financial assets and financial liabilities are initially recognized at fair value and their subsequent measurement is dependent on their classification as described below. The classification depends on the purpose for which the financial instruments were acquired or issued, their characteristics and the Foundation’s designation of such instruments. It is management’s intention that any unrealized gains or losses on investments will be borne by the unrestricted fund rather than being allocated to each of the individual funds. The following is a summary of the classifications the Foundation has elected to apply to each of its significant categories of financial instruments. Assets/ Liabilities

Category

Measurement

Cash and cash equivalents Accounts receivable Investments Accounts payable and accrued liabilities Research grants and awards payable

Held-for-trading Loans and receivables Available-for-sale Other liabilities Other liabilities

Fair value Amortized cost Fair value Amortized cost Amortized cost

The Foundation has chosen to apply CICA Handbook Section 3861, Financial Instruments Disclosure and Presentation, in place of CICA Handbook Section 3862, Financial Instruments Disclosures and CICA Handbook Section 3863, Financial Instruments – Presentation. Changes in Accounting Policies Section 1535, Capital Disclosures Effective September 1, 2008, the Foundation adopted The Canadian Institute of Chartered Accountants (CICA) Handbook Section 1535, Capital Disclosures, that requires an entity to disclose information that enables users of its financial statements to evaluate an entity’s objectives, policies and processes for managing capital, including disclosures of any externally imposed capital requirements and the consequences of non-compliance. The adoption of this standard impacted on the Foundation’s disclosures but did not affect its results or financial position.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Section 3031, Inventories On May 1, 2008, the Foundation adopted CICA Handbook Section 3031, Inventories. This section relates to the accounting for inventories and revises and enhances the requirements for assigning costs to inventories and related disclosures. The adoption of this standard impacted the disclosures but did not affect the Foundation’s statement of financial position or the statement of revenue and expenditures. Section 4400, Financial Statement Presentation by Not-For-Profit Organizations Effective September 1, 2008, the Foundation adopted retroactively the changes to the recommendations in CICA Handbook Section 4400, Financial Statement Presentation by NotFor-Profit Organizations that eliminate the requirement to separately disclose the amount of net assets invested in capital assets. The Foundation has therefore eliminated from the financial statements details about the amount of net assets invested in capital assets and the calculation of this amount. As a result, the Foundation has reclassified the prior year financial statements to include the amount of net assets invested in capital assets as at August 31, 2008 of $208 in unrestricted net assets. Recent Canadian accounting pronouncements issued but not yet adopted Section 1000, Financial Statement Concepts Recent amendments to CICA Handbook Section 1000, Financial Statement Concepts, clarify that assets not meeting the definition of an asset or the recognition criteria are not permitted to be recognized on the statement of financial position. These amendments apply to annual financial statements relating to fiscal years beginning on or after October 1, 2008, specifically September 1, 2009 for the Foundation. This standard is not expected to have a significant effect on the Foundation’s financial statements. Section 4400, Financial Statement Presentation by Not-for-Profit Organizations Recent amendments to CICA Handbook Section 4400, Financial Statement Presentation by NotFor-Profit organizations have modified the requirements with respect to various elements of financial statement presentation. These amendments include a requirement that when a Not-ForProfit organization classifies its expenses by function and allocates some of its fundraising and general support costs to another function, it must disclose the policy adopted for expenses and the amounts allocated from each of these two functions to other functions. The new standard applies to financial statements relating to the fiscal years beginning on or after January 1, 2009, specifically September 1, 2009 for the Foundation. This standard is expected to impact the Foundation’s disclosures but will not affect its results or financial position.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Investments

Canadian equity investments Canadian fixed income securities Accrued investment income

2009

2008

30,033 44,826 589

28,401 74,427 1,154

75,448

103,982

Canadian equity investments include pooled funds. The interest rates and maturity dates for fixed income securities vary from 0.643% to 8.5% and from September 2009 to May 2042. Total investments consist of a current portion with a fair value of $30,572, and a long term portion, valued at $44,876. These investment funds are restricted either externally to reflect donor intent or internally by the Board of Directors to fund research grants and other Board approved initiatives.

Property and equipment, leasehold inducements and rent allowances 2009

2008

Cost $

Accumulated Amortization $

Net $

Leasehold improvements Computer hardware Furniture and fixtures System software and development costs

2,029 397 14

455 303 9

1,574 94 5

1,506 108 8

362

233

129

201

Property and equipment

2,802

1,000

1,802

1,823

Leasehold inducements

(1,904)

(419)

(1,485)

(1,615)

Rent allowances

(1,779)

(145)

(1,634)

(1,717)

In 2006, the Foundation relocated its provincial office and entered into a long-term lease. The office move required investments in leasehold improvements; however, the Foundation received certain leasehold inducements that offset this outlay. In addition, the Foundation received rent allowances on this and other office moves. These costs and inducements are being amortized on a straight-line basis over the expected term of the lease.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Deferred contributions a)

Government sponsored projects Deferred contributions include amounts that have been advanced by the Ontario Ministry of Health and Long-Term Care and the Ministry of Health Promotion (collectively the “Ministries”) for various projects. These are managed and executed by the Foundation in partnership with other health organizations and stakeholders in Ontario, including the Ministries. The contributions are recorded as deferred until the designated costs have been incurred. Any part of the contributions that has not been used belongs to the Ministries. Defibrillator initiative (Automatic External Defibrillators “AEDs”)

Deferred contributions include amounts raised for the defibrillator initiative in excess of amounts disbursed during the fiscal year. Funds raised will be used to place defibrillators and provide training to communities across Ontario. Heart and Stroke Foundation Centre for Stroke Recovery (“the CSR”)

The designated funding campaign in support of the CSR raised $657 (2008 - $15,531). These funds are made available to the CSR based on approved annual spending plans for research and related operating expenses and resulted in a commitment of $5,038 (2008 - $4,809) which is included within the current portion of research grants and awards payable reflected in note 11(a). The cumulative balance of funds raised, for which there are not yet approved spending plans, is reflected as deferred contributions of $9,603 (2008 - $13,984). 2008 Balancebeginning of year

Current year funding

2009 Balanceend of year

Committed/ expended

351 5 48 404

3,367 1,600 596 43 5,606

(3,042) (1,592) (607) (43) (5,284)

676 13 37 726

480 1,922 2,402

61 1,386 1,447

(341) (2,233) (2,574)

200 1,075 1,275

Other

895

CSR

13,984

657

(5,038)

9,603

Total deferred contributions

16,790

8,605

(12,896)

12,499

Less: current portion

2,806

7,948

(7,858)

2,896

Total long-term deferred contributions

13,984

657

(5,038)

9,603

Government sponsored projects Stroke initiatives Anti tobacco Blood pressure Other

Defibrillator initiative Government Individual, corporate and interest

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Internally restricted funds Approved strategic plan initiatives The Board of Directors has internally restricted funds for use toward specific initiatives within its approved strategic plan. These initiatives include High Blood Pressure Strategy, Spark-Together For Healthy Kids and Other Approved Initiatives. Expenditures funded out of the High Blood Pressure Strategy reserve were $2,077 (2008 - $3,174). Focus in the current year was on mid-term evaluation of the Hypertension Management Initiative (HMI) including dissemination of the results to key stakeholders including policy makers and healthcare providers. This initiative is now in winddown mode with final evaluation to be completed in fiscal 2010. Expenditures of $2,804 (2008 - $4,771) were expended on the Spark-Together for Healthy Kids reserve with focus on public communications campaign, KidFit Community Advocacy grants and support of partnership activities. Expenditures of $391 (2008 - $2,614) were funded out of the Other Approved Initiatives reserve. Also, the Board of Directors approved the net release of $2,711 (2008 - $2,635) of the reserve to unrestricted net assets. Future grant awards The Board of Directors has determined that an amount equal to 50% of the future grant awards and commitments of $25,234 (2008 - $23,369) should be internally restricted. Reserve The Board of Directors has determined that each year an amount should be held in reserve against unforeseen events. The reserve is based on a formula approved by the Board of Directors.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Lotteries The Foundation conducts charitable lotteries in accordance with the regulations as set out by the Ontario Gaming and Alcohol Commission. The net proceeds will be used by the Foundation for mission related expenditures. Lottery activities are reflected as externally restricted funds. The financial results were as follows: Winter Lottery

2008 Total

Revenue Ticket sales

23,653

22,562

46,215

46,639

Expenditures Prizes Promotional and other

8,445 8,584

8,331 10,463

16,776 19,047

17,080 18,822

17,029

18,794

35,823

35,902

6,624

3,768

10,392

10,737

Net proceeds of lotteries

2009 Total

Spring Lottery

Related party transactions a) Payments to the Heart and Stroke Foundation of Canada (“HSFC”) Payments made to HSFC are based on a percentage of the current year’s budgeted expenditures of HSFC. This percentage is based on a predetermined formula agreed on between the Foundation and HSFC. In 2009, amounts paid/payable relating to the annual contributions totalled $4,591 (2008 - $4,751) and are included in operating and mission expenditures. b)

Accounts receivable and accounts payable There are ongoing supplier/customer relationships between the Foundation, HSFC and other Heart and Stroke provincial foundations. As at August 31, 2009, there were payables of $3,508 (2008 - $3,452) and receivables of $254 (2008 - $586) among these parties. These amounts arose in the ordinary course of business and have been recorded at their exchange amounts.

Research expenditures and awards The Foundation has a formal professional code of conduct in place for senior volunteers and staff, governing conflict of interest and competitive purchasing practices. During the year ended August 31, 2009, three members (2008 - three members) of the Board of Directors qualified for research grants. Total research expenditures, included in the accounts of the Foundation related to these members, amount to $646 (2008 - $680). Research grants and awards payable include $800 (2008 - $755) payable to these members.

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Financial instruments Financial instruments that potentially subject the Foundation to concentrations of credit risk are cash and cash equivalents, investments and accounts receivable. The Foundation places its cash and cash equivalents in interest bearing accounts and instruments insured by a Canadian chartered bank, or in highly liquid investments that are readily convertible into known amounts of cash. The Foundation believes that an adequate provision has been made for accounts receivables, to the extent that collection is doubtful. Investments are subject to market risk. The Foundation manages market risk by investing in Canadian equities, fixed income instruments and short-term investments that meet specific investment criteria established and approved by the Board of Directors and designed to adequately diversify the Foundation’s investments to reduce exposure to market risk. Professional investment managers invest and manage the investment portfolio in accordance with the Foundation’s investment policy statement. Investments are recorded at fair values. Fair value estimates are made at a specific point in time and may not be reflective of future value. The Foundation does not hold or issue financial instruments for trading purposes and does not hold or invest in derivative financial instruments.

Employee future benefits Multi-employer pension plan The Foundation is a member of a multi-employer pension plan. The plan is registered in the name of HSFC on behalf of itself and the provincial foundations. The most recent actuarial valuation of the Plan, dated January 2008, estimates that the accrued liabilities under administration exceed the assets for pension benefits. This deficit was funded by HSFC and the ten provincial foundations in fiscal 2009. The Foundation made contributions during the year of $1,133 (2008 $1,053).

11 Commitments and contingencies

2010 2011 2012 2013 2014 2015 and thereafter

a) Research grants and awards expensed but not yet paid $ 46,579 649 -

b) Multi-year grants awarded for future years not expensed $ 26,207 14,196 7,320 2,938 6

Lease Commitments $ 2,200 2,040 1,943 1,730 1,645 10,320

Total commitments

47,228

50,667

19,878

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

Commitments a) Research expenditures and commitments During the year, the Foundation expensed $46,359 (2008 - $52,351) relating to research grants and programs. Research grants and awards, which have been expensed but not yet paid, amount to $47,228 (2008 - $46,234) and are payable as per the above schedule. Applications for research grants are generally multi-year in nature. However, the Foundation only commits to and expenses one year at a time, with the subsequent years of research awards subject to annual review and approval. If specified performance criteria are met, and funds are available, further funding of existing multi-year research awards would be forthcoming. Also, in conjunction with the HSFC and other provincial foundations, the Foundation supports ongoing research initiatives including a National Personnel Award Program and a Federation Research Fund (“National Initiatives”). The annual amounts in respect to grants awarded for these programs are included in the current year’s expenses. b) Multi-year grants The total research grants and awards relating to future years, including the Foundation’s share of the HSFC’s research initiatives not yet expensed, amount to $50,667 (2008 - $46,364) and would be payable as per the above schedule. The Foundation is party to a Federation Agreement in support of the National Initiatives. Under this federation structure, HSFC assesses the Foundation, as well as the other provincial foundations, for annual contributions to these National Initiatives. The amount of future years’ commitments to these initiatives is not specifically determinable and therefore is not included in the above schedule; however, the relevant portion of existing multi-year research grants awarded by HSFC is included. Contingencies From time to time, lawsuits may be pending against the Foundation. The actual liability with respect to such lawsuits is not determinable, but management believes that any potential liability would not materially affect the Foundation’s financial position. Differences between accruals previously recorded by the Foundation and actual settlement, if any, will be accounted for in the year of settlement. During fiscal 2009, the HSFC Board of Directors, to provide relief to federation members during difficult economic conditions, approved a federation-wide deferral of a portion of the standard federation research fund assessment. HSFO’s share of the deferred assessment is $941 which is expected to be repaid in three equal instalments on July 1st of 2013 to 2015 contingent upon the outcome of a review by the HSFC Board of Directors of the prevailing economic circumstances and financial position of the provincial federation members. The Foundation has outstanding letters of guarantee as at August 31, 2009 of $12,575 required for the Spring 2009 lottery and $10,637 required for the Winter 2010 lottery (2008 - $12,134 for the Winter 2009 lottery).

Heart and Stroke Foundation of Ontario Notes to Financial Statements August 31, 2009 (in thousands of dollars)

12 Supplementary cash flow information Net cash inflow (outflow) from working capital comprises: 2009

2008

Decrease (increase) in accounts receivable Decrease (increase) in prepaid expenses and deposits Decrease (increase) in inventory Increase (decrease) in accounts payable and accrued liabilities Increase in research grants and awards payable

(568) 325 263 (6,446) 994

659 (521) (47) 7,932 5,973

Net cash inflow (outflow) from working capital

(5,432)

13,996

Non-cash transactions Unrealized loss on investments

(2,325)

(2,270)

13 Management of capital The Foundation defines its capital as the amounts included in its Net Asset balances. The Foundation’s objective when managing its capital is to safeguard the organization’s ability to continue as a going concern so that it can continue to provide the appropriate level of benefits and services to its beneficiaries and its stakeholders by ensuring that funds are available for future projects and grant commitments. The Board of Directors designates that certain funds be internally restricted for those purposes. A portion of the Foundation’s capital is externally restricted through requirements imposed by donors and government. The Foundation has internal control processes to ensure that the restrictions are met prior to the utilization of these resources and that it has been in compliance with these restrictions throughout the year. The Foundation sets the amount of net asset balances in proportion to risk and economic conditions, and manages fund restrictions to ensure that the Foundation’s mission and strategic plans are accomplished.

14 Comparative figures Certain comparative figures have been reclassified to conform to the financial statement presentation adopted in the current year.