20ANNUA0L REPOR9 T FOR TH-E FIS2CAL YEAR0 ENDIN1 G MARC0H 31, 2010 2009 - 2010 ANNUAL REPORT FOR THE FISCAL YEAR ENDING MARCH 31, 2010 TABLE OF CONTENTS 4 BOARD OF DIRECTORS 5 MESSAGE FROM THE CHAIR 6 MESSAGE FROM THE PRESIDENT & CEO 7 FINANCIAL RESULTS 7 Comparative and Cumulative Results 8 Funds Expended 8 PRIVATE RADIO CONTRIBUTIONS 10 LOAN REPAYMENTS 12 INDUSTRY DEVELOPMENT 12 ADMINISTRATION 13 DISTRIBUTION OF FUNDS 13 CULTURAL DIVERSITY 14 PROJECT REQUESTS AND FUNDING COMMITMENT COMPARATIVE ANALYSES 14 Comparative Analysis of all Applications Submitted and Approved – Past three years 15 Comparative Analysis of all Funds Requested and Offered – Past three years 16 Comparative Analysis of all Applications Submitted and Approved by Province/Territory – Past three years 16 Comparative Analysis of all Funds Requested and Offered by Province/Territory – Past three years 18 Comparative Analysis of all Applications Submitted and Approved by Musical Genre – Past three years 19 Comparative Analysis of all Funds Requested and Offered by Musical Genre – Past three years 20 PROGRAMS & FUNDING PROVIDED 20 Sound Recording 24 Video Grants 25 Marketing & Promotion Sound Recordings 26 Touring & Showcasing 28 Marketing Support for Businesses 30 Collective Initiatives 31 OUTSTANDING COMMITMENTS AS OF MARCH 31, 2009 32 PROJECT EVALUATION PROCESS 33 REGIONAL REPRESENTATION 35 NATIONAL ADVISORY BOARD 36 SUCCESS STORIES 46 AUDITOR’S REPORT 47 STATEMENT OF FINANCIAL POSITION 48 STATEMENT OF OPERATIONS 49 STATEMENT OF CHANGES IN NET ASSETS 49 STATEMENT OF CASH FLOWS 50 NOTES TO FINANCIAL STATEMENTS We acknowledge the financial support of the Government through the Canada Music Fund. 53 SCHEDULE OF REVENUE We also acknowledge the financial support 53 SCHEDULE OF LOANS AND AWARDS provided by Canada’s Private Radio Broadcasters. 54 SCHEDULE OF ADMINISTRATIVE EXPENSES K’Naan 2009 Juno Awards Artist of the Year Songwriter of the Year BOARD OF DIRECTORS PEGI CECCONI, Chair NICOLE JOLLY, Vice-Chair ALVIN JAHNS, Treasurer DREW KEITH, Secretary BRIAN HETHERMAN, HEATHER OSTERTAG Vice-President Vice-President, Operations Vice-President, Finance Operations Manager / Secretary President and CEO Anthem Entertainment Flow 93.5-FM Stony Plain Recording Company Ltd. Program Director President FACTOR Astral Media Radio Curve Musi c / Cerberus Artist Management (2007 - November 30, 2009) GRANT DEXTER TERRY KELLY ROBERT LANNI DUFF ROMAN, SUSAN WHEELER AUBREY WINFIELD President President Co-President Founding President – VP Regulatory Affairs President Maple Music TK Productions Coalition Entertainment Director Emeritus Rogers Media Orange Music Inc. (2009 - Present) Vice-President Replacing Brian Hetherman CHUM Radio, A Division of CTVglobemedia LENORE GIBSON ROSS WINTERS JP ELLSON, Observer PIERRE LALONDE , Observer PIERRE-LOUIS SMITH, Observer Director, Regulatory Affairs National Programming Chair Chair Director for Sound Recording VP Policy and CTVglobemedia Inc. CORUS Radio FACTOR National Advisory Board Policy & Program Chief Regulatory Officer (November 2008 - Present) Department of Canadian Heritage Canadian Association Replacing Chris Lecomte of Broadcasters 4 ANNUAL REPORT 2009 - 2010 MESSAGE FROM THE CHAIR It has been a busy, but rewarding year at FACTOR. The Board of Directors did its due diligence with all the routine responsibilities in overseeing FACTOR. The Board also committed the time to take on several new initiatives that we believed would help to strengthen the organization and its mandate. The Board hosted a two day “Presentation Day” in which representatives from 15 music industry associations and organizations prepared and presented to the Board on the current state of their organization, as well as some insights into their long term goals and objectives. Funding proposals were not part of this enlightenment process. All the representatives of the 15 organizations were invited to attend both days to learn about each other. Most accepted the invitation and participated both days. Following the event, a survey was undertaken and both the Board of Directors of FACTOR as well as the music industry associations that presented reported that they found it to be an extremely useful project. The survey indicated that 100% of the participants (both Board and industry) are desirous that this forum be continued. The next one is scheduled to take place in 2011. A great deal of work was executed by the Board of Directors in the creation and adoption of a Governance Document. This document has been adopted and is considered to be a work in progress. When the Department of Canadian Heritage engaged the services of the Governance Institute of Canada to conduct a Governance Audit of FACTOR, the document served the foundation well. The findings stated and I quote “FACTOR as an organization has a clear sense of purpose and direction, and an understanding of the need to keep up with the changing times.” The review also found that “FACTOR has clearly defined conflict of interest policies and codes of conduct, with solid procedures to ensure they are properly implemented.” Personally I am very proud to see FACTOR receive such a strong third party acknowledgment around the transparent manner in which the organization is managed. As a Board, we take the accountability and transparency issues very seriously and endeavor to provide as much detail as possible to ensure there is a high level of confidence in the manner in which the business of FACTOR is conducted. We are very pleased that the Department of Canadian Heritage has committed to renewing the Canada Music Fund for an additional five years. When the announcement was made in July 2009 it was news that was well received by the Canadian Music Industry. This was the earliest the Government has ever renewed its commitment to the program. It has allowed for things to continue to move along in a steady and consistent manner for the music industry at large. It is important FACTOR provide a stable source of funding to the industry it serves. As this fiscal year is wrapped up and we move forward into the next, the Board of Directors looks forward to continuing its support of the Canadian independent music industry while also developing the criteria for the new programs that are forthcoming with the 2010-11 fiscal year. Sincerely, Pegi Cecconi Chair, The Foundation Assisting Canadian Talent on Recordings 5 MESSAGE FROM THE PRESIDENT & CEO The 2009-10 fiscal year is one that was filled with many financial milestones for FACTOR: • Revenue at FACTOR based on contributions received, combined with the earned investment income, reached just over the $20 million mark. This is the largest amount of funds administered by FACTOR in a fiscal year in the foundations history. • Revenue increased 11% over the previous year. • Revenue from Canada’s private radio broadcasters increased 13% over the previous year. • Revenue from Canada’s private radio broadcasters represented 49.4% of all funds received. • Loan repayments increased 48% over the previous year. • An additional $4 million has been put into the stabilization fund. This will assist in FACTOR providing stable funding in future years when other revenue streams may be less. This will enable FACTOR to provide the current program budgets for several years in the future, when revenue streams are down. Other non-financial milestones included: • The total number of submissions increased 12% over the previous year. • The total amount of funding requested increased 44% over the previous year. • The total number of projects approved increased 9% over the previous year. • The total amount of funding offered increased 3% over the previous year. There are a myriad of challenges that come from administering programs for which you have no control over the number of requests received. The deadlines are set for the year at the commencement of a new fiscal and it is critical that applications get processed and responded to prior to the next deadline for that particular program. If answers are not provided to applicants prior to the next deadline, it can prevent applicants from reapplying for funding should their original request not be awarded. Last year FACTOR managed 52 separate deadlines for all its programs. With the increase in the number of submissions it created a very busy time for the staff at FACTOR. As well, the on-line system developed about six years prior found itself without any programmers to support the system. We limped through to year end and have had to undertake having a new system developed. For the first time in over 12 years, FACTOR administration utilized its full 12.5% allowed for administration. The increased number of submissions and approved projects managed by FACTOR has a direct impact on the foundations operational costs. It is encouraging to note that FACTOR supported sound recordings are having such success in the marketplace. To see loans repayments up 49% over the previous year speaks to an effective process which determines which projects should receive funding. If the filtering system were not as effective at the selection process then it would impossible to post such positive results. The work continues and we at FACTOR are intent on continuing to provide a solid, transparent administration. Heather Ostertag, C.M. President & CEO The Foundation Assisting Canadian Talent on Recordings 6 ANNUAL REPORT 2009 - 2010 FINANCIAL RESULTS In 2009-2010 FACTOR had revenue totaling $20,053,285. Revenue was generated from four sources: 1.The Department of Canadian